© Gordon Graham, 2015

Understand Innovationin Five Minutes

What wil l you learn from this?

• What innovation is

• Why it’s important

• The “types” of innovation

• The “degrees” of innovation

What is innovation?

Hundreds of similar definitions can be found in the literature. Here is the Broken Bulbs definition.

“Innovation is the profitable implementation of ideas.”

An innovation can increase profits on the value side (customers value the innovation enough to pay more

for it) . . .

. . . or the cost-cutting side (the company produces a product

offering in a more efficient way).

Either way, value is created for the firm and the consumer.

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An invention is different from an innovation at any particular time in

that it doesn’t have commercial value but . . .

. . . it may have in future.

Think of inventions as the laying of an egg, innovation as the laying and

hatching.

There is no shortage of ideas and inventions in the world. The

challenge is to introduce these successfully to a market.

Only then can the idea/invention be called an innovation.

In other words, innovation requires interplay between a product offering

(technology) and a market.

Why is innovation important?

Innovation reduces waste and environmental damage.

Innovation creates growth, increases productivity, and economic wealth

(avoids stagnation).

Innovation provides better goods and services at a cheaper price –

higher standard of living.

More interesting work for employees.

Old strategies get replicated and, consequently, margins get squeezed.

Survival!

Source: United Kingdom Dept. Trade and Industry

What are the types of innovation?

Numerous types . . .

. . . but all these labels just describe where something “new” or “better”

occurs.

Product

Process

Service

Business model

Value

Market

. . . and many more, depending on the author. Basically, innovation can

occur anywhere in the firm’s product offering.

Note! There is another type that needs to be considered separately. This is “disruptive innovation,” a

term coined by Clayton Christensen. This type of innovation refers to a

firm’s strategy.

The degrees of innovation.

Once again, many labels . . .

. . . however, they all describe the degree of change required by the

innovating firm and/or the market.

Incremental (sometimes called “continuous” or “evolutionary” or

“small”)

Semi-radical

Radical (sometimes called “discontinuous” or “revolutionary”

or “large”)

Incremental and radical innovations need to managed differently.

Here’s a quote:

"He who innovates will have for his enemies all those who are well off under the

existing order of things, and only lukewarm supporters in those who might be

better off under the new."

Niccolo Machiaveli, The Prince

I hope you enjoyed this brief introduction to innovation. You can learn much more

on the topic by listening to my full audiobook online.

is.gd/innoUAE

Gordon Graham

Tel: 052 922 3352