Unit 2

Innovation
Business ventures have some common factors amongst themselves.
But they need to have some unique selling proposition (USP) to survive.
It is for arming the business with a USP that the organizations need to
innovate. Innovation helps a business house to survive when the winds
of change hit the market, in fact innovation fuels in the winds of
change. Innovation is not just creation of new ideas/ thoughts but it is
also about translating them into products/ services. Hence Innovation
can be defined as the successful exploitation of new ideas –
incorporating new technology, design & best practice is the key
business process that enables the businesses to compete effectively.
Innovation is something more than idea generation it is because idea has
little significance till it is converted into some useful product/ services.
Innovation is the process of conceptualizing an idea and then
transforming that idea into a product/ service. Usually innovations are
being made with a desire to overcome a need or a problem. Innovation
can be at the spark of light and can also take generation of
experimentations. Innovation usually make the life more comfortable for
a common man. Process of transforming ideas into products/ services at
times even take lifetime of many. The characteristics of Innovations are
• Innovations are the harbingers of change
• Innovations can take place at the spark of light or can take generation
of experiments
• Innovations can be both revolutionary as well as extension to the
existing products/ services.
• Innovations provide a USP to a business.
• Innovations are action oriented i.e. active and searching new ideas.
• Innovations help in making the product, service or process simple and
understandable.
• Innovations help in making the product, service or process customer
based.
• Innovation is all about trying, testing and revising.
Thus innovation refers to a process of creation/ value addition of a
product/ service/ process that can solve an existing problems or tap an
opportunities.
 Creativity
“Being different for the sake of being different may attract attention but
that is not sufficient value. True creativity must deliver real value.”
- Edward de Bono
Creativity can be defined the process of developing an original product,
service or idea that makes a socially recognized contribution.
Novel combination of old ideas can also be considered as creativity.
Hence Creativity is the ability to bring some thing new into existence
from either an exiting or new idea.
A creative person conceives an idea, which is new. It is immaterial
whether he takes any action. Hence the emphasis is on the ability and
not the activity of bringing anything new.
• Creativity is a continuous process in which required party to work
hard and continually improve ideas and solution. Creative person will
work hard by making gradual alteration and refinements to their
work. Creativity in entrepreneurship also implies the organization
environment such as team climate, teamwork and others. Creativity in
entrepreneurship includes the management in the organization that
will lead to successful company.
• Entrepreneurs need new ideas for setting up / running new business
ventures. An entrepreneur who is creative and brings her / his ideas
into reality turns out to be successful in business.
• Creativity has also become important in the present highly
competitive market where the business needs to differentiate itself
from others to survive.
• The next question that comes to mind is – Are creative persons born
or made? Some of the psychologists were of the view creativity as a
function of the brain’s right hemisphere and creative persons are born
and not made. But various scientific researches have proven that
human brain can be conditioned under stimulating environment to
become creative. It is for these reasons that organizations &
consultancies organize training sessions on creativity.
Sources of Innovative & Creative Ideas
• The Various Sources of idea generation are:
• Present & potential Consumers
• Existing Companies
• Raw material Providers
• Distributors & Retailers
• Research & Development
• Existing Employees
• There is a great misunderstanding of considering innovation/
creativity as synonymous to invention. But this is not true; innovation
is in fact utilization of the inventions that lead to increase in the
overall growth & profitability of the organization. An inventor gives
idea and an innovator implements the idea for economic gain. Some
individuals can be both inventor & innovator. The innovator
(entrepreneur) commercially exploits the invention produced by him
or by any other person. Similarly entrepreneur also exploits even
creative ideas for commercial gains .
• Apart from misunderstanding innovation to invention there are many
more myths in relation to innovation; they have been discussed below
along with reasons as to why these are myths and not facts:
• MYTH 1: Innovation is planned and predictable: This myth is based on
the old concept that innovation should be left to the research and
development department under a planned format. In truth,
innovation is unpredictable and may be introduced by anyone.
• MYTH 2: Technical specifications should be thoroughly prepared: this
is a myth, as thorough preparation often takes too long. Quite often it
is more important to use a try/test/revise approach than spend time
in preparation and planning.
• MYTH 3: Creativity relies on dreams and ideas: Even this is not true,
the fact is that accomplished innovators are very practical people;
they create (and not dream) useful products from the innovations
they make.
• MYTH 4: Technology is the only driving force of innovation and
success: This again is a myth. Technology is certainly one of the
sources for innovation, but it is not the only one. Moreover, the
customers/ market/ changing demands are the driving forces behind
any innovation. In fact market-driven or the customer based
innovations have the highest probability of success.
The importance of creativity & Innovation has swollen up with the
rising competition amongst corporates. Successful entrepreneurs are
realizing that ‘Creativity, Innovation and even incremental value
additions’ are imperative ingredients to survive the ever rising
competition. Schumpeter has identified the importance of innovation
in his definition on ‘entrepreneurship’.
