REPORTERS:

DOMINGO, JOANNE MAE

TRAZO, HANNA JANE
GUILALA, RACHEL
RAMOS, LYKA

Chapter 5 Innovation: The Creative Pursuit of Ideas

Entrepreneurial Thought

“The era of the intelligent man/woman is almost over and a new one is emerging,
the era of the creative man/woman.”
-Pinchas Noy
5-1 Opportunity Identification: The Search for New Ideas
Opportunity identification is central to the domain of entrepreneurship.
“At its core entrepreneurship revolves around the question of why, when, and
how opportunity for the creation of goods and services in the future arise in an
economy. Thus, opportunity recognition is the progenitor of both personal
and societal wealth.” It has been argued that understanding the opportunity
identification process is one of the primary challenges of entrepreneurship
research.

5-1a Sources of Innovative Ideas

TRENDS `
Trend signal shifts in the current paradigm (or thinking) of the major
population.
1. Societal Trends: aging demographics, health and fitness growth, senior
living
2. Technology Trends: mobile (cell phone) technology, e-commerce,
Internet advances.
3. Economic Trends: higher disposable incomes, dual wage-earner
families, performance pressures.
4. Government Trends: increased regulations, petroleum prices,
terrorism

UNEXPECTED OCCURRENCES
Successes or failures that, because they were unanticipated or unplanned,
often prove to be major sources of innovation.
INCONGRUITIES
Incongruities exist in the gap between expectation and reality.

PROCESS NEEDS
Venture capitalists often refer to process needs in the marketplace as “pain”
and to innovative solutions to these needs as “painkillers.”

INDUSTRY AND MARKET CHANGES

Continual shifts in the marketplace caused by changes in consumer attitudes,
advancements in technology, and growth in the structure, design, or
definition of markets or industries are sources of emerging opportunity.

DEMOGRAPHIC CHANGES
Changes in population size, age, education, geographic locality, and similar
demographic variables often catalyze new entrepreneurial opportunities.

PERCEPTUAL CHANGES
Perceptual changes in people’s interpretation of facts and concepts may be
intangible but meaningful.

KNOWLEDGE-BASED CONCEPT
Inventions, which are the product of new thinking, new methods, and new
knowledge, often require the longest time period between initiation and
market implementation because of the need for testing and modification.

TABLE 5.1 SOURCES OF INNOVATIVE IDEAS

5-1b The Knowledge and Learning Process
Once sources of ideas are recognized, entrepreneurs must use their existing
knowledge base, acquired through work, experience, and education, to hone ideas
into actual opportunities.

The following knowledge helps entrepreneurs to distill unusual sources of innovative

ideas into potential opportunities:
● General Industry knowledge : Is information on how a particular
company or business functions
● Prior Market Knowledge : Refers to the knowledge and understanding
that individuals or companies are aware of about the financial markets,
including strategies, trends, and historical data that may affect their
investment decisions.
● Prior Customer Understanding : Refers to the knowledge and
understanding that an entity has about its customers before engaging
with them, often gained through data analysis, market research, or
previous interactions.
● Specific Interest Knowledge : Refers to specialized or focused expertise
in a particular subject or field.

5-2 Entrepreneurial Imagination and Creativity

Entrepreneurs blend imaginative and creative thinking with a systemic, logical
process ability. This combination is a key to successful innovation. In addition,
potential entrepreneurs are always looking for unique opportunities to fill needs and
wants.

5-2a The Role of Creative Thinking

It is important to recognize the role of creative thinking in the innovative process.
Creativity is the generation of ideas that results in the improved efficiency or
effectiveness of a system. Two important components of creative problem solving are
process and people. Process is goal oriented; it is designed to attain a solution to a
problem. People are the resources that determine the solution.

5-2b The Nature of the Creative Process

Creativity is the process that can be developed and improved. Everyone is creative in
some degree. However, as is the case with many abilities and talents (athletic,
artistic, etc..,) some individuals have a greater aptitude for creativity than others.
Also, some people have been raised and educated in an environment that encouraged
them to develop their creativity. They have been taugh to think and act creativity. For
others, the process is more difficult because they have not been positively reinforced;
if they are to be creative, they must learn how to implement the creative process.
TABLE 5.2 TWO APPROACHES TO CREATIVE PROBLEM SOLVING

Four step process

PHASE 1: BACKGROUND OR KNOWLEDGE ACCUMULATION
Successful creation are generally preceded by investigation and information
gathering. This usually involves exstensive reading, conversation with others working
in the field, attendance at professional meetings and workshops, and general
absorption of information relative to the problem or issue under study.

