Here's the $64,000 question. What is innovation, how is it defined and why should we care? If you are counting, that's probably three questions.

Our definition of innovation: People putting ideas into valuable action. This can mean:

• Product innovation - bringing entirely new products to market or simply enhancing the existing product line
• Service innovation - creating a new service offering or improving existing service models
• Creating an entirely new business model or consumer market

There are at least three "types" of innovation as defined by Christensen and others:

• Incremental Innovation - incremental innovation is focused on making small but significant improvements to existing products or services. Think detergent, detergent with Bleach, detergent with pine scent.
• Breakthrough Innovations - this type of innovation introduces an existing technology into a new market, a new technology into an existing market or changes the way the offering is delivered. A good example is adding air bladders to running shoes. Air bladders existed in other applications, but it was a new and interesting idea to add them to the soles of running shoes.
• Game Changers - this type of innovation disrupts an existing market or creates a whole new market. A good example is the switch from cloth diapers to disposable diapers. Most moms switched from a diaper service or washing cloth diapers to paper diapers purchased at a store which they used once and threw away.

Innovation is the least defined and most poorly understood business process. You'll often hear people speak of the "Fuzzy" Front End, by which they mean the processes and actions to generate and capture ideas that can be converted into new products and services. There have been some attempts to formalize the "Front End" of innovation, primarily by individuals who create processes such as Stage-Gate. We at OVO defined an innovation methodology we call Innovate on Purpose.