UK Accounting Glossary
The process of translating an idea or invention into a good or service that creates value or for which customers will pay.
To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination and initiative in deriving greater or different values from resources, and includes all processes by which new ideas are generated and converted into useful products. In business, innovation often results when ideas are applied by the company in order to further satisfy the needs and expectations of the customers.
In a social context, innovation helps create new methods for alliance creation, joint venturing, flexible work hours, and the creation of buyers’ purchasing power. Innovations are divided into two broad categories:
Innovation is synonymous with risk-taking and organizations that create revolutionary products or technologies take on the greatest risk because they create new markets.
Imitators take less risk because they will start with an innovator’s product and make a more effective approach. Examples are IBM with its PC against Apple Computer, Compaq with its cheaper PC’s against IBM, and Dell with its still-cheaper clones against Compaq.
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This glossary post was last updated: 17th January 2020.