DI

What is innovation: why almost everyone defines it wrong

Joe Dwyer

Joe DwyerPartner at DI and Founder Equity. Kellogg professor. Investor, technologist, serial entrepreneur.

Definitions matter; it’s hard to have effective discussions and build on concepts without them. And the best definitions offer utility.

Mention the word innovation in a corporate context, and you’re likely to see some eye rolling. The word “innovation” has turned into something of a buzzword whose application is so broad and nebulous that it often feels useless.

But innovation is critical in the modern economy. That’s why we’re going to come up with a clear and useful definition for innovation.

For our purposes, a useful definition of innovation probably:

  • Has easy to understand tests for filtering
  • Reliably filters out the sorts of activities that set corporate eyes rolling
  • Rarely excludes things most of us would consider meaningful innovation
  • Is brief and simple

Various definitions of innovation

It won’t take much Googling to see that the definition for innovation varies widely. Here are some paraphrased selections from an article by Nick Skillicorn based on interviews with 15 innovators:

  • Application of ideas that are novel and useful
  • It’s about staying relevant
  • Great idea, executed brilliantly, and communicated well
  • Feasible, relevant offering with a viable business model perceived as new and adopted by customers
  • Introduction of new products and services that add value to an organization
  • As long as it includes “new” and addresses customer needs, any variation goes
  • Fundamental way companies bring constant value to their customers
  • Work that delivers new goodness to customers in new markets and radically improves the profitability equation
  • Implementation of something new
  • Implementation of creative ideas to generate value
  • Anything new, useful, and surprising
  • … and so on

There are good concepts in those definitions, but none seem to strike the right balance of clarity, utility, and brevity. We probably need to look elsewhere.

Webster’s definies innovation as “the introduction of something new.” It’s hard to dispute that’s accurate. But it doesn’t seem particularly useful.

Perhaps that’s because innovation exists outside of our business mindset. By their definition, introducing a new paint color that’s a half-shade different from any others known in the market is innovation. Most of us would not consider that “innovation,” at least not in a useful way. It might be the absolutely perfect shade for your new house, but I think we need a better definition for our purposes.

Peter Drucker said “Innovation is the specific instrument of entrepreneurship… the act that endows resources with a new capacity to create wealth.”

It’s eloquent. The concept of endowing resources with a new capacity to create value is interesting. But still it doesn’t feel like a particularly useful definition.

Scott Berkun thinks “Innovation is significant positive change.” That’s starting to sound better to me. He adds the notion of “significance.” If it doesn’t matter (to someone), should we call it innovation? I think not.

But this definition focuses on the outcome rather than the process. If you don’t know whether something is innovative until after the fact, it’s hard to apply the definition proactively. And while the word “change” implies novelty, it’s probably too broad. What if we’re looking at a change to a well-known business model that results in a loss in stock value but an increase in stability? There’s something novel about that, but it doesn’t feel like innovation to us.

Tim Kastelle writes innovation is “not just having an idea—but executing it so that it creates value.” I like that he incorporates three key concepts: an idea, execution, and value creation. You’ll see below this is probably the closest to our definition.

A proposed definition of innovation

Here’s how we define innovation:

“Innovation is the process of creating value by applying novel solutions to meaningful problems.”

The reason we believe it has utility is in the three explicit tests for “innovative-ness” we can apply:

  • Is it novel? The notion of novelty is baked right into the word “innovation.” If it’s not new, it’s probably more optimization than innovation.
  • Does it solve a meaningful problem? If not, maybe it’s art instead of innovation. That’s not to say art isn’t valuable, but it’s generally not designed to solve a problem. To us, innovation is.
  • Does it create value? If not, maybe it’s an invention rather than innovation. Inventions can lead to value creation, but usually not until someone applies them through innovation.

It also points out that—at least where we’re concerned—innovation is a process. It’s not the result itself per se, but the path to get there. We know it’s possible to innovate unsuccessfully—there’s plenty of evidence that innovations often fail. What’s key is that you’re seeking to create value by applying a novel solution to a meaningful problem.

According to this definition, innovation isn’t limited to the commercial context. Non-profits can be innovative; their value creation metric is simply different.

The Value of Definitions

Don’t underestimate the role that definitions and language can play in getting your team on the same page. Even revisiting the way your organization defines this can unlock new ideas and help organizations prioritize initiatives. And it ensures that your team is making meaningful progress toward creating truly innovative solutions.

We host regular workshops and produce a monthly digest on innovation. Join the conversation.