Unit 2

Entrepreneurial Idea and Innovation

Introduction to Innovation:

Better and smarter way of doing anything is innovation. It could be the introduction of:
 New technology
 New product line or segment
 A new method of production
 An improvement in the existing product

It is the means by which the entrepreneur either creates new wealth- producing resources or endow
exiting resources with enhanced potential for creating wealth – Peter Drucker.

Innovation is the specific function of entrepreneurship.

Sources of innovation :

Seven Sources of Systematic Innovation

Peter Drucker refers to innovation as the effort to create purposeful focused change in an
enterprise’s economic or social potential. Innovation must begin with an analysis of opportunities, in
a systematic and organized way. The starting point in innovation is identifying the scope for
improvement with respect to customers, suppliers and internal processes. Innovations must be
market focused. Opportunities to innovate are provided by new customer segments which are just
emerging; customer segments that existing competitors are neglecting or not serving well, new
customer needs which are emerging and new ways of producing and delivering products to
customers.

Most innovation, especially the successful ones, results from a conscious, purposeful research from a
conscious, purposeful result for innovation opportunities.

In his book “Innovation and Entrepreneurship,” Drucker has listed seven sources of opportunity for
innovative organizations. Four are internal to the enterprise and three external.

Four such areas of opportunity exists within a company or industry :

 Unexpected occurrence
 Incongruities,
 Process needs ,and
 Industry and market change

Three additional sources of opportunity exists outside a company in its social and intellectual
environment:

 Demographics
 Changing perception
 New Knowledge

1. Unexpected occurrence :

Innovations can take place unexpectedly. They can happen by chance. Someone might just stumble
upon a new idea or product. Even fire is considered an unexpected innovation that humans
stumbled upon. Another example is the dynamite.

2. Incongruities:

When the need is incongruent with the supply, innovation might be born. In an attempt to resolve
the existing incongruities people might innovate. For example as the number of cars grew there was
a shortage of parking area. In an attempt to solve the incongruity between parking area and parking
shortage, the smart car was born. Smart car is a small car that can fit in small spaces. Incongruities
can be an important source of innovation. It is basically in the human nature to try to fill the
incongruities he sees around him.

3. 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.
 4. Industry and market change:

An existing market structure can also give rise to chances for innovation. This is how Google was
born. Google shaped the search engine market. Before Google the search engines were not as
perfect and Google brought all of it in order. There was so much information scattered over the
World Wide Web. Google made this information searchable. Thus, the World Wide Web gave rise to
a market structure where a search engine like Google could flourish. the world wide web paved way
for interconnection. Google created a search engine that was linked to all the searchable data.

5. 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.

6. Changes in perception :

By changing the common perception of people, new needs can be created. Earlier, the
overweight people were seen as healthier than the leaner ones. However, the social perception of
healthy has undergone a big change where fat people are seen as obese and unhealthy. People feel
the need to remain leaner and healthier. Based upon this changed perception, a flood of healthy and
low calorie foods came to the market.

7. knowledge:

New knowledge can also be a source of innovation. Whether it is nano-technology, biotechnology or

even artificial intelligence, new knowledge in any area is a source of innovation. the science keeps
progressing. Every year new areas are discovered and much gets added to the existing base of
human knowledge. This new knowledge paves way for innovations that can sometimes be life
changing.

Types of innovation :
 1. Incremental Innovation

Incremental innovation also known as sustaining innovation is the continuous improvement of

existing products or services to provide more value to an existing market. It focuses on reducing
defects and incrementally improving performance with features like product line expansions, cost
reductions, and next-generation products. This type of innovation occurs in the short term and has
low technological advancement and low market impact.

Examples include adding new features to existing products or services or even removing features

2. Disruptive Innovation

Disruptive innovation is when new technologies and products are created to serve an existing
market. This type of innovation is enabled by new technology that provides a more efficient and
accessible alternative to what already exists in the market. Businesses apply disruptive innovation to
serve the evolving needs of their consumer base, creating entirely new value streams and service
offerings that did not exist before.

