Lecture 2: What is Innovation

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?