Seeing that we get visitors from both Innovation experts and Innovation novices, we decided to give a helping hand to the latter and make an innovation glossary with a comprehensive list of innovation terms, definitions, and simple explanations.
Being a beginner is nothing to be ashamed of and here you will have a shortcut to some of the most important innovation terms.
We’ve thereby included both terms that are known throughout the innovation community and more official consulting terminology.
With more than 100 innovation-related terms and definitions, this is the most extensive innovation glossary you will find anywhere.
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✅ Related keywords: iterative development, development sprints
A model of innovation used frequently in the tech sector for software development where the cost of prototyping is low. As the agile model allows for fast changes and many iterations of the product, it is used primarily to get a product to market as quickly as possible.
✅ Related keywords: balance of exploration and exploitation
The ability of a firm to change their business smoothly in preparation for the future, all the while supporting their current operations. Ambidexterity is difficult to achieve, because the skills and structure needed to maintain current business operations and prepare for the future are different. This is because preparation for the future through innovation is usually more organic, while maintaining the current business strategy is more mechanistic.
✅ Related keywords: non-tangible model, mathematical models
Analytical prototype: a mathematical model that can easily be experimented with. One downside of analytical prototypes is that they can only demonstrate behaviour that is part of a model, and behaviour is often unpredictable. Analytical prototyping is often used in software engineering.
✅ Related keywords: reconfiguration, new combination of components
To change the way that components of a product or service are configured together, but not the components themselves. An example of an architectural innovation is the networked computer system.
✅ Related keywords: market-creating innovation, create uncontested market space, value curves
Innovation that creates a new market in which to sell, by creating and capturing demand that did not previously exist. Companies that use a blue ocean strategy will start their operations without competitors, a massive competitive advantage. This strategy is optimal for companies without the same level of technical capability as the best competitors in their category. An example of a successful blue ocean strategy is the Nintendo Wii, which captured a new market for video games. Nintendo did not have the capacity to compete with Sony and Microsoft on a technical level at the time, so they found a new market instead.
✅ Related keywords: strategy, value creation
As the value driver of all business, the business model incorporates everything that the business does to capture value. From the revenue model to the customer base to the marketing strategy, the business model should be organized to accomplish the goals of the organization, and align directly with their strategy.
✅ Related keywords: strategic changes, new ways of value creation
The type of innovation that is most likely to deliver competitive advantage to a firm, business model innovation is the simultaneous improvement of the product offering and the operational model of the firm and often means a strategic shift. If a company innovates its business model, this means they will look for a new way to create value for their stakeholders. A famous example of business model innovation is when Rolls Royce shifted their turbine aircraft engine sales model to a rental model, thereby retaining ownership and remaining responsible for the repair of the engines. This made the Rolls Royce service more affordable, allowing them to service low-cost airlines.
✅ Related keywords: internal development, internal process, open innovation
Innovation that stays within the confines of the company. Closed innovation may stay within the departments responsible for innovation, or extend throughout the company. It is the opposite of open innovation.
✅ Related keywords: customer co-creation, customer-focused innovation, collaborative development
A form of innovation that involves the creator and the customer collaborating together to make the ideal offering for the customer. A successful example of co-creation is the Starbucks Ideas Platform, where customers can submit suggestions for products that Starbucks may then turn into a product.
✅ Related keywords: core competencies, threshold competencies, capabilities
The ways in which a company utilizes its resources. An example of an innovation competency is Apple designing its own operating system, hardware, software, and services. A threshold competency is a baseline competency a company needs to compete in its industry, such as the ability to transform a technology patent into a product. A core competency is a defining process by which a company distinguishes itself from the competition. An example of a core competency is the ability of NASA to integrate open innovation into its operational model.
✅ Related keywords: minimum viable product (MVP), experimentation, product innovation
A prototype that implements most or all of the attributes of the final product, and offers the opportunity for rigorous testing in the field. An example of comprehensive prototype testing is Patagonia's product trials during extreme outdoor adventures, which ensure that the prototype is ready for anything and is good enough to be sold.
✅ Related keywords: agile model, product development, simultaneous development
A best practice in product development, concurrent working is the development of products on different timelines at the same time. It is often used in agile development.
