Fortunately (or unfortunately for some) there are plenty of definitions for innovation.

Wikipedia references the following:
The classic definitions of innovation include:

1. the act of introducing something new: something newly introduced (The American Heritage Dictionary).
2. the introduction of something new. (Merriam-Webster Online)
3. a new idea, method or device. (Merriam-Webster Online)
4. the successful exploitation of new ideas (Department of Trade and Industry, UK).
5. change that creates a new dimension of performance Peter Drucker (Hesselbein, 2002)
6. the process of making improvements by introducing something new

The outcome of innovation is a process or product that creates additional value for the customer. It may be through enhancement or addition to an existing product or service. It may represent a modification that provides additional or new benefit.

But the outcome will always be far less interesting than the input. To define how innovation works, the process of innovation, is the prize. If we can get that right, organisations can follow a route map or a plan to become "innovative".

The complexity in the definition of the process lies in its multiple facets. It is as much (if not more) about thinking and attitude as it is about organisation and structure.

Peter Drucker defined seven sources of innovation:

1. The Unexpected - An unexpected success, an unexpected failure or an unexpected outside event can be a symptom of a unique opportunity.
2. The Incongruity - A discrepancy between reality and what everyone assumes it to be, or between what is and what ought to be, can create an innovative opportunity.
3. Innovation based on process need - When a weak link is evident in a particular process, but people work around it instead of doing something about it, an opportunity is present to the person or company willing to supply the “missing link”.
4. Changes in industry or market structure - The opportunity for an innovative product, service or business approach occurs when the underlying foundation of the industry or market shifts.
5. Demographics - Changes in the population’s size, age structure, composition, employment, level of education and income can create innovative opportunities.
6. Changes in perception, mood and meaning - Innovative opportunities can develop when a society’s general assumptions, attitudes and beliefs change.
7. New Knowledge - Advances in scientific and nonscientific knowledge can create new products and new markets.

Implicit in each one of these sources is a set of knowledge requirements that include the following:

• A deep understanding of customer requirements
• The ability to observe and analyse the present state objectively
• An attitude of openness to new ideas
• A personal confidence that allows experimentation
• Sensitivity to impending changes
• A natural inclination towards creativity
• An intellectual toolkit for managing creative thinking
• A set of strategies for objectively assessing hypotheses in a structured manner