Examples: Digital currency, 3D Printing & Cross-platform instant messaging apps

another example of disruptive innovation, one of the more prominent being Apple’s iPhone
disruption of the mobile phone market. Prior to the iPhone, most popular phones relied on buttons,
keypads or scroll wheels for user input. The iPhone was the result of a technological movement
that was years in making, Apple had to cobble together an amazing touch screen that had a simple
to use interface, and provide users access to a large assortment of built-in and third-party mobile
applications.

3. Architectural Innovation
Architectural Innovation is the modification of existing solutions for an entirely new market.
Architectural innovation refers to changing the overall design of a product by putting existing
components together in new ways. This innovation occurs in the short to medium term.

Examples: Winchester Disk Drives, Desktop Photocopiers & Multi-core Processors.

4. Radical innovation :

Radical innovation is what we think of mostly when considering innovation. It gives birth to new
industries (or swallows existing ones) and involves creating revolutionary technology. The airplane,
for example, was not the first mode of transportation, but it is revolutionary as it allowed
commercialized air travel to develop and prosper.
Idea Generation :
 Idea generation or ideation is the act of forming ideas.
 It is a creative process or procedure that a company uses in order to figure out solutions to
any number of difficult challenges.

 Idea generation is described as the process of creating, developing and communicating

abstract, concrete or visual ideas. Ideas are the first step towards making improvement.

 It involves coming up with many ideas in a group discussion,Selecting the best idea or ideas,

 Working to create a plan to implement the idea, and

 Then actually taking that idea and putting it into practice.

It forms basis for innovation.

It’s the front end part of the idea management funnel and it focuses on coming up with possible
solutions to perceived or actual problems and opportunities.

Sources of Idea Generation :

 External sources:

 Customers

 Competitors

 Suppliers

 Trade fairs

 Published information

 Trade magazines

 Outside consultants

 Governments law and regulation

 Internal sources

 Internal R&D

 Employees

 Complaints systems

 Customer service; salesforce

Tools and techniques for generating ideas

Focus group:

 A group of individuals providing information in a structural format.

 A moderator leads a group of people through an open , in-depth discussion,

 In addition to generating a new ideas, the focus group is an excellent source for initially
screening ideas and concept.

Brainstorming:

 People can speak out their ideas freely without fear of criticism.

 Even strange ideas are accepted with open hands

 Frequently, ideas are blended to create one good idea as indicated by slogan “1+1=3”.

 Brainstorming can be done both individually and in group

 The typical brainstorm group comprises six to ten people

Brainwriting:

Pen down their ideas .

SCAMPER Technique

The SCAMPER technique is created by Bob Eberle, and is a method used for problem-solving and
creative thinking. The purpose of the SCAMPER is to make adjustments to some parts of the existing
idea or process to reach the best solution. It consists of seven actions that can be used to replace
parts in the process:

1. Substitute – Substitution technique refers to replacing a part of your product, concept or process
with another to achieve even better outcome.
2. Combine – The combine technique explores the possibility to combine two ideas into a single,
more effective solution.

3. Adapt – Adaptation analyses the possibilities to make the process more flexible and focuses on
other similar incremental improvements to the idea, process, or concept.

4. Modify – Modifying the idea looks at the problem or opportunity from a bigger perspective and
aims for improving the overall results, not just the idea.

5. Put to another use – This approach focuses on finding ways to use the idea or existing solution for
another purpose and analyses the possible benefits if applied to other parts of the business.

6. Eliminate – The elimination technique is quite straightforward: it examines the possible outcomes
if one or more parts of the concept were eliminated.

7. Reverse – This action focuses on reversing the order of interchangeable elements of an idea

Synetics:

 It is a problem solving methodology that stimulates thought processes of which the subject
may be unaware.

The 5W + H Method:

 Answer who, what, where, why, when and how.

Storyboarding:

 Concepts are placed to look like that of a cartoon strip.

 Then the story is being developed from it.

 Ideas are being taken from every colleague and then a sticky note is then being passed on
board.
Business Opportunity

An opportunity is a chance to take advantage of a situation. It can relate to several situations in

career, sports, business, etc.

