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ENTREPRENEURSHIP
ENTREPRENEURSHIP
AND
AND
INNOVATION:
INNOVATION:
3.
3.1 THE INNOVATION
3.1 THE INNOVATION
CONCEPT:
CONCEPT:
 Innovation is the specific tool of entrepreneurs, the
Innovation is the specific tool of entrepreneurs, the
means by which they exploit change as an
means by which they exploit change as an
opportunity for a different business or a different
opportunity for a different business or a different
service. It is capable of being presented as a
service. It is capable of being presented as a
discipline, capable of being learned, capable of
discipline, capable of being learned, capable of
being practiced. Entrepreneurs need to search
being practiced. Entrepreneurs need to search
purposefully for the sources of innovation, the
purposefully for the sources of innovation, the
change and their symptoms that indicate
change and their symptoms that indicate
opportunities for a successful innovation. And
opportunities for a successful innovation. And
they need to know and to apply the principles of
they need to know and to apply the principles of
successful innovation.
successful innovation.
3.1 THE INNOVATION CONCEPT:
3.1 THE INNOVATION CONCEPT:
(Continued)
(Continued)
 A business opportunity, therefore, is the chance to do
A business opportunity, therefore, is the chance to do
something differently and the better. An innovation is the
something differently and the better. An innovation is the
way of doing something differently and better. Thus an
way of doing something differently and better. Thus an
innovation is the means of exploiting a business opportunity.
innovation is the means of exploiting a business opportunity.
Innovation has a different meaning in economics. All goods
Innovation has a different meaning in economics. All goods
(whether physical products or services) are regarded as being
(whether physical products or services) are regarded as being
made up of three factors: nature raw materials, physical and
made up of three factors: nature raw materials, physical and
mental labor and capital (money). An innovation is a new
mental labor and capital (money). An innovation is a new
combination of these three things. Entrepreneurs, as
combination of these three things. Entrepreneurs, as
innovators, are people who create new combinations of these
innovators, are people who create new combinations of these
factors and then present to the market for assessment by
factors and then present to the market for assessment by
consumers. This is a technical conceptualization of what is
consumers. This is a technical conceptualization of what is
innovation is about. It does not give the practicing
innovation is about. It does not give the practicing
entrepreneur much of a guide to what innovation to make, or
entrepreneur much of a guide to what innovation to make, or
how to make it, but it should warn that innovation is a much
how to make it, but it should warn that innovation is a much
broader concept then just inventing new products. It also
broader concept then just inventing new products. It also
involves bringing them to market. Some important areas in
involves bringing them to market. Some important areas in
which valuable innovation might be made will be discussed
which valuable innovation might be made will be discussed
below.
below.
NEW PRODUCTS:
NEW PRODUCTS:
 One of the most common forms of innovation is
One of the most common forms of innovation is
the creation of new product. The new product may
the creation of new product. The new product may
exploit an established technology or it may be the
exploit an established technology or it may be the
outcome of a whole new technology. The new
outcome of a whole new technology. The new
product may offer a radically new way of doing
product may offer a radically new way of doing
something it may simply be an existing theme.
something it may simply be an existing theme.
David Packard built scientific instrumentation
David Packard built scientific instrumentation
and information processing business umpire,
and information processing business umpire,
Hewlett Packard, based on advanced scientific
Hewlett Packard, based on advanced scientific
developments.
developments.
NEW PRODUCTS:
NEW PRODUCTS:
(Continued)
(Continued)
 Products are not simply a physical tool for achieving
Products are not simply a physical tool for achieving
particular ends. They can also have a role to play in
particular ends. They can also have a role to play in
satisfying emotional needs. Branding is an important
satisfying emotional needs. Branding is an important
aspect of this. A brand name reassures the consumer,
aspect of this. A brand name reassures the consumer,
draws ready-made associations for them and provides a
draws ready-made associations for them and provides a
means of making a personal statement. The possibility of
means of making a personal statement. The possibility of
innovations being made through branding should not be
innovations being made through branding should not be
overlooked. The English entrepreneur, Richard Branson,
overlooked. The English entrepreneur, Richard Branson,
for example, has been active in using the virgin brand
for example, has been active in using the virgin brand
name on a wide variety of product areas following its
name on a wide variety of product areas following its
initial success in the airline business. To date, it has been
initial success in the airline business. To date, it has been
used to create a point of difference on, among other
used to create a point of difference on, among other
things, record labels, soft drinks and personal finance
things, record labels, soft drinks and personal finance
products.
products.
