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New Enterprises · Lecture 2 of 12 · 4:18

Lecture 2: What is Innovation

What is Innovation on YouTube

Study guide

What this lecture covers

Building on the previous lecture's distinction between types of entrepreneurship, this lecture defines innovation itself. It introduces a formula, borrowed from MIT's Ed Roberts, for separating invention from innovation, and argues that people often confuse the two.

Watching this gives you a working definition you can apply to any product or company: whether an idea alone counts as innovation, and what has to happen for it to create value.

Key ideas

  • Invention: an idea, technology, or patent by itself; it does not generate value on its own.
  • Innovation: something that makes life faster, better, or cheaper, generating real value for the world.
  • Innovation = invention x commercialization: framed as a product, not a sum, because if either factor is zero, there is no innovation.
  • Commercialization is the hard part: Aulet argues it is commercialization, not the original idea, that most often drives whether innovation succeeds.
  • Apple as an example: the graphical interface behind the Mac came from Xerox PARC, and the mp3 format behind the iPod was not invented by Apple; Apple's contribution was commercializing both.
  • Ideas are cheap: without commercialization, even a strong idea creates no value.

Before you watch

  • Watch "What is Entrepreneurship" first, since this lecture builds directly on the SME/IDE distinction it introduces.

Check your understanding

  1. How does Aulet's equation for innovation differ from simply adding invention and commercialization together?
  2. Why does an invention with no commercialization equal zero innovation in this framework?
  3. What do the Mac and the iPod examples illustrate about where Apple's innovation actually came from?
  4. Can you think of an idea that failed to become an innovation because it was never commercialized?

Vocabulary

innovation (noun)
Something new that makes life faster, better, or cheaper and creates real value.
True innovation must actually reach and help people.
invention (noun)
A new idea, technology, or design, before it is turned into something useful for people.
A patent by itself is just an invention with no guaranteed value.
commercialization (noun)
The process of turning an idea into a product people can actually buy and use.
Commercialization is what makes an invention reach the market.
patent (noun)
A legal right protecting a new invention from being copied.
Owning a patent doesn't guarantee the idea will succeed commercially.
value (noun)
The real benefit or worth something provides to people.
An innovation only counts if it creates real value for users.
graphical interface (noun)
A way of using a computer through pictures and menus instead of typed commands.
The graphical interface behind the Mac was developed elsewhere first.
format (noun)
A specific way information or media is structured or stored.
The mp3 format existed before Apple built the iPod around it.
generate (verb)
To produce or create something.
An idea alone does not generate value without commercialization.
framing (noun)
The way an idea is presented or explained.
The lecture's framing separates invention from innovation clearly.
formula (noun)
A fixed way of expressing a relationship between things, often using math symbols.
Aulet borrows a formula to define innovation precisely.
factor (noun)
One of the parts that, multiplied together, produce a result.
If either factor in the formula is zero, there is no innovation.
confuse (verb)
To mistakenly treat two different things as if they were the same.
People often confuse invention with innovation.
contribution (noun)
The part someone adds or provides to a larger effort.
Apple's real contribution was commercializing existing ideas.
reach (verb)
To arrive at or successfully get to a goal or group of people.
An idea must reach real customers to count as innovation.
breakthrough (noun)
A sudden important discovery or development.
A scientific breakthrough is not automatically an innovation.
illustrate (verb)
To make an idea clear by giving a specific example.
The Apple example illustrates the difference between invention and innovation.
underlying (adjective)
Forming the basic or hidden foundation of something.
The underlying technology of the iPod came from outside Apple.
working definition (noun)
A practical explanation of a term, useful enough to apply even if not perfect.
The lecture gives a working definition of innovation you can use anywhere.
originate (verb)
To come from or begin at a particular source.
The graphical interface did not originate at Apple.
widespread (adjective)
Found or happening in many places or among many people.
A truly successful innovation becomes widespread among users.

Chapters

From the YouTube description

MIT 15.390 New Enterprises, Fall 2013
View the complete course: http://ocw.mit.edu/15-390F13
Instructor: Bill Aulet

Discussion of the essential difference between invention and innovation and the important role played by commercialization in innovation.

License: Creative Commons BY-NC-SA
More information at http://ocw.mit.edu/terms
More courses at http://ocw.mit.edu

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