Innovation Management and Entrepreneurship

CHAPTER ONE

1. THE INNOVATION IMPERATIVE

1.1. Basic definition innovation, management and Entrepreneurship

Innovation has been widely regarded as the central process driving economic growth and the
sustainable competitive advantages of companies and nations, as well as global sustainable
growth, while the key precondition to conducting innovation management effectively is to have a
big picture and deep insight of the concept: the nature of innovation.
The term Innovation is derived from the Latin word “innovare”, meaning renewal, making of
new material or change. Innovation is the practical application of ideas that result in different
new types of new offerings, like products, services, processes, and business models, intending to
improve or disrupt existing applications or creating new solutions.

It doesn’t matter if you are getting the ideas from outside the organization,
through brainstorming, combining of existing ideas or radical new thinking within your field.
But it should be at the heart of your business and it should constantly be done to ensure business
survival. Innovation is the specific function of entrepreneurship, whether in an existing business,
a public service institution, or a new venture started by a lone individual in the family kitchen. It
is the means by which the entrepreneur either creates new wealth-producing resources or endows
existing resources with enhanced potential for creating wealth.

Innovation refers to the introduction of a new quality of a good or a new good, market, method
of production, source of supply, and organization in an industry. The most promising thing about
the innovation process is being able to actualize an idea into a successful concept.

Innovation is a process by which a domain, a product, or a service is renewed and brought up to

date by applying new processes, introducing new techniques, or establishing successful ideas to
create new value.

“An innovation is the implementation of a new or significantly improved product (good or

service), or process, a new marketing method, or a new organizational method in business
practices, workplace organization or external relations”. The narrower definition of innovation
could be “the implementation of one or more types of product and process innovations”. An
innovation is deemed to have been realized if a product was launched into the market or a

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process was applied to production. Therefore, innovation spans a range of activities, whether
scientific, technological, organizational, financial or commercial. In general innovation can be
summarized as:

• Introducing new products or improving product quality;

• Adopting new production methods and processes;
• Developing new markets;
Note: Innovation is the practical implementation of ideas that result in the introduction of new
goods or services or improvement in offering goods or services.

Entrepreneurship is a dynamic process undertaken by an entrepreneur to create incremental value

and wealth by discovering investment opportunities, organizing an enterprise, undertaking risk
and economic uncertainty and there by contributing to economic growth.
Management can be defined as a process "consisting of planning, organizing, actuating and
controlling, performance to determine and accomplish the objectives by the use of people and
other resources".
1.2. Characteristics of innovation
The characteristics of innovation are described below.

a) Market demand: Demand and acceptance of the product in the market is one of the key
criteria for product innovation. It is directly linked to the company’s market share and to
profit margin.
b) Optimal use of existing condition: It is examined whether the existing technology is
used in an optimal way relevant to the product and its production. It relates to updating
procedures and technology forecast.
c) Compliance with the regulations: Compliance with the safety, health, environmental
regulations, etc. It is a characteristic of innovation because compliance with the
regulations could often lead to qualitative innovative changes on the product.
d) Market research: Market research may disclose alternative solutions regarding design,
price, distribution and product promotion and offers an estimate of product acceptance
and image in the market.

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e) Connection to target-customers: Frequency of contact between the company and target-

customers at local, national or international level. The main objective is to establish a
long lasting relation mainly with large customers.
f) Access to new technology: Frequency of the company’s contact with the current
technological evolutions regarding production of product. It relates directly with
departments of R&D, design, cooperation with technological bodies, participation in
exhibitions, etc.
g) Emphasis on fulfilling operational needs: Focus of product development process on the
specific operational need the product addresses. It involves conversion of requirements to
product specifications and relates to the way the trade mark participates in product
development process.
h) Formal procedures to protect copyright: It is examined whether the required actions
are taken to protect copyright. It is assessed whether an enterprise is geared towards
protecting patents and designs and whether the above methodology constitutes its policy.
i) Cost control: Control is a systematic review process applied during the design phase, in
order to cut production cost, preserving at the same time the value and the required
operation specifications (value/price) and ensuring the product’s sustainability and
competitive price.
j) Quality control: Formal control procedures during the design phase that include use of
methods to analyze and improve innovation process quality and processes to safeguard
rules applying to date.
k) Organizational culture: Emphasis of organizational culture on innovation. It has been
evidenced that organizational culture relates directly to a company’s innovativeness.

