Creativity and innovation

The essentials

Creativity is the ability to produce new and useful ideas. Innovation is the process of turning a creative idea into a product, service or process that is actually used and creates value. Creativity is the starting point; innovation is the successful application.

The creative process is commonly described in stages:

• Preparation: gathering information and studying the problem.
• Incubation: letting the problem rest in the mind; ideas develop unconsciously.
• Illumination: the moment of insight when a solution appears.
• Verification: testing and refining the idea to check that it works.

Some texts add an earlier stage, idea germination, when interest in a problem first arises.

Key points

• Joseph Schumpeter saw innovation as the core function of the entrepreneur. His forms of innovation include: introducing a new product, a new method of production, opening a new market, finding a new source of raw materials, and creating a new organisation of an industry.
• Incremental innovation: small improvements to existing products.
• Radical (breakthrough) innovation: a major change that creates a new product category or replaces old methods.
• Innovation can be in product, process, marketing or organisation.
• Barriers to creativity include fear of failure, rigid habits and lack of time.

Exam tips

• Learn the stages in order; questions often describe a stage and ask you to name it.
• Remember: "invention" is creating something new; "innovation" is bringing it into commercial use.

Common mistakes

• Using creativity and innovation as exact synonyms.
• Mixing up incubation (resting stage) with illumination (the "aha" moment).