Innovation can be defined as the process of implementing new ideas to create value for an organization. This may mean creating a new service, system, or process, or enhancing existing ones. Innovation can also take the form of discontinuing an inefficient or out-of-date service, system, or process.
Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation. (Drucker, 1986)
Innovation is an important tool in entrepreneurship. It helps provide resources with a new capacity to create wealth.
2.1.1 Seven Sources of Innovation
When we talk about innovation in a systematic manner, we need to monitor the areas where we can innovate. These areas are known as the sources of innovation. The first four sources lie within the business or the industry. And the last three are sources from outside the industry. These are
· The Unexpected Source
o This could be an unexpected success or failure of a product/service that leads to innovation
· The Incongruity Source
o This comes from a difference between what a product/service actually is and what everybody else assumes it to be.
· Innovation based on process need
o This comes by redesigning the weak spots within the process of a business.
· Changes in industry structure or market structure
o Innovation can also come from changes in the industry which push a business to find a new way to make them successful.
· Changing Demographics
o A change in the demographics of the target customer can lead a business to innovate new products/services for the customer.
· Changing perceptions, mood or meaning
o Over time the people & population changes and so do their perceptions. Innovations can arise from these changing ideas in the customer group
· New Knowledge
o Any new knowledge, scientific or non-scientific, can lead to a oath of innovation
2.1.2 Types of Innovation
Depending on the type of technology & market – existing & new, we can categories four types of innovations.
220.127.116.11 Incremental Innovation
This is the most common form of innovation. When innovation takes place in an existing market with an existing technology, the innovation is referred to as incremental innovation. It uses existing technologies to improve a product/service being offered to the customers in an existing market. Today, all companies utilize incremental innovation to improve their business. It can be a small change in just the way the product is viewed by the customer. For example, it can be introducing a new feature on an existing website.
18.104.22.168 Disruptive Innovation
Also known as Stealth Innovation, disruptive innovation is when business uses a new technology to provide the customer with something new in an existing market. It takes time for disruptive innovation to get recognized by the market as the new technology is often difficult to understand. Generally, disruptive innovation starts at the bottom of the market & slowly captures the customers in the market. A great example of disruptive innovation is the Apple iPhone.
22.214.171.124 Architectural Innovation
Taking existing technological knowledge and incorporating it into new markets is called Architectural Innovation. The risk involved with architectural innovation is very less as it relies on proven technology & its benefits. The technology is then made to adapt to the expectations of the new market.
126.96.36.199 Radical Innovation
Radical innovation gives birth to new markets and new technology. It creates something revolutionary. For example, the creation of the airline industry involved the use of a new technology to create a new market segment.