What is Innovation?

The word “innovation” is derived from the Latin verb innovare, which means to renew. In essence, the word has retained its meaning up until today. Innovation means to improve or to replace something, for example, a process, a product, or a service. In the context of companies, however, the term needs a definition. In the complex context of business, a definition is needed.

 

Innovation is a process by which a domain, a product, or a service is renewed and brought up to date by applying new processes, introducing new techniques, or establishing successful ideas to create new value.

Why is innovation so important?

Organisations have several options to increase their competitiveness: they can strive for price leadership or develop a strategy of differentiation. In both cases, innovation is essential.

• Companies that choose price leadership must secure their long-term competitiveness by developing innovative, highly efficient processes. Process optimization and continuous improvement in terms of costs are important for them.
• Companies that strive for a differentiation strategy need innovation to develop unique distinguishing features to their competitors.
• Many start-ups launch their activities by developing an innovative product or service.

Continuous innovation is, therefore, crucial for all companies. The main difference is in the focus of the innovation strategy, which varies considerably from company to company.

 

 “Although innovation has always been one of the driving forces in competition and has always been a primary competitive dimension, the numerous studies and publications of recent years show that the speed of change is increasing.”

 

The Different Types of Innovation

In the context of businesses, there are different types of innovation.

• Process improvement and organisational innovation: The improvement of processes through continuous improvement and the development of new solutions.
• Product development: The development of innovative products or product features.
• Service innovation: The creation and introduction of new services for customers and partners.
• Business Model Innovation: The development of innovative business models and new revenue streams.

Digitisation and digital transformation also require companies to rethink and develop new approaches.