A business opportunity is the chance to take advantage of an occurrence in the market for business
gain. It is what makes some businesses succeed while others fail.

A good example of a business opportunity in the market today is e-books. Amazon was one of the
first companies in the online bookselling business who initiated an e-book reader that made it
possible to read books by means of a digital device that looks more or less like a tablet pc.

Importance Of A Business Opportunity

The main purpose of an opportunity is to serve as the basis for any action that results in profit and
business growth.

Opportunities allow businesses to create and implement ideas and innovations and improve their
performance.

Here are some reasons why a business opportunity is important:

 The chance to build a business: A business opportunity can be an existing unsolved problem
in the market or a new problem arising from current trends, which is the chance to build a
business.
 The chance to avoid failure: A business is likely to fail without opportunities. This is because
they are essential for implementing ideas and innovations that can make a business
successful. They allow businesses to take the right decision at the right time.
 The chance to grow: Opportunities allow businesses to create and implement ideas and
innovations. It is also a chance to improve performance by solving existing problems better,
providing a more refined value proposition to the target market, and building a more
efficient business model.
 The chance to maximise profits: A business opportunity involves favourable conditions that
can be used to increase profits.

Characteristics Of A Good Business Opportunity

Business opportunities are the core of every successful business. They help in identifying problems
and in creating solutions that can potentially help businesses grow.

Here are some characteristics of a good opportunity:

 Clarity: Good opportunities are clear, well defined, and straightforward. They allow
businesses to accurately and completely identify problems and create solutions that can
maximise their potential.
 Relevance: Good opportunities are relevant to the scenario in which they exist. They provide
added value to customers, markets, and industries. This means they do not only represent
potential but also relevance for solving existing problems or creating added value for others.
  Feasibility: Good opportunities are realistic and feasible. They help businesses achieve their
goals while making them more efficient, productive, and profitable.
 Profitable: A good opportunity is capable of providing returns on investment. It is able to
achieve its objectives while capitalising on the available resources, strategies, and assets
more efficiently.
 Scalable: A good opportunity is scalable. This means it can be expanded to a big or a wide
scale. It can extend to various markets and industries while maximising the results of
investments in terms of time, human resources, and money.

Types Of Business Opportunities

There are different types of business opportunities, each one serves as the basis for important
decisions that help businesses succeed. Here are some examples:

1. New market opportunity: A new market opportunity involves an untapped market, which
gives businesses the chance to create and implement ideas and innovations without facing
much competition.
2. Untapped resource opportunity: An untapped resource opportunity is a type of business
opportunity that involves underutilised or unexploited resources that can be used to create
added value.
3. Repressed demand opportunity: A repressed demand opportunity capitalises on existing
demands that the current offerings don’t cater to. For example, Uber capitalised on a
repressed demand for an on-demand cab system in the existing cab industry.
4. Technology opportunity: A technology opportunity is a type of business opportunity that
allows businesses to introduce new technologies that can be used in existing markets.
5. Competitive opportunity: A competitive opportunity allows businesses to introduce new
products or services that can provide more value than their competitors while solving the
0.problems of the target market better.
6. Strategic partnership opportunity: A strategic partnership opportunity involves the chance
to collaborate with businesses from complementary industries, allowing them to access new
resources, strengthen their product offerings, and increase their competitive advantage.

How To Identify A Business Opportunity?

Opportunity identification is an important part of business development and growth. It allows

companies to make the right decisions that will help them achieve their goals.

Here’s the business opportunity identification process:

The Customer Research Stage: The first step is to research customers and their problems by
asking questions related to the customer’s needs, goals, and expectations.

This involves collecting, organising, and analysing information about customers’ behaviour as well as
their needs.

The past and present trends of the target market must also be identified to help businesses better
understand customer preferences.
The objective is to identify potential business opportunities that can help the business create value
for its customers.

Problem Hypothesis Stage

In this stage, businesses search for problems by identifying issues and concerns from customer
feedback and other sources of market research. The first step is to define the problem.

