Today’s competitive landscape heavily relies on innovation. Business leaders must constantly look for new ways to innovate because you can’t solve many problems with old solutions.

Innovation is critical across all industries; however, it’s important to avoid using it as a buzzword and instead take time to thoroughly understand the innovation process.

Here’s an overview of innovation in business, why it’s important, and how you can encourage it in the workplace.


Innovation and creativity are often used synonymously. While similar, they’re not the same. Using creativity in business is important because it fosters unique ideas. This novelty is a key component of innovation.

For an idea to be innovative, it must also be useful. Creative ideas don’t always lead to innovations because they don’t necessarily produce viable solutions to problems.

Simply put: Innovation is a product, service, business model, or strategy that’s both novel and useful. Innovations don’t have to be major breakthroughs in technology or new business models; they can be as simple as upgrades to a company’s customer service or features added to an existing product.

Types of Innovation

Innovation in business can be grouped into two categories: sustaining and disruptive.

  • Sustaining innovation: Sustaining innovation enhances an organization’s processes and technologies to improve its product line for an existing customer base. It’s typically pursued by incumbent businesses that want to stay atop their market.
  • Disruptive innovation: Disruptive innovation occurs when smaller companies challenge larger businesses. It can be classified into groups depending on the markets those businesses compete in. Low-end disruption refers to companies entering and claiming a segment at the bottom of an existing market, while new-market disruption denotes companies creating an additional market segment to serve a customer base the existing market doesn’t reach.

The most successful companies incorporate both types of innovation into their business strategies. While maintaining an existing position in the market is important, pursuing growth is essential to being competitive. It also helps protect a business against other companies affecting its standing.


Unforeseen challenges are inevitable in business. Innovation can help you stay ahead of the curve and grow your company in the process. Here are three reasons innovation is crucial for your business:

  1. It allows adaptability: The recent COVID-19 pandemic disrupted business on a monumental scale. Routine operations were rendered obsolete over the course of a few months. Many businesses still sustain negative results from this world shift because they’ve stuck to the status quo. Innovation is often necessary for companies to adapt and overcome the challenges of change.
  2. It fosters growth: Stagnation can be extremely detrimental to your business. Achieving organizational and economic growth through innovation is key to staying afloat in today’s highly competitive world.
  3. It separates businesses from their competition: Most industries are populated with multiple competitors offering similar products or services. Innovation can distinguish your business from others.


    Several tools encourage innovation in the workplace. For example, when a problem’s cause is difficult to pinpoint, you can turn to approaches like creative problem-solving. One of the best approaches to innovation is adopting a design thinking mentality.

    Design thinking is a solutions-based, human-centric mindset. It’s a practical way to strategize and design using insights from observations and research.

    Four Phases of Innovation

    Innovation’s requirements for novelty and usefulness call for navigating between concrete and abstract thinking. Introducing structure to innovation can guide this process.

    In the online course Design Thinking and Innovation, Harvard Business School Dean Srikant Datar teaches design thinking principles using a four-phase innovation framework: clarify, ideate, develop, and implement.

    • Clarify: The first stage of the process is clarifying a problem. This involves conducting research to empathize with your target audience. The goal is to identify their key pain points and frame the problem in a way that allows you to solve it.
    • Ideate: The ideation stage involves generating ideas to solve the problem identified during research. Ideation challenges assumptions and overcomes biases to produce innovative ideas.
    • Develop: The development stage involves exploring solutions generated during ideation. It emphasizes rapid prototyping to answer questions about a solution’s practicality and effectiveness.
    • Implement: The final stage of the process is implementation. This stage involves communicating your developed idea to stakeholders to encourage its adoption.

    Human-Centered Design

    Innovation requires considering user needs. Design thinking promotes empathy by fostering human-centered design, which addresses explicit pain points and latent needs identified during innovation’s clarification stage.

    There are three characteristics of human-centered design:

    1. Desirability: For a product or service to succeed, people must want it. Prosperous innovations are attractive to consumers and meet their needs.
    2. Feasibility: Innovative ideas won’t go anywhere unless you have the resources to pursue them. You must consider whether ideas are possible given technological, economic, or regulatory barriers.
    3. Viability: Even if a design is desirable and feasible, it also needs to be sustainable. You must consistently produce or deliver designs over extended periods for them to be viable.

    Consider these characteristics when problem-solving, as each is necessary for successful innovation.

    The Operational and Innovative Worlds

    Creativity and idea generation are vital to innovation, but you may encounter situations in which pursuing an idea isn’t feasible. Such scenarios represent a conflict between the innovative and operational worlds.

    The Operational World

    The operational world reflects an organization’s routine processes and procedures. Metrics and results are prioritized, and creativity isn’t encouraged to the extent required for innovation. Endeavors that disrupt routine—such as risk-taking—are typically discouraged.

    The Innovative World

    The innovative world encourages creativity and experimentation. This side of business allows for open-endedly exploring ideas but tends to neglect the functional side.

    Both worlds are necessary for innovation, as creativity must be grounded in reality. You should strive to balance them to produce human-centered solutions. Design thinking strikes this balance by guiding you between the concrete and abstract.