PHASE 2: THE INCUBATION PROCESS

Creative individuals allow their subconscious to mull over tremendous amounts of
information gathered during the preparation phase. This incubation process often
occurs while they are engaged in activities totally underrated to the subject or
problem.

TABLE 5.3 THE MOST COMMON IDEA KILLER

PHASE 3: THE IDEA EXPERIENCE
This phase of the creative process is often the most exciting, because it is when the
idea or solution the individual is seeking is discovered. Sometimes referred to as the
“eureka factor” this phase is also the one average person incorrectly perceive as the
only component of the creativity.

PHASE 4: EVALUATION AND IMPLEMENTATION

This is the most difficult step of creative endeavor and requires a great
deal of courage, self discipline, and perseverance. Successful
entrepreneurs can identify ideas that are workable and that they have the
skills to implement. More important, they do not give up when they run
into temporary obstacles.

5-2c Developing Your Creativity

You can do number of things to improve your own creative talents; one
of the most helpful is to become aware of some habits and mental blocks
that stifle creativity. Of course, as with most processes, your
development will be more effective if you regularly practice exercises
designed to increase yout creative abilities.

FIG. 5.1 THE CRITICAL THINKING PROCESS

RECOGNIZING RELATIONSHIP
Many invention and innovation are a results of the inventor’s ability to see new and
different relationship among objects, processes, materials, and technologies and
people. Examples range widely and include (1) adding fruit juice to soft drinks to
create slice, (2) combining combustion engine technology with the wheel to create
the automobile, and (3) using 330-found defensive footbal player as a running back
and pass receiver.

5-3 Developing a Functional Perspective

- If you wish to become more innovative and creative, you need to visualize
yourself in complementary relationships to the things and people of the world.
You must learn to look at them in terms of how they complement attempts to
satisfy your own needs and to complete your projects. You must begin to look
at things and people in non-conventional ways and from a different
perspective.

5-4 USING YOUR BRAINS

The Right Brain Hemisphere
- helps an individual understand analogies, imagine things, and synthesize
information.
The Left Brain Hemisphere
- Helps the person analyze, verbalize, and use rational approaches to problem
solving

TABLE 5.4 PROCESS ASSOCIATED WITH THE TWO HEMISPHERES OF

THE BRAIN

Elimination Muddling Mindset

- A number of mental habits block or impede creative thinking.
TABLE 5.5 WAYS TO DEVELOP LEFT- AND RIGHT- HEMISPHERE
SKILLS
ARENAS OF CREATIVITY
- Remember, people are inherently creative. Some act on that creativity all of
the time while others stifle it, and most of us fall somewhere in between the
two. The reality is that people often do not recognize when or how they are
being creative. Furthermore, they fail to recognize the many opportunities for
creativity that arise within their jobs on a daily basis. Creativity researcher
William Miller argues that people often do not recognize when they are being
creative, and they frequently overlook opportunities to be creative. He
suggests that the path to creativity begins by first recognizing all of the ways in
which we are or can be creative. People in organizations can channel their
creativity into seven different arenas:
1. Idea Creativity
2. Material Creativity
3. Organization Creativity
4. Relationship Creativity
5. Event Creativity
6. Inner Creativity
7. Spontaneous Creativity

THE CREATIVE CLIMATE

Creativity is most likely to occur when the business climate is right. No enterprise
will have creative owners and managers for long if the right climate is not established
and nurtured. Following are some important characteristics of this climate:
● A trustful management that does not overcontrol employees Open channels of
communication among all business members
● Considerable contact and communication with outsiders
● A large variety of personality types A willingness to accept change An
enjoyment in experimenting with new ideas
● Little fear of negative consequences for making a mistake
● The selection and promotion of employees on the basis of merit

