Week 4 Innovation and Entrepreneurship-1 - 014551

Week 4
GS 105
Innovation and Entrepreneurship
Definition
- Innovation is a specific instrument of entrepreneurs, the means by which they
exploit change as an opportunity for a different business or a different service
- A process whereby organizations transform ideas into new improved products,
service or process, in order to advance, compete or differentiate themselves
successfully in their market place
- Also refers to successful implementation of creative ideas within an organization
Joseph Alois Schumpeter, in the year 1934, introduced the concept of innovation
as key factor in entrepreneurship in addition to assuming risks and organizing
factors of production. He emphasized that an innovator who brings new products
or services into an economy is given the status of an entrepreneur. He defined
innovation as composed of the following five functions:
 the introduction of a new product (goods/services)
 introduction of new methods of production
 the opening of new markets
 the identification or conquest of new sources of supply
 the creation of new organizations of any industry (e.g., creation of
new monopoly position or breaking up of a monopoly
Goals of Innovation
 improved quality
 creation of new markets
 extension of product range
 reduced Labour costs
 improved production processes
 reduced materials
 reduced environmental damage
 reduced energy consumption
Types of innovations
The types of innovation, which extend from totally very new to modifications of
existing products or services. In order of originality, there are four basic types:
1. Invention
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- The creation of a new product, service or process, often one that is novel or
untried (totally new) e.g., Wright brothers and the airplane, Alexander
Graham Bell- telephone; Thomas Edison-light bulb. Such concepts tend to be
revolutionary
2. Extension
- It is the application of a current concept to a different application e.g., the
expansion of a product, service or process already in existence such concepts
make a different application of a current idea. Mark Zuckerberg- Facebook;
Ray Kroc- McDonalds among others
3. Duplication
- The creative replication of an already existing product, service or process. The
duplication effort however, is not simply copying but adding the
entrepreneurs own creative touch to enhance or improve the concept to beat
competition e.g. departmental stores such as supermarkets
4. Synthesis
- The combination of existing concepts and factors into a new formulation. This
involves taking a number of ideas or items already invented and finding a way
to combine them together such that they form a new application
√Sources of Innovative opportunities√

Innovation builds on changes that are already taking place. Innovations looks at
existing changes to know the opportunities that may exist in future.
Drucker outlines seven sources for innovative opportunities that should be
monitored by those interested in starting an entrepreneurial venture. The first four
are sources of innovation that lie within the industry. The last three arise in the
societal environment.
1. The Unexpected
Innovations can take place unexpectedly or even happen by chance.
- Unexpected results, success or failure or an unexpected outside event can be
a symptom of a unique opportunity. Such give clues to underlying trends thus
leading to innovations.
2. The Incongruity
- A discrepancy/or a dissonance between what is and what it is supposed to be.
This can a source of innovative opportunity as it compares what is and what
everybody else assumes it to be
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- For example, looking at your competitor’s product reviews and ratings,
following chat room discussions can help you understand the problems that
exist and find new ways to solve those problems
3. Process need
- Innovations from process needs improves on existing processes that is
recognized as having significant limitations.
- For instance, looking at the processes involved in doing things and finding
better ways to do them can triggers process improvements like what is
happening within the airline industry specifically on adoption of On-line check-
in at airports
4. Changes in industry or market structure
- The opportunity for an innovative product, service or business approach
occurs when the underlying foundation of the industry or market experience
shifts.
- For example, you may discover that consumer demands are moving away
from the norm
5. Demographics
- Changes in the population’s size, age structure, composition, employment,
level of education and income can create innovative opportunities.
6. Changes in perception, mood and meaning
- This change occurs in people’s interpretation of facts and concepts.
- Innovative opportunities can develop when a society’s general assumptions,
attitudes and beliefs change.
- Look for the changes in perception and build in new or additional features into
your product or service, or create new products and services, to match these
perceptions
7. New Knowledge
- Advances in technology create opportunities for new products and services.
Attributes/Factors/Characteristics that make adoption of Innovations easy

1) Relative advantage
The degree to which an innovation is superior to other competitive products
2) Compatibility
The degree to which an innovation is consistent with values and experiences of potential adopters
3) Divisibility
The degree to which an innovation can be tried on limited basis
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4) Communicability
The relative ease of observing and describing the benefits of the innovation to others
5) Perceived risk
The degree to which an innovation is risky to adopt
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√Sources of Innovative opportunities√

Attributes/Factors/Characteristics that make adoption of Innovations easy

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