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David Stokes Nicholas Wilson Small Business Management and Entrepreneurship Fifth Edition

Lecture outline
Definition of innovation
Innovation in detail Measuring innovation Innovation in small firms Managing innovation Sources of innovative opportunity

Innovation
It comes from a Latin word innovare, which means to

make something new. It can be defined as the successful exploitation of ideas or turning ideas into profitable products, processes, services or business practices. There are three underlying concepts
Innovation as achievement

The impact of those achievements


Capacity to change or innovation as dynamic capabilities

Innovation as achievement
In technological context not in social or commercial

context New technologies evolve over time Introduction of new technology is a risky process in terms of uncertainties

Innovation as the impact of achievement


Making a social or commercial impact
Some consequences or impacts may not be

anticipated. E.g. the telephone, the car

Innovation as dynamic capabilities


It focuses on the idea of innovation as the capacity to

change. It is a process Dynamic capabilities means a learned and stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness.

Innovation in detail
Misinterpretations of innovation Innovation = invention

Invention is a creative idea and innovation takes it a step ahead and puts it to work New markets, new marketing methods, new operating methods Old ideas can be combined to make them new It is a gradual and ongoing process

Innovation = new products or services only

Innovation = original

Innovation = one-off inspiration

Measuring innovation
Can it be measured?
Four factors can be used Conceptual novelty Technological uncertainty Market uncertainty Extent to which a firm has committed sunk costs to the project. The first three factors require judgment and forth can be measured

Do you think small firms are more innovative?

Sources of innovative opportunity


The unexpected
The incongruous Process need Industry and market structures Demographics Changes in perception New knowledge

The unexpected
Unexpected success or failure often gives clues to

underlying trends which can lead to innovation. Success computers were basically designed for scientific purposes Failure restaurant with sales of jacket potatoes rather than the main courses

The incongruous
An incongruous event or result is a discrepency

between what is said and what everyone expects. Its is a further sign that changes are taking place

Process need
necessity is the mother of invention
It means the way or process through which products or

services are produces

How do you think market and industry structures,

demographics and changes in perceptions have lead to innovation?

Innovation and the entrepreneurship


To help those that remain small and yet wish to

innovate, it has been suggested that cooperation and collaboration among smaller enterprise can help overcome some disadvantages The concept of networked innovation is becoming popular The aim is to promote individual projects by pooling ideas, technology, and commercial experiences.

Innovating for the marketplace


Technology
Task environment Changing preferences More levels of management

Approaches to the market


Product based Concerned with product development Lead to successful products Inflexible and maybe arrogant attitudes towards customers Market based It seeks to find out what the customers want and is willing to pay for Market research is conducted and then products are developed

Which one would you prefer and why?

It may be a mixture of both!!


Entrepreneurs tend to take an idea first and then seek

a market. They understand that research can not always predict needs because sometimes customers do not know what is possible through a breakthrough Owners usually have a specific skill or knowledge that they wish to exploit The business is already established and wishes to add to its existing range without diversification The business has established products which it wishes to sell to new customers

Who is the customer?


Why segment the market?

Resources available

New ideas

Market opportunity

Possible customer And end user segments

Selection of best-fit (with firms resources)

Research and precise Definition of needs of Selected segments

Analysis of distribution

why will the customer buy from me?


Features - characteristics
Benefits value of a product feature to the customer Price Comparisons Substitute products e.g. book or a cassette programme Benefits offered Competitive edge Compare text books and those targeted at the coffee

table

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