Invention and innovation
An invention is something new: a new device, material or method. Innovation is taking an idea, new or old, and making it useful and successful in the market. Many inventions never become innovations because no one makes, sells or uses them.
Types of innovation
- Product innovation: a new or improved good or service (an electric scooter, a new app feature).
- Process innovation: a new or better way of producing or delivering (robots on a production line, online ordering).
- Business-model innovation: a new way to earn money (subscriptions instead of selling once, ride-sharing).
- Incremental vs radical (disruptive): small upgrades of what exists vs something that changes a whole market, such as smartphones replacing cameras, maps and music players.
Kaizen: continuous improvement
Kaizen is a Japanese word for 'change for the better'. Every worker looks for small ways to cut waste, save time or raise quality, and these are tried quickly.
- Benefits: low cost, low risk, staff feel involved, gains add up over time.
- Limits: gains become smaller over time; it rarely produces a brand-new product; it needs a culture of trust.
Research and development (R&D)
Research finds new knowledge; development turns it into a product or process that can be made and sold. R&D can lead to big leaps and a strong lead over rivals (first-mover advantage).
- Costs and risks: high spending, long waits before any income, and many projects fail.
- Firms judge R&D by comparing expected future profit with today's spending; governments often give tax relief to encourage it.
Protecting ideas: intellectual property
- Patent: protects a new invention, usually for about 20 years. Others need permission (a licence) to use it.
- Copyright: protects creative work such as books, music, software and films, automatically from creation.
- Trademark: protects a brand name, logo or slogan; can be renewed again and again.
- Design right protects the shape and look of a product.
Protection lets an innovator earn a reward, which encourages R&D. Downsides: it costs money, must be defended in court, and a patent makes the invention public.
Digitalisation and other innovation tools
Digital tools speed up innovation: cloud software, data analysis, 3D printing for quick prototypes, artificial intelligence and e-commerce. Common methods:
- Design thinking: empathise, define, ideate, prototype, test.
- Lean start-up: build a minimum viable product (MVP), measure what customers do, learn and change.
- Open innovation: work with universities, start-ups or customers instead of only in-house.
- Business Model Canvas: one page showing customers, value, channels, costs and revenue.
Key formulas and definitions
- Key term: innovation = idea + successful use in the market
- Key term: kaizen = many small, continuous improvements
- Key term: R&D = research (new knowledge) + development (usable product)
- Key term: patent / copyright / trademark = legal protection for inventions / creative work / brand names
- Key term: disruptive innovation = a new idea that changes a whole market
Worked examples
1. A bakery switches from hand mixing to an electric mixer and makes bread 30% faster. Product or process innovation?
Process innovation: the bread is the same, but the way of making it is better.
2. Kaizen adds 0.5 units of quality per month. R&D adds nothing for 7 months, then 6 units in month 8. After 12 months, which is ahead?
Kaizen: 12 × 0.5 = 6 units. R&D: 6 units. They tie; but R&D cost money for 8 months and could have failed, while kaizen was cheap.
3. A start-up invents a new water filter. Which protection should it get for the device, the brand name and the instruction video?
A patent for the filter design, a trademark for the brand name and copyright for the video.
Common mistakes
- Using invention and innovation as the same word. Innovation needs the idea to be used or sold.
- Thinking only new products count. New processes and business models are innovations too.
- Thinking R&D always pays off. Many projects fail and money is lost.
- Mixing up protections: a patent is for inventions, not for logos or songs.