THE CONCEPT OF INNOVATION
Meaning of Innovation
Innovation
can be defined as the application of new ideas to the products, processes, or
other aspects of the activities of a firm that lead to increased value. This
value is defined in a broad way to include higher value added for the firm and
also benefits to consumers or other firms.
Forms of innovation
Product innovation is the introduction of a new
product, or a significant qualitative change in an existing product.
Process innovation is the introduction of a new
process for making or delivering goods and services.
Some
authors have emphasized a third category of innovation, that of organizational
change within the firm, but we see this as being naturally included within the
second category, as a type of process innovation.
Product innovations
This
may include tangible manufactured goods, intangible services, or a combination
of the two. Examples of recent tangible product innovations that have had a
very significant impact on the way people live and work are personal computers,
mobile phones, and microwave ovens. Intangible products that complement these
types of physical equipment include the various pieces of computer software
needed to control flows of information through these devices, leading to the
delivery of information, the supply of communication services, or the arrival of
a correctly heated dinner. Equally,
Process innovations,
Is
the one in which are new ways of making and doing things, can arise from the
use of new combinations of tangible and intangible inputs. A robotic machine
to assemble cars can deliver welding services with even greater precision than
a human welder, but is only as good as its computer control system
Inherent
in the above definitions of innovation is an element of novelty. The question
then arises as to how much novelty is enough to identify any change as innovation.
A key issue here is to distinguish innovation, the bringing to market of a
truly novel item, from imitation, the
adoption
of a new technique or design that is already in the market. A product or
process can be
new
to the firm new to the domestic market or new to the world market. Clearly, the
last of these, global novelty, is sufficient to qualify the product or process
as an innovation. For those goods and services that are not internationally
traded whether due to the nature of the product prohibitive transport costs, or
restrictions on trade the test of being new to the domestic market is
sufficient to establish that there is an innovation within that economy. In our
view, being new to the firm is an
insufficient test for innovation, as the firm in question may simply be
adopting a product design, or a production method, introduced by a competitor.
In this book we call this the diffusion of innovation.
Conclusion,
Definition of innovation as new to the firm and new to the relevant market whether
this relevant market is local or global is dependent on the product or process
in question and the degree to which it is traded in a competitive global or
local environment in which the product exist.
By Segesela Blandina
BAPRM 42663
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