CHAPTER 2

INNOVATION
IN
ENTREPRENEURSHIP
The era of the intelligent
man/woman is almost over and
a new one is emerging – the era
of the creative and innovative
man/woman.
-Pinchas Noy
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Learning Objectives:
After studying this chapter you should be
able to describe:
1. The Business Idea and How to Develop New
business Idea.
2. The Definition of Technology and How to
Create a Product (product life cycle).
3. The Important of Leadership, Innovation and
Consultancy Skills in Business.
4. The Government and Private Agencies Related
with the Innovation Activities.

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DEVELOPING BUSINESS IDEA
Identifying and Recognizing Opportunities
 Opportunity = is a favorable set of
circumstances that creates a need for a new
product, service or business.
 An opportunity has four essential qualities.





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Three Ways to Identify an Opportunity
1. Observing Trends

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2. Solving a Problem

Sometimes identifying
opportunities simply
involves noticing a problem
and finding a way to
solve it.
These problems can be
pinpointed through observing
trends and through more simple
means, such as intuition,
serendipity, or chance.
Some business ideas are clearly
initiated to solve a problem.
For example, Symantec Corp.
created Norton antivirus
software to guard computers
against viruses.
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3. Finding Gaps in the Marketplace

 A third approach to identifying opportunities is to find a gap
in the marketplace.
 A gap in the marketplace is often created when a product or
service is needed by a specific group of people but doesn’t
represent a large enough market to be of interest to
mainstream retailers or manufacturers.
 This is the reason that small clothing boutiques and
specialty shops exist.
 The small boutiques, which often sell designer clothes or
clothing for hard-to-fit people, are willing to carry
merchandise that doesn’t sell in large enough quantities
for Wal-Mart.
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Five Steps to Generating Creative
Ideas
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Preparation

Elaboration

Incubation

Evaluation

Insight

Is the stage during which a person
considers an idea or thinks about a
problem.
Is the background, experience and knowledge
that an entrepreneur brings to the opportunity
recognition process.
Is the flash of recognition – when the solution
to a problem is seen or an idea is born. It is
sometimes called the “eureka” experience.
Is the stage during which the creative
idea is put into a final form.
Is the stage of the creative process
during which an idea is subjected to
scrutiny and analyzed for its viability.
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Techniques for Generating Ideas
1. Brainstorming
 Is a technique used to generate a large number of
ideas and solutions to problems quickly.
 A brainstorming “session” typically involves a
group of people, and should be targeted to a
specific topic.
 Rules for a brainstorming session:
 No criticism.
 Freewheeling is encouraged.
 The session should move quickly.
 Leap-frogging is encouraged.




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2. Focus Groups

 A focus group is a gathering of five to ten people,
who have been selected based on their common
characteristics relative to the issues being
discussed.
 These groups are led by a trained moderator, who
uses the internal dynamics of the group
environment to gain insight into why people feel
they way they do about a particular issue.
 Although focus groups are used for a variety of
purposes, they can be used to help generate new
business ideas.
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3. Surveys
(

 A survey is a method of gathering information from
a sample of individuals. The sample is usually just
a fraction of the population being surveyed.
 The most effective surveys sample a “random”
portion of the population, meaning that the
sample is not selected haphazardly or only from
people who volunteer to participate.
 The quality of survey data is determined largely
by the purpose of the survey and how it is
conducted.
 Surveys generate new product, service, and
business ideas because they ask specific questions
and get specific answers.

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Other Techniques
4. Customer Advisory Boards
 Some companies set up customer advisory boards that meet
regularly to discuss needs, wants, and problems that may
lead to new ideas.
5. Day-In-The-Life Research
 A type of anthropological research, where the employees of
a company spend a day with a customer.
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TECHNOLOGY AND CREATING PRODUCTS
Entrepreneurs need to keep up with the
ever-changing phase of technology which
would affect their production in terms of:
i. New product development
ii. Packaging
iii. Marketing
iv. Product quality
Having up-to-date technological skills gives
them the competitive edge in the business
world.


