3.

ENTREPRENEURSHIP
AND
INNOVATION:

3.1 THE INNOVATION

CONCEPT:

Innovation is the specific tool of entrepreneurs, the

means by which they exploit change as an
opportunity for a different business or a different
service. It is capable of being presented as a
discipline, capable of being learned, capable of
being practiced. Entrepreneurs need to search
purposefully for the sources of innovation, the
change and their symptoms that indicate
opportunities for a successful innovation. And they
need to know and to apply the principles of
successful innovation.

3.1 THE INNOVATION CONCEPT:

(Continued)

A business opportunity, therefore, is the chance to do something

differently and the better. An innovation is the way of doing
something differently and better. Thus an innovation is the means of
exploiting a business opportunity. Innovation has a different
meaning in economics. All goods (whether physical products or
services) are regarded as being made up of three factors: nature raw
materials, physical and mental labor and capital (money). An
innovation is a new combination of these three things.
Entrepreneurs, as innovators, are people who create new
combinations of these factors and then present to the market for
assessment by consumers. This is a technical conceptualization of
what is innovation is about. It does not give the practicing
entrepreneur much of a guide to what innovation to make, or how to
make it, but it should warn that innovation is a much broader
concept then just inventing new products. It also involves bringing
them to market. Some important areas in which valuable innovation
might be made will be discussed below.

NEW PRODUCTS:
One of the most common forms of innovation is
the creation of new product. The new product may
exploit an established technology or it may be the
outcome of a whole new technology. The new
product may offer a radically new way of doing
something it may simply be an existing theme.
David Packard built scientific instrumentation
and information processing business umpire,
Hewlett Packard, based on advanced scientific
developments.

NEW PRODUCTS:
(Continued)

Products are not simply a physical tool for achieving

particular ends. They can also have a role to play in
satisfying emotional needs. Branding is an important
aspect of this. A brand name reassures the consumer,
draws ready-made associations for them and provides a
means of making a personal statement. The possibility of
innovations being made through branding should not be
overlooked. The English entrepreneur, Richard Branson,
for example, has been active in using the virgin brand
name on a wide variety of product areas following its
initial success in the airline business. To date, it has been
used to create a point of difference on, among other
things, record labels, soft drinks and personal finance
products.

NEW SERVICES:

A service is an act which is offered to undertake a

particular task or solve a particular problem. Services are
open to the possibilities of new ideas and innovation just as
much as physical products. For example, the American
entrepreneur, Frederick smith, created the multi-million
dollar international business, federal express, by releasing
a better way of moving parcels between people.
Like physical products, services can be supported by the
effective use of branding. In fact, it is beneficial to stop
thinking about products and services as distinct types
of business and to recognize that all offerings have product
and service aspects. This is important because it is possible
to innovate by adding a customer service in component
to a physical product to make it more attractive to the user.
Similarly, developments in products technology allow new
service concepts to be innovated.

NEW PRODUCTION TECHNIQUES:

Innovation can be made in the way in which a product

is manufactured. Again, this might be by developing
an existing technology or by adopting a new
technological approach. A new production technique
provides a sound basis for success if it can be made to
offer the end-user new benefits. It must either allow
them to obtain the product at lower cost, or to be
offered a product of higher or more consistent quality,
all to be given a better service in the supply of the
product.
Production is not about just technology. Increasingly
new production philosophies such as just-in-time
supply (JIT) and total quality management (TQM)
are providing platforms for profitable innovation.

NEW MEANS OF INFORMING THE

CUSTOMER ABOUT THE PRODUCT:

People will only use a product or service if they know

about it. Demand will not exist if the offering is not
properly promoted to them. Promotion consists of
two parts: a message, what is said, and a means, the
route by which that message is delivered. Both the
message and the means present latitude for
inventiveness in the way they are approached.
Communicating with costumers can be expensive and
entrepreneurs especially when their ventures are in
an early stage, rarely have the resources to invest in
high profile advertising and public relation
campaigns. Therefore, they are encouraged to
develop new means of promoting their products.

MULTIPLE INNOVATION:

An entrepreneurial venture does not have to

restrict itself to just one innovation or even
one type of innovation. Success can be built
on a combination of innovations:
for
example, a new product delivered in a new
way with a new message.

3.2

IMPORTANCE
OF
INNOVATION
FOR
ENTREPRENEURSHIP:

ORGANIZATION FOR INNOVATION:

CORPORATE ENTREPRENEURSHIP
W.D. Guth and A. Ginsberg defined corporate
entrepreneurship (also called in-trapreneurship)
as the birth of new business within existing
organization, i.e., internal innovation or
venturing; and the transformation of organization
through renewal of the key ideas on wish they are
built, i.e., strategic renewal. A large corporation
that wants to encourage innovation and creativity
must give the new business unit a certain amount
of freedom while maintaining some degree of
head-quarters control.

ORGANIZATION FOR INNOVATION:

CORPORATE ENTREPRENEURSHIP
(Continued)

(1)

(2)

Burgelman proposes that the uses of a particular

organizational design should be determined by
the strategic importance of the new business to the
corporation and
the relatedness of the units operation to those of
the corporation. The combination of these two
factors results in 9 possible organizational designs
for corporate entrepreneurship.

ORGANIZATION FOR INNOVATION:

CORPORATE ENTREPRENEURSHIP
(Continued)
1.
2.
3.
4.
5.
6.
7.
8.
9.

Direct integration
New product business department
Special business unit
Micro new ventures departments
New venture division
Independence business units
Nurturing and contracting
Contracting
Complete spin-off

3.3

SOURCES
OF
INNOVATION
FOR
OPPORTUNITIES

SOURCES OF INNOVATION

In
this
book
innovation
and
entrepreneurship,
Peter
Drucker
proposed that those interested in
starting an entrepreneurial ventureeither within an established company
or as independent small businessshould monitor seven sources of
innovative opportunity.

The first four exist within the industry itself,

and the last three in the social environment.
1.
2.
3.
4.
5.
6.
7.

The Unexpected
Incongruity
Innovation Based on Process Need
Changes in Industry or Market Structure
Demographics
Changes in Perception, Mood, and Meaning
New Knowledge

Factors affecting a new

ventures success
Industry structure
Business strategy
Entrepreneurial characteristics

Successful entrepreneurs are better

Successful entrepreneurs have a sense
of urgency
Successful
entrepreneurs
have
a
detailed knowledge
Successful entrepreneurs seek outside
help
to
supplement
their
skills,
knowledge and abilities

3.4

THE INNOVATION
PROCESS

Invention versus Innovation:

Translation of creative idea into a useful application
Analytical
planning

To identify:
Product
design
market
strategy
financial
need

Organizing
resources

To obtain:
Materials
technology
human
resources
capital

Implementation

To accomplish:
Organization
product design
manufacturing
services

Commercial
application

To provide:
Value to
costumers
rewards for
employees
revenues foe
investors
satisfaction for
founders

Innovation is the development process, as

shown in figure. It is the translation of an idea
in to an application. It requires persistence in
analytically working out the details of product
design or service, to develop marketing, obtain
finances, and plan operations. If the
entrepreneur is going to manufacture a product,
the process includes obtaining materials and
technical manufacturing capabilities, staffing
operations, and establishing an organization.