The Macro View

Viewing innovation through the lens of progress—what people hope to achieve, what we promise, and what they actually realize—broadens our creative runway and shrinks the classic “innovation gap.”

In essence, to innovate is to craft a new way for beneficiaries to reach their desired outcomes more effectively than they can today. Those outcomes are both functional and experiential: faster, safer, more fulfilling, healthier, and so on.

However, any definition must also safeguard the organization’s long-term viability and draw on principles from service-dominant logic. When we weave these strands together, we reach the following expanded definition:

(Imagem)

Implications

Our perspective places service at the core of innovation. Innovation, in this view, is only meaningful if it enables people to make real progress—defined from their perspective, in their specific context. Success is ultimately measured by how beneficiaries experience that progress.

Importantly, innovation must introduce something new—but “new” doesn’t always mean groundbreaking. Often, value emerges when ideas or methods are transferred from one domain to another, adapting proven concepts in fresh ways.

We also recognize that value doesn’t stop at launch. Because outcomes are co-created in use, innovation should be designed to evolve—customization, feedback, and iteration are essential to achieving greater results over time.

Crucially, any innovation must be scalable and sustainable. It must support the long-term health of the organization, not undermine it. This isn’t just about generating profit, but about ensuring the initiative can grow and thrive within its environment.

Lastly, innovation should be intentionally designed to reduce friction—addressing resistance, avoiding unintended harm, and supporting adoption. These are often overlooked, yet critical, to success.

This same definition applies to digitalization—where the value proposition is delivered through digital means, but the principles remain unchanged.

The Idea

There’s widespread acknowledgment that innovation isn’t delivering as it should—94% of business leaders report dissatisfaction with their innovation outcomes. One of the root causes? The way we define innovation itself, which fundamentally shapes how we pursue and measure it.

At the heart of the issue is also how we define value. Traditionally, we treat value as something manufacturers embed into products—something the customer buys in a one-time transaction. This perspective, known as goods-dominant logic, places heavy emphasis on features and outputs, with innovation largely focused on enhancing those features to drive short-term returns.

But this model is limiting.

It’s become increasingly clear that we need a more dynamic view—one where value is centred on the progress that users are trying to make. Value isn’t just embedded; it’s co-created and experienced through use, and it unfolds over time.

With this shift in how we view value, a new definition of innovation naturally follows. One that’s rooted in enabling meaningful, ongoing progress. The updated definition we propose is illustrated in Figure 1.

(Figure 1)

Before We Redefine Innovation, Let’s Understand the Current Landscape

Before diving into a more progressive definition of innovation, it’s helpful to understand how we arrived at the standard thinking found in most books and consulting frameworks. (But if you’re eager to skip ahead to the redefined version—feel free to click here.)

Where Are We Now?

The mainstream definition of innovation tends to rest on three key pillars:

• It’s both a process and an outcome
  
  
• It involves the creation of something new or original—be it a product, service, or system
  
  
• It carries value, typically seen as embedded by the producer
  
  

Sites like Idea2Value.com have reviewed definitions from numerous innovation professionals. Among 15 thought leaders, they found that 60% highlighted the execution of an idea, but only 40% referenced value for the customer or business. That gap is telling.

Traditional marketing frameworks reinforce this perspective by breaking products into layers of features—core, expected, and augmented—further anchoring innovation in a product-centric, goods-dominant mindset.

(Imagem Product Features)

As a result, most structured innovation efforts end up focusing on feature enhancement—think of it as the “add another razor blade” mentality. We keep refining the same core idea instead of questioning the model itself.

Approaches like open innovation or creative calls-to-action aim to break out of this limited scope by inviting fresh perspectives. Yet ironically, the ideas gathered often get forced back into the same narrow framework—leading to stagnation or, worse, a performance of innovation without real progress. It’s what some call innovation theater.

Interestingly, early definitions of innovation took a far broader view—one that we may need to return to if we want to evolve meaningfully.

Schumpeter’s View on Innovation

To understand the roots of innovation theory, we can return to one of its founding voices: Joseph Schumpeter, often regarded as the “father of innovation.”

