Innovation - What is it?

Put simply, 'innovation' is 'the useful exploitation of an idea'. Our analytical framework distinguishes seven types of innovation:

  • Technological - e.g. electric power and computing.
  • Product - e.g laptops and mobile phones.
  • Process - e.g reducing the time-to-market for products and services.
  • Service - e.g. providing health care over the phone.
  • Business Model - e.g. online rather than physical bookstores.
  • Policy - e.g. using education and incentives as alternatives to regulation.
  • Behavioural - e.g. 'self-service' shopping and vehicle refuelling.

Another classifier is the degree of change - an innovation can be 'incremental' or 'radical'. It can also be 'disruptive' if it will significantly change the 'rules of the game'.


Successful innovation is not just about research and development. Knowledge exchange, design, branding and customer insight are also critical. So too is the ability to build organisations with cultures, and formal systems and processes, which actively foster innovation.

Innovation - Recognised and Promoted but still Challenging

Why is innovation now held to be so important, and so widely promoted?

  • For individual firms - innovation is critical to business sustainability. No firm can survive and prosper in the long term simply by selling existing offerings through traditional business models, by improving productivity, or through acquisitions.
  • For local economies - regeneration and growth depend not only on innovation within firms but also on innovation between diverse companies, universities, and often other players too.
  • For national economies - innovation is recognised as having a critical role to play in bringing countries out of recession and in maintaining national economic competitiveness in the globalised economy.
  • For environmental and economic sustainability - making the radical transition to a low-carbon economy will require innovation in technology (e.g. for energy), behaviours (e.g. reducing car use), business models (e.g. internalising the price of carbon), and policy.

Innovation is seen as integral to entrepreneurship and has been popularised through TV programmes like 'Dragon's Den'. We see the benefits of innovation every day, for example, through advances in electronic consumer goods. NESTA has found that the 'golden 6%' of high-growth UK businesses, which are invariably more innovative than the norm, generate half of all new jobs.

Innovation conjures up images of science, technology and new products. These are all part of the picture, but the most exciting opportunities can arise by bringing together unrelated areas of knowledge. Making this happen is as much about getting different cultures to work together as technical considerations.

Mastering innovation entails not only selecting and applying appropriate tools but also developing an innovation culture; it is not simply about adopting a 'blueprint' or 'management by numbers'. It is critical to understand the frameworks, processes and behaviours associated with innovation and the mainstream business alike.

In practice, successful innovation still presents major challenges. We have identified two major 'chasms' which leaders and practitioners must learn how to cross. Please click on 1 or 2 for more information:

1. Innovation WITHIN an organisation - the relationship between 'mainstream' people and activities

2. Innovation BEYOND an organisation - through collaborative working