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
Innovation = new products or services only
 New markets, new marketing methods, new operating methods
Innovation = original
 Old ideas can be combined to make them new
Innovation = one-off inspiration
 It is a gradual and ongoing process
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?
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