NEW SERVICES:
NEW SERVICES:
 A service is an act which is offered to undertake a
A service is an act which is offered to undertake a
particular task or solve a particular problem. Services are
particular task or solve a particular problem. Services are
open to the possibilities of new ideas and innovation just as
open to the possibilities of new ideas and innovation just as
much as physical products. For example, the American
much as physical products. For example, the American
entrepreneur, Frederick smith, created the multi-million
entrepreneur, Frederick smith, created the multi-million
dollar international business, federal express, by releasing
dollar international business, federal express, by releasing
a better way of moving parcels between people.
a better way of moving parcels between people.
 Like physical products, services can be supported by the
Like physical products, services can be supported by the
effective use of branding. In fact, it is beneficial to stop
effective use of branding. In fact, it is beneficial to stop
thinking about “products” and “services” as distinct types
thinking about “products” and “services” as distinct types
of business and to recognize that all offerings have product
of business and to recognize that all offerings have product
and service aspects. This is important because it is possible
and service aspects. This is important because it is possible
to innovate by adding a “customer service” in component
to innovate by adding a “customer service” in component
to a physical product to make it more attractive to the user.
to a physical product to make it more attractive to the user.
Similarly, developments in products technology allow new
Similarly, developments in products technology allow new
service concepts to be innovated.
service concepts to be innovated.

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entrepreneurshipandinnovation-091206034558-phpapp02.pdf

  • 2. 3.1 THE INNOVATION 3.1 THE INNOVATION CONCEPT: CONCEPT:  Innovation is the specific tool of entrepreneurs, the Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an means by which they exploit change as an opportunity for a different business or a different opportunity for a different business or a different service. It is capable of being presented as a service. It is capable of being presented as a discipline, capable of being learned, capable of discipline, capable of being learned, capable of being practiced. Entrepreneurs need to search being practiced. Entrepreneurs need to search purposefully for the sources of innovation, the purposefully for the sources of innovation, the change and their symptoms that indicate change and their symptoms that indicate opportunities for a successful innovation. And opportunities for a successful innovation. And they need to know and to apply the principles of they need to know and to apply the principles of successful innovation. successful innovation.
  • 3. 3.1 THE INNOVATION CONCEPT: 3.1 THE INNOVATION CONCEPT: (Continued) (Continued)  A business opportunity, therefore, is the chance to do A business opportunity, therefore, is the chance to do something differently and the better. An innovation is the something differently and the better. An innovation is the way of doing something differently and better. Thus an way of doing something differently and better. Thus an innovation is the means of exploiting a business opportunity. innovation is the means of exploiting a business opportunity. Innovation has a different meaning in economics. All goods Innovation has a different meaning in economics. All goods (whether physical products or services) are regarded as being (whether physical products or services) are regarded as being made up of three factors: nature raw materials, physical and made up of three factors: nature raw materials, physical and mental labor and capital (money). An innovation is a new mental labor and capital (money). An innovation is a new combination of these three things. Entrepreneurs, as combination of these three things. Entrepreneurs, as innovators, are people who create new combinations of these innovators, are people who create new combinations of these factors and then present to the market for assessment by factors and then present to the market for assessment by consumers. This is a technical conceptualization of what is consumers. This is a technical conceptualization of what is innovation is about. It does not give the practicing innovation is about. It does not give the practicing entrepreneur much of a guide to what innovation to make, or entrepreneur much of a guide to what innovation to make, or how to make it, but it should warn that innovation is a much how to make it, but it should warn that innovation is a much broader concept then just inventing new products. It also broader concept then just inventing new products. It also involves bringing them to market. Some important areas in involves bringing them to market. Some important areas in which valuable innovation might be made will be discussed which valuable innovation might be made will be discussed below. below.
  • 4. NEW PRODUCTS: NEW PRODUCTS:  One of the most common forms of innovation is One of the most common forms of innovation is the creation of new product. The new product may the creation of new product. The new product may exploit an established technology or it may be the exploit an established technology or it may be the outcome of a whole new technology. The new outcome of a whole new technology. The new product may offer a radically new way of doing product may offer a radically new way of doing something it may simply be an existing theme. something it may simply be an existing theme. David Packard built scientific instrumentation David Packard built scientific instrumentation and information processing business umpire, and information processing business umpire, Hewlett Packard, based on advanced scientific Hewlett Packard, based on advanced scientific developments. developments.