✅ Related keywords: Schumpeter, innovation, progress
A continuous process in which new products and processes replace long-standing old products and processes. Creative destruction is a driving force in our economy. The most drastic example of creative destruction of our time is the internet, which reshaped not only retail but many different markets. The term was originally used by Economist Joseph Schumpeter.
✅ Related keywords: internal collaboration, cross-department
Teams from different departments that come together to work on a specific problem. Using cross-functional teams is considered a best practice in innovation, because it allows the problems to be analyzed from as many angles as possible. There can be communication issues between teams, however, because they do not have expertise in the same areas.
✅ Related keywords: open innovation, idea generation, customer-focused innovation
Working together with a crowd towards a common goal. Generating ideas, content, or services directly from the public. An example of a crowdsourcing campaign is when Airbnb teamed up with eYeka and asked customers to submit videos featuring their homes, which were then used to show users how Airbnb offers a unique travel experience.
✅ Related keywords: value creation, customer empathy, design thinking
Fictional characters that represent specific types of users of your product or service. Particularly important to develop when using the design-thinking model. The goal of using a customer persona is to think, how a specific person would go through the purchase process or use the product.
✅ Related keywords: value creation, customer empathy, design thinking
Innovation that focuses on the problems of the customers, and seeks to solve those problems in a way that would bring the most value to said customers. The best way to accomplish customer-focused innovation is to speak with the customers themselves about their problems, and learn to think like them during product development. Ideally, the customer should also be involved in product experimentation and prototyping. An example of a customer-focused innovation is Amazon's "Try Before You Buy" service, that allows Prime members shopping for clothes to try them on before purchasing them. This solves the problem of customers trying on clothes that might not fit after purchasing them.
✅ Related keywords: customer empathy, customer-focused innovation
A process of innovation that places the user at the center. It usually involves five stages: empathise, define, ideate, prototype, test. The design-thinking model is often used in the service sector where the user experience is very important, but also for new product development.
✅ Related keywords: digitalization, digital transformation
The innovation of digital technology to improve business models and services. Digital innovation is practiced by every firm using software today, not only those firms that are purely software-based. This is because firms that forego digital innovation risk becoming obsolete. In no industry is this more true than in media, where companies have had to start offering digital subscriptions, podcasts, and other forms of online content in order to remain relevant.
✅ Related keywords: digitalization, digital innovation, change
Reshaping the business model through the digitization of business processes and establishing a digital culture. Digital transformation improves the performance and the power of enterprises to bring greater value to the customer. An example of digital transformation is the implementation of AI into the marketing department of a business, which improves the ROI of marketing efforts.
✅ Related keywords: radical innovation, drastic change, disruption
Innovation that changes the way that an industry or a market operates. This type of innovation can be highly profitable for the company that creates them, and devastating for their competition. An example of a disruptive innovation is the car that made horse carriages obsolete or also the internet, which changed many industries completely. The opposite of disruptive innovation is incremental innovation, which is a process of step-by-step improvement.
✅ Related keywords: competences, resources
A company’s capacity to adapt to an evolving market through change, innovation, and learning. In order to do this effectively, firms need to sense the market change before competitors, seize the opportunity quickly, and reconfigure the business model to adjust to the change. Two companies with impressive dynamic capabilities are Apple and IBM, who need to adapt to the market and even reinvent themselves quickly and effectively in order to remain market leaders.
✅ Related keywords: Schumpeter, Startups, new business, entrepreneurs
Starting a business and thereby creating or extracting value and driving economic growth in society. The innovation and entrepreneurship processes are closely linked, and rely on each other for success. To Joseph Schumpeter, one of the foundational thinkers in the areas of entrepreneurship and innovation, the entrepreneur is the driving force that transforms inventions to innovations, and thereby makes them available for the market.
✅ Related keywords: ideation, testing, iterations
The refinement of an idea by testing different versions of a product or service. Experimentation is very important for innovation, because it allows the innovators to learn, receive constructive criticism, and save money by entering the market with a product that is already proven.
✅ Related keywords: efficiency, improvements, resources
Using the current resources of the firm to improve innovations incrementally, by improving quality or efficiency. Is the opposite of exploration.
