What is innovation

An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.

— Organization For Economic Co-Operation And Development (OECD) (2005)

 

More on innovation, by OECD :

(1)  Product innovation

A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics.

Product innovations can utilize new knowledge or technologies, or can be based on new uses or combinations of existing knowledge or technologies.

(2)  Process innovation

A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.Process innovations can be intended to decrease unit costs of production or delivery, to increase quality, or to produce or deliver new or significantly improved products.

(3)  Marketing innovation

A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.

Marketing innovations are aimed at better addressing customer needs, opening up new markets, or newly positioning a firm’s product on the market, with the objective of increasing the firm’s sales.

(4)  Organizational innovation

An organizational innovation is the implementation of a new organizational method in the firm’s business practices, workplace organization or external relations.

Organizational innovations can be intended to increase a firm’s performance by reducing administrative costs or transaction costs, improving workplace satisfaction (and thus labour productivity), gaining access to nontradable assets (such as non-codified external knowledge) or reducing costs of supplies.

As early as 1934, Joseph Schumpeter proposed a list of five types of innovations:

(1)  Introduction of new products.

(2)  Introduction of new methods of production.

(3) Opening of new markets.

(4)  Development of new sources of supply for raw materials or other inputs.

(5)  Creation of new market structures in an industry

 

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Reference:

OCED defining innovation: https://www.oecd.org/site/innovationstrategy/defininginnovation.htm

Oslo Manual – Guidelines For Collecting And Interpreting Innovation Data, OCED: https://www.oecd-ilibrary.org/docserver/9789264013100-en.pdf?expires=1537796277&id=id&accname=guest&checksum=36421D28C3BCDF9294676C14753A760E