The Innovation Process

[ by Rajnish Tiwari ]

Innovation, according to Schumpeter (1934), covers:

1) The introduction of a new good or a new quality of the good

2) The introduction of a new method of production

3) The opening of a new market

4) The conquest of a new source of supply

5) The carrying out of the new organization of an industry

The “newness” need not necessarily involve “new” knowledge thereby effectively implying that the “newness” may also concern advancement or modification of existing knowledge. Innovation, according to Rogers (2003), is “an idea, practice, or object that is perceived as new by an individual or other unit of adoption”.

The Oslo Manual, developed jointly by Eurostat and the OECD and currently in its 3rd edition, defines innovation as "the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations." It differentiates between 4 types of innovations, namely "Product Innovation", "Process Innovation", "Marketing Innovation", and "Organisational Innovation" (OECD, 2007).

A PDF file with definitions and scope of the terms "innovation", "innovation activities", "Innovative firm", "Product innovation", "process innovation", "marketing innovation", "organizational innovation", "research and (experimental) development", "basic research", "applied research", "experimental development", and "prototye", as well as a brief clarification on the "boundaries of R&D" may be consulted and/or downloaded here (file size 81 KB). The definitions complied therein are based on the Oslo Manual and the Frascati Manual.

Keeping these views in mind and for the purpose of this project, we regard innovation as "invention and commercialization of new (or betterment of existing) products, processes and/or services". The terms "processes" and "services" in this definition therefore cater also to marketing and organisational innovations.

The innovation process encompasses several systematic steps, beginning from problem/requirement analysis to idea generation, idea evaluation, project planning, product development and testing to finally product marketing.

The steps may overlap each other. These steps may be categorised into 3 broad phases, which represent a simplified innovation process. This project takes into account all the three phases of innovation. Special attention is paid to the process of research and development (R&D), which in many cases builds a corner-stone of innovation.

Figure 1: Three phases of a simplified innovation process

Globalization of the Innovation Process: A Reference Modell

Figure 2: A Reference Modell for Global Innovation (Source: Tiwari et al, 2007)

For further reading on globalization of the innovation process, its causes and limitations, see "Innovation via Global Route: Proposing a Reference Model for Chances and Challenges of Global Innovation Processes" (Tiwari et al, 2007).

For detailed discussion on definition and scope of the term “innovation”, see amongst others:

Biemens, W.G. (1992): Managing Innovations with Networks, London: Routledge.

Dangayach, G.S., Pathak, S.C. and Sharma, A.D. (2005): "Managing Innovations", in: Asia Pacific Tech Monitor, Vol. 22, Issue 3, pp. 30-33, New Delhi.

OECD (2007): OECD Science, Technology and Industry Scoreboard 2007, Organisation for Economic Co-operation and Development, Paris, p. 94.

Pavitt, K. (2005): "Innovation Processes", in: Fagerberg, et al (eds.): The Oxford Handbook of Innovation, pp. 86-114, Oxford: Oxford University Press.

Rogers, E.M. (2003): Diffusion of Innovations, 5th Edition, New York: Free Press.

Schumpeter, J.A. (1934): The Theory of Economic Development, 13th Printing 2007, New Jersey: Transaction Publishers.

Verworn, B., Herstatt, C. and Nagahara, A. (2006): "The impact of the fuzzy front end on new product development success in Japanese NPD projects", in: Proceedings of R&D Management Conference 2006, Manchester. [Download Working Paper version].

Von Hippel, E. (1988): The Sources of Innovation, New York / Oxford: Oxford University Press. [Download e-book or individual chapetrs].