What is innovation? Although the term is often used to refer to new technology, many innovations are neither new nor involve new technology. The self-service concept of fast-food popularized by McDonald's, for instance, involved running a restaurant in a different way rather than making a technological breakthrough. However, innovation can involve plenty of clever gadgets and gizmos.
One way to arrive at a useful definition is to rule out what innovation is not. It is not invention. New products might be an important part of the process, but they are not the essence of it. These days much innovation happens in processes and services. Novelty of some sort does matter, although it might involve an existing idea from another industry or country. For example, Edwin Drake was not the first man to drill for a natural resource; the Chinese used that technique for centuries to mine salt. But one inspired morning in 1859, Colonel Drake decided to try drilling for oil in Titusville, Pennsylvania. He struck black gold and from his innovation the modern oil industry was born.
Source: The Economist, http://www.economist.com