The value of innovation for companies

From Latin, the word “innovation” is used today in the sense of new ideas and inventions and how these are realized economically. 

“Innovation” is one of most popular terms currently: in 2014, this word appeared in over 14,000 articles published in Switzerland, according to the Swiss media database SMD. “Innovation” literally means novelty or renewal, a term derived from the Latin “novus” (new) and “innovativo” (to create something again). 

Application to economics

This notion is used today in the sense of new ideas and inventions, and their realization and economic application. In 1911, the economist Joseph Schumpeter described the concept in his thesis entitled “Theory of Economic Development,” as follows: “Imposing a technical or organizational innovation, not only on account of its invention.” J. Schumpeter introduced the term innovation into economic theory in 1939. 

Competitive advantages

Innovation is vital to an SME’s survival and is not an end in and of itself. It enables the company to acquire competitive advantages through attractive avant-garde products, processes or services. Thanks to innovations, unlike minor everyday improvements, a company wins its place in tomorrow’s markets. An innovation increases the attractiveness of its range or offer and measures the company against the competition. 

Transforming ideas into reality

An innovation finds success when, starting with a problem, a customer requirement, the search for an opportunity or simply a spontaneous idea, something new is initiated and realized, then accepted by the market. It is also important for the company to decide whether it intends on protecting its innovations against improper use and profiteers and, where applicable, how (protection by patent, for example). 

Advantages and risks

The advantages and risks of innovations can be defined as follows:

Avantages Risks
Guarantee and strengthen market positioning Expenses which are often considerable in terms of costs and time
Competitive differentiation Potential failure of innovation projects (e.g. non-acceptance of the innovation by market or customers)
Increase in profits  
Increase in growth  
Increase in yield  
Substitution of old products and services  
Consolidation and increase in the life of company  


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Last modification 07.08.2018

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