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10.1 What Does It Mean to Be Innovative?

Organizations in all developed economies (and increasingly many developing economies) want to be innovative. While cost control, cost parity, or both are important to be competitive, organizations in developed economies simply cannot compete with the low cost advantages that developing economies offer. As a result, more and more organizations voice or attempt to embrace the 21st-century mantra, “Innovate or die.”Peters (2006).

Many people equate creativity with innovation, and while this is understandable it is also a mistake. Creativity is the process of generating something new; while innovation is the application of creativity to a new product or service that has value. Product innovations add direct value to customers; process innovations add indirect value to customers by lowering costs, increasing the quality of new or existing products, or both. Value is generated by taking a creative new idea and moving it through a series of stages in order to yield a practical new innovation. Therefore, creativity is a necessary, but not sufficient condition for innovation.

Another misconception about innovation is that it is effortless and just happens. The philosopher Plato observed that “necessity is the mother of invention.” This observation suggests that problems are the stimulus for creativity and innovation and that persistence is required. Perhaps this is why T. S. Eliot, the highly creative American writer, stated, “Anxiety is the hand maiden of creativity”; and Andy Grove, the highly successful CEO who guided the Intel Corporation through an amazing streak of innovative activity, insists that “only the paranoid survive.”Grove (1996). In sum, creativity and innovation are essential for just about any organization today, but they are different concepts and neither comes easily.