Innovation Defined

Innovation is a process of taking new ideas through to satisfied customers. It is the conversion of new knowledge into new products and services.
Innovation is about creating value and increasing efficiency, and therefore growing your business. It is a spark that keeps organizations and people moving ever onward and upward. "Without innovation, new products, new services, and new ways of doing business would never emerge, and most organizations would be forever stuck doing the same old things the same old way."

Renewed Emphasis on Innovation

Shift to the new knowledge-based economy, combined with a dramatic increase in highly capable global competition, demands a renewed emphasis on innovation. Rapid changes in the competitive environment create the new world of competition – "a fierce contest set in truly global context, with more capable players, higher stakes, and vastly different rules of engagement from those that we have enjoyed to date."3 This new economy is led by those who innovate – create, find and/or combine knowledge into new products, services, and distribution methods – faster than their competitors. Innovation is above all spurred by entrepreneurial action, aimed at creating value through the application of knowledge.

Innovation as an Engine of Economic Growth

The speed and efficiency of the diffusion of innovation through the economy is critical to productivity and economic growth. It can be pictured as a cascade process. Through the forces of competition and imitation, an initial innovation is developed and improved so that the impact on the economy is many times greater than that brought about by the first application of the innovation.2
Leaders in technology development are not necessarily leaders in technology adoption. The most important economic contribution does not necessarily come from the "early adopter" but from the "fast follower" who adopts the innovative design that captures the international market.2 As Jack Welch, former CEO of General Electric, puts it:" The operative assumption today is that someone, somewhere, has a better idea; and the operative compulsion is to find out who has that better idea, learn it and put into action – fast."
In fast-moving sectors it is the new enterprises with growth potential that are often the most innovative, forcing established enterprises to respond to the change by themselves becoming more innovative. Encouraging the emergence of new firms is a strong force for innovation in many sectors.