In his 1934 work, Schumpeter defined innovation as the creation of “new combinations”—novel arrangements of knowledge, resources, technologies, or methods—brought forward with the intent to commercialize (Schumpeter, 1934).

This foundational idea has since influenced many interpretations and frameworks, including Fagerberg’s guide (2008), which highlights five forms of innovation described by Schumpeter:

1. Introducing a new product or a new variation of an existing one
   
   
2. Implementing a new production or sales method not yet established in the industry
   
   
3. Opening a new market, previously unserved by the industry
   
   
4. Securing new sources of raw materials or semi-finished goods
   
   
5. Reconfiguring industry structure, such as creating or dismantling monopolies
   
   

These categories reveal how Schumpeter viewed innovation not as a single event but as a broad force capable of reshaping markets, industries, and economies.

Contemporary Definitions of Innovation

In 2013, researchers Edison, bin Ali, and Torkar conducted a study focused on how innovation is defined within the software industry. Their findings were striking—they uncovered 41 distinct definitions of innovation in use across the field.

Amid this diversity, two definitions emerged as particularly influential:

• One proposed by the OECD (Organization for Economic Co-operation and Development)
  
  
• Another from the European Commission
  
  

These two frameworks have been widely adopted due to their clarity and broad applicability. They are presented in Figure 2 for reference, offering a modern lens through which innovation can be understood—especially within dynamic, fast-evolving industries like software.

(Imagem da figura 2)

As innovation practices continued to mature, the Oslo Manual—a key reference for measuring and guiding innovation—released an updated definition in its 4th edition, published in 2020.

This revision reflects a broader and more inclusive understanding of innovation, aligning more closely with modern industry realities and service-based economies. The updated definition is included in Figure 3, offering a more nuanced and adaptable framework for policymakers, researchers, and organizations navigating innovation today.

(Imagem da figura 3)

Innovation According to ISO Standards

In parallel with other global efforts to clarify what innovation truly means, the International Organization for Standardization (ISO) developed its own definition as part of the ISO 56000 series. While access to the full standard comes at a cost, its core ideas are consistent with those found in the updated Oslo Manual.

As Alice de Casanove, Chair of the ISO Technical Committee behind the innovation standards, explains:

“Innovation is about creating something new that adds value—whether it’s a product, service, business model, or even an organization itself. That value doesn’t have to be financial; it might be social or environmental, for example.”
— Alice de Casanove

This reinforces the idea that innovation extends beyond markets and profits—it’s about meaningful, multidimensional impact.

So, What’s the Real Problem?

The core issue with many existing definitions of innovation is that they maintain a strict separation between producer and user—positioning one as the sole creator of value, and the other as a passive recipient who consumes or depletes it.

This perspective reinforces what’s known as goods-dominant logic. It leads us to:

• Focus primarily on producers embedding value into products
  
  
• Assume that all innovation is inherently beneficial
  
  
• Embrace a value-in-exchange mindset, where the goal is to maximise revenue at the moment of sale—rather than focusing on the ongoing benefit experienced by the user
  
  

This approach has deep roots. As Gallouj and Weinstein highlighted in Innovation in Services, much of today’s innovation theory is grounded in technological advancements within manufacturing industries. So it’s no surprise that the dominant logic mirrors that history.

However, this lens brings significant limitations:

• It narrows our solution space—prompting us to keep “adding another razor blade” instead of rethinking value entirely
  
  
• It biases innovation efforts toward what benefits the producer, rather than what serves the user
  
  
• It weakens our connection with users—discouraging meaningful feedback, adaptability, or long-term relationship-building
  
  
• It ignores how users interact with innovation after the point of sale. For example, the circular economy holds little interest from a value-in-exchange standpoint: once the transaction is done, there’s no incentive to care what happens next. Similarly, in a job-to-be-done framework, we might notice the initial “hire,” but overlook the many follow-up moments that shape ongoing value
  
  

And perhaps most critically: by treating all innovation as inherently good, we overlook the resistance, friction, or unintended consequences it can bring. This creates blind spots—not just in adoption strategies, but in how we measure and manage the real-world impact of innovation.

Are There Existing Solutions?

