Chapter 1: The Innovation Imperative and Practice
Basic out lines of the chapter includes
Innovation matters
Innovation and Entrepreneurship
Innovation Isn’t Easy!
Managing Innovation and Entrepreneurship
Dimensions of Innovation
A process Model for Innovation and Entrepreneurship
Introduction
• The national, regional and sectorial contexts can have a
significant influence on the rate and direction of innovation and
entrepreneurship through the availability or scarcity of
resources, talent, opportunities, infrastructure and support.
• However, while context influences the rate and direction, it
does not determine outcomes.
• The education, training, experience and aptitude of individuals
also have a profound effect on the goals and outcomes of
innovation and entrepreneurship
Innovation Matters
• You don’t have to look far before you bump into the innovation imperative. It leaps out at
you from a thousand mission statements and strategy documents, each stressing how
important innovation is to our customers/our shareholders/our business/our future’ and,
most often, ‘our survival and growth’.
• Innovation shouts at you from advertisements for products ranging from hairspray to
hospital care. It nestles deep in the heart of our history books, pointing out how far and
for how long it has shaped our lives. And it is on the lips of every politician, recognizing
that our lifestyles are constantly shaped and reshaped by the process of innovation.
• This isn’t just advertising babble. Innovation does make a huge difference to
organizations of all shapes and sizes. If we don’t change what we offer the world
(products and services) and how we create and deliver them, we risk being overtaken by
others who do.
• William Baumol points out that ‘virtually all of the economic
growth that has occurred since the eighteenth century is ultimately
attributable to innovation.
• Survival and growth poses a problem for established players but a
huge opportunity for newcomers to rewrite the rules of the game.
• One person’s problem is another’s opportunity and the nature of
innovation is that it is fundamentally about entrepreneurship.
• The skill to spot opportunities and create new ways to exploit them
is at the heart of the innovation process. Entrepreneurs are risk-
takers, but they calculate the costs of taking a bright idea forward
against the potential gains if they succeed in doing something different –
especially if that involves upstaging the players already in the game
What is innovation
The dictionary defines ‘innovation’ as ‘change’; it comes from Latin in and
novare, meaning ‘to make something new’. Or the ‘the successful
exploitation of new ideas’.
Those ideas don’t necessarily have to be completely new to the world, or
particularly radical.
Innovation does not necessarily imply the commercialization of only a
major advance in the technological state of the art (a radical innovation)
but it includes also the utilization of even small-scale changes in
technological know-how (an improvement or incremental innovation and
utilization)
Innovation always does not mean invention. Innovation can create change and add
value to the existing product or service. Thus, Innovation is about
A) Identifying or creating opportunities
Innovation is driven by the ability to see connections, to spot opportunities and to
take advantage of them.
Sometimes this is about completely new possibilities, like exploiting radical break
through in technology.
New drugs in the war against disease. Mobile phones, tablets and other devices have
revolutionized where and when we communicate.
B) New ways of serving existing markets
Innovation isn’t just about opening up new markets; it can also offer new ways of
serving established and mature ones.
c) Growing new markets:- Equally important is the ability to spot
where and how new markets can be created and grown.
d) Rethinking services
In most economies, the service sector accounts for the vast
majority of activity, so there is likely to be plenty of scope and the
lower capital costs often mean that the opportunities for new
entrants and radical change are greatest in the service sector.
Online banking have radically transformed the efficiency with
which this sector works and the range of services it can provide.
E. Meeting social needs
Innovation offers huge challenges – and opportunities – for the public
sector.
Pressure to deliver more and better services without increasing the tax
burden is a puzzle likely to keep many civil servants awake at night.
Making radical improvements in the speed, quality and effectiveness of
services is a challenge that opens opportunity
F) Improving operations – doing what we do but better
Dimensions of change
Dimension types of change
Product Changes in the things (products/serv
ices an organization offers
Process Changes in the ways these offerings
are created and delivered
Position Changes in the context into which
the products/services are introduced
Paradigm Changes in the underlying mental models
which frame what the organization does
Discuss how innovation is different from invention.