1.3. Dimension/Classification of innovation

These are the many types of innovation that stand out and seem to be the consensus among
organizations looking for a ground breaking idea, concept, or product.

1. The Product or Service Innovation: it refers to the case when an enterprise introduces a new
product in the market or provides a new service.

2. Process Innovation is in takes place when an enterprise introduces new elements in its
production process or its operation, being used for the production of a product or the provision of

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a process. In some cases the dividing line between these two types is not clear. Separation
depends on the organization involved. The emphasis placed by companies on every type of
innovation differs depending on the company’s stage of development. In the first stages, when
the company is small, it adopts product innovations mainly. As the company grows and becomes
more complex, it adopts process innovations too. The development of new products is a risky
venture as it may inject big profit in an enterprise, if the venture succeeds, but it could also lead
to failure. On the contrary, process innovations, whereby higher production volume, low
production cost and higher sales are sought after, are less radical, hence entailing lower risk for
the enterprises adopting them.

3. Administrative or Organizational Innovation

The Administrative or Organizational Innovation appears in the administration sector and affects
the organizational system of an enterprise, consisting of business executives and the relations
between them. In other words, the Administrative Innovation is the introduction of a new
administrative system or a new administrative process; it does not introduce a new product or
service but influences indirectly their introduction or the production process thereof and
primarily adopted by large enterprises with more complex structures..
4. The Technological Innovation: Technological Innovation refers to the creation, improvement
and expansion of the procedures sustained by the products. Technological innovation may refer
to the adoption of a new idea relating to a new product or service, or the introduction of new
elements in production processes or service provision of an enterprise.
5. Incremental Innovation is the one leading to a relatively small deviation from current
practices. It is introduced to improve old products or procedures, without intervening to the
existing structure and strategy of the enterprise. The best Example for incremental innovation
can be seen in the Smartphone market where the most innovation is only updating the hardware,
improving the design, or adding some additional features/cameras/sensors, etc.

6. Radical Innovation brings about fundamental changes in the activities of an enterprise and
expresses a significant deviation from current practices. It gives momentum to new business
activities, strategies and structures and introduces totally new products. Radical innovation
involves the creation of technologies, services, and business models that open up entirely new
markets. Example: The best example of radical innovation was the invention of the airplane.

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This radical new technology opened up a new form of travel, invented an industry, and a whole
new market.

1.4. The Importance of Innovation

Unforeseen challenges are inevitable in business. Innovation can help you stay ahead of the curve and
grow your company in the process. Here are three reasons innovation is crucial for your business:

a. It allows adaptability: Routine operations were rendered obsolete over the course of a few
months. Many businesses still sustain negative results from this world shift because they’ve stuck to the
status quo. Innovation is often necessary for companies to adapt and overcome the challenges of change.

b. It fosters growth: Stagnation can be extremely detrimental to your business. Achieving

organizational and economic growth through innovation is key to staying afloat in today’s highly
competitive world.

c. It separates businesses from their competition: Most industries are populated with multiple
competitors offering similar products or services. Innovation can distinguish your business from others.

d. Define What Is Important to Your Company

Before you can drive innovation, you need to know what you’re trying to achieve. What are your
top priorities for the next year and beyond? What are the strategic goals of your organization?
How will these goals drive your decision-making processes? Once you have a clear picture of
your company’s priorities, you can tailor your innovation strategy accordingly.

e. Build Community Collaboration

Successful innovation hinges on solid partnerships with key stakeholders throughout your
organization. To achieve innovation success, you need to develop strong partnerships with your
employees, customers, partners, and community. As you work to improve your innovation
process, it’s important to involve different stakeholders across your organization.

f. Test Ideas Quickly

Innovation success depends heavily on the speed with which you can test ideas. You need to
quickly identify the most promising ideas and move them forward as quickly as possible. A slow

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innovation process may hinder your progress significantly. Some of the best ideas may never
reach the testing stage.

