Innovation is the introduction into use of a new or significantly improved product (good or service) or production process, a new marketing method or a new organisational method in business practice, workplace organisation or external relations that creates market advantages and, in so doing, increases the competitiveness of firms.

Innovation is novelty, i.e. something that has a qualitatively different degree of improvement compared to its previous state or is something new - an innovation, a new discovery that has not existed in time and space before. Innovation has a significant positive value, which means that in order for there to be innovation it is not enough to create something new, but it must produce a strong positive effect compared to previous similar creations of the same class and kind. Moreover, this positive effect must be achieved at minimum cost, or at least the ratio of positive effect to cost must be multiplied in favour of the effect.

A common feature of innovation is the fact that it must be implemented, i.e. it must have entered the market. New production processes, marketing methods or organisational methods are considered to have been implemented when they are actually used in the company's operations.

The European Innovation Scoreboard presents an analysis of the performance of innovation in the countries of the European Union, other European countries and regional neighbours.

Incremental and disruptive innovations

According to the degree of innovativeness they have, innovations are of two main types - incremental and disruptive:
1. Incremental innovation - an improvement on something existing with a relatively low degree of innovativeness; may represent a series of small improvements made to a company's existing products or services, its processes, organization, or the way it does things

Between 70% and 98% of innovations globally are incremental.

Examples of incremental innovations:
- Shavers - start with one shaving blade, then two, three, etc.
- Changing the flavour of soft drinks and alcoholic beverages - at the beginning a standard flavour is offered, then new flavours are added, e.g. cherry, lime, lemon, etc., the aim being to expand consumer demand
- Changes in mobile device features with the introduction of new features

2. Disruptive innovations (they are high-risk but carry a potnecial for high returns) - have a high degree of innovativeness; create something that did not exist before and lead to the emergence of a new market; change the way we do things

Examples of disruptive innovation:
- Vessels with steam engines versus ships with sails
- Laptops versus desktops
- CDs versus records
- Downloading music files from the internet versus CDs or records
- Digital cameras versus film cameras
- Cloud technologies versus recording information on hard drives, etc.

Types of innovation

There are four types of innovation:
- Product
- Production
- Marketing
- Organizational (process)

- Product innovation

Product innovation is the introduction of a good or service that is new or significantly improved in terms of its properties or uses. This includes significant improvements in technical characteristics, components and materials, embedded software, degree of user-friendliness or any other functional features.

Product innovations may use new knowledge or technologies, or they may be based on new techniques in use or on new combinations of existing knowledge or technologies.

- Production innovation

Manufacturing innovation is the introduction of a new or significantly improved way of producing or delivering a product. This includes significant changes in technology, production equipment and/or software.

Production innovations may aim at reducing the cost or cost of supply of the output, increasing the quality of the output or the production or supply of new or significantly improved products.

- Marketing innovation

A marketing innovation is the introduction of a new method of marketing, including significant changes in the design or packaging of the product, its storage, its advertising in the market or in the determination of its selling price.

Marketing innovations are aimed at better meeting consumer needs, opening new markets or gaining new positions for the company's products in its market in order to increase sales volume.

- Organisational (process) innovation

Organisational or process innovation is the introduction of a new organisational method or process into the firm's business practice, workplace organisation or external relationships.

This type of innovation can be aimed at increasing the efficiency of the firm, e.g. reducing administrative or operational costs, increasing employee satisfaction with their job situation leading to improved labour productivity, expanding access to intangible assets (e.g. databases, intellectual property, etc.) or reducing supply costs.

Global Innovation Index 2021

The most comprehensive ranking of the innovation performance of national economies is made by Global Innovation Index, edition of World Intellectual Property Organization. Its 81 indicators examine the innovation performance of 132 countries, including the policy environment, education, infrastructure and business development.