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Innovation and
Entrepreneurship
Chapter 14
© 2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Learning Objectives
• Summarize the difference between incremental
and breakthrough innovation.
• Explain what is meant by continuous improvement
and how it contributes to incremental innovation
• Summarize the risks associated with an
incremental versus a breakthrough approach to
innovation.
• Describe the three key elements of the
entrepreneurship process.
• Explain intrapreneurship and how to enable it to
thrive.
2
Invention vs. Innovation
• Invention is the creation of new products
or processes through the development of
new knowledge or from new
combinations of existing knowledge
3
Invention vs. Innovation (contd.)
• Innovation is the initial commercialization of
invention by producing and selling a new
product, service, or process
• Product innovation
• Service innovation
• Process innovation
4
Incremental Innovation
• Incremental innovation refers to simple changes
or adjustments in existing
– products
– services
– or processes
5
Continuous Improvement
• The process of relentlessly trying to find ways
to improve and enhance a company’s
products and processes from design through
assembly, sales, and service. It is called kaizen
in Japanese. It is usually associated with
incremental innovation.
6
Incremental Innovation
• Toyota’s CCC21: construction of cost
competitiveness for the 21st century
• Six Sigma is a rigorous and analytical approach
to quality and continuous improvement with an
objective to improve profits through defect
reduction, yield improvement, improved
consumer satisfaction, and best-in-class
performance
7
Ex. 14.2 The DMAIC Six Sigma Approach
8
Six Sigma – Developing a Customer
Orientation
9
10 Essential Elements that
Lead to Incremental Innovation
1. Define quality and
customer value
2. Develop a customer
orientation
3. Focus on the company’s
business processes
4. Develop customer and
supplier partnerships
5. Take a preventive
approach
6. Adopt an error-free
attitude
7. Get the facts first
8. Encourage every
manager and
employee to
participate
9. Create an atmosphere
of total involvement
10. Strive for continuous
improvement
10
Breakthrough Innovation
• A breakthrough innovation is an innovation
in a product, process, technology, or the cost
associated with it that represents a quantum
leap forward in one or more of those ways
• Breakthrough approaches to innovation are
inherently more risky than incremental
innovation approaches
11
Ex. 14.3 From Idea to Profitable Reality
12
Characteristics of Successful
Innovations
1. Moderately new to the marketplace
2. Based on tried and tested methodology
3. Saved money for users of the innovation
4. Reportedly met customer needs
5. Supported existing practices
The Economist
13
Idea Factors
• Need spotting
• Solution spotting
• Mental inventions
• Random events
• Market research
• Trend following
14
Risks Associated with Innovation
• Innovation involves creating something that
doesn’t now exist
• Long odds for success
• Market risk
• Technology risk
15
Ex. 14.5 Risks Associated with Innovation
16
Disruptive Innovation
• A term to characterize breakthrough
innovation popularized by Harvard Professor
Clayton Christensen; usually shakes up or
revolutionizes industries with which they are
associated even though they often come from
totally different origins or industry settings
than the industry they “disrupt.”
17
Treacy’s Useful Points about Managing Risks
• The point of innovation is growth
• Get the most from the minimum innovation
• Incremental product innovations can lock in
existing customers
• Incremental business process innovations can
generate more revenue gain or cost savings with
less risk than radical ones
• Radical innovations are often too radical
• The time to launch breakthrough innovations is
when they are essential to the marketplace
18
Ways to Lower Risk
• Product teams
• Cross-functional groups
• Joint ventures
• Cooperation with lead users
• “Do it yourself” innovation
• Acquiring innovation
• Outsourcing innovation
19
Ideagoras
• A web-enabled, virtual marketplace which
connects people with unique ideas, talents,
resources, or capabilities with companies
seeking to address problems or potential
innovations in a quick, competent manner.
20
Ex. 14.8 Who is the Entrepreneur?
21
Entrepreneurship
• Entrepreneurship is the process of bringing
together creative and innovative ideas and
actions with the management and
organizational skills necessary to mobilize
the appropriate people, money, and
operating resources to meet an identifiable
need and create wealth in the process
22
Entrepreneurs vs. Others
• Entrepreneurs are different from
– Inventors
– Promoters
– Administrators
• Entrepreneurs (unlike the above three) are
high on both creativity/ innovativeness and
management skills/business know-how.
23
Three Elements Central to Entrepreneurial
Process
1. Opportunity
2. Entrepreneurial Teams
3. Resources
24
Resources
1. Debt financing is generally obtained from
a commercial bank to pay for property,
equipment, and maybe provide working
capital
2. Equity financing is usually obtained from
one or more of three sources: friendly
sources, informal venture investors, or
professional venture capitalists
25
Intrapreneurship
• Intrapreneurship, or entrepreneurship in
large companies, is the process of
attempting to identify, encourage, enable,
and assist entrepreneurship within a large,
established company so as to create new
products, processes, or services that
become major new revenue streams and
sources of cost savings for the company
26
Pinchot’s 10 Freedom Factors
1. Self-selection
2. No hand-offs
3. The doer decides
4. Corporate “slack”
5. End the “home
run” philosophy
6. Tolerance of risk,
failure, and
mistakes
7. Patient money
8. Freedom from
turfness
9. Cross-functional
teams
10.Multiple options
27
Key Terms
• Breakthrough
innovation
• CCC21
• Continuous
improvement
• Debt financing
• Disruptive innovation
• Entrepreneurship
• Equity financing
• Ideagoras
28
Key Terms (contd.)