Innovation does make a huge difference to
organizations of all shapes and sizes.
The logic is simple: if we don’t change what we offer
the world (products and services) and how we create
and deliver them, we risk being overtaken by others
who do.
On the plus side innovation is also strongly associated
with growth.
New business is created by new ideas, by the process of
creating competitive advantage in what a firm can offer.
Innovation accounts for a sizeable proportion of economic
growth.
Survival and growth poses a problem for established players but a
huge opportunity for newcomers to rewrite the rules of the game.
One person’s problem is another’s opportunity and the nature of
innovation is that it is fundamentally about entrepreneurship.
The skill to spot opportunities and create new ways to exploit is at the heart of
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Entrepreneurs are risk-takers, they calculate the costs of taking a
bright idea forward against the potential gains if they succeed in
doing something different especially if that involves upstaging the
players already in the game.
Systematic entrepreneurship
Innovation matters – but it doesn’t happen automatically.
It is driven by entrepreneurship – a potent mixture of vision,
passion, energy, enthusiasm, insight, judgment and plain hard work
which enables good ideas to become reality.
As Peter Drucker put it innovation is the specific tool of
entrepreneurs, the means by which they exploit change as an
opportunity for a different business.
It is capable of being presented as a discipline, capable of being
learned, capable of being practiced.
Mc Donald’s, however, was entrepreneurship and did not invent
anything, to be sure. Its final product was what any decent
American restaurant had produced years ago. But by
Applying management concepts and management techniques
(asking, What is “value” to the customer?),
standardizing the “product,”
Designing process and tools, and
Training on the analysis of the work to be done and then
setting the standards it required, McDonald’s both drastically
upgraded the yield from resources, and created anew market and a
new customer. This is entrepreneurship.
Admittedly, all new small businesses have many factors
in common. But to be entrepreneurial, an enterprise has
to have special characteristics over and above being new
and small.
Indeed, entrepreneurs are a minority among new
businesses. They create something new, something
different; they change or transmute values.
An enterprise also does not need to be small and new to
be an entrepreneur. Indeed, entrepreneurship is being
practiced by large and often old enterprises. The General
Electric Company (G.E.), one of the world’s biggest
businesses and more than a hundred years old, has a
long history of starting new entrepreneurial businesses
from scratch and raising them into sizable industries.
Entrepreneurship is a distinct feature whether of
an individual or of an institution. It is not a
personality trait as it is common to see
people of the most diverse personalities and
perform well in entrepreneurial challenges.
People who need certainty are unlikely to make
good entrepreneurs. But such people are unlikely
to do well in a host of other activities as well
In all such pursuits decisions have to be made, and the
essence of any decision is uncertainty.
But everyone who can face up to decision making can
learn to be an entrepreneur and to behave
entrepreneurially.
Entrepreneurship, then, is behavior/practice rather
than personality trait. And its foundation lies in
concept and theory rather than in intuition.
Every practice rests on theory, even if the practitioners
themselves are unaware of it. Entrepreneurship rests on a
theory of economy and society.
This is basically what Say, two hundred years ago, meant
when he coined the term entrepreneur.
It was intended as a manifesto and as a declaration of
dissent: the entrepreneur upsets and disorganizes his task
is “creative destruction.”
Entrepreneurs see change as the norm and as healthy.
Usually, they do not bring about the change
themselves.
But this defines entrepreneur and entrepreneurship
The entrepreneur always searches for change,
responds to it, and exploits it as an opportunity.
Entrepreneurship, as commonly believed is enormously risky.
And, indeed, in such highly visible areas of innovation as high
tech, casualty rate is high and the chances of success or even of
survival seem to be quite low. But why should this be so?
Entrepreneurs, shift, resources from areas of low productivity
and yield to areas of higher productivity and yield.
One should thus expect entrepreneurship to be considerably less
risky than optimization.
Indeed, nothing could be as risky as optimizing resources in
areas where the proper and profitable course is innovation,
that is, where the opportunities for innovation already exist.
