School of Management Studies,

ITS Engineering College, Greater Noida

CREATIVITY, INNOVATION
AND ENTREPRENEURSHIP
MBA - 1st Semester
BMB- 106
UNIT- 1
By
Dr. Deepak Sharma
 SYLLABUS
UNIT – I
Creativity and Innovation: Meaning,
the difference between innovation and creativity,
Innovation types & Platforms, Business Model
Innovation,
Service Innovation,
Design-led innovation,Improvisation
Large firm Vs. Start-up innovation,
Co-creation and open innovation,
developing an innovation strategy,
Sources of innovation,
Innovation Environment,
Creative Destruction
 CREATIVITY
Creativity is an act of creating new idea
imaginations and possibilities.
Creativity generates new and unique ideas,
approaches, or solutions to problems. It involves
thinking outside the conventional frameworks and
combining existing concepts in novel ways.
Creativity is the characteristic of a person to
generate new ideas, alternatives, solutions, and
possibilities in a unique and different way.
Creativity is the ability to conceive something
unpredictable, original and unique. It must be
expressive, exciting and imaginative. It is the
mirror of how beautifully a person can think in
any given circumstance.
 Definitions
 Creativity is typically defined as the ability to
generate novel associations that are adaptive in
some way.
(Ward, Thompson‐Lake, Ely, & Kaminski, 2008).
 Creativity may be defined as the capacity to
transform experience into original and meaningful
interpretations.
(Runco, & Cayirdag, 2012).
 Creativity is a precondition for innovation.
(Bassett-Jones, 2005).
 CHARACTERISTICS OF CREATIVITY
(a) Imaginative: Creative thinking starts with imagination as it
brings about something that did not exist or was not known
before, so it has to be imagined first.
(b) Purposeful: Creative imagination must have a purpose, an
objective to serve the responsibilities of the business.
(c) Original: Originality means inventiveness or the ability to think
independently and creatively or the quality of being novel or
unusual.
(d) Valuable: It means that the product or result must be held in
great esteem for admirable qualities especially of an intrinsic
value.
(e) Ability: Ability is to imagine or invent something new. It is not
only qualification but also need skills to do a particular task in a
productive manner
 INGREDIENTS OF CREATIVITY
(a) Knowledge: Information about the problems and
possible solutions that can help solving problems. It
can be gathered from one or more of the four styles,
intuitive, innovation, imagination, and inspirational.
(b) Motivation: Entrepreneurial creativity requires a
combination of intrinsic motivation and extrinsic
motivation. Extrinsic motivation relates to tangible
reward whereas intrinsic relates to the job itself.
(c) Passionate: An entrepreneur must be passionate about
his ideas and willing to take risk to achieve his
objectives.
(d) Self-discipline: Control and ability to overcome
failure and rejection is crucial.
CREATIVE PROCESS
 The Preparation Stage
The first stage of the creative process is the preparation stage. In
this stage, you’ll research, gather knowledge, and gather
resources. Depending on your own particular area or industry,
you might read around your subject, study past masters and best
in class examples or attend events and trade shows. You might
brainstorm initial ideas or background concepts with colleagues.
 The Incubation Stage
After completing the preparation stage, the creative process
moves into the incubation stage. Incubation is the crucial second
stage where you put all that preparation to the back of your mind,
allowing it subconsciously to process ideas and hopefully turn
these into a creative solution. It is a stage where you can relax
and take breaks from your daily work routine and let your mind
wander. Activities like exercising, engaging in hobbies or doing
nothing at all can help the mind relax and allow new ideas to
form.
 The Illumination Stage
This third stage is where an original idea should strike. It’s where
creative minds have their “Eureka!” or lightbulb moment and come
up with an innovative solution or approach. We all have creative
potential and this is the stage at which our mind makes new
connections to come up with something unique.
 The Evaluation Stage
Evaluation is the stage where you can bring your creative idea to
life through development, testing, prototyping, elaboration and
refining what has emerged from the first four stages. This could
involve simply speaking to colleagues or friends about it, or even a
more formal process such as market research.
 The Implementation Stage
The final stage of the creative process is where the hard work
begins – or the fun part, depending on your perspective! If you are
working in a team, this stage involves collaboration and
communication among team members, as well as critical thinking
and problem-solving. Effective implementation is where you turn
abstract ideas into tangible products or solutions. There might be a
further element of brainstorming at this stage.
 DEFINITIONS
“Innovation is change that creates a new
dimension of performance.”
- Peter Drucker.
Innovation- A process that combines science,
technology, economics and management, as it is
to achieve novelty and extends from the
emergence of the idea to its commercialization in
the form of production, exchange, consumption.
- (Twiss, 1989).
 Types of Innovation
Innovation implicates different dimensions, from the state of the art to step-
function-like breakthroughs. Here are some common types of innovation,
1. Product Innovation: Product innovation consists of developing new products
with superior characteristics, adding new features to the existing ones, or
improving the quality and functionalities of the existing products. These
innovations usually incorporate research and development to introduce brand
new and appealing technological systems, designs, or materials more often.
2. Process Innovation: The constant improvement of methods, technologies, or
workflows for producing goods or providing services is a part of process
innovation. A good supply chain management, production process, or service
delivery system can result in a variety of benefits like costs savings, increased
efficiency, as well as quality improvement.
3. Business Model Innovation: The innovation of the business model implies the
recreation of the fundamentals of the business systems related to how the
business does its work, gets revenue, creates value to its customers. Such
endeavor may coincide with designing corresponding pricing
schemes, distribution channels, revenue streams, or partnerships that can
challenge the current order that reigns in the market and discover new market
gems.
4. Marketing Innovation: Innovation in marketing is about new and
dynamic tactics for attracting customers, building the brand and
sending to their attention the goods or services at one's offer. Some
examples could be creative marketing tools and fresh approaches to
social media visibility, experiential techniques, and customer-
centered strategies, to help brand differentiate in the market.