Once that has been done, businesses need to search for the root cause of the problem and explore
possible solutions. The goal is to formulate a well-focused hypothesis that can be tested with market
research.

Product Hypothesis Stage

Businesses should determine what kind of product or service will solve customers’ problems or
address their needs. The product or service should target specific customers based on the
information gathered during the customer research stage.

Market Hypothesis Stage

The market hypothesis stage involves testing certain key assumptions about the business
opportunity with customers to determine the demand for a particular product or service in the real
world, and how it solves problems in the specified market.

It also involves doing in-depth research to identify existing players in the targeted market, and
determining customer expectations for the product or service.

Product Development Stage

Once a business opportunity is confirmed, the next step is to develop a product or service that will
solve the problem.

The product or service should be designed and tested using various methods to ensure its viability
and effectiveness.

Opportunity identification/recognition process:

1. Preparation: Preparation is the first stage where entrepreneurs brings past experiences to the
opportunity recognition process. As per literature 50 to 90 percent of start-up ideas emerge
from a person’s previous work experience.

2. Incubation: At this various idea might emerge. In this process an entrepreneur is

contemplating an idea or a problem. Entrepreneurs consider various options and possibilities
through unconventional style. They rely on their intuition for finding ways to the solutions.
 3. Insight: Insight refers to the “eureka” moment. At this point the answer or the solution strikes
suddenly or spontaneously. The problem is solved at this stage or the idea becomes available. In this
process three different types of insights may occur:

 Experience of spontaneous identification of business opportunity. Prior research suggests

that entrepreneurs often have the experience of being immediately confident that an idea
will work (Hills, 1995).

 An occasion when a person gets the idea to solve the problem.

 A moment when an idea becomes available to you via your social network. Entrepreneurs
with a wider network of social contacts will identify more ideas and recognize more
opportunities than entrepreneurs with fewer contacts (Singh, 1998).

4. Evaluation: In this process feasibility analysis is conducted to evaluate the viability of the idea.
Insights are assessed for the viability of the concept.

5. Elaboration: Assuming that a business idea is viable, entrepreneur start working on detailing of
those ideas. They can begin business planning and venture creation process. Various plans and
programs can be decided to execute the business idea.
Management skills for Entrepreneurs

Entrepreneur skills include various skill sets such as leadership, business management, time
management, creative thinking and problem-solving. You can apply these skills in many job roles and
industries. These entrepreneur skills are vital for promoting innovation, business growth and
competitiveness. Developing these skills means developing many skills together. For example, to be
a successful entrepreneur, you may need to develop your risk-taking skills and sharpen your business
management skills.

Certain qualities are required for the entrepreneur to achieve the best goal.

 Time Management

Time is an important factor to make decisions. The success of an entrepreneur depends upon how
they utilize their time in evaluating and prioritizing their tasks according to relevance and
importance. They have responsibilities towards their partners, customers and employees to make
most out of their time. Effective time management skills enable entrepreneurs to expeditiously
complete essential tasks. They must manage their professional life in conjunction with their family
life, making a balance between work and home.

 Opportunity Recognition

The seed of every successful business is a great Idea. They must recognize the opportunities on time
that are unique and gives a competitive advantage. A good opportunity only comes when an
effective market research is done. They must take the views of industry experts and must utilize the
information gained from organizational experience.

 Business Planning

Successful business involves proper utilization of managerial skills and formulation of an effective
business plan. The planning is required from the start of the business till the entrepreneur achieves
the goal. Business planning includes the ability to manage the future forecasting in each aspect.

 Information Gathering

Reliable information is required to ensure those right decisions are made. Successful entrepreneurs
often make information gathering one of their top priorities. An entrepreneur's close associates are
the most valuable resource for gathering actionable information. Motivation is required for the
associates to share their learning and experience. Successfully gathering the right information
enables entrepreneurs to take the decisions better than the competitors in the market.