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Product Life Cycle


A new product progresses through a sequence of
stages
- from introduction to
- growth,
- maturity, and
- decline.
This sequence is known as the product life cycle
and is associated with changes in the marketing
situation, thus impacting the marketing strategy
and the marketing mix.

The product revenue and profits can be plotted as
a function of the life-cycle stages as shown in the
graph below:

Product Life Cycle
 Product Life Cycle Diagram


Product Life Cycle Diagram










Introduction Stage

This is the stage where a product is
conceptualized and first brought to market.

The firm seeks to build product awareness and
develop a market for the product.

The impact on the marketing mix is as follows:
 Product branding and quality level is established,
and
 Intellectual property protection such as patents
and trademarks are obtained.



Introduction Stage

The introduction of a new product can be
broken down into five distinct parts: .
Idea validation:
Which is when a company studies a
market, looks for areas where needs are
not being met by current products, and
tries to think of new products that could
meet that need.
The company's marketing department is
responsible for identifying market
opportunities

Introduction Stage

 Conceptual design:
1. Occurs when an idea has been approved and
begins to take shape.
2. The company has studied available materials,
technology, and manufacturing capability and
determined that the new product can be created.
3. Once that is done, more thorough specifications
are developed, including price and style.
4. Marketing is responsible for minimum and
maximum sales estimates, competition review,
and market share estimates.



Introduction Stage

Specification and design is when the
product is nearing release.

Final design questions are answered
and final product specs are
determined so that a prototype can be
created.




Introduction Stage

 Prototype and testing
1. First version of a product is created and
tested by engineers and by customers.
2. The marketing department is extremely
important at this point.
3. It is responsible for :
a. developing packaging
b. conducting the consumer tests
c. tracking customer responses

Introduction Stage

Manufacturing ramp-up
1. The final stage of new product
introduction.
2. This is also known as commercialization.
3. Product goes into full production for
release to the market.
4. Final checks are made on product reliability
and variability.



Introduction Stage

Pricing may be low penetration pricing to build
market share rapidly, or high skim pricing to
recover development costs.

Distribution is selective until consumers show
acceptance of the product.

Promotion is aimed at innovators and early
adopters. Marketing communications seeks to
build product awareness and to educate potential
consumers about the product.


Introduction Stage


Promotion is aimed at innovators and early
adopters.

Marketing communications seeks to build
- product awareness and
- to educate potential consumers
about the product.

Growth Stage
In the growth stage, the firm seeks to build brand
preference and increase market share.
Product quality is maintained and additional
features and support services may be added.
Pricing is maintained as the firm enjoys increasing
demand with little competition.
Distribution channels are added as demand
increases and customers accept the product.
Promotion is aimed at a broader audience.
Growth Stage
The growth phase occurs when a product has
1. Survived its introduction and is
2. Beginning to be noticed in the marketplace.
3. A company can decide if it wants to go for increased
market share or increased profitability.
4. It is boom time for any product.
5. Production increases, leading to lower unit costs.
6. Sales momentum builds as advertising campaigns
7. Competition grows as awareness of the product
builds.
8. Minor changes are made as more feedback is
gathered or as new markets are targeted.
9. The goal for any company is to stay in this phase as
long as possible.
Growth Stage
It is possible that the product will not succeed at
this stage and move immediately past decline and
straight to cancellation.
Marketing staff needs to evaluate what costs the
company can bear and what the product's chances for
survival are.
Tough choices need to be made—sticking with a losing
product can be disastrous.
Growth Stage
If the product is doing well.
1. The goal is to build brand loyalty by
adding first-time buyers and
retaining repeat buyers.
2. Sales, discounts, and advertising
are important role in that process.
3. Creating variations of the initial
product that appeal to additional
audiences.

Maturity Stage

Strong growth in sales diminishes.

Competition may appear with similar
products.

The primary objective at this point is to defend market
share while maximizing profit.



Maturity Stage

At the maturity stage,
1. Sales growth has started to slow

2. Decline will begin.

3. Defending market share becomes the chief
concern.

Maturity Stage

 More competitors have stepped
forward to challenge the product
 Some of which may offer a higher
quality version of the product at a
lower price.
 This can touch off PRICE WARS,
 Lower prices mean lower profits,
 Some companies to drop out of the
market for that product altogether.