5. Technological Innovation: Technological innovation is a very broad

concept that defines how companies get a production of a new
product or service by means of some technologies that have never
been utilized before or only recently used up to the innovating
moment. These, of course, can range from breakthroughs in areas of
AI, biotechnology, renewable energy, nanotechnology, IT or
communication, which in turn form a basis for the industries of the
future and become drivers of economic growth.
6. Incremental Innovation: Creeping innovation encompasses
repeated minor upgrading of products, processes and services that
occur over time. The incremental approach is a consistent and
continuous strategy, and combined with other approaches, it is one
of the most viable strategies for businesses. However, these
advancements may not be earth-shattering at the moment, but, they
give organizations a generative edge in the long run in the sense that
they keep on enhancing the performance, reliability, or affordability
of the various products.

7. Open Innovation: Open innovation means the external partners’

collaboration and transfer of knowledge, which may be customers,
suppliers, universities, or research institutions with their own ideas
and resources. This could be through the form of open-source
projects, crowdsourcing, or strategic partnerships to utilize the out-
of-box and streamline innovation action plans.
Innovation Process: 7 Key Steps
Step 1. Identify Opportunities
The first step is to identify opportunities for innovation. This can be done
through market research, customer insights, trend analysis, or internal
assessments. The goal is to uncover unmet needs, emerging trends, or
areas for improvement that can be addressed through innovation.
Step 2. Generate Ideas
Once opportunities are identified, the next step is to generate ideas. This
can be done through brainstorming sessions, idea competitions, customer
feedback, or cross-functional collaboration. The aim is to generate a wide
range of creative and innovative ideas that have the potential to address
the identified opportunities.
Step 3. Evaluate and Select Ideas
After ideation, the next step is to evaluate and select the most promising
ones. This involves assessing the feasibility, viability, and desirability of
each idea. Consider factors such as market potential, technical feasibility,
resource requirements, alignment with strategic goals, and potential
impact. The goal is to identify the ideas that are worth pursuing further.
Step 4. Develop and Prototype
Once ideas are selected, they can be further developed and
prototyped. This involves translating the selected ideas into
tangible prototypes, mock-ups, or minimum viable products
(MVPs). The aim is to test and validate the concepts, gather
feedback, and refine the ideas based on customer insights and
technical feasibility.
Step 5. Test and Iterate
In this step, the prototypes or MVPs are tested with users or in
real-world scenarios. Customer feedback is collected, and the
concepts are iterated and refined based on the insights gained.
This iterative process helps to validate assumptions, uncover
potential issues, and improve the innovation before moving to
the next stage.
Step 6. Implement and Scale
Once the innovation has been tested and refined, it can be
implemented and scaled up. This involves developing a detailed
implementation plan, allocating resources, and executing the
necessary actions to bring the innovation to market or implement
it within the organization. The goal is to ensure a smooth
transition from the development phase to full-scale
implementation.
Step 7. Monitor and Evaluate
After implementation, it is important to monitor and evaluate the
performance and impact of the innovation. This involves tracking
