"Innovation is a change in the thought process for the useful application of new inventions or discoveries. It may refer to incremental or radical changes in thinking, products, processes, or organisations.
The distinction between invention and innovation is that invention is an idea made evident whereas innovation is an idea applied successfully in practice. In economic terms, an innovation should increase customer value or producer value. The goal of innovation is positive change, to make something better. Innovation leading to increased productivity is the fundamental source of increasing wealth in an economy."
In the organisational context, innovation can be linked to performance and growth through improvements in efficiency, productivity, quality, competitive positioning, market share, and of course, profitability.
A key challenge in innovation is maintaining a balance between process and product innovations, where process innovations tend to develop shareholder satisfaction through improved efficiencies while product innovations develop customer support but at the risk of costly R&D that can erode shareholder return.
Though creativity by individuals and teams is a starting point for innovation, it does not guarantee that innovation can happen. It is well known that innovations that fail are often potentially good ideas but have been rejected or postponed due to budgetary constraints, lack of skills or poor fit with current goals. It is, therefore, of utmost importance to nurture an environment conducive to innovation.
Programmes of organisational innovation in developed organisations are linked to organisational goals and objectives, to the business plan, and to market competitive positioning.
Systematic programmes of organisational innovation are most frequently driven by:
- Improved quality
- Creation of new markets
- Extension of the product range
- Reduced labour / process costs
- Improved production processes
- Reduced materials
- Reduced environmental damage
- Replacement of products / services
- Reduced energy consumption
- Conformance to regulations