According to McKinsey, 84% of executives believe that future success is based on innovation. Although innovation may sound like a buzzword to some, there are numerous reasons why businesses place so much importance on it.

Innovation not only allows firms to remain competitive, but it also contributes significantly to economic growth. The ability to solve crucial problems is dependent on new inventions, and developing countries require them more than ever.

We’ve written several pieces regarding innovation management, and this time we’ve decided to delve deeper into the reasons why innovation is vital for both individual organizations and society as a whole.

What is innovation, and why is it important?

Innovation is defined as the introduction of something new. Without innovation, there is no new, therefore there will be no advancement. If an organization is not making progress, it will be unable to remain competitive.

Understanding the effects of innovation on our society as a whole might be difficult at times because organizations frequently collaborate with other organizations. However, innovation encompasses far more than just corporations seeking a competitive advantage.

Innovation is truly the driving force behind modern existence. Although innovation might have unintended repercussions, change is unavoidable, and in most circumstances, innovation results in beneficial change.

We’ve opted to look at the outcomes of innovation at both the macro and micro levels:

Macro Perspective: The Role of Innovation in Our Society.

Over the last few decades, innovation has become an important tool for combating crucial social hazards and challenges.

For example, during the Industrial Revolution, energy-driven consumption of fossil fuels has resulted in a significant increase in CO2 emissions, interrupting the global carbon cycle and contributing to planetary warming.

Our culture revolves around continual economic expansion, which is mostly driven by population growth. Populations are declining and aging in industrialized countries, and this trend is anticipated to continue in other regions of the world.

Innovation is vital to the growth of civilization because it solves these types of social problems and increases society’s ability to act.

It is in charge of resolving community problems in a long-term and efficient manner, typically using modern technology. These new technology, products, and services address a social need while also improving capabilities and optimizing the use of assets and resources.

The business, public, and non-profit sectors all play a role in addressing these types of societal issues.

• The key outcomes of innovation

Because innovation affects so many aspects of our society, it is nearly hard to cover everything in a single post. As a result, we’ve opted to focus on the most important components of the value of innovation.

In general, innovation should lead to improvement. From the standpoint of society, the primary outcomes of innovation are economic growth, improved well-being and communication, educational accessibility, and environmental sustainability.

• Economic growth.

Technological innovation is seen as a key driver of economic progress. Economic growth is defined as the rise in the inflation-adjusted market value of goods and services generated by an economy over time. It is typically quantified as the percentage rate of rise in real gross domestic product, or GDP.

In general, there are two strategies to boost economic output:

• Increase the amount of inputs that enter the productive process.
• Find new methods to get more output from the same number of inputs.

The latter captures the essence of innovation fairly effectively. The goal of innovation is to develop new ideas and technologies that boost productivity and generate more output and value from the same input.

According to the aforementioned Stanford study, innovation accounts for up to 85% of total economic development.

When we examine the transformation of the United States, which began as a largely agrarian economy and advanced from emerging nation status in the mid-19th century to an industrial economy by the First World War, we can see that agricultural innovations and inventions played a significant role in bringing about the Industrial Revolution.

Vast improvements in agricultural production had already revolutionized the way people worked in Europe, freeing farmers to pursue other interests and allowing them to go to cities for industrial labor. The change from hand-made to machine-made products enhanced productivity, which had a direct impact on living standards and growth.

Previously, one worker could only feed a portion of their family; now, one person can create more in less time to feed the entire family.

• Innovation and the Future of Jobs 

Technological innovation and improved production represent significant changes for today’s occupations as well. The global economy could more than double in size by 2050 as a result of ongoing technological product advances.

According to a new World Economic Forum estimate, AI, automation, and robotics might provide over 133 million new jobs by 2022 while displacing 75 million others.

Manual, low-skilled employment and middle-income positions such as accountants, lawyers, and insurance clerks will be hit the most during the next decade.

The main worry here is not that these jobs will disappear totally, but rather that labor force polarization will grow more substantial. Both traditional and emerging occupations necessitate the acquisition of new skills.

People’s working habits and locations will evolve over time. Experts will be in more demand, while “regular workers” may be forced to accept low-wage roles.

• Increased well-being

In general, innovation and economic expansion promote well-being by raising living standards. The Brookings Institution found that countries with higher GDP per capita have higher average life satisfaction. Another study found that there is a correlation between innovation and subjective wellbeing.

However, not all of the advantages of innovation and expansion are equally dispersed. A growth in real GDP frequently results in increased income and wealth disparity. Although there is no set amount of inequality that is considered excessive, larger socioeconomic disparities are likely to have some negative implications.

In theory, income disparity isn’t a problem unless the concrete purchasing power decreases. In practice, however, it has a variety of effects on our society and overall well-being.

• Reduced illness, poverty, and hunger.

As previously said, developing countries rely on innovation since new digital technology and innovative solutions provide enormous opportunities to combat disease, poverty, and hunger in the world’s poorest places.

Developed countries also rely on innovation to address their own difficulties relating to these topics.

When it comes to eliminating hunger, agricultural production is essential in developing countries where the next population boom is expected to occur. In developing countries, smallholder farms play a vital role because they produce up to 80% of the food.

Developing and sharing agricultural innovations, such as connecting farmers to meteorological data, has proven to be an effective strategy to keep farmers in business. Although this is only one example of how innovation can help people continue to produce food, it also opens up a plethora of additional possibilities that can eventually help alleviate poverty and hunger worldwide.

• Communication and Educational Accessibility

You’re undoubtedly already aware that the World Wide Web is celebrating its 30th birthday this year. We’ve already seen a massive technological revolution in the last few decades, and it will continue in the coming years.

