Innovation is the process of practically satisfying a human need by either inventing some ‘new’ product (such as the telephone) or process or more commonly improving an existing one (smartphone). In the cases of the invention of products such as the telephone, they often implement existing technologies, such as those used with the telegraph, and combining them in a new way.

Innovation is distinguished from invention and discovery, in that innovation makes the discovery or invention of practical use to human life. Thomas Edison may not have invented the original light-bulb, but he did make it into a practical product and worked out the details that allowed people to more efficiently and effectively (better quality and at less cost than a candle) to light their homes. Henry Ford did not invent the motor car, but he figured out how to make it cheap enough so that more people could afford to own one.

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Take for example the incandescent bulb and artificial light “one of the greatest gifts of civilization.” In his book, How Innovation Works: And Why It Flourishes in Freedom, author Matt Ridley points out this astonishing fact:

“A minute of work on the average wage could earn you four minutes of light from a kerosene lamp; a minute of work in 1950 could earn you more than seven hours of light from an incandescent bulb; in 2000, 120 hours.”

The LED light bulbs of today use only 10% of the energy for the same amount of light as earlier bulbs, making the effective supply of energy increase in proportion. Innovation is the solution to the problem of ‘scarcity’ and ‘diminishing returns’ that plagues the ‘dismal science.”

According to Ridley, innovation has the following characteristics:

• Innovation is gradual rather than disruptive. It is evolutionary, rather than revolutionary, “technologies evolve from technologies, not from scratch.”
• Innovation is different from invention. It must have some positive human impact, that is, “the people who find ways to drive down the costs and simplify the product who make the biggest difference.”
• Innovation is serendipitous; that is, innovation is often an “accidental discovery,” which is why liberal “free-roving experimental” economies “give luck a chance” — a bit of luck is involved as in the case of the fortuitous discovery of antibiotics.
• Innovation is recombinant, in that it combines earlier innovations to create something new. To what the author issues what I call the Ridley Challenge: “I defy the reader to find a technological (as opposed to a natural) object in his or her pocket or bag that is not a combination of technologies and of ideas.”
• Innovation is a process that involves trial and error, and “most human innovations evolve through a process that looks awfully like natural selection rather than are created by intelligent design.”
• Innovation is a collaborative, team sport and “not an individual phenomenon but a collective, incremental and messy one” that “thrives in an ecosystem of innovation” where innovators stand “on the shoulders of others.”
• Innovation is exorable. “Simultaneous invention is more the rule than the exception…” says Ridley. I agree though some innovations take a long time to happen. As evidence John Kay’s innovation the ‘flying-shuttle’ which could have been invented five centuries earlier, but wasn’t.
• Innovation operates on a “hype cycle.” Innovation is hyped to happen now, but often takes much longer then we think to materialize.
• Innovation prefers fragmented governance. “[E]mpires are bad at innovation,” city-states are good for it. America’s federalized system in the 19^th century created a control group laboratory for innovation between different states, which through ‘trial and error’ allowed the best innovations to be adopted, whereas the centralized EU’s one size fit’s all approach halts innovation.
• Innovation means using fewer resources to accomplish a task. That is, “growth can take place through doing more with less.”The LED light bulbs of today use only 10% of the energy for the same amount of light as earlier bulbs, making the effective supply of energy increase in proportion. Innovation is the solution to the problem of ‘scarcity’ and ‘diminishing returns’ that plagues the ‘dismal science.”

“Innovation is the child of freedom and the parent of prosperity. It is on balance a very good thing. We abandon it at our peril. The peculiar fact that one species above all others has somehow got into the habit of rearranging the atoms and electrons of the world in such a way as to create new and thermodynamically improbable structures and ideas that are of practical use to the wellbeing of that species never ceases to amazes me. That many members of the species show little curiously about how this rearrangement comes about, and why it matters, puzzles me. That there is no practical limit to the ways in which the species could rearrange the atoms and electrons of the world into improbable structures in the centuries and millennia that lie ahead excites me.” — Matt Ridley, How Innovation Works: And Why It Flourishes in Freedom