• Incremental innovation
• Innovation
• Intrapreneurship
• Intrapreneurship
freedom factors
• Invention
• Six Sigma
29

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4253047.ppt

  • 1. Innovation and Entrepreneurship Chapter 14 © 2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
  • 2. Learning Objectives • Summarize the difference between incremental and breakthrough innovation. • Explain what is meant by continuous improvement and how it contributes to incremental innovation • Summarize the risks associated with an incremental versus a breakthrough approach to innovation. • Describe the three key elements of the entrepreneurship process. • Explain intrapreneurship and how to enable it to thrive. 2
  • 3. Invention vs. Innovation • Invention is the creation of new products or processes through the development of new knowledge or from new combinations of existing knowledge 3
  • 4. Invention vs. Innovation (contd.) • Innovation is the initial commercialization of invention by producing and selling a new product, service, or process • Product innovation • Service innovation • Process innovation 4
  • 5. Incremental Innovation • Incremental innovation refers to simple changes or adjustments in existing – products – services – or processes 5
  • 6. Continuous Improvement • The process of relentlessly trying to find ways to improve and enhance a company’s products and processes from design through assembly, sales, and service. It is called kaizen in Japanese. It is usually associated with incremental innovation. 6
  • 7. Incremental Innovation • Toyota’s CCC21: construction of cost competitiveness for the 21st century • Six Sigma is a rigorous and analytical approach to quality and continuous improvement with an objective to improve profits through defect reduction, yield improvement, improved consumer satisfaction, and best-in-class performance 7
  • 8. Ex. 14.2 The DMAIC Six Sigma Approach 8
  • 9. Six Sigma – Developing a Customer Orientation 9
  • 10. 10 Essential Elements that Lead to Incremental Innovation 1. Define quality and customer value 2. Develop a customer orientation 3. Focus on the company’s business processes 4. Develop customer and supplier partnerships 5. Take a preventive approach 6. Adopt an error-free attitude 7. Get the facts first 8. Encourage every manager and employee to participate 9. Create an atmosphere of total involvement 10. Strive for continuous improvement 10
  • 11. Breakthrough Innovation • A breakthrough innovation is an innovation in a product, process, technology, or the cost associated with it that represents a quantum leap forward in one or more of those ways • Breakthrough approaches to innovation are inherently more risky than incremental innovation approaches 11
  • 12. Ex. 14.3 From Idea to Profitable Reality 12
  • 13. Characteristics of Successful Innovations 1. Moderately new to the marketplace 2. Based on tried and tested methodology 3. Saved money for users of the innovation 4. Reportedly met customer needs 5. Supported existing practices The Economist 13
  • 14. Idea Factors • Need spotting • Solution spotting • Mental inventions • Random events • Market research • Trend following 14
  • 15. Risks Associated with Innovation • Innovation involves creating something that doesn’t now exist • Long odds for success • Market risk • Technology risk 15
  • 16. Ex. 14.5 Risks Associated with Innovation 16
  • 17. Disruptive Innovation • A term to characterize breakthrough innovation popularized by Harvard Professor Clayton Christensen; usually shakes up or revolutionizes industries with which they are associated even though they often come from totally different origins or industry settings than the industry they “disrupt.” 17
  • 18. Treacy’s Useful Points about Managing Risks • The point of innovation is growth • Get the most from the minimum innovation • Incremental product innovations can lock in existing customers • Incremental business process innovations can generate more revenue gain or cost savings with less risk than radical ones • Radical innovations are often too radical • The time to launch breakthrough innovations is when they are essential to the marketplace 18
  • 19. Ways to Lower Risk • Product teams • Cross-functional groups • Joint ventures • Cooperation with lead users • “Do it yourself” innovation • Acquiring innovation • Outsourcing innovation 19
  • 20. Ideagoras • A web-enabled, virtual marketplace which connects people with unique ideas, talents, resources, or capabilities with companies seeking to address problems or potential innovations in a quick, competent manner. 20
  • 21. Ex. 14.8 Who is the Entrepreneur? 21
  • 22. Entrepreneurship • Entrepreneurship is the process of bringing together creative and innovative ideas and actions with the management and organizational skills necessary to mobilize the appropriate people, money, and operating resources to meet an identifiable need and create wealth in the process 22
  • 23. Entrepreneurs vs. Others • Entrepreneurs are different from – Inventors – Promoters – Administrators • Entrepreneurs (unlike the above three) are high on both creativity/ innovativeness and management skills/business know-how. 23
  • 24. Three Elements Central to Entrepreneurial Process 1. Opportunity 2. Entrepreneurial Teams 3. Resources 24
  • 25. Resources 1. Debt financing is generally obtained from a commercial bank to pay for property, equipment, and maybe provide working capital 2. Equity financing is usually obtained from one or more of three sources: friendly sources, informal venture investors, or professional venture capitalists 25
  • 26. Intrapreneurship • Intrapreneurship, or entrepreneurship in large companies, is the process of attempting to identify, encourage, enable, and assist entrepreneurship within a large, established company so as to create new products, processes, or services that become major new revenue streams and sources of cost savings for the company 26
  • 27. Pinchot’s 10 Freedom Factors 1. Self-selection 2. No hand-offs 3. The doer decides 4. Corporate “slack” 5. End the “home run” philosophy 6. Tolerance of risk, failure, and mistakes 7. Patient money 8. Freedom from turfness 9. Cross-functional teams 10.Multiple options 27
  • 28. Key Terms • Breakthrough innovation • CCC21 • Continuous improvement • Debt financing • Disruptive innovation • Entrepreneurship • Equity financing • Ideagoras 28
  • 29. Key Terms (contd.) • Incremental innovation • Innovation • Intrapreneurship • Intrapreneurship freedom factors • Invention • Six Sigma 29