  • 5. NEW PRODUCTS: NEW PRODUCTS: (Continued) (Continued)  Products are not simply a physical tool for achieving Products are not simply a physical tool for achieving particular ends. They can also have a role to play in particular ends. They can also have a role to play in satisfying emotional needs. Branding is an important satisfying emotional needs. Branding is an important aspect of this. A brand name reassures the consumer, aspect of this. A brand name reassures the consumer, draws ready-made associations for them and provides a draws ready-made associations for them and provides a means of making a personal statement. The possibility of means of making a personal statement. The possibility of innovations being made through branding should not be innovations being made through branding should not be overlooked. The English entrepreneur, Richard Branson, overlooked. The English entrepreneur, Richard Branson, for example, has been active in using the virgin brand for example, has been active in using the virgin brand name on a wide variety of product areas following its name on a wide variety of product areas following its initial success in the airline business. To date, it has been initial success in the airline business. To date, it has been used to create a point of difference on, among other used to create a point of difference on, among other things, record labels, soft drinks and personal finance things, record labels, soft drinks and personal finance products. products.
  • 6. NEW SERVICES: NEW SERVICES:  A service is an act which is offered to undertake a A service is an act which is offered to undertake a particular task or solve a particular problem. Services are particular task or solve a particular problem. Services are open to the possibilities of new ideas and innovation just as open to the possibilities of new ideas and innovation just as much as physical products. For example, the American much as physical products. For example, the American entrepreneur, Frederick smith, created the multi-million entrepreneur, Frederick smith, created the multi-million dollar international business, federal express, by releasing dollar international business, federal express, by releasing a better way of moving parcels between people. a better way of moving parcels between people.  Like physical products, services can be supported by the Like physical products, services can be supported by the effective use of branding. In fact, it is beneficial to stop effective use of branding. In fact, it is beneficial to stop thinking about “products” and “services” as distinct types thinking about “products” and “services” as distinct types of business and to recognize that all offerings have product of business and to recognize that all offerings have product and service aspects. This is important because it is possible and service aspects. This is important because it is possible to innovate by adding a “customer service” in component to innovate by adding a “customer service” in component to a physical product to make it more attractive to the user. to a physical product to make it more attractive to the user. Similarly, developments in products technology allow new Similarly, developments in products technology allow new service concepts to be innovated. service concepts to be innovated.
  • 7. NEW PRODUCTION TECHNIQUES: NEW PRODUCTION TECHNIQUES:  Innovation can be made in the way in which a product Innovation can be made in the way in which a product is manufactured. Again, this might be by developing is manufactured. Again, this might be by developing an existing technology or by adopting a new an existing technology or by adopting a new technological approach. A new production technique technological approach. A new production technique provides a sound basis for success if it can be made to provides a sound basis for success if it can be made to offer the end-user new benefits. It must either allow offer the end-user new benefits. It must either allow them to obtain the product at lower cost, or to be them to obtain the product at lower cost, or to be offered a product of higher or more consistent offered a product of higher or more consistent quality, all to be given a better service in the supply of quality, all to be given a better service in the supply of the product. the product.  Production is not about just technology. Increasingly Production is not about just technology. Increasingly new production “philosophies” such as just-in-time new production “philosophies” such as just-in-time supply (JIT) and total quality management (TQM) supply (JIT) and total quality management (TQM) are providing platforms for profitable innovation. are providing platforms for profitable innovation.
  • 8. NEW MEANS OF INFORMING THE NEW MEANS OF INFORMING THE CUSTOMER ABOUT THE PRODUCT: CUSTOMER ABOUT THE PRODUCT:  People will only use a product or service if they know People will only use a product or service if they know about it. Demand will not exist if the offering is not about it. Demand will not exist if the offering is not properly promoted to them. Promotion consists of properly promoted to them. Promotion consists of two parts: a message, what is said, and a means, the two parts: a message, what is said, and a means, the route by which that message is delivered. Both the route by which that message is delivered. Both the message and the means present latitude for message and the means present latitude for inventiveness in the way they are approached. inventiveness in the way they are approached. Communicating with costumers can be expensive and Communicating with costumers can be expensive and entrepreneurs especially when their ventures are in entrepreneurs especially when their ventures are in an early stage, rarely have the resources to invest in an early stage, rarely have the resources to invest in high profile advertising and public relation high profile advertising and public relation campaigns. Therefore, they are encouraged to campaigns. Therefore, they are encouraged to develop new means of promoting their products. develop new means of promoting their products.
  • 9. MULTIPLE INNOVATION: MULTIPLE INNOVATION:  An entrepreneurial venture does not have An entrepreneurial venture does not have to restrict itself to just one innovation or to restrict itself to just one innovation or even one type of innovation. Success can be even one type of innovation. Success can be built on a combination of innovations: for built on a combination of innovations: for example, a new product delivered in a new example, a new product delivered in a new way with a new message. way with a new message.
