Chapter 5 Entrepreneurial Creativity and Innovation

Fundamentals of Entrepreneurship All Rights Reserved
© Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1

CHAPTER 5
ENTREPRENEURIAL
CREATIVITY AND INNOVATION

Objectives
The objectives of this chapter are to:

 provide students with a better understanding of the issues on
creativity and innovation especially those that are related to
entrepreneurship.
 provide students with creativity techniques that can be
applied in their course works

Learning Outcomes
At the end of this chapter, students should be able to:

 be more open minded and ready to accept new ideas
 gain an understanding of issues on creativity, innovation and
learn to apply creativity techniques

Entrepreneurial Creativity and
Innovation
 In free market economy—entrepreneur has to be creative
and innovative—in order to be more competitive, to improve
market share and to increase profitability.
 Creativeness and innovativeness are valuable assets—help
entrepreneurs to beat their competitors by being able to offer
better quality products, at competitive prices and with better
service delivery.

Innovation (cont.)
 Peter Drucker (1986) has stated that, ‘Innovation is the specific
tool of entrepreneurs, the means by which they exploit change as
an opportunity for a different business or service.
 According to Kuratko (2009), creativity is a process that can be
developed and improved. Everyone is creative to some degree,
some individuals have a greater aptitude for creativity than others.
 Schaper and Volery (2007) stated that creativity is the process
through which invention occurs, the enabling process by which
something new comes into existence.
 Baron and Shane (2008) define creativity as a production of ideas
for something new that is also potentially useful.

Innovation (cont.)
Creative ideas can be worked out or extracted from three different
perspectives as suggested by Bessant and Tidd (2007):
 Creativity at the personal level includes creative style, inclination,
ability to identify, assess and develop new ideas and concepts.
 Group or social creativity stresses the contribution of teams and groups
such as creativity through the discussion of a cross-functional team—
may provide a better interface between departments or a more
synergistic approach that improve effectiveness and efficiency for the
whole group or organization.
 Contextual creativity focuses on creativity that relates to internal and
external context such as processes, tools work method, lay out,
structures, strategy, concept, environment, climate, logistic, location,
etc.

Innovation (cont.)

Innovation (cont.)
Components Of Creativity
 Creative Thinking Skills
– refers to how a person identifies a problem and seeks its
solution—the capacity and ability to put existing ideas and
knowledge together to explore new possibilities.
– an entrepreneur identifies opportunities based on market
demand, develops a new product concept, formulates a
business strategy and mobilizes the required resources to
undertake the project.
– this requires a lot of creative thinking, resourcefulness and
execution skills as it is about being creative at finding the right
concept, formula, strategy, products, etc. to make the
proposal practical, affordable, viable and acceptable to the
customers and various stakeholders.
Innovation (cont.)
 Knowledge
– Expertise or knowledge encompasses everything a person
knows and can do—can be acquired in different ways: formal
and informal education—education and training are major
factors that distinguish the founders of technical ventures from
other types of entrepreneurs.
– In order to be creative, a person should have an adequate
level of knowledge and skills in the area of his interest as
specialized knowledge can enable a person to focus on his
specific area of interest—should also have broad general
knowledge to enable him to think divergently and integrate or
apply other technologies that have been developed in other
fields.
Innovation (cont.)
 Motivation
– Motivation determines what people actually want and will do.
– There are two types of motivation: intrinsic and extrinsic. Intrinsic
motivation is internally driven through a person interest, desire,
aspiration and passion.
– Extrinsic motivation can be divided into financial and non-financial
motivation.
– Non-financial rewards can be in terms of compliments, words of
encouragement, acknowledgement, peer pressure and
encouragement to promote creativity.