key metrics and performance indicators to assess the success of
the innovation. Regular evaluation helps identify areas for
improvement, make necessary adjustments, and capture learnings
for future innovation initiatives.
Difference between Creativity and Innovation
 Business Model Innovation
 Business model innovation is defined as the process of
creating, modifying, or defining the fundamental
structure and components of a business model to create
new value propositions, capture new market
opportunities, and gain a competitive advantage. It
involves developing innovative ways to generate
revenue, deliver products or services, and create and
capture customer value.
 Traditional business models typically consist of various
elements such as target customer segments, value
propositions, distribution channels, revenue streams,
key activities, resources, and cost structure. Business
model innovation challenges existing assumptions,
norms, and industry practices to explore new avenues
for growth and profitability.
 Business Model Innovation Forms:
 New Revenue Models: Introducing novel ways of generating
revenue, such as subscription-based models, licensing, or pay-per-
use.
 Value Proposition Innovation: Developing innovative products,
services, or features that offer unique benefits to customers and
differentiate the business from competitors.
 Cost Structure Innovation: Identifying cost-saving opportunities,
optimizing resource allocation, or leveraging technology
innovation to reduce costs and improve profitability.
 Distribution Channel Innovation: Finding new channels or
leveraging existing ones in innovative ways to reach customers more
effectively and efficiently.
 Platform and Ecosystem Innovation: Building platforms or
ecosystems that connect different stakeholders and create value
through network effects and collaborations.
 Business Model Reinvention: Completely reimagining the business
model to adapt to changing market conditions, emerging trends,
or disruptive innovation.
Importance of Business Model Innovation
 Service Innovation
Service innovation is a crucial aspect of driving growth and remaining
competitive in today’s dynamic business landscape. By focusing on
personalized service and developing service offerings that provide value for
customers, businesses can differentiate themselves in the market. Customer
support plays a pivotal role in ensuring customer satisfaction and loyalty,
making it essential for businesses to prioritize customer-facing initiatives.
 The Impact Of Service Innovation On Business Growth
 Enhanced Customer Experiences: By tailoring services to meet customer
preferences and expectations, businesses can elevate the overall customer
experience, leading to increased satisfaction and loyalty.
 Differentiation and Competitive Advantage: Through innovative service
offerings, organizations can differentiate themselves from competitors,
establish unique value propositions, and capture market share.
 Revenue Growth and Market Expansion: Service innovation opens
doors to new revenue streams and market segments, driving top-line
growth and expanding business reach.
 Operational Efficiency and Cost Optimization: Innovative service
delivery processes streamline operations, reduce inefficiencies, and
optimize resource allocation, leading to cost savings and improved
profitability.
 Examples Of Successful Service Innovations
 Digital Banking Solutions
 Telemedicine Services
 E-commerce Personalization
 Food Delivery Platforms
 Design-led Innovation,
 Design-led Innovation is a human-centred approach of
applying the principles and practices of design to creatively
help organizations develop new value and new forms of
competitive advantage. At its core, it is the integration of
customer empathy, experience design and business strategy.