Schumpeter (1934) listed five different kinds of innovations or ways to
act as an entrepreneur:
1. The introduction of a new good or quality of a good.
2. The introduction of a new method of production.
3. The opening of a new market.
4. The utilization of some new sources of supply for raw materials or
intermediate goods.
5. The carrying out of some new organizational form of the industry.
Whatever may be the kind of innovation (as discussed above) or
whatever might be the degree of innovation (remember de bono
pointed out that even incremental changes can amount to innovations.)
the Keyword is INNOVATION to survive in the business.
Irrespective of sector, creativity & innovation have become imperative
for thriving in business. Organizations recognize the fact that to
maintain competitive advantage they must continually seek to identify,
develop and make best use of all available resources. In response to the
rapid rate of change in competition and the pressures of technological
advances, corporate executives are unanimous in their stated desire to
make their employees and their organizations more "entrepreneurial".
The traditional view has been that this is accomplished through
individual creative people and, more recently, teams of individual
creative people.
• Consequently, "entrepreneurial" organization has been seen less as an
organization in which innovativeness is an embedded part of the
organization's process and structure, and more the "place" within
which (a) innovations have been developed, (b) innovative people
happen to reside and work, and (c) whose controls are capable of
being overcome so that top management can reluctantly agree to
accept the innovation. Corporate executives then seek to find means
by which to unleash the creative talents of their people and to lower
the built-in barriers to new ideas that could bubble up from the
depths of the organization.
Process Of Creativity
Brilliant ideas do not come out of the blue they evolve through a
creative process wherein ideas are germinated developed and matured
by imaginative person. The process of creativity involves six stages
• Stage I: Task Presentation
The first stage to the process of creativity is idea germination. The idea
germinates from personal interest/ inclination or an existing problem or
future opportunity. The important thing at this stage is how far is the
idea motivating enough to capture the attention of the entrepreneur.
But a lot of internal motivation is required to learn about a problem/ or
to tap an opportunity and if the perceived problem is motivating
enough to capture the individual’s attention, one moves to the Stage II.
• Stage II: Preparation
Preparation is the plan for a conscious research of a solution to the
problem/ opportunity, it involves seeking information about the
problem and how others have tried to solve it. This stage builds up and
activates information that is relevant to the problem. At this stage a
market research is often conducted for new products and services. This
stage does not generally deliver any results. However, the effort of
gathering information and knowledge is useful for the final solution.
Successful gathering of information at this stage motivates entreprenur
to move to Stage III.
• Stage III: Incubation
In this stage the knowledge and information is assimilated. It is a stage
of subconscious assimilation of knowledge. Herein the subconscious
intellect assumes the control of the creative process and the limitations
of human logic do not affect the solutions.
• Stage IV: Idea Generation
Multiple ideas and solutions (alternative courses of actions) are generated
at this stage. These ideas are brainstormed to assess the feasibility, by using
previous experiences, insight and fears. Thus this is the stage of evolution of
alternative ideas or solutions.
• Stage V Idea Validation
Ideas generated in the previous stage needs to be verified and proved
realistic, useful and practical. Various approaches to the problem are
attempted using previous experiences, insight and fears. Ideas are
recognized as being feasible. This is the stage that refines knowledge into
application.
• Stage VI Outcome Assessment
An assessment of the creative process can either lead to the achievement of
goal wherein a creative idea or solution to the problem is located or no
progress in this direction is achieved. In any case the creative process ends.
 Idea Generation
• Entrepreneurship is being able to create and run a business. In
entrepreneurship, idea generation is one of the main factors that lead
to its success. The idea thought of here should be able to solve a
problem. Idea generation is described as the process of creating,
developing and communicating abstract, concrete or visual ideas. It
focuses on coming up with possible solutions to perceived or actual
problems and opportunities.
• And along with being unique, the idea should also be easy to execute.
For example, let’s suppose you feel a lot of people have a problem
understanding legal jargon and legal proceedings. So, in this case,
your entrepreneurial idea could be setting up a platform that caters to
all the legal needs of people and helps them understand it.
Idea Generation in Product Development
• Idea generation is the first step for any product development. This
requires you to look for feasible product options that can be
executed. It is a very important step for organizations to solve their
problems.
• It requires you to do market research and SWOT analysis. You should
aim to come up with an idea that is unique from your competitors
and can be used profitably.
• For example, self-sanitizing door handles can be a product that you
look at. It is unique and would be in high demand because of the
current shift towards a healthy lifestyle.
