Innovation: Pressures and Types

Innovation is a key source of competitive advantage. Firms that fail to innovate risk being overtaken by competitors or disrupted by new entrants. This lesson examines the internal and external pressures that drive innovation, the distinction between product and process innovation, and the strategic significance of innovation for business success.

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What Is Innovation?

Innovation is the successful exploitation of new ideas. It involves turning an invention, concept, or improvement into a product, service, or process that creates value for customers and the firm. Innovation is not the same as invention:

Concept	Definition	Example
Invention	Creating something entirely new	Tim Berners-Lee inventing the World Wide Web (1989)
Innovation	Commercially exploiting a new or improved idea	Amazon using the internet to create an online retail business

Innovation can be radical (a completely new product or process that transforms an industry) or incremental (a small, gradual improvement to an existing product or process).