 Design-led innovation is a business strategy that focuses on

creating radical and groundbreaking innovations through the
use of design.
It emphasizes understanding and addressing the latent and
unarticulated needs of users, often leading to products,
services, or solutions that redefine markets and user
experiences. Here are the key components of design-led
innovation.
 User-Centric Approach
It places the end-user at the core of the innovation process, seeking deep insights
into their needs, desires, and behaviors through techniques like ethnographic
research, user observation, and qualitative studies.
 Creative Problem Solving
Design-driven innovation leverages creativity and design thinking methodologies to
solve problems in novel ways, encouraging out-of-the-box thinking and
experimentation.
 Aesthetics and Functionality
It integrates both aesthetic appeal and functional effectiveness, ensuring that
innovations are not only useful but also emotionally engaging and visually
appealing.
 Interdisciplinary Collaboration
This approach often involves collaboration across various disciplines, including
design, engineering, marketing, and social sciences, to combine diverse
perspectives and expertise.
 Cultural Sensitivity
Understanding cultural contexts and integrating them into the design process is
crucial, as it helps create products and services that resonate with specific user
groups and cultural norms.
 Proactive Market Shaping
Instead of responding to market demands, design-driven innovation aims to shape
and create new markets by introducing groundbreaking ideas that users might not
have previously considered.
Improvisation
 Large firm Vs. Start-up innovation
 Large Firm Innovation refers to the process of innovation within established,
typically large-scale corporations. These firms have significant resources at
their disposal, including dedicated research and development (R&D)
departments, substantial financial assets, and a broad customer base. The focus
in Large Firm Innovation is often on incremental improvements in products or
processes, risk management, and sustaining their position in the market. Such
firms may innovate to enhance their existing product lines, improve operational
efficiency, or respond to competitive pressures. The innovation process in large
firms can be slower due to their size, complex organizational structures, and the
need to align innovation with the existing corporate strategy and market
expectations.
 Startup Innovation, on the other hand, is associated with young, often small-
scale businesses that are in the early stages of operation. Startups typically
exhibit a more agile and risk-tolerant approach to innovation, driven by the
need to establish a market presence and differentiate themselves from
competitors. With limited resources and less bureaucratic impediments, startups
are able to rapidly develop and implement innovative ideas. Their innovation
often focuses on creating new markets or disrupting existing ones with
breakthrough products or services. The nature of Startup Innovation is
inherently more volatile, with a higher risk of failure, but it also offers the
potential for substantial growth and market impact if successful.
Key Differences between Large Firm Innovation and Startup Innovation