These challenges aren’t new—and they haven’t gone entirely unnoticed. As far back as 1969, Theodore Levitt issued a clear warning in his classic piece Marketing Myopia. Yet, more than five decades later, his insight is widely quoted but rarely applied in practice.

“People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.”
It’s a truth nearly every marketer acknowledges. Yet paradoxically, many still define their markets by drill types and price brackets, track market share of drills, and compare features of drills, not outcomes—not the hole.

Similarly, Christensen’s “Jobs to Be Done” theory reframed how we think about customer needs. It reminds us that people don’t want products—they want help achieving specific goals. Observing real behavior and asking better questions allows us to uncover the job behind the request. (After all, it’s said that if Henry Ford had asked people what they wanted, they would’ve said “a faster horse.”)

Other methodologies have also emerged, such as Lean and Agile, which attempt to challenge the rigid transactional view of value. These frameworks offer useful tools, particularly in iterative development and experimentation. But too often, they’re confined to the build phase—failing to consider the full lifecycle of the innovation or the user’s evolving experience.

In the end, these solutions—while valuable—still feel incomplete. It wasn’t until I began to explore the concept of value itself—what it really is, how it’s created, and who defines it—that a more coherent and actionable definition of innovation began to emerge. That clarity became the foundation for a new mindset—and a more robust approach to innovation going forward.

What Is Innovation?

The evolved definition I propose isn’t meant to be radical—it still centers on value. But the key shift lies in how we define value: not as something embedded in a product, but as progress made, both functional and emotional.

People—beneficiaries—are always seeking to improve their lives in various ways. I refer to this as progress sought.
Organizations step in by creating offerings designed to help them move forward—this is progress offered.
And when people actively engage with these offerings, combining their own resources with those of the enterprise—be it people, tools, systems, or products—they attempt to realise progress achieved.

Seen through this lens, we can frame innovation, at its simplest, as:

The design and delivery of a new value proposition that helps beneficiaries achieve the progress they’re striving for—by combining people, systems, physical assets, and goods—in a way that’s meaningfully better than what’s currently available.

However, this definition alone doesn’t go far enough. We also need to:

• Define what “new” means in context
  
  
• Ensure the innovation contributes to the long-term sustainability of the organization
  
  
• Integrate key principles from service-dominant logic, which emphasize co-creation, interaction, and mutual benefit
  
  

Bringing all these elements together, I present a fuller, more actionable definition of innovation—shown in Figure 4.

(Imagem da figura 4)

Let’s Break This Down — What Does It Really Mean?

Innovation is about designing and offering a value proposition…

This definition is intentionally grounded in service-dominant logic. According to its core principles:

“Actors cannot deliver value, but can participate in the creation and offering of value propositions.”
— Foundational Premise #7, Service-Dominant Logic

In other words, as innovators, we don’t deliver value—we offer opportunities for value to be realized through use. That’s a major departure from the traditional goods-dominant mindset, where value is seen as something embedded within a product and handed off to the user.

This shift in thinking applies to both goods and services—and in fact, from a service-dominant view, there’s no fundamental distinction between them. They’re simply different mechanisms for supporting value creation.

Innovation, then, involves both the creative design and the delivery of a value proposition. It must introduce some element of novelty, whether in form, function, process, or application.

…that is new to the organization, market, industry, or world

I adopt an inclusive view of what qualifies as “new.” It doesn’t have to be a never-before-seen invention. Instead, I draw from the work of Edison, bin Ali, and Torkar (2013) in their study “Towards Innovation in the Software Industry.” With a slight adjustment—replacing “firm” with “enterprise” to include non-profits and other organizations—I define novelty as something new to:

• The organization itself
  
  
• The broader market or industry
  
  
• Or the world at large
  
  

This broader framing allows us to recognize impactful innovation that may be contextually new, even if not globally unique.

(Imagem da figura 5)

Understanding What “New” Really Means

When we think of innovation, many of us instinctively imagine something entirely new to the world—something no one has ever seen or experienced before. In those cases, as den Hertog suggests in “Knowledge-Intensive Business Services As Co-Producers Of Innovation,” the inventor is the origin of the innovation.

