Definition: Innovation

There is no single dogmatic definition of the term "innovation" in the context of economics and science.

The book Small Business Management and Entrepreneurship by David Stokes, Nicholas Wilson, Nick Wilson, wraps it up nicely:

In its broadest sense, the term innovation comes from the Latin innovare, meaning ‘to make something new’. Modern day understanding is that innovation is a process of turning ideas into new opportunities for value creation and of putting these into widely used practice. The terms innovation and creativity are often used interchangeably. […] it is helpful to distinguish between them:

■  Creativity is the generation of new ideas.
■  Innovation is the successful exploitation of new ideas.

The process of entrepreneurship relies on the creativity of those individuals involved, in terms of coming up with the original ideas for new products and services in the first place. This is only one side of the story, however. Entrepreneurship involves the successful exploitation of these ideas. In a market context, this involves the successful exchange of the new product or service, or what we refer to as innovation. Arguably, therefore, we can only really refer to an innovation after the event (post hoc), since whether or not a new product or service is successfully introduced into the market can only be born out by the evidence, rather than through prior speculation.It is widely acknowledged that innovation plays a central role in the competitiveness of firms and countries. Innovation is understood to be a key driver of productivity. Innovation helps businesses to improve the way that products and services are made and delivered, or to introduce entirely new ones. [...] Evidence suggests that innovating companies sustain a higher performance and grow faster than non-innovators. Innovation has been defined broadly as the successful exploitation of ideas - or turning ideas into profitable products, processes, services or business practices. In other words, an innovation has been commercialized, whereas an invention has not.

Here's another short definition that I can relate to:

Innovation is the process of translating an idea or invention into a good or service that creates value or for which customers will pay.
Source: http://www.businessdictionary.com/definition/innovation.html

The UK Department for Innovation, Universities and Skills has expressed this even more sustinct:

Innovation is the successful exploitation of new ideas.
Source: Innovation Nation, UK Dept. for Innovation, Universities & Skills, 2008; see also "Innovate to Accumulate", 1994.

Others have turned this into a short formula:

Innovation = Invention + Exploitation
Source: Managing Invention & Innovation, E.B. Roberts, 1998

Innovation = Creativity + Exploitation
Source: Applying Innovation, D. O'Sullivan, L. Dooley, 2008

The OECD defines "innovation" in a more comprehensive fashion:

An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.  
Source: OECD Oslo Manual, Guidelines for collecting and interpreting innovation data, 3rd Edition, 2005 

Wikipedia has adopted a definition that even goes beyond the OECD definition:

Innovation is: production or adoption, assimilation, and exploitation of a value-added novelty in economic and social spheres; renewal and enlargement of products, services, and markets; development of new methods of production; and establishment of new management systems. It is both a process and an outcome.   

Source: A Multi-Dimensional Framework of Organizational Innovation: A Systematic Review of the Literature, Crossan & Apaydin, 2010
Cited in Towards innovation measurement in the software industry. Journal of Systems and Software 86(5), 1390-1407, Edison, Ali, Torkar, 2013

MIT's Innovation Initiative (MITii) simply defines

        Innovation is the process of taking ideas from inception to impact.

Of course, there are many other definitions, some of which have been assembled on the following web pages:

http://www.ericshaver.com/the-many-definitions-of-innovation

http://www.freshconsulting.com/what-is-innovation 

https://www.linkedin.com/pulse/why-so-hard-define-innovation-derek-christensen

I took note of the alternative definitions referenced in the LinkedIn article above:

          An innovation is a feasible relevant offering

         such as a product, service, process or experience

        with a viable business model that is perceived as new and is adopted by customers.

         - Gijs Van Wulfen

         Innovation = Invention * Commercialization

        - Bill Aulet

Scott Berkun, author of the book "The Myths of Innovation", claims the "best definition of innovation" to be his:

Innovation is significant positive change.

I find Scott's book a little too much focussed on the ideation and invention phases of the overall innovation process and I don't fully concur with the broadness of his definition (but even creators of Idea Management Software seem to like and endorse it). I'd  rather refer to one of the short definitions listed above or Geoff Mulgan's formula that I came across just recently:

        Innovation = Ideas that work.

To put this into the context of research, invention and creativity, i.e. the creation of ideas, let me quote Dr. Geoff Nicholson, the "Father" of the "Post-it" Notes @ 3M:

      Research is the transformation of money into knowledge.
      Innovation is the transformation of knowledge into money.

      Creativity is thinking but innovation is doing.

Others have morphed this into

      Invention is turning money into ideas. Innovation is turning ideas into money.

which brings me to the final quote by Jim Balsillie, co-founder of RIM/Blackberry:

      Innovation is getting money for ideas.

[20210615 - Added MIT definition and two more taken from referenced LinkedIn article.]