- Invention
- Invention is an advance in knowledge, such as a new idea, design or discovery, whether or not anyone has yet put it to use.
- Innovation
- Innovation is putting an advance in knowledge to use in a new product or service, or in a new way of producing.
Two kinds of innovation
Can you name the two kinds of innovation a firm can make?
Each one is a way to earn more profit: make the same thing more cheaply, or make something buyers want more.
Process innovation is a new or improved way of making an existing good or service, changing which inputs are used or how they are combined.
Can you think of an example?
A parcel warehouse brings in robots that carry shelves to the packers, so each packer fills more orders an hour. The parcels customers receive are exactly the same.
Product innovation is a new good or service, or an existing one improved, so that what buyers are offered changes.
Can you think of an example?
A phone maker launches a model whose battery lasts twice as long as the old one, or a bank starts offering accounts that run entirely through an app.