5. Create a Culture of Experimentation

Innovation success hinges on how easily your organization experiments with new ideas. This
requires that everyone from your top managers to your interns clearly understands the
importance of experimentation. You can foster a culture of experimentation by creating a safe
space for your employees to try new things and fail. Innovation requires a certain amount of
freedom for all employees involved, so too much strategic oversight my limit creative
solutions. It's helpful for managers to balance the need for freedom with the company's need
to offer a certain type of product or remain in a certain industry.

1.5. A process Model for Innovation and entrepreneurship

An innovation process is a set of steps between an idea’s conception and its implementation. It is
a streamlined process that is managed in a way that reflects a company’s structure and
innovation goals. A strong innovation process helps to optimize the identification, capture and
duration of the best ideas and bring them to life. By following a process and iterating and sharing
feedback at every stage, you demonstrate to your entire team that innovation, and every single
idea, matters. To create a successful and sustainable innovation process, your company needs to
go through different stages of corporate innovation. This includes Idea Generation, Evaluation,
Testing and Experimentation, Development and Implementation, and Optimization. Each stage is
important for the overall success of your innovation initiative.

Step 1: Idea generation and collection

This stage is all about coming up with new and innovative ways to improve your business, and
services or products. Some common methods for generating new ideas include free-associating,
customer feedback, new technologies, changing economy or other sources for new ideas. It all
starts with an idea and the best ideas can come from anyone in your team, at any time. So
making sure everyone knows how to capture and store ideas is essential. Experience shows that
researching and introducing dedicated idea management software is the simplest and most

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effective way to capture great ideas from your team. It provides a central location for storing
ideas and actioning them in a transparent and efficient manner.

Step 2: Idea review and evaluation

Ideas should be reviewed and evaluated on a regular basis to ensure that they move quickly and
that your ideators receive immediate feedback. You don’t want people to think that their ideas
are going into a bottomless pit because lack of feedback can demotivate them and discourage
further participation in your innovation programme.

Step 3: Testing, Experimenting or a pilot

This stage involves prototype development, market testing, and user feedback. Ideas that are
aligned with your strategic goals and have successfully passed through the evaluation stage can
be further developed. If the idea creates a big change, it’s beneficial to run a small pilot, build its
run a proof of concept before rolling it out to the whole organisations. Think of this stage as a
rehearsal and also as a time to prepare your communication plan about upcoming changes. The
key to a successful pilot stage is simple: feedback, feedback, feedback! Watch, listen and
participate, and don’t just focus on the positives. This is your chance to significantly limit risk
before going into full production. However, if the idea is a quick win, it’s better to act fast and
simply jump into the execution and implementation stage as it will keep the momentum going.
During this stage, you’ll want to establish clear, measurable KPIs for a full rollout, so pay
attention to the details.

Step 4: Development and Implementation

A successful test can give you good first feedback that can help you create a plan and then
execute the full-scale development of the innovation. It’s time to roll the idea out to your whole
company. This plan should include all the steps necessary for bringing the innovation to market.
Luckily, you should be feeling confident after a pilot, and all your stakeholders should be on
board. Remember to consider how this new idea is going to be integrated into your existing
systems, and get help with producing clear training guides.

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Step 5: Adoption and benefit realization

This stage is all about making sure the innovation is successful and sustainable in the long term.
When you’ve successfully implemented an idea, don’t forget to regularly review and check
whether this news solution still solves the initial problem and whether it has been well adopted
by the whole organisations. It’s also really important to keep collecting feedback.

1.6. How to encourage innovation in your business?

Innovation is sometimes a key critical area for the survival of many businesses and industries.
But encouraging your employees to come up with new ideas can be sometimes stressful. Here
are some tips on how to get more innovation going:

 Actively encourage your employees

 Ask customers for feedback/invite customers for feedback rounds
 Ask stakeholders for feedback
 Invest in your employee’s education
 Actively reserve resources for Research and Development (R&D)
 Build a reward system for innovative thinking
 Collaborate with start-ups and innovative companies
 Build an entrepreneurship program
 Do active research on the internet (follow industry news, tech news, etc.)
 Ask / interview experts

End of chapter one

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