„Innovation” is currently one of the most popular words that are used to describe any business project. Especially in IT field. Enterpreneurs associate this term is as an incentive for growth and success in businesses. However, it is not interpreted equally by people. As many people, as many definitions.
„Business has only two functions — marketing and innovation.”
Peter Drucker
The word innovation derives from Latin word „innovare” and means „to do something new”. Thereby, it has a very wide meaning. Actually, in non-economic terms almost every change can be considered to be an innovation. And it won’t be mistake as long as the change doesn’t lead to an old, well known previous state, that would be generally bad. The definition found in dictionary refers best to its meaning in colloquial language. In terms of economy the precise definition of innovation is still complicated. The subject’s literature states different, inconsistent definitions and classification methods.
Innovation was implemented into field of economy by Joseph Schumpeter. He’s considered to be a godfather of a theory of innovation in economic terms. This famous austrian economist knew already in XX century (1934) that innovation is obviously one of the most important feature of a company that want to enjoy the high position on the market.
Cases that J. Schumpeter classified as an innovation
- Implementation of a new product
- Introduction of a new method od production
- Creation of a new market
- Using new sources of raw materials or semi-manufactured goods
- Creation of a new organizational structure of some type of industry
The change might be classified as an innovation, when it meets at least ONE of these conditions. The Schumpeter’s definition is considered to be a classical definition and began deliberations about the role of an innovation in economy. Regarding to the period of its initiation, Schumpeter’s focus on innovations in industry and manufacturing can bo noted. The austrian economist limited the scope of his investigations to a product, process, production and industry’s organization.
Creative destruction
Schumpeter presented also a very significant concept of creative destruction process. This specifies the nature of changes and economic development. It’s a result of a constant strive to innovations by competing organizations. In a broader interpretation it has a positive character – old products and structured are being abandoned and replaced with new ones. The outcome of creative destruction process is the creation of better and more effective solution. The market gets rid of less offective ones in a natural way and at the same time makes space for new opportunities.
Thereby, Schumpeter highlighted the value of other-than-financial attributes of companies on competitive markets. It can be also assumed that enterpreneurs are being motivated not only by potential profits, but also by a fear of competition, as they can introduce new, better products that may destroy other market participants anytime. For example, Polaroid. Finally, even that Polaroid had great perspectives, it was withdrawn from the market due to the creative destruction process. Polaroid is a commonly known type of camera that enables us to print photos instantly. Despite its huge attractiveness did not support the competition with innovative technologies. The expansion of a digital cameras defeated that well prospering technology.
Sources:
- E. H. Edersheim: Przesłanie Druckera. Zarządzanie oparte na wiedzy, Warszawa: MT Biznes 2009 s. 94
- J. Tidd, J. Bessant: Managing Innovation. Integrating technological, market and organization change. 4th edition, Chichester: John Wiley & Sons 2009 s. 16
- Oslo Manual: Guidelines for collecting and interpreting innovation data, OECDPublishing 2005 s. 29
- J. Tidd, J. Bessant: Managing Innovation. Integrating technological, market and organization change. 4th edition, Chichester: John Wiley & Sons 2009 s. 16
- A. Harman: The International Computer Industry: Innovation and comparative advantage, Boston: HUP 1971
- J. Czupiał: Ekonomika innowacji, Wrocław: Wydawnictwo Akademii Ekonomicznej im. O. Langego 1994, s.10
