Innovation is a process of taking new ideas
through to satisfied customers. It is the conversion of new knowledge
into new products and services.
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