Maturity Stage

The maturity stage is usually the
LONGEST of the four life cycle
stages, and it is not uncommon for a
product to be in the mature stage for
several decades.

Maturity Stage

A smart company will seek to:
Streamline Operations,
Cost efficiencies sought, and
Hard decisions made.
Lower unit costs as much as possible
So that profits can be maximized.

The money earned from the mature products
is used in research and development to come
up with new product ideas to replace the
maturing products.


Maturity Stage

Marketing experts argue that the right promotion can make
more of an impact at this stage than at any other.
Two primary marketing strategies at this stage.
Offensive
1. Looking beyond current markets and
2. Attempting to gain brand new buyers.
3. Re-launching the product
4. Changing the price of a product (either
higher or lower) to appeal to an new
audience or
5. Finding new applications for a product.
Defensive - special sales, promotions, cosmetic
product changes,

Maturity Stage

Product: features may be enhanced to
differentiate the product from that of
competitors.

Pricing: may be lower because of the new
competition.

Distribution: becomes more intensive,

Promotion: emphasizes product differentiation.

Decline Stage

1. This occurs when the product
peaks in the maturity stage and
then begins a downward slide in
sales.
2. Eventually, revenues will drop to
the point where it is no longer
economically feasible to continue
making the product.
3. Investment is minimized.

Decline Stage

As sales decline, the firm has several options:
- Maintain the product, possibly -
rejuvenating it by
..adding new features and
..finding new uses.
- Harvest the product –
..reduce costs and
..continue to offer it to loyal
niche segment.

Decline Stage

- Discontinue the product,
- liquidating remaining
inventory or
- selling it to another firm that is
willing to continue the product.

Decline Stage

The marketing mix decisions in the decline
phase will depend on the selected strategy.
E.g.
the product may be changed if it is being
rejuvenated, or
left unchanged if it is being harvested or
liquidated.
The price may be maintained if the product is
harvested, or reduced drastically if liquidated.
LEADERSHIP, INNOVATION AND
CONSULTANCY SKILLS IN BUSINESS
Leadership = the process of influencing
others to achieve group or organizational
goals.
Visionary Leadership = leadership that
creates a positive image of the future that
motivates organizational members and
provides direction for future planning and
goal setting.




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Leadership Traits
Desire to lead
Honesty and integrity
Self-confidence
Emotional stability
Cognitive ability
Knowledge of the business
Drive
Have Vision
Integrity
Dedication


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Leadership & Skills
 Successful Leaders Don’t
Procrastinate