✅ Related keywords: discovery, new things, disruption
Finding new opportunities in new markets that can be turned into innovations for the company. It is important to undergo exploration so as not to become irrelevant in the future. Opposite of exploitation.
✅ Related keywords: market-access, loyalty, product innovation
The advantages of being the first to market in a new product category. Advantages include capturing a large market segment, customer loyalty, and ensuring brand-name recognition. First movers in a new market often maintain the majority of the market even after competitors join them. An example of a successful first mover is Kindle, the first e-reader, which gained massive customer loyalty and brand value.
✅ Related keywords: testing, product development
A prototype with only one or two attributes of the final product, which is used to answer specific questions regarding the product. Focused prototypes are often mechanical, where a prototype is made to answer questions about one aspect of a larger mechanical system.
✅ Related keywords: first-mover advantage, market entry
Following the first mover into a new industry has multiple advantages and disadvantages. Firstly, the follower or second mover does not have to use as many resources as the first mover on educating consumers on the product. They can also learn from the experience of the first mover. However, they will often not earn as much market share as the first mover. Successful followership stories include Kellogg’s and Coca Cola.
✅ Related keywords: social innovation, sustainability, climate change
A form of social innovation that focuses on sustainability or environmental protection. An example of a green innovation is the Smog Free Tower created by Studio Roosegaarde which is now being spread across the world. The Smog Free Tower is essentially a pollution vacuum, and cleans 30,000 square metres of air every hour using a small amount of green electricity.
✅ Related keywords: creativity, brainstorming
The first part of any innovation process, idea generation is the brainstorming of ideas which can be turned into opportunities for innovation. There are many methods for idea generation, the most common of which are mind mapping and brainstorming.
✅ Related keywords: innovation management, structured process, internal collaboration
The whole process of generating, evaluating, and implementing ideas for innovation. Idea management often follows a formal structure, and relies on three pillars of business for success: the culture, system, and process of a company. In terms of culture, management should foster an environment where employees feel comfortable giving feedback that could prove valuable. The company system should then allow the company to collect said feedback, and the process should allow the company to effectively implement the ideas that were brought forward.
✅ Related keywords: actions, value creation, innovation process
The transformation of innovative ideas into actions. Many believe that the implementation of an idea is a more effective value-driver than the idea on its own. The implementation of ideas in innovation usually follows these 6 steps: idea generation, idea evaluation (weeding out the less attainable ideas), proof-of-concept (which could be in the form of a prototype), pilot, product launch, and value capture.
✅ Related keywords: constant improvement, gradual innovation, lean startup
The modular, gradual innovation that improves a product through small, constant changes. Examples of incremental innovation are the constant improvements to products at Patagonia to make them more sustainable, or the constant improvement of a website using UX. The opposite is radical or disruptive innovation.
✅ Related keywords: constant improvement, gradual innovation, lean startup
The invention, development, and implementation of new ideas in order to create value. In business, there are many different forms of innovation which can result in new products, services, processes or business models.
✅ Related keywords: product development, tools, opportunity management
A method of opportunity management that works well for established organizations. It has 4 sections: the background (situation analysis), the focus (outlining technological and market dimensions), the goals and evaluations mechanisms, and the guidelines for the opportunity imposed by management. The Product Innovation Charter is for example used for new product development.
✅ Related keywords: innovation hub, collaboration, Really Good Innovation
A space where ideas can be freely exchanged and built upon through collaboration. Innovation communities exist within the innovation departments of organizations, or even throughout said organizations. They also exist anywhere that individuals come together to collaborate on new things. Really Good Innovation is a community that anyone can join, where innovators from around the world share resources, stories, and ideas.
✅ Related keywords: community, co-creation
A place that nurtures innovation in a particular field, where experts lend advice and direction to the innovators. Innovation hubs often have preset objectives to accomplish and strong management to help them do so. An example of an innovation hub is the Trento Co-Location Centre in Italy, that focuses on innovating digital technologies to improve quality of life in the EU. Really Good Innovation is a digital innovation hub.