But increasingly, innovation doesn’t come from isolated breakthroughs—it comes from adapting solutions across industries. We often look to other markets to see what’s already working and how those ideas could apply in our own context. This is what den Hertog refers to as carried innovation.

Importantly, it’s not just companies doing this—beneficiaries themselves are driving it. People now expect the same level of convenience and functionality across industries. If they can do something easily in one area of life, they expect similar experiences elsewhere.

Take QR codes, for example. Initially popularized in event ticketing, they quickly migrated into the travel sector—replacing clunky paper boarding passes with seamless digital alternatives. That spread was driven by user expectation, not just technological push.

Lastly, innovation can also be new to the organization, even if it exists elsewhere. Adopting a tool, process, or business model already in use in another company or sector can still be a meaningful act of innovation—because for your enterprise, it’s novel.

The Value Proposition: Helping the Beneficiary Make Progress

This brings us to the core of our definition: progress.

People don’t buy products or services for their own sake—they engage with them to solve problems, achieve goals, or fulfill desires. In essence, they’re “hiring” solutions to help them move forward in life. This aligns with Clayton Christensen’s Jobs-to-be-Done theory, and echoes Theodore Levitt’s famous reminder:

“People don’t want a quarter-inch drill—they want a quarter-inch hole.”

A strong value proposition, therefore, must be centered on helping beneficiaries make the progress they’re seeking. To do that, we first need to understand what that progress looks like.

Progress can take two main forms:

1. Functional Progress

This is the practical, task-oriented outcome the person is trying to achieve. For instance, they may want to stay entertained during a commute, or hang a picture securely on the wall. In each case, they are trying to overcome a barrier, solve a problem, or complete a specific job.

2. Non-Functional Progress

Beyond the task itself, there are emotional, social, or psychological needs involved. To explore this, we can turn to “The Elements of Value” by Almquist, Senior, and Bloch, which outlines a hierarchy of non-functional value elements—such as reducing anxiety, gaining a sense of belonging, or feeling accomplished. These deeper motivators often shape user preferences even more than the functional outcomes.

Together, these two types of progress—functional and non-functional—are what beneficiaries truly seek when they engage with innovation.

(Imagem da figura 6)

Why “Better” Matters for Innovation

For an innovation to have real potential, the beneficiary must perceive a clear advantage in what’s being offered.

…Better Than What They Can Currently Achieve

To qualify as innovation, our solution must help people make progress better than they currently can. If we offer an inferior alternative—or even just the same level of benefit as what they already have—there’s no compelling reason for them to switch. In fact, “do nothing” is often the strongest competitor, especially when existing options are simply tolerable but familiar.

Importantly, “better” can mean improvements in functional outcomes (faster, cheaper, more efficient) or non-functional ones (more enjoyable, safer, more aligned with values). Both are valid dimensions of progress.

But here’s the nuance: value is not something we get to define—only the beneficiary can do that.

“Value is uniquely and phenomenologically determined by the beneficiary.”
— Foundational Premise #10, Service-Dominant Logic

This means that value is subjective and context-specific—tied to the lived experiences of each person. A self-checkout lane, for example, might be highly valuable to someone in a hurry, but frustrating for someone doing a large weekly grocery run. The same offering can produce very different perceptions of value.

Offering More, Less—or Just Different Progress

There are times when we might deliver more than the beneficiary expects—anticipating future needs or introducing novel capabilities. Apple often does this with features that don’t seem necessary at first but eventually become industry standards.

We may also address latent needs—those that beneficiaries haven’t fully articulated, but still feel.

In some cases, we knowingly offer less progress. This might be strategic: perhaps we simplify a solution to reach underserved users who are willing to trade performance for affordability or accessibility. In disruptive innovation terms, we may be offering “worse” progress to mainstream users, but “good enough” for entry-level markets—setting the stage to move upward over time.

Innovation Improves Through Co-Creation

This is where we shift from goods-dominant thinking to a co-creation mindset.

“Value is always co-created by multiple actors, always including the beneficiary.”
— Foundational Premise #6, Service-Dominant Logic

Value doesn’t exist at the point of sale. It’s realized in use, and evolves over time. That’s why successful innovation requires us to stay close to users—not just sell to them.

