What is innovation

There are different ideas of what an innovation is. Many think of technologies, such as recently blockchain (or distributed ledger) technology or artificial intelligence (AI) and the new technical devices in which these technologies are used (autonomous cars, robots).

However, the concept of innovation is much broader. An innovation can be anything that is fundamentally new or has been renewed or further developed. The OECD defines an innovation as follows:

"Innovation is the introduction of a new or significantly improved product (or service), a new process, or a new marketing or organizational method into business practice, work processes, or external relationships."

Source: OECD/Eurostat (2005): ”OSLO Manual: Guidelines for collecting and interpreting innovation data”, 3rd ed., Paris: OECD/Eurostat, p. 46

Accordingly, four types of innovations can be distinguished:

• Product and service innovation
• process innovation
• marketing innovation
• organizational innovation

However, the last two play a minor role in the public sector.

The key differentiator here is the novelty of the innovation to the organization, the market, or even the world.

Another differentiator is the level of change that the innovation brings, making it different from traditional products/services. These are then referred to as incremental and radical innovations.

• Incremental innovations: these are mostly gradually further developed products/services that are applied in established markets and in familiar contexts. Accordingly, the level of risk is low.
• Radical innovations: they bring with them serious changes and therefore higher risks. At the same time, they offer a high potential for new market opportunities and thus competitive advantages. As a result, they have a high degree of novelty that leads to deep and complex changes.

Above all, the procurement of radical innovations is a challenge, since the risk here is particularly high. However, this also entails special potential that could be decisive for the public sector and contribute to the realization of the vision of the Federal Government's High-Tech Strategy 2025 to make Germany an innovative nation.

FoRMöB/ BME (2016): "Concept of an innovative public procurement (PPI) - Definition and approaches for an innovative procurement in the public sector" (in German)