Innovation (cont.)
Example of sources for new ideas
 Consumers—the feedback and complaints from consumers will
trigger ideas on how to fulfil the needs and want of the
customers.
 Existing products and services—existing products and services
in the market will give new ideas to entrepreneurs to further
improve and upgrade their products and services from time to
time.
 Distribution channels—members of distribution channels are
also excellent sources of market information because of their
familiarity with the needs of the market.
 Government—government policy, regulation and support can be
a source of new product ideas that push entrepreneurs to be
innovative and creative.
Innovation (cont.)
Creativity Techniques
 Entrepreneurs can use several techniques to help generate
new ideas such as:
– problem reversal
– lateral thinking
– forced analogy
– mind mapping
– brainstorming
– attribute listings

Innovation (cont.)
Creativity
Techniques

Innovation (cont.)
Problem Reversal
 It looks at the opposite of things, see things inside out,
backwards or upside down.
 This technique is based on the premise that the world is full of
opposites where the action of viewing a problem from an
opposite angle and by asking questions can yield a awareness
or realization of issues that hitherto is not obvious or
noticeable.

Innovation (cont.)
Problem
Reversal

Innovation (cont.)
Forced Analogy
 This technique takes a fixed element such as the product or
some idea related to the product and forces it and compares it to
the attributes of another unrelated object or element. It is also
called forced relationship meaning the action of making an
association between two unlike things in order to obtain new
insights. There are five steps on processes for forced analogy:
– Isolate and list the elements of the problem.
– Find and establish possible relationships or connection between the
elements.
– Record the relationships in an orderly form.
– Analyze the resulting relationships to find new ideas or patterns.
– Develop new ideas from this pattern.

Innovation (cont.)
Using forced analogy to compare new start-up business with a new

born baby.

Innovation (cont.)
Brainstorming
 The brainstorming term was popularized by Alex Faickney
Osborn in 1953.
 Peters, Hisrich and Shepherd (2008) suggest that when using
brainstorming, 4 rules must be adhered to:
– No criticism is allowed by anyone in the group especially negative
comments.
– Freewheeling is encouraged because as the idea is wilder, it
becomes better.
– Quantity of ideas is desired. The greater the number of ideas, the
greater the likelihood of the emergence of the useful ideas.
– Combinations and improvements of ideas are encouraged because
ideas of others can be used to produce other new ideas.
Innovation (cont.)
Attribute Listing
 The attribute listing technique is where the problem is broken
down into smaller parts or characteristics and analysis is made
on each of these parts to develop ideas on how to improve
them.
 In this technique, the entrepreneur is required to list the attributes
of an item or problem and look at each from a variety of
viewpoints, looking at the positives and negatives aspects.
 This technique allows entrepreneurs to process some unrelated
ideas and form it into a new combination for new uses.

Innovation (cont.)
Mind Mapping
 Mind mapping technique was developed and made famous by
Tony Buzan.
 A mind map is a diagram used to represent words, ideas, tasks,
or other items linked to and arranged around a central key word
or idea.
 Mind maps are used to generate, visualize, structure, and classify
ideas, and as an aid to studying and organizing information,
solving problems, making decisions, and writing.

Innovation (cont.)
Mind
Mapping

Innovation (cont.)
Lateral Thinking
 Lateral thinking technique was introduced and developed by
Edward De Bono.
 Lateral thinking requires a person to explore the possibility of new
solutions to a problem from a different approach or perspective.
 Looking at and analyzing problems from a different perspective
may give new insight and new solutions to an old problem or the
problem itself may already be irrelevant.

Innovation (cont.)
The Process Of
Creativity

Innovation (cont.)
Knowledge Accumulation
 This phase focuses more on the study of the background for the
subject matter which requires extensive reading, discussion with
experts, practitioners, academicians, researchers in the field,
attending workshops and seminars.
 This exploration exposes and helps entrepreneurs to have a better
understanding on the subject matter.

Innovation (cont.)
Incubation
 In the incubation stage, an individual will immerse oneself by
allowing the subconscious mind to muse or ponder on the
information gathered.
 The individual may not be directly involved in the creative task.
Incubation may be induced by engaging in ‘relaxing activities’
such as painting, meditating or playing sports or board games.
 The rationale is that new ideas or new insight often emerge when
one is busy doing something unrelated to the matter.

