INNOVATION AND

ENTREPRENEURSHIP

Innovation is a ‘mould-breaking’ development in new products or

services or how they are produced – materials used, the process employed or how the firm is

organised to deliver them – or how or to whom they are marketed, that

can be linked to a commercial opportunity and successfully

exploited

Innovation

Innovation is a ‘mould-breaking’ development in new products or

services or how they are produced – materials used, the process employed or how the firm is

organised to deliver them – or how or to whom they are marketed, that

can be linked to a commercial opportunity and successfully

exploited

Innovation - revisited

Innovation Why?

Globalization is inducing strong competitive pressures.

Why??

Technologies are evolving rapidly

Markets are expanding and changing fastly

Customer’s demand ever-changing

What should manufacturers do?

Develop high quality new products more efficiently and effectively.

Where is the catch ?It is innovation!

Innovation is a major driving force for

Economic growth

expansion of companies.

ORGANIZATIONALTRANSFORMATION

RESOURCES

COMPETENCIES

SKILLS

ADAPTIVENESS

NEW IDEAS GENERATION

LEARNING ABILITY

Inner Capabilities

New ProductsNew ProcessNew Customer Focus

?INNOVATION

Innovation is the engine of organizational transformation

Need to innovate. Why?51% of the European enterprises are technological innovators

(OECD 2000).

New products or services account for 20% of companies

turnover

12% of companies are highly innovative and generate 50% of

companies turnover

Two out of every three companies introduce new products

and services

Innovation definedMintzberg (1983)

• It is the means to break away from established pattern. (doing things really differently)

Kanter (1983)

It is generation, acceptance and implementation of new ideas, processes, products, services

It is the application of creative concepts.It is the application of inventions to bring new products and processes

Michael Porter (1990)

‘Companies achieve competitive advantage through acts of innovation.

provides

ignites

causes

Entrepreneurs are at the heart of innovation led opportunities

Entrepreneurs Innovation

opportunityChange inenvironment

value TechnologyProductProcessPricesQuality

ServicesMarketing

profit

Leads to

Create

exploit

To Create

To add

Creates

To enhance

in

EntrepreneurshipInnovationAnd Profit

INVENTION VS INCREMENTAL INNOVATIONS

• B I G - B A N G B R E A K T H R O U G H I S I N V E N T I O N

Incremental innovations (Bessant : 1999)• Small innovations at frequent and regular intervals increases competitive advantage of an

organization

Low High Innovation scale

Low

High

FreqOfInnovations

IncreasingCompetitiveedge

Industrialization

Marketable

Products

Profits

Research &Developme

nt

Inventions Research and Development

Leads to inventions

Building R &D , Industrialization and Entrepreneurship Cycle

Industrialization

Marketable

Products

Profits

Research &Developme

nt

Inventions Inventions are backbone of

Growth and promotion ofIndustrialization

Building R &D , Industrialization and Entrepreneurship Cycle

Industrialization

Marketable

Products

Profits

Research &Developme

nt

Inventions

Industrialization causes thecreation of Marketable Products

Building R &D , Industrialization and Entrepreneurship Cycle

Industrialization

Marketable

Products

Profits

Research &Developme

nt

Inventions

Building R &D , Industrialization and Entrepreneurship Cycle

Profits arerealized by marketing

products

Industrialization

Marketable

Products

Profits

Research &Developme

nt

Inventions

Building R &D , Industrialization and Entrepreneurship Cycle

R & D is fueled by Profits

No Profit No R & D

Industrialization

Marketable

Products

ProfitsResearch &Developme

nt

Inventions

Entrepreneurship

Entrepreneurship is at the heart of Inventions

Schumpter’s innovations

• Introduction of a new or improved good• Introduction of a new process• Opening of a new market• Identification of a new source of supply of raw

materials• Creation of new types of industrial organisation

Schumpeter (1934) Economic Development Theory

Economists believe that; Economic development changes slowly with population

growth and saving ratios.

The pace of development accelerates when there are wars

and natural disasters.

Schumpeter argues that entrepreneurial led technological innovations provide a major impetus to economic development.