 Good Entrepreneurial Business
Ideas
MARKET DRIVEN
• Solve a problem
• Find a market need
• Customer focused not product driven
• Target an identified, sizeable market segment
UNIQUE
• Differentiated (vs. commodity)
• Faster
• Better
• Cheaper
FEASIBLE
• Attractive –there is a demand
• Achievable –it can be done
• Durable –it lasts
• Value creating –it is worth something
• Safe
• Affordable for target market
FUNDABLE
• Revenue stream
• Manageable risk
• Sustainable -Market exists with frequency of purchase
• Scalable or Replicable
• Barriers to entry
• Growth potential
• Exit plan
INNOVATIVE
 Sources of Business Ideas
• Friends, family and other contacts(Network)
• Employees
• Reading
• Examine surroundings –Hobbies/activities–Education–Work
Experience–Personal Life
• Recognized needs not effectively met
• Geographic or business niches not currently served or under served
• Changes in – Market/Industry/Legal/Political factors/ Technology
factors
• others
 Idea Generation Process
The process may be different for different organizations and different
people. But there are three main steps in the process.
• Identification of the question or the problem we need to solve.
• Looking for ideas and probable solutions.
• Selecting the most suitable idea and execute it.
For example, let’s suppose you are opening up a restaurant. So firstly, you
need to identify what question you need to answer. Let’s assume you want
to decide upon a name for the restaurant. Now you will use different
techniques (brainstorming, mind mapping, etc) to come up with ideas for
names. In the last step, you will choose the most appropriate name from the
different names you came up with within the second step.
 Idea Generation Techniques
• Mind Mapping • Role-Playing
• Reverse Thinking • Storyboarding
• Brainstorming • Brainwriting
• SCAMPER • Forced Relationship
• S -Substitute • Collaboration
• C – Combine
• The 5 W’s
• A – Adapt
• M – Modify • Listening
• P – Put to another use • Accidental Genius
• E – Eliminate
• Visualization
• R – Reverse
• Removing Assumptions
• Synectic
 Entrepreneurial Motivation
• Entrepreneurship is to a great extent the product of motivation. Motivation
refers to the inner drive that ignites and sustains behaviour to satisfy needs.
• Entrepreneurial motivation may be defined as the process that activates and
motivates the entrepreneur to exert higher level of efforts for the
achievement of his/her entrepreneurial goals. In other words, the
entrepreneurial motivation refers to the forces or drive within an
entrepreneur that affect the direction, intensity, and persistence of his / her
voluntary behaviour as entrepreneur.
• The need for and significance of entrepreneurial motivation in running an
enterprise can best be appreciated as: “While an organization is like a
vehicle, entrepreneurships as driving and the entrepreneurial motivation as
fuel or power that makes the organizational vehicle move or run.”
Motives for starting enterprises
R.A. Sharma classified all the factors motivating the entrepreneurs into
two types as follows :
Internal factors
(a) Educational background
(b) Occupational experience
(c)Desire to do something pioneering and innovative
(d) Desire to be free and independent
(e) family background
External factors
(a) Assistance from Government
(b) Financial assistance from institutions
(c) Availability of technology and/or raw materials
(d) Encouragement from big business units
(e) Heavy demand for product

Murthy, Sekhar and Rao on entrepreneurial motivation classified the

factors behind entrepreneurial growth into three categories as follows :
1. Entrepreneurial ambitions
• To make money
• To continue family business
• To secure self-employment/independent living
• To fulfil desire of self/wife/parents
• To gain social prestige
• Other ambitions-making of a decent living, self-employment of
children, desire to do something creative, provide employment to
others.
2. Compelling reasons
• Unemployment
• Dissatisfaction with the job so far held or occupation pursued
• Make use of idle funds
• Make use of technical/professional skills.
• Others-maintenance of large families, revival of sick unit started by
father.
3. Facilitating factors
• Success stories of entrepreneurs
• Previous association (experience in the same or other line of activity)
• Previous employment in the same or other line of activity
• Property inherited/self-acquired/spouse’s
• Advice or influence (encouragement) of family members/
relatives/mends.
• Others- association as apprentices and sleeping partners.
 Barriers to Entrepreneurship
• Finances
• Fear of not to be a success
• No strategic plan in place
• Human resource issues
• Stringent rules and regulations of the market
• Fewer opportunities
• Lack of capacity
• Less market experience
• Lack of risk-taking capacity
• Corrupt business situations
• Inadequate training
Stages in Business Development
Process
• Initial Idea Exploration, Identification and Assessment
• Formulate general business idea(s) or concept(s)
• Identify alternative business models or scenarios for the idea(s)
• Investigate idea/concept and alternative business scenarios
• Formal investigation
• Refine scenarios
• Idea/Concept and Scenario/Model Deliberation and Assessment
• Further refine the business scenarios/models
• Conduct feasibility study
• Analyze the feasibility study
• Go/No-Go Decision
• Decide that the project is viable and move forward with it.
• Decide to do more study and or analyze additional alternatives.
• Decide that the project is not viable and abandon it.
• Business Plan Preparation and Implementation
• Creating a legal structure
• Securing market access
• Raising equity and securing financing
• Hiring management and staff
• Constructing facility
• Other
• Business Operations