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7INNOVATION AND

ENTREPRENEURSHIP

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Chapter Learning Objectives

Explaining the factors needed for successful innovation and entrepreneurship.

Examining barriers to innovation and suggesting how to overcome these barriers.

Understanding how to identify opportunities for innovation and entrepreneurship.

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Chapter Learning Objectives (Continued)

Being aware of the role leading-edge industries and environmental challenges play in innovation and entrepreneurship.

Distinguishing risk from uncertainty and exploring different types of uncertainty.

Seeing innovation and entrepreneurship as a long-term process.

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Invention and Innovation

A promising idea is an invention: It is the creation of an idea in a laboratory, a test of the principles involved, and an act of technical creativity where a concept may be suitable for patenting

Innovation entails actually delivering on the idea’s promise by creating distinctive value and paying attention to the needs of customers.

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Ex. 7.2 Invention Versus Innovation

Invention InnovationCreation of idea in laboratory

Test of principle

Act of technical creativity

Concept suitable for patenting

Idea put into widespread use

Commercial exploitation

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Ex. 7.3 Types of Entrepreneurs

Stubborn dreamers– Stick tenaciously to vision despite odds (less than 1 in 10 new

ideas bear fruit)– Sometimes exhibit foolhardy optimism to overcome natural

inclination to caution

Leaders of small companies– May not have access to capital, workforce, or other resources to

complete the task

Refugees from large corporations– Have solid business experience, which may mean more success

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Ex. 7.3 (Continued)

Women– Numbers are increasing

Classic inventors without conventional credentials Well-connected individuals

– Access to investment banks and venture capitalists

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Sources of Funding for New Businesses

Own personal fortunes and contacts Commercial banks Venture capitalists Initial Public Offering (IPO) Large corporations

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Business Plan

A business plan describes the business. It has an external analysis that covers such essentials as suppliers, customers, and competitors; an internal assessment of the organization’s capabilities and its functional plans; an implementation schedule; an end-game strategy that indicates when the business will be viable; financial projections; and a risk analysis

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Economic Growth

Economic growth – the capacity to produce the goods and services people desire

Economic growth depends onQuantity and quality of labor and natural resourcesCapital, machines, and equipmentManagementValues that encourage hard work, diligence/thriftHigh level of technology

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Ex. 7.4 Innovation Waves

Period Technological Advances1782-1845 Steam power, textiles

1845-1892 Railroads, iron, coal, construction

1892-1948 Electrical power, automobiles, chemicals, steel

1948-present Semiconductors, consumer electronics, aerospace, pharmaceuticals, petrochemicals, synthetic and composite materials, advanced telecommunications and the Internet

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Ex. 7.5 Next Innovation Wave

Extension of Human Sensory Capabilities and Intellectual Processes

Genetic engineeringAdvanced computers/ telecommunicationRoboticsArtificial intelligenceAlternative energy (solar, fuel cells, etc.)

Advanced materials (molecular design, new polymers, high-tech ceramics, fiber-reinforced composites)

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Ex. 7.6 Environmental Challenges as Opportunities

Profits

High

Low

Bad Good

Environmental Performance

Old ModelWin-Loss

ComplianceModel (neutral)

New ModelWin-Win

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Ex. 7.8 Enhanced Efficiency via Pollution Prevention at Novartis

Inputs Finished Products

Waste

1979 100 30% 70%

1988 100 62% 38%

2000 100 75% 25%

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Ex. 7.9 Material Balance Model

Processstep

1

2

3

4

product

Hazardous/solid waste

waste/water

airreleases

other

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TOTAL

INPUTS

Total inputs =Total outputs

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Ex. 7.10 Minimizing Risk

•Focus on simple, well-trod areas•Establish new generations of existing products•Introduce new models•Differentiate product rather than create different ones•License others’ inventions•Imitate others’ product introductions•Modify existing processes•Make minor technical improvements

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Types of Uncertainty Affecting New Product Development

Technical uncertainty

Business condition uncertainty

Market uncertainty

Government uncertainty

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Difficulties of Successful Innovation

The entities that make the discoveries are not always the ones that profit from them

Innovation rarely is instantaneous Diffusion is very uneven Since imitators face lower costs, the incentive to

be innovative and entrepreneurial is not large

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Ex. 7.11 The Innovation Journey – A Typical Path

•Coincidental events initiate gestation of many years•Plans presented to resource controllers in form of sales pitches•At start, disagreement and lack of clarity abound•Ideas proliferate, making managing difficult•Lack of continuity among personnel creates problems•Emotions run high, leading to frustration, setbacks, mistakes, and blame•Problems snowball and patience of resource providers weakens•A struggle for power ensues•Resources may run out before dreams fulfilled

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Ex. 7.12An Augmented View of Innovation