Entrepreneurship

Innovation
Innovation
 Innovation is the specific instrument
of entrepreneurship
 It is the act that endows resources
with a new capacity to create wealth
 Systematic innovation consists in the
purposeful and organized search for
changes, and in the systematic
analysis of the opportunities such
changes might offer for economic or
social innovation
Principles of Innovation

 Innovation through flash of genius

 Innovation through hard work
 The do’s:
1. Analysing opportunities
2. Do your homework
3. Simplicity is the ultimate sophistication
4. Start small
5. Aim at leadership
 The Don’t’s:
1. Try not to be clever
2. Don’t do too many things at once
3. Don’t try to innovate for the future
 THREE CONDITIONS

1. Innovation is work.
• Requires knowledge and great ingenuity.
• Rarely work in more than one area.
• Citibank in New York is unlikely to embark
on innovations in retailing or health care.
• Innovation becomes hard, focused,
purposeful work making very great
demands on diligence, on persistence, and
on commitment.
2. To succeed, innovators
must build on their strengths.

 It is important in innovation to
build on one’s strengths
because of the risks of
innovation and the resulting
premium on knowledge and
performance capacity.
 Need to be temperamentally
attuned to the innovative
opportunity.
3. Innovation is an effect in
economy and society, a
change in the behavior of
customers, of teachers, of
farmers, of eye surgeons—of
people in general.

 Innovation always has to be

close to the market, focused
on the market, indeed
market-driven.
THE CONSERVATIVE
INNOVATOR
 “Entrepreneurial personality,” which was
characterized by a “propensity for risk-
taking.”
 In fact, they are not ‘risk-takers.’ They
try to define the risks they have to take
and to minimize them as much as
possible.
 Of course, innovation is risky. But so is
stepping into the car to drive to the
supermarket for a loaf of bread
CONTD:
 All economic activity is by definition
“high-risk.” And defending yesterday—
that is, not innovating—is far more risky
than making tomorrow.
 The innovators are successful to the
extent to which they define risks and
confine them.
 Successful innovators are conservative.
They have to be. They are not “risk-
focused”; they are “opportunity-focused.”
 The unexpected—the unexpected
success, the unexpected failure,the
unexpected outside event;
 The incongruity—between reality as it
actually is and reality as it is assumed
to be or as it “ought to be”;
 Innovation based on process need;
 Changes in industry structure or
market structure that catch everyone
unawares.
 The second set of sources for
innovative opportunity, a set of three,
involves changes outside the
enterprise or industry:
- Demographics (population changes);
- Changes in perception, mood, and
meaning;
- New knowledge, both scientific and
nonscientific.
1. The Unexpected Failure
 Unlike successes, Failures cannot be rejected.

 Results of greed, stupidity or incompetence.

 If something fails despite being carefully planned,

designed and conscientiously executed ,that failure
often bespeaks underlying change, and with it,
opportunity.
Innovation and the unexpected
 To exploit the opportunity offered by the unexpected
success requires innovation. Unexpected success is a
symptom.
 It can be a symptom of,
- failure
- fundamental change in behavior, expectations and
values
- Success
Examples of companies who got success by paying attention
to the unexpected:

1. DuPont made Nylon unexpectedly.

2. IBM got a new insight of target market.

3. Matsushita (Panasonic and National )became one of the

top brands
Management implication
As an entrepreneur, we need to keep an open
mind and see whether our existing ideas can
bring about other ideas that may
unexpectedly result to more success.
Sometimes existing ideas can be used in an
innovative manner to form another
successful idea.
The Unexpected Failure
 Unlike successes, Failures cannot be rejected.

 Results of greed, stupidity or incompetence.

 If something fails despite being carefully planed,

designed and conscientiously executed ,that failure
often bespeaks underlying change, and with it,
opportunity.
Contd…
 The unexpected failure demands that you go out look
around and listen.

 It is equally important to watch out for unexpected

event in the supplier’s business, and among the
customers.

 Failure should always be considered a symptom of an

innovative opportunity, and taken seriously as such.
The unexpected outside event
 They come out of the blue and change everything.
For an entrepreneur this is a clear source of
innovation.
 The unexpected outside event may be an opportunity
to apply already existing expertise to a new
application, but to an application that does not
change the nature of the “business we are in.”
 It may be extension rather than diversification.
 It also demands innovation in product.
 But exploiting the unexpected outside event
appears to be something that particularly fits the
existing enterprise, and a fairly sizable one at that.
2. Incongruity
 An incongruity is a discrepancy, a
dissonance, between what is and what
“ought” to be, or between what is and
what everybody assumes it to be.
 We may not understand the reason for
it; indeed, we often cannot figure it out.
Still, an incongruity is a symptom of an
opportunity to innovate.
 3. Process Need
 Exists within the process of a business, an
industry, or a service
 Do not starts with an event in the environment
 Incongruities in Process Needs essentially look
for a "weak" or "missing" link in an existing
process.
 Basic Criteria Requirements For A
Successful Process Need Innovation

1. A self-contained process
2. One “weak” or “missing” link
3. A clear definition of the objective
4. The specifications for the solutions can be
defined clearly
5. High receptivity – widespread realization
that “there ought to be a better way”
4. Changes in industry and
market structures

•Understanding the nature of the changes

•Responding effectively to the changes when they
occur
•Detecting impending changes in good time.
Understanding Nature of
change
 Industry and market structures tend to
remain constant for long periods then to
change abruptly.
 Many people believe that these strcutures
are permanent.
 who do not to respond effectively are likely
to experience a substantial reduction in
their market share
 Eg: automobile industry Ford, General
Motors, and Fiat all responded wirh quite
different strategies, all of which succeeded.
Responding to change
 Organisations to respond coherently
with a strategy for achieving their
purpose in the changed context.
 Broad and thoughtful observation,
understanding of the nature of the
change, and application of
intelligence to respond appropriately.
5.Demographics
 Demographics is defined as change in
population, it’s size, age structure,
composition, employment, education
status and income.

Examples

Population and it’s size

 Japanese are ahead in robotics because
they paid attention to demographics.
 The change in demographic trends
have mostly been unpredictable but
they have predictable and long lead
time (completion time).
 The ones who actually saw and were
able to grab the opportunity of the
demographic changes were the ones
who could bring changes, innovation,
and become the entrepreneurs.
 6. Perception: Meaning
 The way in which something is
regarded, understood, or interpreted.
 Over time populations and people
change. The way they view life changes,
where they take their meaning from,
and how they feel about things also is
modified over time.
 Entrepreneurs pay attention to this in
order to capitalize the change in
perception of the people.
Impacts of Change in
perception
 Creation of substantial innovative
opportunities.
 High chance to enter into market and
competition
 May not necessarily lead to positive
outcome
 If general perception changes from
seeing the glass as “half full” to seeing it
as “half empty,” there are major
innovative opportunities
 Consequences/Impacts of
change in perception
 Differention of an innovation.
 Ability to identify one or more features
that distinguish the innovation from
existing alternatives.
For E.g. Apple has focused on premium
services such as music, movies, apps via
App store and iTunes.
Contd.
 Leads to new trends and practices
For e.g. the success of Ford’s Thunderbird
and failure of its Edsel brand

 Change in perception depends on

moods and attitudes rather than facts
7. Knowledge Based Innovations
 The innovations that is made by
using the knowledge or concept is
known as knowledge based
innovations.
What knowledge based innovation
requires?
 Careful analysis of missing social,
economic and perceptual factors
 Clear focus on strategic position
and market focus
 Practice entrepreneurial
management to reduce risk