Theoretically, entrepreneurship should be the least risky
rather than the most risky course
Entrepreneurship is “risky” mainly because so few of
entrepreneurs know what they are doing. They lack the
methodology and violate elementary and well-known rules.
This is particularly true of high-tech entrepreneurs.
High-tech entrepreneurship and innovation are
intrinsically more difficult and more risky than
innovation based on economics, market structure and on
demographics.
But even high-tech entrepreneurship need not be high
risk. It does need, to be systematicand needs to be
managed.
Above all, it needs to be based on purposeful innovation.
Purposeful innovation and the seven source for innovative opportunities
Entrepreneurs innovate. Innovation is the specific instrument of
entrepreneurship. It is the act that endows resources with a new capacity
to create wealth.
Innovation, indeed, creates a resource.
There is no such thing as a resource until man finds a use for something
in nature and thus endows it with economic value.
Until then, every plant is a weed and every mineral is just another rock
Entrepreneurs will have to learn to practice systematic innovation.
Successful entrepreneurs do not wait until the Muse kisses them and
gives them a “bright idea”; they go to work.
Altogether, they do not look for the “biggie,” the innovation that
will “revolutionize the industry,” create a “billion-dollar business,”
or “make one rich overnight.”
Those entrepreneurs who start out with the idea that they’ll make it
big and in a hurry can be guaranteed failure. They are almost bound
to do the wrong things.
Successful entrepreneurs, whatever their individual motivation: be
it money, power, curiosity, or the desire for fame and recognition—
try to create value and to make a contribution.
Still, successful entrepreneurs aim high. They are not content
simply to improve on what already exists, or to modify it.
They try to create new and different values and new and different
satisfactions, to convert a “material” into a “resource,” or to
combine existing resources in a new and more productive
configuration.
it is change that always provides the opportunity
for the new and different.
Systematic innovation therefore consists in the
purposeful and organized search for changes, and
in the systematic analysis of the opportunities such
changes might offer for economic or social
innovation.
Systematic innovation
Most successful innovations are far more prosaic
(featureless); they exploit change. And thus, the
discipline of innovation is
the knowledge base of entrepreneurship
a diagnostic discipline: a systematic examination of
the areas of change
that typically offer entrepreneurial opportunities.
Seven source of innovation
Systematic innovation means monitoring seven sources for
innovativeness.
The first four sources lie within the enterprise, whether
business or public-service institution, or within an industry or
service sector.
They are visible primarily to people within that industry or
service sector and basically symptoms.
But they are highly reliable indicators of changes that have
already happened or can be made to happen with little effort.
These four source areas are:
1. The unexpected
a) the unexpected success
b) the unexpected failure
c) the unexpected outside event
2. The incongruity between reality as it actually is and reality as it
is assumed to be or as it “ought to be”
3. Innovation based on process need;
4. Changes in industry structure or market structure that catch
everyone unawares.
The second set of sources for innovative
opportunity, a set of three, involves changes
outside the enterprise or industry:
5. Demographics (population changes);
6. Changes in perception, mood, and meaning;
7. New knowledge, both scientific and non-
scientific
The lines between these seven source areas of
innovative opportunities are blurred, and there is
considerable overlap between them.
They can be likened to seven windows, each on a
different side of the same building.
Each window shows some features that can also be
seen from the window on either side of it. But the
view from the center of each is distinct and different.
The seven sources require separate analysis, for each has its own
distinct characteristic.
No area is, however, inherently more important or more productive
than the other
But the order in which these sources will be discussed is not
arbitrary.
They are listed in descending order of reliability and predictability.
Contrary to almost universal belief, new knowledge—and
especially new scientific knowledge—is not the most reliable or
most predictable source of successful innovations
The unexpected success or the unexpected failure carry fairly low
risk and uncertainty.
And the innovations arising there from have, typically, the shortest
lead time between the start of a venture and its measurable results,
whether success or failure.
1.1. The unexpected success, failure and external event
1.1.1 THE UNEXPECTED SUCCESS
No other area offers richer opportunities for successful innovation
than the unexpected success.
Yet the unexpected success is almost totally neglected; worse,
managements tend actively to reject it.