 Successful Leaders Don’t
Delegate Accountability

 Successful Leaders Develop
Other Leaders

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Innovation and the Entrepreneur
 Innovation:
 Is the process by which entrepreneurs convert
opportunities into marketable ideas.
 Is a combination of the vision to create a good
idea and the perseverance and dedication to
remain with the concept through
implementation.
 Is a key function in the entrepreneurial process.
 Is the specific function of entrepreneurship.
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The Innovation Process
 Types of Innovation
 Invention
 Extension
 Duplication
 Synthesis
 Sources of Innovation
 Unexpected occurrences
 Incongruities
 Process needs
 Industry and market
changes
 Demographic changes
 Perceptual changes
 Knowledge-based
concepts
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Type Description Examples
Invention Totally new product,
service, or process
Wright brothers—airplane
Thomas Edison—light bulb
Alexander Graham Bell—telephone
Extension New use or different
application of an already
existing product, service,
or process
Ray Kroc—McDonald’s
Mark Zuckerberg—Facebook
Barry Sternlicht—Starwood Hotels &
Resorts
Duplication Creative replication of an
existing concept
Wal-Mart—department stores
Gateway—personal computers
Pizza Hut—pizza parlor
Synthesis Combination of existing
concepts and factors into a
new formulation or use
Fred Smith—Fed Ex
Howard Schultz—Starbucks
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Principles of Innovation
 Be action oriented.
 Make the product, process, or service simple and
understandable.
 Make the product, process, or service customer-
based.
 Start small.
 Aim high.
 Try/test/revise.
 Learn from failures
 Follow a milestone schedule.
 Reward heroic activity.
 Work, work, work.
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Strategies to Encourage Creativity and
Innovation
1. Recognize personal abilities.
2. Change your perception.
3. Change the organizational
culture.
4. Dare to fail.
5. Create an organization conducive
to creativity and innovation.
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Consultancy Skills in Business
Two definitions of "consultant."
 "A person who consults with another or
others."
 "An expert who is called on for professional or
technical advice or opinions."
Professionals in many fields use consultation
services to help solve problems,
improve quality and increase skills and
knowledge.
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Below are listed some general
characteristics of most consultation relationships:
 It involves a helping or problem solving process to achieve
goals
 It occurs between a professional helpgiver and a helpseeker
who has responsibility for the welfare of another person
 It is a voluntary relationship
 The helpgiver and helpseeker share in solving the problem
 The goal is to help solve a current work problem of the
helpseeker
 The helpseeker benefits from the relationship in such a way
that future problems may be handled more skillfully
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The Stages of Consultation
Stage 1: Preparation for Consultation
Develop an introductory statement to
identify yourself and your services briefly
when you make the first contact by phone,
in person, or in writing.
Make arrangements to meet at a convenient
time and location.
 Prepare your “consultant’s tool kit” based
on needs you anticipate the consultee has.
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Stage 2: Initiation of Consultation
 Arrive promptly for your consultation visit.
 Begin building a working relationship by
introducing yourself and your services, describing
your role as a consultant, and fees.
 Find out what kind of consulting services the
program is interested in, and/or is required to
receive.
 Develop a preliminary plan for consultation needs.
 Set an agenda for the rest of the visit based on
perceived needs.
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Stage 3: Assessment
Focus on concerns identified by the
consultee.
Collect information through discussions,
observation.
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Stage 4: Identify Needs/Concerns
Analyze information collected during the
assessment stage and jointly identify needs
and/or areas of concern.
Prioritize needs to address.
Work with consultee to set goals.
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Stage 5: Select Strategy
Use a collaborative, problem-solving
approach to generate options and discuss
consequences of each.
Select most feasible and potentially
successful strategy that can also be
implemented with minimal guidance from
the consultant.
Incorporate methods of evaluation into the
strategy.
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Stage 6: Implementation
Set a timeline for implementing the strategy
selected.
Identify responsibilities of consultee and
consultant to implement strategy.
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Stage 7: Evaluation

Evaluate the effectiveness of the strategy
upon completion.
 Reassess periodically.
 Provide positive reinforcement for changes.
 Adjust plan as needed.
 Evaluate effectiveness of consultation
relationship periodically .
 Bring closure to consultation relationship if
no longer needed and/or desired.
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GOVERNMENT AND PRIVATE AGENCIES RELATED WITH
THE INNOVATION ACTIVITIES
Kementerian Sains,Teknologi & Inovasi (MOSTI):
Jabatan/Agensi Kerajaan:
 National Space Agency (ANGKASA)
 Department of Chemistry Malaysia (JKM)
 Malaysia Nuclear Agency (ANM)
 Malaysian Meteorological Services (MMS)
 Department Standard Malaysia (DSM)
 Atomic Energy Lecencing Board (LPTA)

Syarikat Milik Kerajaan:
 MIMOS Bhd (MIMOS)
 Multimedia Development Corporation (MDeC)
 SIRIM Bhd (SIRIM)
 Technology Park Malaysia Corporation Sdn. Bhd . (TPM)
 Malaysia Biotechnology Corporation (MBC)
 Astronautic Technology (M) Sdn. Bhd . (ATSB)
 National ICT Security and Emergency Response Centre (NISER)
 Malaysia Network Information Centre (MYNIC)

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GOVERNMENT AND PRIVATE AGENCIES RELATED WITH
THE INNOVATION ACTIVITIES
Syarikat Subsidiari Khazanah:
 Malaysian Technology Development
Corporation (MTDC)

Badan Statutory:
 Malaysia Science Academy (ASM)

Badan Bukan Kerajaan (SWASTA):
 Malaysian Industry Group High Technology
(MIGHT)
 Inno Biologics Sdn. Bhd.


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