According to the World Bank’s 2016 Annual Report, 7 out of 10 households have a cell phone, including the lowest 20%. This means that more people now own mobile phones than toilets or clean water.

In addition, the number of mobile workers is predicted to increase from approximately 96 million to more than 105 million by 2020. Mobile technology innovations such as voice control and augmented reality are allowing workers in entirely new ways.

Technology innovation can also help rural communities prosper and become more sustainable. Despite some impediments to technology adoption, such as poor money or user capability, more individuals can have access to information and increase their knowledge regardless of socioeconomic status or demographics.

• Environmental sustainability

Sustainability and environmental difficulties, such as climate change, are challenges that require significant effort and imaginative solutions both now and in the future.

The environment suffers when consumerism spreads and consumerism becomes central to the modern economy. Although consumerism promotes innovation as a source of economic progress, the increased consumption of creative items is frequently cited as one of the causes of environmental deterioration.

Politics and other techniques are often insufficient to effect change, at least not quickly enough. Policy changes take time to take effect, which is why the long-term survival of our society and the environment is dependent on new, responsible, innovative technologies.

Although new greener technological options, like as eco automobiles, are not yet more competitive alternatives to gasoline-powered vehicles, they will undoubtedly provide many benefits in the future.

Micro Perspective: The Importance of Innovation for Organizations

Now that we’ve discussed the role of innovation in society, we can look more closely at its value for organizations and enterprises.

In general, it is difficult to identify industries in which innovation is not vital. Although certain industries rely more on innovation than others, innovation and the potential to improve benefit everyone.

Even highly regulated industries like taxis and banking are subject to change. Consider Uber’s impact on the traditional taxi sector, or how innovation affects financial services.

In general, innovation can provide major benefits and is a necessary ability for success in any firm.

• Competitive advantage

Competitive advantage refers to the essential developments in capabilities that provide you an advantage over your industry competitors. What these are relies on your business model and the industry you work in.

As previously said, one of the most compelling motivations for firms to innovate is to stay ahead of the competition. Successful, innovative organizations can adapt their operations, services, and products to meet the needs of their customers and the changing market conditions.

According to Deloitte, only 12% of Fortune 500 businesses from 1955 remain in operation, and half of S&P 500 corporations will be replaced in the next ten years, emphasizing the need of being able to respond rapidly to external problems.

Innovation boosts your ability to respond to changes and identify new opportunities. It can also help you get a competitive advantage by allowing you to develop better products and services for your clients.

• Maximize ROI

Increased competitive advantage and ongoing innovation can have a direct influence on performance and profitability.

According to Global Innovation 1000, more innovative firms have a clear advantage in terms of revenue (11%) and EBITDA (22%) growth. These figures reveal that innovative businesses not only expand quicker but also are more profitable than the competition.

Although evaluating the ROI of innovation can be difficult, especially in the beginning or when discussing disruptive breakthroughs, investing in innovation is typically a safer approach to improve your numbers than not innovating at all.

• Increased productivity

Innovation and technological advancements drive economic growth by lowering production costs and increasing output. Looking at it from an organizational standpoint, various automation solutions reduce manual, repetitive work, freeing up time for more critical, value-creating tasks.

Improved productivity and efficiency make work more meaningful by reducing the amount of time spent on low impact jobs. The more time you can devote to tasks that directly affect your business, such as improving processes, solving problems, or conversing with your customers, the more likely you are to reduce costs, increase turnover, and provide your customers with solutions that truly benefit them.

• Positive influence on organizational culture

Finally, innovation has a good impact on organizational culture because it improves the ability to acquire, generate, and maximize the use of competencies, skills, and knowledge.

Innovation methods can help to foster a culture of lifelong learning, growth, and personal development. This type of inventive atmosphere can inspire workers to constantly enhance how they and their teams work.

When the entire organization is supportive and provides the necessary tools for individuals to excel in their tasks, people’s perceptions of their jobs improve.

What Are the Main Characteristics of Innovation?

Innovation is defined as infusing innovation into a product, service, strategy, or business model. Furthermore, innovation improves the utility and longevity of the entity mentioned above. It can be an idea or a concept that helps firms keep ahead of the competition while also instilling creativity and efficiency.

Modern executives recognize the value of company innovation for advancement and progress in today’s business environment. As a result, it is claimed that there is a high demand for managers and executives that enjoy business innovation. Below, we will explore the main characteristics of business innovation; please see:

• Different types of innovation, such as sustaining and disruptive, have a direct impact on the company’s product or process. While sustaining innovation improves corporate processes over time, disruptive innovation occurs when smaller enterprises challenge larger corporations.
• Innovation is critical in bringing innovation to established product lines or processes, resulting in improved market share, revenue, and customer happiness.
• Sometimes innovation is employed to enhance the business’s operating systems or to introduce contemporary automation technology. It is claimed that the combination of innovation and automation can enable businesses to experience exponential development.

In the following section of the text, we will go deeply into understanding business innovation. Beginning with the benefits of corporate innovation and progressing to an awareness of its importance.

Generally, the primary goal of innovation is to better people’s lives. Innovation is essential for company success.

Although your innovation activities may not be powerful enough to change the world, you should focus on improving what you can influence.

Small improvements lead to bigger and better ideas, which may one day be revolutionary. In the meantime, you’re responsible for improving your own area of influence.

Getting started is often the most difficult aspect of innovation because there are so many approaches. Our advice is to work on both personal and business development at the same time. You should, however, start small and narrow your focus, as it is difficult to accomplish everything at once.