Of course I know what innovation is..

Innovation has been around for a long time, and although everyone has an idea on what it means, there is still no agreed-on and consistent definition used in the world today and there might never be one phrased, due to the subjective and complex nature. Why? Because paradigms are different for everyone based on personal experiences, level of education, ways of thinking and so on. What is new and crosses boundaries for one may be normal for another. In the most basic form, innovations relate to improvements or renewals. Regarding businesses, it means doing something new that, once implemented, creates value for the firm.

The difference between an invention and an innovation is that the first is the appearance of a new product or process, while the latter is the original pursuit of carrying it out in practice. In this sense, an idea that is not realized is not an innovation but merely an invention. You can invent a new product and patent it right away, but this does not help you in winning the game since it has no substantial impact on your business. Inventions need a market to become innovations.

And then there are Chindogus! This is an invention that is so absurd or socially embarrassing that it becomes perfectly useless, or 'unuseless' and thus will never become an innovation. A great example of this is baby mop; an outfit for babies with a mop on the bottom so that they clean the floor while crawling.

The innovative mindset..
According to John Cleese

We all operate in two contrasting modes, which might be called open and closed. The open mode is more relaxed, more receptive, more exploratory, more democratic, more playful and more humorous. The closed mode is the tighter, more rigid, more hierarchical, more tunnel-visioned. Most people, unfortunately spend most of their time in the closed mode. Not that the closed mode cannot be helpful. If you are leaping a ravine, the moment of takeoff is a bad time for considering alternative strategies. When you charge the enemy machine-gun post, don't waste energy trying to see the funny side of it. Do it in the "closed" mode. But the moment the action is over, try to return to the "open" mode—to open your mind again to all the feedback from our action that enables us to tell whether the action has been successful, or whether further action is need to improve on what we have done. In other words, we must return to the open mode, because in that mode we are the most aware, most receptive, most creative, and therefore at our most intelligent.

That's one radically incremental innovation..

The general consensus is that there are two types of innovation, being radical innovations and incremental innovations. Each requires different core competencies and resources in order to be successful. 

The former type covers innovations that are hard to copy and thus have the potential to destroy the existing competition. Radical innovations are a risky business due to the high costs and high risks for the company, also because the customers wishes are often ignored. A good example is the Segway: Forty years ago people thought that we all would have flying cars in the year 2000, but so far this obviously did not happen. 
Dean Kamen came up with a radical and brilliant innovation that would change the way we go around and would mean the end of walking. He obviously did not see the movie WALL·E, or else he would have seen that not needing to walk, leads to even more obese people, as can be seen in the following video.

Incremental innovations are the absolute opposite. The risks and costs involved are much smaller and they only consist of modifications or extensions of existing products or services. Most innovations are incremental and we often take them for granted. The best example of an incremental innovation is: Evolution. Tiny small changes that, over time, change the 'product' for the better. Just ask Homer Simpson.

Post-its and the internet..

Even though it may sound shocking, not all innovations are as meticulously planned as you might think. Of course there are plenty of innovation that are the result of a focused and conscious search for it (imminent innovations), but in the service industry, most innovations happen due to luck, flair, and a good portion of intuition (serendipitous innovations).

The internet is probably the best know and most widely used example of planned innovation, with its roots in the United States' military. A famous example of serendipitous is the Post-it from 3M, which is even today promoted as "invented as a solution without a problem".