Innovation (cont.)
According to Davenport and Prusak (2000), ideas are free. Ideas to

innovate can come from various sources as mentioned by Drucker
(1986):
 The unexpected sources—sources of innovation might be derived
from unexpected success, unexpected failure or unexpected
events which trigger ideas and creativity in firms.
 The incongruity—the uneasiness of customers in dealing with their
daily lives could give firms ideas to create something new for the
customers. For example, paying bills on the Internet.
 Process need—opportunity is the source of innovation. Ideas
could be derived from the market information.

Innovation (cont.)
 Changes in industry or market changes that caught everyone

unawares—the effect of globalization that has an impact on
the industry.
 Demographic changes—population change is one of the
innovation sources in meeting consumers needs.
 Changes in perception, mood and meaning—trend and
lifestyles are among the sources of innovation under this
source of innovation.
 New , scientific and non-scientific knowledge—knowledge-
based innovation is based on this source— is unique as the
competitors could have a hard time to imitate the innovation.

Innovation (cont.)
Evaluation and Implementation

 In this phase, a person transforms the idea into a workable
solution.
 The process of evaluation and implementation requires
continuous development and assessment so that a raw idea can
be conceptualized, modeled, strategized, refined, reworked,
improved, adjusted to make it practical, affordable, viable and
acceptable to the customers and stake holders.

Innovation (cont.)
Factors Influencing
Creativity

Innovation (cont.)

Innovation (cont.)
Innovation
 Innovation can be defined as the process by which
entrepreneurs convert opportunities (ideas) into marketable
solutions.
 It is the means by which they become catalysts for change
(Kuratko, 2009). Innovation is commonly defined as ‘the
introduction of something new’ or ‘a new way of doing
something’.

Innovation (cont.)
 According to Kinicki and Williams (2003), innovation is finding

ways to deliver new or better goods or services.
 Chell (2001) stated that innovation is also deemed as the
creation of something new in the marketplace that alters the
supply–demand equation.
 Peter Drucker said ‘Innovation is change that creates a new
dimension of performance.
 Many successful innovations improve on an existing product
to make it a better product in terms of quality, cost (price), or
service delivery.

Innovation (cont.)
 Innovation, according to Schumpeter (1934), covers:

• the introduction of a new good or a new quality of the good
• the introduction of a new method of production
• the opening of a new market
• the conquest of a new source of supply
• the carrying out of the new organization of an industry

Innovation (cont.)

Innovation (cont.)
Sources of Innovation
 Professor Thomas W. Mason states that successful innovation is
seldom the outcome of a brilliant idea.
 Peter Drucker emphasized looking for unexpected events, stupid
situations, needs within current processes and changes in
industry structure, demographics and perception.

Innovation (cont.)
 The following are four sources of innovation for entrepreneurs.

– unexpected events or occurrence
– new-knowledge concept
– changes of demographics
– process needs

Innovation (cont.)


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Fundamentals of Entrepreneurship All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1

Fundamentals of Entrepreneurship All Rights Reserved

The objectives of this chapter are to:

Fundamentals of Entrepreneurship All Rights Reserved

At the end of this chapter, students should be able to:

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Using forced analogy to compare new start-up business with a new

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

According to Davenport and Prusak (2000), ideas are free. Ideas to

Fundamentals of Entrepreneurship All Rights Reserved

 Changes in industry or market changes that caught everyone

Fundamentals of Entrepreneurship All Rights Reserved

Evaluation and Implementation

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

 According to Kinicki and Williams (2003), innovation is finding

Fundamentals of Entrepreneurship All Rights Reserved

 Innovation, according to Schumpeter (1934), covers:

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

 The following are four sources of innovation for entrepreneurs.

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

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