 Risk Appetite: Large firms often have a lower risk tolerance, favoring
incremental improvements, while startups are typically more willing to take
significant risks for groundbreaking innovations.
 Resource Allocation: Large firms have more substantial resources and
established R&D departments, whereas startups operate with limited
resources but often with a more agile approach.
 Innovation Focus: The innovation in large firms usually aims at enhancing
existing products and services, while startups often focus on creating
entirely new markets or disrupting existing ones.
 Organizational Structure: Large firms have more complex organizational
structures that can slow down the innovation process, in contrast to
startups’ typically flat and flexible structures.
 Market Influence: Large firms’ innovations are influenced by their need to
maintain market share, whereas startups innovate with the goal of
establishing a market presence.
 Customer Base Considerations: Large firms consider their existing
customer base in their innovation strategies, whereas startups are
more likely to innovate without such constraints.
 Bureaucracy and Decision-Making: Decision-making in large
firms often involves navigating through layers of bureaucracy,
unlike the swift decision-making common in startups.
 Speed to Market: Startups generally bring innovations to market
more quickly than large firms, which often have longer development
cycles.
 Risk of Failure: The consequences of failed innovation are
generally more significant for startups, while large firms can
typically absorb such setbacks more easily.
 Innovation Culture: Large firms often have a more conservative
culture regarding innovation, while startups typically have a culture
that strongly encourages creativity and experimentation.
 Key Similarities between Large Firm Innovation and
Startup Innovation
 Goal of Creating Value: Both aim to create value through new
products, services, or processes, albeit in different scopes and scales.
 Need for Strategic Vision: Both require a clear strategic vision to
guide their innovation efforts, ensuring alignment with broader
business objectives.
 Dependence on Human Capital: Innovation in both settings heavily
relies on the talent, skills, and creativity of their workforce.
 Importance of Market Research: Understanding market needs and
trends is crucial for both to ensure their innovations are relevant and
timely.
 Adaptability to Change: Both must be adaptable to changing market
conditions, customer needs, and technological advancements to stay
competitive.
 Integration of Technology: Utilizing advanced technology and
staying abreast of technological developments is essential for both
large firms and startups in driving innovation.
 Pursuit of Competitive Advantage: The underlying goal for
innovation in both contexts is to achieve a competitive advantage in
their respective markets.
 Co-creation and open innovation
Definition: Co-creation involves collaborating with customers, partners, and
other stakeholders to jointly create value, products, services, or
experiences. It acknowledges that innovation is not solely an internal
process, but one that involves external input and participation.
 Key Aspects:
 Collaborative Ecosystem: Co-creation fosters a collaborative ecosystem
where customers, employees, and external stakeholders work together to
generate ideas, develop solutions, and refine offerings.
 User Involvement: Customers are actively engaged in the innovation
process, providing feedback, ideas, and insights that influence product
development.
 Iterative Process: Co-creation often involves an iterative process of
ideation, prototyping, and testing, with continuous feedback loops.
 Value Co-creation: It focuses on creating value for both the company and
the stakeholders involved, leading to products or services that better meet
customer needs.
 Empowerment: Co-creation empowers customers to have a more
significant role in shaping the products and services they use.
 Open Innovation
Definition: Open innovation is a strategic approach that involves leveraging
external sources of knowledge, expertise, and resources to complement
internal capabilities in the innovation process. It recognizes that innovation
can come from a variety of sources, not just within the organization.
 Key Aspects:
 External Collaboration: Open innovation emphasizes collaboration with
external partners, including customers, suppliers, research institutions, and
even competitors.
 Technology Transfer: It involves the exchange of technologies, ideas, and
knowledge across organizational boundaries.
 Inbound and Outbound Flows: Open innovation considers both inbound
(external knowledge coming into the organization) and outbound (internal
knowledge going out to external partners) innovation flows.
 Licensing and Partnerships: It may involve licensing intellectual
property, forming strategic partnerships, or even acquiring startups or
innovative companies.
 Scouting and Networking: Companies engaged in open innovation
actively scout for innovative ideas, technologies, and startups, and build
networks to tap into external expertise.
 Developing an innovation strategy
1. Clear Objectives:
Define clear objectives for innovation, aligning them with overall business
goals and long-term vision.
2. Understanding Market and Customer Needs:
Conduct thorough market research to understand customer needs, pain
points, and emerging trends.
3. Balancing Internal and External Innovation:
Determine the right balance between internal R&D efforts and external
collaborations through open innovation.
4. Resource Allocation:
Allocate appropriate resources, including budget, talent, and time, for
innovation initiatives.
5. Risk-Tolerance and Experimentation:
Foster a culture that embraces calculated risk-taking and experimentation,
allowing for the exploration of new ideas.
6. Measuring and Evaluating Innovation:
Establish metrics and key performance indicators (KPIs) to track the
progress and impact of innovation efforts.

7. Feedback and Iteration:

Create mechanisms for collecting feedback from customers,
stakeholders, and employees to continuously refine and improve
innovation initiatives.
8. Adaptability and Flexibility:

Be prepared to adapt the innovation strategy in response to changing

market conditions, technological advancements, and customer
preferences.