 Rational Decision Making

Entrepreneurs cannot expect to succeed without nurturing their ability to make rational decisions.
Decisions can be taken for long term or short term depending upon the working of the business.
Many entrepreneurs underestimate the importance of giving time in taking the right decisions, as a
result, they make impulsive decisions based on intuition or conjecture.

 Employee Management

Successful businesspeople evaluate potential employees, hire and train workers and put them in
appropriate positions in her company. They must find people who will work well together and makes
organization goals as their own achievements. Once employees are on the job, a successful
entrepreneur needs to have the ability to manage teams, oversee conflict and dispute resolution and
provide ongoing training to encourage high-quality performance.

 Communication Skills

An entrepreneur must be a good orator with best communication skills. They must be able to
communicate with the people with whom they work. A good understanding between businessmen
and its fellow persons makes the work easier. Entrepreneurs with strong communication skills can
find it easier to communicate with partners, acquire funding, and develop relationships with
prospective customers. Communication skills can also make it easier to manage associates who work
for the enterprise.

 Leadership

Leadership quality is essential for every entrepreneur to make the whole team work together and
give their best in achieving the goal. Entrepreneurs must possess adequate leadership skills to
effectively coordinate the efforts of everyone involved in an enterprise. Leadership skills can be
learned through experience and formal education on leadership techniques.

 Business Management

Successful entrepreneurs must have strong overall business management skills. They must
understand all the aspects of how his business operates, including the regulatory requirements of his
industry. They should have knowledge about labor, employment, and tax laws, and must stay
abreast of industry and market trends. This will help him quickly change direction if economic
conditions dictate.

 Financial Management

Hiring an accountant or finance professional to track money and other assets is responsible for the
financial management of the company. It is significant when the company is at the growth stage and
is bringing the investors. A successful entrepreneur has the management skills necessary to review
books and financial statements to ensure that he is always aware of his business's finances.
Organizational Effectiveness :

Organizational effectiveness refers to how an organization has achieved full self-awareness due in
part to:

 Leaders setting well-defined goals for employees and outlining ways to efficiently execute those
goals
 Management implementing clear decision-making processes and communication pipelines
 Engaged employees—who are carefully selected and fairly compensated—producing work that
prioritizes results

5 ways leaders can produce long-term organizational effectiveness

The Bain & Company study maps out five key areas where successful companies made adjustments
to achieve organizational effectiveness:

 Strategy
 Metrics
 Commitment
 Behaviours
 Culture

1. Strategy

Strategy involves shifting an organization’s central identity—how leaders describe its purpose and
goals both internally and externally—to include effectiveness and efficiency as core values. The more
your company is known to be “effective” and “efficient,” by both the market and your employees,
the more these values will be built into every new project and goal.

Organizational effectiveness should simplify and clarify long-term objectives for a company. The
clearer these objectives are outlined at a strategic level, the easier it is to translate across
departments.

2. Metrics

Measuring organizational effectiveness through metrics can help organizations stay accountable. But
choosing the right data to measure—as well as knowing when to prize human judgment and
discussion over hard analytics—is just as important. A few questions to help your organization get
started should include:

 What concrete goals are your teams working toward?

 Are they clearly outlined by team leaders?
 How and at what intervals will progress be evaluated?

3. Commitment

“Strong executive sponsorship is the single most important factor for success and the most often
cited reason for failure when things go off track,” the Bain & Company study says. The authors stress
that “visible and credible commitment” to effectiveness policies from senior leaders—in
companywide communications and hiring approaches, all the way down to how quarterly budget
meetings are conducted—creates a trickle-down effect across the organization.

4 . Behaviour

Meanwhile, recurring behavior is where efforts to achieve organizational effectiveness are most
likely to break down. Identifying specific decision-making moments in the day-to-day operation of
the company, communicating the ways employees ought to be changing their behavior in those
moments, and then implementing systems for reinforcement, including incentivizing those choices,
can build a much healthier organization that polices its own effectiveness.

5. Culture

Finally, the degree to which employees are enthusiastically engaged at work determines how
effective their work will be. Therefore, creating an organizational culture that values effectiveness is
key.