He cites the major technological breakthroughs in history (shown on next slide)

TECHNOLOGICAL INNOVATIONS(Major Breakthroughs)

18th century ( ~ 1800)• Water power, iron, textile

19th century (1800-1900)Steam, rail-road, steel

20th century (1900-1950) Electricity, Chemicals, Internal Combustion Engines(1950-1980) Oil, Electronics, Aviation, Mass production(1980-1990) Digital networks, software, new communication medias(1990-2000) INTERNET, e-commerce

Innovation cycleIs shortening

TECHNOLOGICAL INNOVATIONS KEEPS ECONOMIES GOINGNew technological innovations leads to

• New industries• new businesses• new employment

When technology matures, jobless growth starts due to operations optimizations

Start Growth Maturity Decline Technology Life Cycle

No OfJobs

StagnationCrisisNew jobs?

New innovation/inventionemerges

Cycle starts again

Drucker’s 5-stage approach to innovation

• Analyse, internal and external. Innovate for NOW – timing is everything

• Innovation is conceptual and perceptual, so look at financial implications and analyse whether it meets the opportunity

• Keep innovation simple • Start small, take an incremental approach• Aim at leadership and dominate the competition as soon as

possible

Drucker’s sources of opportunity

for creative innovation

• The unexpected; be ready for un-foreseen event and develop an attitude of quick and reactive response for commercial attitude

• The incongruity: difference between expectations and actual outcomes. Develop ability to spot them and make it to your use.

• The inadequacy in underlying processes: we take inadequacy for granted. NO! take your time to fix it (particularly related to cost and quality)

Drucker’s sources of opportunity

for creative innovation

• The changes in industry or market structure: technology change, legislature change, outside events)

• Demographic changes: population changes, wars, medical improvements

• Changes in perception, mood or meaning• New knowledge

Dr Patterson’s Innovative Thinker(ten types of people)

• Change agent: who does not stick to what he was told• Consolidator: prefers status quo• Harmoniser : likes challenge but does not disclose ideas for fear of upsetting people

• Firefighter : who flits from one idea to another idea in imaginative but unpredictable way

• Cooperator : who likes change but goes with wind• Catalyst: who is good at thinking new ideas but soon looses interest

• Incremental innovator: implements ideas in step-by-step• Spice-of-life: do something, anything, new

• Middle-of-the-road : blending ideas but ambivalent about them

Are you Adaptor or Innovator?[ Kirton , 1976 ]

InnovatorAdaptor

Approaches task from unusual Employs a disciplined, methodical approach

Discovers problems and avenues of solutions

Is concerned with solving problems, rather than finding problems

Questions basic assumptions related to current practicesAttempts to refine current practices

Has little regard for means; is more interested in ends

Tends to be means-oriented

Has little tolerance for routine workIs capable of extended detail work

Is sensitive to group cohesion and cooperation

Has little or no need for consensus; often is insensitive to others

Creativity , Innovationand Entrepreneurship

CREATIVITY• Creativity and Innovation go hand-in-hand for true

entrepreneurship• Creativity leads to innovation• Innovation is the most distinguishing features of

Entrepreneurs.

According to Parkhurst (1999) creativity is;ability or quality to solve hithero unsolved problems;when developing novel and original solutions to problems

others have solved differently

Innovation and entrepreneurship

STRUGGLER

COPIER

INNOVATOR

STAGNATOR

Innovation/Creativity

High

Low

Entrepreneurship spirit

Low High

• Left side of brain performs rational & logical functions

• It tends to be analytic operating in linked and linear fashion (called logical or vertical thinking)

• Adaptive innovation is a left brain activity

Left vs Right sides of Brain

• Right side operates intuitive and non-rational thinking

• It creates holistic images and causes creative innovation

Left vs Right sides of Brain

Left vs Right brain Thinkers

• Left brain thinkers work alone• Right brain thinkers prefer to work in

groups• Left brains learn things rather experiencing

them while right brains learn by doing• Left brains make quick decisions while

right brains generate lots of options rather than focusing on making a speedy decision

Left and Right brains

• The two halves (left and right ) of brain complement each

• People have a preference for one or the other approach, and, can switch between them for different tasks and in different contexts.

Mintzberg (1976) on Left and Right brain

• Planning activity is a left brain activity

• Implementation of the Plan is the right brain activity

• Truly effective managers are those that can harness both sides of the brain.

ARE YOU CREATIVE TYPE ?(Majaro-1992)

CHARACTERISTICS

• Conceptual fluency : ability to produce many ideas• Mental flexibility : ability to think creatively• Originality : ability to produce atypical responses to

problems• Suspension of Judgment : slow speed of analysis • Impulsive : ability to express your ‘gut-feel’• Anti-authority : willing to challenge authority• Tolerance : high tolerance threshold for ideas of others