9. Leadership and Organizational Support:

Ensure that leadership supports and champions innovation efforts,
and that there’s alignment throughout the organization.
 Sources of innovation
Peter F. Drucker, known as the father of modern management, suggested
that purposeful, systematic innovation begins with the analysis of the
opportunities and classifies "Seven Sources of Innovative Opportunity".
 Unexpected success or failure : Understanding the reasons for the
unexpected success or failure of a product generates opportunities to
innovate. Take the case of IBM, which wanted to sell accounting
machines to banks, but discovered that it was libraries that wanted to
buy these machines. IBM’s Univac, designed for
advanced scientific work, became popular in business applications
such as payroll. Unexpected product failures can also give companies
new ideas that may help them to come up with something that the
market likes.
 The incongruity between what actually happens and what was
supposed to happen : If things are not happening as they should, there
is scope to innovate. For example, in industries which are growing, but
where the margins are falling, there is tremendous potential for
innovation. Similarly, when companies continue to work at improving
something to reduce costs but fail to do so, an innovator can look at
other options to cut costs. This is exactly how container ships emerged
by focusing on the ship’s turnaround time rather than fuel efficiency.
 Process Needs: If a process is inefficient or suffers from a big gap, there is
scope to innovate. Sometimes, a process that is widely used may have certain
deficiencies. An innovator, by thinking out of the box, may come up with a new
idea that removes this deficiency. Pilkington’s float glass manufacturing
process, for example, paved the way for the development of glass with a
smooth finish.
 The changes in industry or market structure that catch everyone by
surprise : The emergence of new, fast-growing segments provides scope for
innovation. Innovators can serve the needs of these segments. The success of
the small floppy disk drive manufacturers had much to do with the emergence
of new customer segments who wanted smaller and lighter disk drives.
According to Drucker, “New opportunities rarely fit the way the industry has
always approached the market, defined it, or organized to serve it. Innovators
therefore have a good chance of being left alone for a long time.”
 Demographic changes : Demographic changes result in new wants and new
lifestyles that call for new products. The Japanese pioneered robotics because
they anticipated the rising levels of education and the consequent shortage of
blue-collared workers. In recent years, the ageing of Japan and Europe has put
pressure on governments to control healthcare expenses. This has fuelled the
rise of generic drugs. Demographic changes provide innovation opportunities
that are the most rewarding and the least risky, as the trends are easier to
predict.
 Changes in Perception, Meaning, Mood: By changing the
common perception of people, new needs can be created. For
example, capitalizing on people’s concern for health and fitness, a
booming industry has emerged for exercise and jogging equipment.

 New knowledge : New knowledge can be used to develop

innovative products. Innovations of this sort usually combine many
sorts of knowledge. The development of the computer, for example,
was facilitated by a combination of binary arithmetic, calculating
machine, punch card, audion tube, symbolic logic and programming.
Such innovations are also risky, because there is usually a gap
between the emergence of new knowledge and its conversion into
usable technology and another gap before the product is launched in
the market. Drucker has mentioned, “Contrary to almost universal
belief, new knowledge is not the most reliable or most predictable
source of successful innovations. For all the visibility, glamour and
importance of science-based innovation, it is actually the least
reliable and least predictable one.”
 Innovation Environment
An innovative environment refers to the conditions, culture,and
ecosystem within and around an organization that foster creativity,
experimentation, and the development of new ideas, products, and
services. This environment is crucial for business that seek to
remain competitive and responsive to the ever-changing market
demands.
1. Cultural foundation and innovation
2. Leadership and support
3. Collaborative workspaces and team structure
4. Access to resources and technology
5. External collaboration and open innovation
6. Customer centric approach
7. Risk management and flexibility
 Creative Destruction
Creative destruction can be defined as the decay of
long-standing practices, procedures, products or
services followed by more innovative, disruptive
ones. It is based on the principle that old assumptions
need to be broken so that new innovations can benefit
from existing resources and energy.
Principles of Creative Destruction
Innovation
Competition
Entrepreneurship
Capital