  • 11. ORGANIZATION FOR INNOVATION: ORGANIZATION FOR INNOVATION: CORPORATE ENTREPRENEURSHIP CORPORATE ENTREPRENEURSHIP W.D. Guth and A. Ginsberg defined corporate W.D. Guth and A. Ginsberg defined corporate entrepreneurship (also called in-trapreneurship) entrepreneurship (also called in-trapreneurship) as “the birth of new business within existing as “the birth of new business within existing organization, i.e., internal innovation or organization, i.e., internal innovation or venturing; and the transformation of organization venturing; and the transformation of organization through renewal of the key ideas on wish they are through renewal of the key ideas on wish they are built, i.e., strategic renewal.” A large corporation built, i.e., strategic renewal.” A large corporation that wants to encourage innovation and creativity that wants to encourage innovation and creativity must give the new business unit a certain amount must give the new business unit a certain amount of freedom while maintaining some degree of of freedom while maintaining some degree of head-quarters control. head-quarters control.
  • 12. Burgelman proposes that the uses of a particular Burgelman proposes that the uses of a particular organizational design should be determined by organizational design should be determined by • the strategic importance of the new business the strategic importance of the new business to the to the corporation and corporation and • the relatedness of the unit’s operation the relatedness of the unit’s operation to those of to those of the corporation. The combination of these two the corporation. The combination of these two factors results in 9 possible organizational designs factors results in 9 possible organizational designs for corporate entrepreneurship. for corporate entrepreneurship. ORGANIZATION FOR INNOVATION: CORPORATE ENTREPRENEURSHIP (Continued)
  • 13. 1. 1. Direct integration Direct integration 2. 2. New product business department New product business department 3. 3. Special business unit Special business unit 4. 4. Micro new ventures departments Micro new ventures departments 5. 5. New venture division New venture division 6. 6. Independence business units Independence business units 7. 7. Nurturing and contracting Nurturing and contracting 8. 8. Contracting Contracting 9. 9. Complete spin-off Complete spin-off ORGANIZATION FOR INNOVATION: CORPORATE ENTREPRENEURSHIP (Continued)
  • 15. SOURCES OF INNOVATION SOURCES OF INNOVATION  In this book innovation and In this book innovation and entrepreneurship, Peter Drucker entrepreneurship, Peter Drucker proposed that those interested in proposed that those interested in starting an entrepreneurial venture- starting an entrepreneurial venture- either within an established company either within an established company or as independent small business- or as independent small business- should monitor seven sources of should monitor seven sources of innovative opportunity. innovative opportunity.
  • 16. The first four exist within the industry itself, The first four exist within the industry itself, and the last three in the social environment. and the last three in the social environment. 1. 1. The Unexpected The Unexpected 2. 2. Incongruity Incongruity 3. 3. Innovation Based on Process Need Innovation Based on Process Need 4. 4. Changes in Industry or Market Structure Changes in Industry or Market Structure 5. 5. Demographics Demographics 6. 6. Changes in Perception, Mood, and Meaning Changes in Perception, Mood, and Meaning 7. 7. New Knowledge New Knowledge
  • 17. Factors affecting a new venture’s Factors affecting a new venture’s success success  Industry structure Industry structure  Business strategy Business strategy  Entrepreneurial characteristics Entrepreneurial characteristics  Successful entrepreneurs are better Successful entrepreneurs are better  Successful entrepreneurs have a sense of Successful entrepreneurs have a sense of urgency urgency  Successful entrepreneurs have a detailed Successful entrepreneurs have a detailed knowledge knowledge  Successful entrepreneurs seek outside help to Successful entrepreneurs seek outside help to supplement their skills, knowledge and supplement their skills, knowledge and abilities abilities
  • 19. Invention versus Innovation: Invention versus Innovation: Analytical planning Organizing resources Implementation Commercial application To identify: Product design market strategy financial need To obtain: Materials technology human resources capital To accomplish: Organization product design manufacturing services To provide: Value to costumers rewards for employees revenues foe investors satisfaction for founders Translation of creative idea into a useful application
  • 20. Innovation is the development process, as Innovation is the development process, as shown in figure. It is the translation of an idea shown in figure. It is the translation of an idea in to an application. It requires persistence in in to an application. It requires persistence in analytically working out the details of product analytically working out the details of product design or service, to develop marketing, obtain design or service, to develop marketing, obtain finances, and plan operations. If the finances, and plan operations. If the entrepreneur is going to manufacture a entrepreneur is going to manufacture a product, the process includes obtaining product, the process includes obtaining materials and technical manufacturing materials and technical manufacturing capabilities, staffing operations, and capabilities, staffing operations, and establishing an organization. establishing an organization.