✅ Related keywords: open innovation, co-creation, think tanks
A highly-effective tool to innovate collectively, innovation labs are used by corporations, NGO’s, and think tanks to tackle large, complex problems. Most innovation labs use an open innovation model, which is guided by a central question or theme. An example of an innovation lab is The Finance Innovation Lab in London, which aims to tackle questions relating finance to people and the planet.
✅ Related keywords: innovation process, idea generation, experimentation, implementation, idea management
Innovations go through three primary stages: fluid, transitional, and specific. In the fluid stage, the innovators are trying to define the opportunity and obtain patents. In the transitional stage, they are developing the business model of the innovation. In the specific stage, the innovators are fine-tuning the production process, to minimize costs and decrease development cycle time.
✅ Related keywords: innovation management, innovation process, opportunities
This process changes from organization to organization, but involves generally these 4 steps: searching for opportunities, selecting and refining the opportunities chosen, developing the opportunity selected, and capturing the benefits it delivers after development.
✅ Related keywords: innovation projects, innovation strategy
The collection of innovation projects a company is undergoing. It is best practice for a company to maintain projects with different risk profiles and timelines.
✅ Related keywords: business model, goals, corporate strategy
The roadmap a company follows when innovating new products, services, or business models. The innovation strategy encompasses the mission, vision, and values of a company’s innovation, as well as its goals and structure. It is very important that the innovation strategy of a company fits in with its overall strategy.
✅ Related keywords: integration, supply chain, business model
The ability of a company to integrate the innovative strengths of their partners into their supply chain and business model. An example of a company with extensive integrative competencies is Patagonia, who constantly integrates the innovations of other companies into their supply chain. For example, Patagonia is currently integrating Bureo's NetPlus, an innovative new clothing material made from discarded fishing nets, into their product lines.
✅ Related keywords: corporate silos, communication, network analysis
Internal collaboration is the development of innovation within the confines of the organization pursuing said innovation. That being said, internal collaboration may include collaboration between departments or people that do not work together on a regular basis to develop a creative solution to the problem being addressed.
✅ Related keywords: experimentation, rapid development, sprints
A method of innovation that allows for the rapid development and launch of new products into the market. In a lean startup, it is accepted and even expected for a product to not be ready for market entry on its first iteration. A famous lean startup is Dropbox, which used customer feedback during its first iterations to improve their product.
✅ Related keywords: external resources, closed innovation, collaboration
Sourcing resources for innovation from outside the organization, and combining ideas sourced externally with those created internally. Open innovation often allows for the development of more ideas for innovation, and more creative solutions to the problems facing the company. Open innovation can occur between companies, with only the company and outside experts, or it can be open to the public. NASA often undergoes open innovation, where they pose a question to the public regarding a problem they are facing in their innovation processes, and they hold a contest to get the best solutions.
✅ Related keywords: innovation process, problem identification, market need
Finding a problem in the market that needs a solution in the form of a product or service. Opportunity identification can come from a technology improvement that allows a company to better serve its customer, or from a perceived discrepancy between what is currently available in the market and what the customer wants. Opportunity identification is the first stage in the product innovation process.
✅ Related keywords: hierarchy, collaboration, cross-functional teams, innovation culture
The culture that exists within an organization, which is established by its leadership and perpetuated by a variety of processes and activities. Organizational cultures that are more favourable for innovation are usually horizontal and highly collaborative, with many cross-functional teams and a strong sense of shared mission and values. Examples of companies with such cultures include Google and Twitter.
✅ Related keywords: experimentation, MVP, product development
A tangible prototype used mainly for showcasing the future product. The focus of a physical prototype varies depending on its purpose. For example, some prototypes are only visual, in order to evaluate its aesthetics, whereas others are function or user-experience based.
✅ Related keywords: internal collaboration, efficiency, effectiveness
The improvement of any process in an organization. Process and product innovation are often developed together in the most successful companies. An example of a process innovation is the use of big data at hotel chains to effectively market their services and reach the right customers.
✅ Related keywords: product innovation, prototyping
The creation of an innovative product that is ready to be launched into the market. This is the third stage of the product innovation process. This part of the process may involve extensive prototyping and testing of the product.
