Innovation Definition and Importance in Business

Subject: Management
Pages: 5
Words: 1136
Reading time:
5 min
Study level: College


Innovation can be defined as the introduction of something new. This can be an extraordinary person, thing, idea, method or even a device that functions in a different way from the previously existing ones. An innovation may completely change the way things were done or improve on the previous ones. An innovative manager will come up with new methods of production, packaging and even better quality products. Creativity is mostly realized due to openness of ideas, allowing employees to try new methods of doing things and the need to be competitive and unique. Innovations can either be in processes, products and or in the systems of administration. According to Scumpeter (1997, p.28), apart from processes, products and systems, opening of new markets and development of new sources of supply of raw materials is also innovation.

Comparison between innovation, invention, and creativity

While innovation is the introduction of new ideas, persons, products and business functions, an invention can be defined as a inimitable or new device, process, composition, method or finding that has been realized. An invention can also be an enhancement upon a machine, a product, or even an alternate method of realizing a process.. Inventions usually enhance employees’ knowledge, ability and exposure. An organization may also have a set of behavior that is so inherent in its workforce. This can be regarded cultural inventions. On the other hand, creativity can be regarded as the ability or the power to be able to bring into existence. According to (Mumford, 2003, p.11), creativity involves the production of noel and useful products. A creative person is one who possesses a certain skill or idea that he can use or that can be used by others to develop new things. Such a person can come up with something completely new for example a product, explanation, a piece of work or even a device that is valuable.

Relationship between traditional and creative problem solving

There exists a continuum from traditional problem solving to creative problem solving. Organizations are always hunting for new technologies, ideas, human resource and even policies that can win over news customers and even maintain the existing ones. Traditional methods are therefore used as bench marks indicators for developments. The traditional methods of solving problems are the mother of the current innovations. The need to increase the quality of ideas, products and devises, the need to save time and reduce production cost are all generated from the traditional problem solving methods. Everyday competition among institutions, individuals and functions increases. The need to outdo competitors and have more appealing products will result in the need for creativity, innovation and invention. This leads to an automatic deviation from the traditional methods of problem solving.

However, the existence of previous methods of problem solving forms the bases of new innovations. It is from the existing knowledge that managers derive ideas that are later enhanced to develop new knowledge. For example, innovation and creativity may arise due to the need to adopt a new technology in a firm. With such developments, the managers must be creative to use the existing resources rather than loose them. This results in an integration of functions, which ultimately reduce the production cost. Furthermore, every organization has its culture. Therefore, as new creations come in they must be adaptable to the traditional means and methods. The existing mechanisms are therefore modified to accommodate the new devices, ideas and people.

Importance of innovation to the success of individuals, organizational leaders, organizations, and nations

Innovation is integral to the success of individuals, organization leaders, organizations and even the nation at large. To an individual who comes up with a certain invention especially a ground breaking creation, then legal or patent protection is issued. Such individuals are able to overtake their competitors in the market. In some countries, these innovators are rewarded by business organizations, accreditation firms and even the government. Creative persons are also likely to be appointed in leadership positions due to their inherent abilities. Innovators are also rewarded by the high price of new products and processes in the market. For example, if an individual discovers a new drug that kills malaria parasites faster and more effectively, then the new drug fetches better price and more customers in the market.

Davila et al. (2006) argues that companies cannot develop via cost cutback and reengineering only, innovation is the main building block in realizing forceful development. The need for process innovation and product innovation is what drives organizations to employ new staff and buy new machines

With innovation supervision, monitoring and evaluation becomes simpler. For instance in process innovation, an organization may come up with a new way of allocating duties, appraising employees and even rewarding their performance. A good example is the application of central monitoring computers by supervisors in Information Technology firms. From his office, the supervisor is able to monitor what every employee is doing in real time. This enables the leaders to save time, energy and make their work more efficient.

Nations are also beneficiaries of the innovations of the citizens. According to Geroski (1995, p.91), innovation is a non-excludable good. As the individual innovator benefit, the organization he works for benefits and so does the public at large. Every innovation has a public good and the ultimate benefit trickles down to the public. Therefore, the government is able to benefit from such discoveries. For instance, the invention of a drug that cures a disease that has been declared a national disaster is of benefit to the government. This saves the nation from spending resources that would have been used in research and manufacture of drugs.

Importance of management systems and styles in creating an organization where innovation is enabled

Management systems and styles are important in creation of an innovation-enabled organization. The existing management systems may pave way or prevent innovations in an organization. Systems that allow employees time for innovation, reward innovations and even punish redundancy do better in innovation. Innovation is also more common in organizations that encourage its employees to try new ideas. Organizations that practice open door policy are also likely to realize more innovation. In such organizations, employees feel the liberty to try their ideas without fear of intimidation or loss of job (Schumpeter, 1942). On the other hand, organizations that practice closed door policy of administration are likely to experience innovation deficiency. Here, the employees have no freedom to share ideas with their bosses and any new idea must originate from the top managers.

In conclusion, innovation is the application of new thoughts to products, processes, or even the organization systems that increase its value. Creativity and innovation lead to invention. Innovation impacts on individual employee, the organization and the nation at large. A good system of management promotes innovation that in turn increases returns.


Davila, T., Marc J. E., & Shelton, R. (2006). Making Innovation Work: How to Manage is, measure it, and profit from it. Upper Saddle River: Wharton Scholl Publishing.

Geroski, P. (1995). Markets for technology: knowledge, innovation and appropriability.

In Handbook of the Economics of Innovation and Technical Change. Oxford, UK: Blackwell.

Mumford, M. D. (2003). Where have we been, where are we going? Taking stock in creativity research. Creativity Research Journal, 15, 107–120

Schumpeter, J. A. (1942). Capitalism, Socialism and Democracy, reissued 1975. New York: Harper & Row.