The art of innovation is being able to solve technical problems in ways others may not have considered. Innovators have no trouble thinking "outside the box" and dislike rules that constrain solutions to conventional wisdom. Innovators can see an entire project as a whole and know a path to completion even when others may think the project is impossible.

Risk Management

Innovators can be good engineers but not all engineers can be good innovators. The science of engineering is to find solutions within the bounds of conventional wisdom with a high probability of success. Engineering minimizes risk creating incremental progress whereas innovation accepts a greater level of risk in the hopes of taking a leap forward.

It is not surprising that most established companies choose the engineering approach; the investment in time and money is more predictable with an outcome that is more assured. It is also no surprise that most innovative companies are small and self funded; innovation requires a more flexible development philosophy with no assured outcome. What is not often considered is the funding of multiple incremental steps can be more costly than a single innovative step to arrive at the same place. Most who choose incremental are either unwilling to accept the risk or lack the vision to see it through.

Leadership

Innovation requires strong leadership, usually an individual with an unwavering picture of the final product and an obsession to see it completed. Weak leaders rarely succeed because there is no clear vision. Without a clear vision the product design will invariably devolve into "Design by Committee" producing a design that doesn't do anything well. In short, innovation can only succeed with a strong leader with a clear vision of where they want to go and how to get there.

Innovators and entrepreneurs share many traits but are not the same. Whereas the innovator is obsessed with the product, the entrepreneur is obsessed with the business. This is an important distinction because it is a symbiotic relationship where one cannot exist without the other. The entrepreneur is skilled at seeing a market niche that is poorly served and the innovator is skilled at finding a solution; together they can successfully develop a product. Thomas Alva Edison was a rare example of all of these qualities in one person; strong leader, meticulous innovator and ruthless businessman.

Finding and Keeping the Right Niche

Finding the right market niche to exploit is as important as the innovative product itself. If the product is too simple or the market too large, competitors will copy your design knowing they can outspend you in legal fees. These companies often have in-house legal counsel with budgets larger than the annual sales of most small businesses. While you may ultimately prevail, it will come after years and hundreds of thousands, if not millions, in legal fees. The best approach is to find a poorly served niche that requires a complex enough product that few larger companies will find it worth exploiting. Once you establish market dominance then it will be too late except to offer you a merger or acquisition. This may sound unethical or unfair but it is often how business is done.

A small company with an innovative idea should make every effort to manufacturer the product domestically doing all final assembly themselves. I have personally seen offshore contract manufacturers build expensive aircraft connectors for USA companies during the day and then manufacture the same product at night under a different name for one quarter the price. Avoiding the use of offshore manufacturing removes one very common opportunity to lose your idea with little recourse. And never, ever, send proprietary software overseas to load on a product.

Innovative Processes

An innovative process can be just as important as an innovative design and much harder to copy. Whereas a design can often be copied once an example is acquired, processes remain secret unless the competitor gains access to company records. We have known for years that competitors have examined our products but no evidence they were ever able to reproduce the processes that gave our products a competitive edge.

Protecting Innovation with a Patent

Prior to the Patent Reform Act of 2005, the United States had a policy of "First to Invent" that became "First to File" under the act. First to Invent actually gave small companies an edge by allowing them to keep inventions secret so long as they could objectively prove prior invention or "Priority".

First to File gave priority to the first company to file a patent application. This means that a company can see your new design, copy it, patent it, and then prevent you from manufacturing what you invented. Patenting someone else's invention is technically disallowed by H.R 2795 but it is still up to the actual inventor to contest the patent at their expense. To protect themselves, small companies now must disclose and patent their inventions as a defense.

Enforcement of patent infringement is still left up to the patent holder; if a large company sees your patent disclosure and copies it, it is still up to you to file a legal challenge. This process can still take years, even in discovery, and costly if the large company deems it worthwhile to drag out the process. Since legal challenges always favor the party with the best funding, small business should take additional steps to protect their invention.

Protecting Innovation with Secret Processes

In addition to defensive patents, small businesses can protect inventions with undisclosed "secrets" built into every design that are difficult to reproduce. For simple hardware, secrets could be one or more manufacturing processes that would prevent a copy from working correctly if not performed. Even something as simple as removing component part numbers can make a design more expensive to reverse engineer. For more complex designs, secrets could be encrypted software or tables that cannot be copied without the encryption code. Secret processes or encryptions used for invention protection should be kept well hidden within the company so that few know they exist for that purpose.