Innovation and Its Role in Management

Innovation: Concept, Classification, Importance Of Innovation In Contemporary Management

The definition of “innovation” as found in encyclopedias can be presented in broad terms (e.g. innovation, novelties, new things introduced to the market, implementation of new technologies, founding organizations and institutions) as well as in narrow terms, describing particular branches of knowledge (e.g. product innovations, introducing new products, services and process innovations, using new and more efficient ways of obtaining these products.

Innovation is a tool for modern organizations that, if used properly, can enable businesses to take effective action in competitive markets. Oftentimes, it is innovation and the ability to create it that make it possible for companies to gain and strengthen their competitive advantage. Innovations are sometimes considered a prerequisite for running a business under current economic circumstances, or even the most valuable asset for organizations these days (Dziekoński & Chwiećko, 2013). The author of one of the first definitions of the concept of innovation is J.A. Shumpeter, who already in 1912 said that it was a discontinuous performance of new combinations in the five following cases: introducing a new product or new production method; opening up a new market; obtaining a new source of raw materials or semi-finished products; and setting up a new organization for an industry (Schumpeter, 1960, 104).

Schumpeter's approach is strictly an engineering one, focusing on the productive aspect of the organization’s activity. Innovation today, however, does not come down merely to production, and the original term has been conceptually expanded. We are now more often talking about innovation in terms of services, as noted by P. Kotler, who writes that innovation refers to every good that is perceived as new (Kotler, 1994, 15-28). It is also important to note there is no size requirement for innovation, as in the OECD’s declaration it is the introduction of a new or significantly improved product, process, new organizational or marketing method in business practice, workplace or relations with the outside world (OECD, 2005, 46-48). E. Dworak points out that, regardless of the area of application and its scope, innovations have a number of characteristics in common. These characteristics are (Dworak. 2012):

• 1.

  Purposefulness of Innovations: They are not accidental and are intended to bring about beneficial changes;

• 2.

  Scope of Changes Resulting From Innovations: Processes, products, organization, or management methods;

• 3.

  Practical dimension and practical relevance of innovations;

• 4.

  Economic, technical or social benefits of innovations;

• 5.

  Need for a key resource in the form of economic, technical, market-related and socio-psychological knowledge;

• 6.

  Microeconomic benefits, as the result of innovation is the development of the organization;

• 7.

  Macroeconomic benefits, as the result of innovation should be positive economic effects, thus making innovation a propeller of technical progress.

The importance of innovation, along with the development of the sciences of organization and management, has also changed accordingly. This is particularly evident in the evolution of the definition of the concept in question, which dates back to Schumpeter and the early years of the 20^th century and which fully corresponds to the classical trends in management, but has never ceased to advance. Today’s definitions no longer mention production, but rather the implementation of innovation and the strengthening of its importance in the community (Denning & Dunham, 2010, 6). Table 1 lists some of the definitions of the concept of innovation that demonstrate a clear shift in the perception of it over the last century.