Innovation and Entrepreneurship

1
Innovation and Entrepreneurship

• Practice and principles

Peter f. drucker(1985)
2
Contents

• Preface
• Introduction The Entrepreneurial Economy
• The Practice of Innovation
• The Practice of Entrepreneurship
• Entrepreneurial Strategies
• Conclusion The Entrepreneurial Sociality

3
The Practice of Innovation

• Systematic Entrepreneurship
• Purposeful Innovation and the Seven Sources for
  Innovative Opportunity
• Sources The Unexpected
• Sources Incongruities
• Sources Process Need
• Sources Industry and Market Structures
• Sources Demographics
• Sources Changes in Perception
• Sources New Knowledge
• The Bright Idea
• Principles of Innovation

4
1Systematic Entrepreneurship

• Concept about entrepreneur?
• Entrepreneurship, and economic theory, social
  theory?
• Entrepreneurship ,risk ,and methodology

5
Concept about entrepreneur?

• Says definition shifts economic resources out
  of an area of lower and into an area of higher
  productivity and greater yield.
• U.S. way one who starts his own, new and small
  business.
• Druckers comments entrepreneurship does not
  need small , new and economic affairs

6
Druckers Concept about entrepreneur?

• Entrepreneur create something new, something
  different they change and transmute value.
• Entrepreneur see change as the norm and as
  healthy.
• The entrepreneur always searches for change,
  responds to it, and exploits it as an opportunity

7
Entrepreneurship and economic theory, social
theory?

• Entrepreneurship rests on a theory of economy and
  society
• Joseph Schumpeter dynamic disequilibrium brought
  on by the innovating entrepreneur ,rather than
  equilibrium and optimization, is the norm of a
  healthy economy and the central reality for
  economic theory and economic practice.
• Entrepreneurship pertains to all activities of
  human beings, including business, economic and
  social sphere

8
Entrepreneurship ,risk ,and methodology

• Entrepreneurship, it is commonly believed, is
  enormously risky
• Entrepreneurship is risky mainly because so few
  of the so-called entrepreneur know what they are
  doing. they lack methodology
• Entrepreneurship does need, however, to be
  systematic, to be managed. Above all ,it needs to
  be based on purposeful innovation.

9
2Proposeful Innovation and Seven Sources for
Innovation

• About innovation?
• The theory and practice of innovation?
• Systematic innovation?
• The seven sources of innovative opportunity?

10
About innovation

• Innovation is the specific instrument of
  entrepreneurship. It is the act that endows
  resources with a new capacity to create wealth
• Whatever changes the wealth-producing potential
  of already existing resources constitutes
  innovation
• Innovation does not have to be technical, it is
  also an economic or social term
• Innovation can be defined as changing the yield
  of resources, or defined in demand terms rather
  than in supply terms, that is as changing the
  value and satisfaction obtained from resources by
  the consumer

11
The theory and practice of innovation?

• Theory we can not yet develop a theory of
  innovation
• Practice we know enough to develop, but still
  only in outline form

12
The theory and practice of innovation

• We already know enough when, where, and how one
  looks systematically for innovation opportunities
• And how one judges the chances for their success
  or the risks of their future

13
From Invention,Research to Innovation

• Invention one of the great achievements of the
  nineteenth century was the invention of
  invention.
• Invention was mysteries ,resulted from flash of
  genius

14
From Invention,Research to Innovation

• Researchby1914,the time WW1 broke out, invention
  had become research
• Research is a systematic, purposeful activity,
  which is planned and organized with high
  predictability both of the results aimed at and
  likely to be achieved
• Something similar now has to be done with respect
  to INNOVATION ,i.e. systematic innovation

15
Successful Entrepreneur and Systematic
innovation?

• Successful Entrepreneur have to learn to practice
  systematic innovation
• Successful entrepreneur do not wait until the
  Muse kiss them and gives them a bright idea
  they go to work, they try to create new and
  different values and new and different
  satisfactions, to convert a material into a
  resources ,or to combine existing resources in
  a new and more configuration
• And it is CHANGE that always provides the
  opportunity for the New and Different

16
Systematic innovation

• The overwhelming majority of successful
  innovation exploit change.
• Systematic innovation 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

17
Systematic innovation

• The discipline of innovation (and it is the
  knowledge base of entrepreneurship) is a
  diagnostic discipline a systematic examination
  of areas of change that typically offer
  entrepreneurial opportunities
• Systematic innovation means monitoring seven
  sources for innovative opportunities

18
The seven sources of innovative opportunities

• The unexpectedsuccess, failure, or event
• The incongruity-reality as it actually is,
  assumed to be, and ought to be
• Innovation based on process need-
• Changes in industry structure or market structure
  that catch everyone unawares-
• Demographics (population changes)
• Changes in perception, mood, and meaning
• New knowledge, both scientific or nonscientific