✅ Related keywords: product development, value proposition
The improvement or novel creation of a product. It could be a brand-new product or an incremental innovation on an existing product. Product innovation usually comprises some form of these 4 stages: opportunity identification, concept refinement, product development and testing, and market launch.
✅ Related keywords: product innovation, market entry strategy
The debut of a the product in the market, and the marketing tactics that accompany said launch. This is the final stage of the product innovation process.
✅ Related keywords: product innovation, gradual improvement
Product refinement occurs after opportunity identification. It is when the innovator translates the customer’s needs into a product, and decides exactly what the product will look like. This is the second stage of the product innovation process.
✅ Related keywords: product innovation, MVP, product development
A preliminary model of a product or service that can be used for testing during the product or service development. Prototyping is often used to determine the MVP (Minimum Viable Product). Prototypes are often made from rudimentary materials instead of those that would be used for the finished product, or they are made with a 3D printer.
✅ Related keywords: disruptive innovation, blue ocean strategy
A type of innovation that produces highly differentiated, system-altering creations. Radical innovation changes the components that make up a product, service or business model and how they interact with each other. A common example of a radical innovation is Netflix and their video streaming capabilities that put the entire movie rental market out of business. The blue ocean strategy template can help to find opportunities for radical innovation.
✅ Related keywords: competition, blue ocean strategy
Innovation in the same space as competitors, in the competitive ‘red ocean’ full of ‘sharks’. In order to compete successfully in the red ocean, companies must have technical capabilities at least as good as their competitors. An example of a company who maintains a successful red ocean strategy is Apple. They also prove that it can be beneficial to undergo red and blue ocean strategies simultaneously.
✅ Related keywords: virtual innovation, online, digital transformation
Innovating in a virtual setting, remote innovation is how innovation has been conducted during the pandemic, and how it may be conducted for the foreseeable future. Remote innovation has allowed employees of innovative companies to choose where to live based on the merits of the city versus the company it hosts. Remote innovation has also popularized digital tools like Zoom, Discord, Teams, and Slack, to organize the innovation workforce.
✅ Related keywords: culture, skills, knowledge, assets
The assets, skills, and knowledge utilized in the innovation process. For example, Google uses its flat, horizontal organizational culture to foster an organization where ideas come from everywhere. A threshold resource is a resource a firm needs to compete in a given industry, such as a technology patent. A unique resource gives a firm competitive advantage, such as the strong people culture at Nintendo.
✅ Related keywords: opportunities, trends, technology
The skill of a firm in sensing opportunities in the market before competitors by knowing how and where to look for innovations. Opportunities could come from the user of the product, from an advancement in technology, or the emergence of a new trend.
✅ Related keywords: prototype, MVP, service innovation
Essentially a prototype of a service experience, the simulation may consist of role play or a full-scale example of a service delivery. Simulations are a highly effective way to communicate the service experience to stakeholders.
✅ Related keywords: social impact, social entrepreneurship, green innovation
Innovation in the name of social progress. Social innovation is usually realized through collaboration between the business, government, and non-profit sectors. An example of a social innovation is the TOMS One-for-One business model, by which the company donates a pair of shoes to a child in need every time they sell a pair of shoes.
✅ Related keywords: structured innovation, incremental innovation
A model for innovation used in large organizations that emphasizes structure and discipline. The goal of the stage gate model is to avoid creating too many iterations of the same product to keep costs low and maximize product quality. The stage gate model works best in complex situations with lots of uncertainty. It is too slow for simple innovations, and inefficient for radical innovation. The stage gate model is used in organizations such as NASA where the innovation team works on huge, complex innovations.
✅ Related keywords: visualization, customer experience
A visualization of the experience of a customer during service delivery or product usage. An example of a storyboard can be seen here.
✅ Related keywords: brainstorming, customer needs
A brainstorming framework that links customer needs to product features, and includes the weightings of customer needs. This allows the innovators to translate the opportunity offered by the customer’s problem into a product to fix their problem. The best way to build a house of quality is to use a template.
✅ Related keywords: customer-focused innovation, product / service portfolio
The offering to the customer, and the reason they should purchase a product. The value proposition should drive the innovation process, because the extent to which the value proposition matches what the customer desires will determine the company’s ROI on the innovation.
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