5-6 INNOVATION AND THE ENTREPRENEUR

INNOVATION
● It is a key function in the entrepreneurial process. Researchers and authors in
the field of entrepreneurship agree, for most part, with renowned consultant
and author Peter F. Drucker about the concept of innovation: “Innovation is
the specific function of entrepreneurship . It means by which the
entrepreneur either creates new wealth-producing resources and endows
existing resources with enhanced potential for creating wealth.”
● Innovation is the process by which entrepreneurs convert opportunities
(ideas) into marketable solutions. It means they become the catalyst for a
change.
 ● The innovation process starts with a good idea. The origin of an idea is
important, and the role of creative thinking may be vital to that development
● A major difference exists between an idea that arises from mere speculation
and one that is the product of extended thinking, research , experience, and
work. More importantly, a prospective entrepreneur must have the desire to
bring good idea through the development stage.
5-6a THE INNOVATION PROCESS
● Most innovations result from conscious, purposeful search for new
opportunities. This process begins with the analysis of the sources of new
opportunities. Drucker has noted that , because innovation is both conceptual
and perceptual, would-be innovators must go out and look, ask, and listen.
● Successful innovators use both the right and left side of their brains.
They look at figures. They look at people. They analytically work out what the
innovations have to be to satisfy the opportunity. Then they go out and look at
the potential product users to study their expectations, values, and needs
● Most successful innovators are simple and focused. They are directed towards
a specific, clear, and carefully designed application. In the process, they create
new customers and markets.
● Innovation often involves more work than genius. As Thomas Edison once
said, “Genius is 1 percent inspiration and 99 percent perspiration.” Moreover,
innovators rarely work in more than one area. For all his systematic
innovative accomplishments, Edison worked only in the electricity field

5-6b TYPES OF INNOVATION

Four basic types of innovation exist (see Table 5.6). These extend from the
totally new to modification of existing products or services. Following are the four
types, in order of originality.
1. Invention: the creation of a new product, service, or process, often one that
is novel or untried. Such concepts tend to be “revolutionary”
2. Extension: the expansion of a product, service, or process already in
existence . Such concepts make a different application of a current idea
3. Duplication: the replication of an already existing product, service, and
process. The duplication effort, however it is not simply copying but adding
the entrepreneur’s own creative touch to enhance or improve the concept and
beat the competition
4. Synthesis: the combination of existing concepts and factors into a new
formulation. This involves taking a number of ideas or items already invented
and finding a way that they can form a new application
 TABLE 5.6 INNOVATION IN ACTION

5.6c THE MAJOR MISCONCEPTION OF INNOVATION

The entire concept of innovation conjures up many thoughts and
misconceptions; it seems that everyone has an opinion as to what innovation entails.
In this section, we outline some of the commonly accepted innovation
misconceptions and provide reasons why these are misconceptions and not facts.
● Innovation is planned and predictable. Innovation is unpredictable
and may be introduced by anyone.
● Technical specification must be thoroughly prepared. Preparation
is good but it sometimes takes too long. Quite often, it is more important to
use a try/test/revise approach.
● Innovation relies on dreams and blue-sky idea. Accomplished
innovators are very practical and create opportunities from opportunities
grounded in reality and not daydreams.
● Big projects will develop better innovations that smaller ones.
Larger firms are now encouraging their people to work in smaller groups
where it often easier to generate creative ideas.
● Technology is the driving force of innovation success. Technology is
certainly a driving factor in many innovations, but it is not only a success
factor. Moreover, the customer or market is the driving force behind any
innovation. Market-driven or customer-based innovations have the highest
probability of success.
5-6d Principles of Innovation
These principles can be learned and when combined with opportunity can enable
individuals to innovate.

The major motivation principles are as follows:

1. Be action oriented. Innovators always must be active and searching for
new ideas, opportunities, or sources information.
2. Make the product, process, or simple and understandable. People
must readily understand how innovation works
3. Make the ,product, or service customer-based. Innovation always
must keep the customer in mind. The more innovator has the end user in
mind, the greater the chance the concept will be accepted and used.
4. Start small. Innovators should not attempt a project or development on a
grandiose scale. They should begin small and then build and develop, allowing
for planned growth and proper expansion in the right manner and at the right
time.
5. Aim high. Innovators should aim hight for succes by seeking a niche in the
market place.
6. Try/test/revise. Innovators always should follow the rule of try, test, and
revise. This helps work out any flaws in the product, process, or service.
7. Learn from failures. Innovation does not guarantee success. More
important, failures often give rise to innovations.
8. Follow a milestone schedule. Every innovator should follow a schedule
that indicates milestone accomplishments.
9. Reward heroic activity. This principle applies more to those involved in
seeking and motivating other to innovate.
10. Work, work, work. This is a simple but accurate exhortation with which
to conclude the innovation principles.