19
The seven sources of innovative opportunities

• The first four sources lie within the enterprise,
  and are visible primarily to people within.
• They are highly reliable indicators of changes
  that already happened or can be made to happen
  with little effort

20
The seven sources of innovative opportunities

• The seconded three sources involves changes
  outside the enterprise or industry
• The seven sources require separate analysis, for
  each has its own distinct characteristic

21
3SourcesThe Unexpected

• The unexpected success
• The unexpected failure
• The unexpected outside event

22
The unexpected success

• Offered the most richest opportunities for
  successful innovation ,with less risky and less
  arduous
• Yet the unexpected success is almost totally
  neglected

23
The unexpected success

• The first thing is to ensure that the unexpected
  is being seen. It must be properly featured in
  the information management obtains and studies

24
The unexpected success

• Management must look at every unexpected success
  with the questions(1)What would it mean to us if
  we exploited it?(2)Where could it lead us?(3)What
  would we have to do to convert it into an
  opportunity? And (4)How do we go about it?

25
The unexpected success

• The unexpected success is an opportunity it
  demands innovation .It forces us to ask, What
  basic changes are now appropriate for this
  organization in the way it defines its business?
  Its technology? Its markets?
• If these questions are faced up to ,then the
  unexpected success is likely to open up the most
  rewarding and least risky of all innovative
  opportunities

26
The unexpected failure

• If something fails despite being carefully
  planed, designed and conscientiously executed
  ,that failure often bespeaks underlying change,
  and with it, opportunity
• The assumptions on which a product or service,
  its design or its marketing strategy, were based
  may no longer fit reality. Any change like this
  is an opportunity for innovation

27
The unexpected failure

• The unexpected failure demands that you go out
  look around and listen.
• It is equally important to watch out for
  unexpected event in the suppliers business, and
  among the customers
• Failure should always be considered a symptom of
  an innovative opportunity, and taken seriously as
  such

28
The unexpected outside event

• The unexpected outside event are often more
  important
• It is a condition of success in exploiting the
  unexpected event that it must fit the knowledge
  and expertise of ones own business
• But exploiting the unexpected outside event
  appears to be something that particularly fit the
  existing enterprise ,and a fairly sizable one at
  that

29
4SourcesIncongruities

• Incongruous economic realities
• The incongruity between reality and the
  assumptions about it
• The incongruity between reality and the
  assumptions about perceived and actual customer
  values and expectations
• Incongruity within the rhythm or logic of a
  process

30
5SourcesProcess Need

• Need is a major innovative opportunity
• Process need exists within the process of a
  business, an industry ,or a service
• It perfects a process that already exists,
  replaces a link that is weak, redesigns an
  existing old process around newly available
  knowledge.
• Incongruities and demographics may be the most
  common causes of a process need

31
Five Basic Innovation Criteria of Process Need

• A self-contained process
• One week or missing link
• A clear definition of objective
• That the specification for the solution can be
  defined clearly
• Widespread realization that there ought to be
  abetter way. that is, high receptivity

32
Three important caveats

• The need must be understood
• We may even understood a process and still not
  have the knowledge to do the job
• The solution must fit the way people do the work
  and want to do it

33
6SourcesIndustry and Market Structures

• The automobile story
• The opportunity
• When industry structure changes

34
6SourcesIndustry and Market Structures

• Industry and market structure sometimes last for
  many ,many years and seem completely stable
• Actually ,market and industry structure are quite
  brittle. One small scratch and they disintegrate,
  often fast
• When this happens, every member of the industry
  has to act
• To continue to do business as before is almost a
  guarantee of disaster
• A CHANGE IN MARKET OR INDUSTRY STRUCTURE IS ALSO
  A MAJOR OPPORTUNITY FOR INNOVATION

35
The opportunity

• A change in industry structure offers exceptional
  opportunities, highly visible and quite
  predictable to outsiders
• But the insiders perceive these same changes
  primarily as threats
• The outsiders can thus become a major factor in
  an important industry or area fast ,and at
  relatively low risk

36
When industry structure changes4 indicators

• The most reliable and the most easily spotted of
  these indicator is rapid growth of an industry
• By the time an industry growing rapidly have
  doubled in volume, the way it perceives and
  services its market is likely to have become
  inappropriate

37
When industry structure changes4 indicators

• Another development that will predictably lead to
  sudden changes in industry structure is the
  convergence of technologies that hitherto were
  seen as distinctly separate
• An industry is ripe for basic structure change if
  the way in which it does business is changing
  rapidly

38
Industry and Market Structures

• Innovations that exploit changes in industry
  structure are particularly effective if the
  industry and its markets are dominated by one
  very large manufacture or supplier or by a few
• Again and again, when market or industry
  structure changes, the producers or suppliers who
  are todays leaders will be found neglecting the
  fastest-growing market segments
• The new growth opportunities rarely fit the way
  the industry has always approached the market,
  been organized for it, and defines it
• The innovator in this area therefore has a good
  chance of being left alone