“A service-centric approach is inherently beneficiary-oriented and relational.”
— Foundational Premise #8

Building relationships with beneficiaries allows us to respond to their changing expectations and continuously improve our offering. Christensen’s “Jobs to Be Done” theory supports this: switching to a new solution is the “big hire,” but staying with it—repeatedly choosing it—is a series of “little hires.” Keeping those little hires requires responsiveness and adaptation.

This relational approach is especially powerful when aligned with broader priorities—like the circular economy. Innovation isn’t just about solving problems today, but also enabling more sustainable use patterns: reuse, repurposing, shared access, remanufacturing, etc.

Scalable and Sustainable Delivery

Of course, any innovation must also be scalable—capable of reaching the size of market we aim to serve—and it must be sustainable for the organization behind it.

Here, I deliberately say “sustainable,” not necessarily “profitable.” While profitability is crucial for commercial firms, not all organizations are driven by profit. What matters is that the innovation supports the ongoing viability of the enterprise—whether it’s a business, nonprofit, or public institution.

Innovation Is Resource Integration

Finally, innovation is also about the intelligent integration of resources—people, systems, technology, and more.

“All social and economic actors are resource integrators.”
— Foundational Premise #9, Service-Dominant Logic

Every innovation combines various resources and skills. Whether through people, physical tools, digital systems, or goods (which we view as a channel for service delivery), innovation is ultimately about bringing together the right mix to help someone make meaningful progress.

(Imagem da figura 7)

Innovation often emerges from reconfiguring the mix of employees, systems, physical assets, and goods. By adjusting how these elements interact, we move along the service–service continuum, exploring new ways to deliver value through integrated experiences.

(Imagem da figura 8)

Understanding the Role of Goods in Service-Dominant Logic

In service-dominant logic, goods are simply tools for delivering services—not a separate category. This is captured in its third foundational principle:

“Goods are distribution mechanisms for service provision.”
— Foundational Premise #3, Service-Dominant Logic

Imagine the simple act of quenching thirst. You can achieve this by filling a glass of water from the tap (a service through a system) or by purchasing a bottled water (a good). But in both cases, the goal is the same: delivering the service of hydration. There’s no conflict between goods and services—they are just different means of providing value.

The Power of Ecosystems

Value propositions rarely stand alone—they thrive within ecosystems. Payment systems, distribution networks, supply chains—all of these partners enhance and support the service you provide.

An ecosystem approach also opens up opportunities for innovation, whether by adding new partners, replacing existing ones, or discovering fresh ways to enhance value.

Minimizing Resistance to Innovation

Finally, we must account for innovation resistance—when users hesitate, reject, or even oppose a new offering. Despite being a major barrier to success, resistance is often overlooked. It’s critical to design innovations that not only deliver value but also reduce friction for users.

(Imagem da figura 9)

Minimizing Value Co-Destruction

In addition to reducing resistance, it’s essential to minimise value co-destruction—when an innovation inadvertently causes harm, confusion, or diminished value for users. This can happen through poor design, misleading promises, or even user misunderstandings.

By proactively identifying and addressing these risks, we ensure that our innovations consistently create positive outcomes, rather than accidentally undermining user experiences.

(Imagem da figura 10)

Wrapping Up

We’ve arrived at a refined and more practical definition of innovation, one that is firmly rooted in service-dominant logic—moving beyond the traditional, product-centric mindset that has often limited true innovation.

What is Innovation?

Innovation is the creation and delivery of a new value proposition (whether new to the organisation, market, industry, or world) that:

1. Helps beneficiaries make progress—both functional (solving tasks) and non-functional (enhancing experiences)—better than they currently can.
   
   
2. Continuously improves through value co-creation, adapting based on user interactions and feedback.
   
   
3. Is delivered through a scalable and sustainable combination of skills and resources, including people, systems, physical assets, and goods, often within an ecosystem.
   
   
4. Minimizes resistance and value co-destruction, proactively addressing friction and avoiding unintended negative impacts.
   
   

This definition doesn’t just describe what innovation is—it provides a clear framework for designing, managing, and measuring it.