small business and entreprenership 4

David StokesNicholas Wilson

Small Business Management and Entrepreneurship

Fifth Edition

Lecture outlineDefinition of innovationInnovation in detailMeasuring innovationInnovation in small firmsManaging innovationSources of innovative opportunity

Innovation It comes from a Latin word ‘innovare’, which

means ‘to make something new’.It can be defined as the successful exploitation

of ideas – or turning ideas into profitable products, processes, services or business practices.

There are three underlying conceptsInnovation as achievementThe impact of those achievementsCapacity to change or innovation as dynamic

capabilities

Innovation as achievementIn technological context not in social or

commercial contextNew technologies evolve over timeIntroduction of new technology is a risky

process in terms of uncertainties

Innovation as the impact of achievementMaking a social or commercial impactSome consequences or impacts may not be

anticipated. E.g. the telephone, the car

Innovation as dynamic capabilitiesIt focuses on the idea of innovation as the

capacity to change.It is a processDynamic capabilities means a learned and

stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness.

Innovation in detailMisinterpretations of innovation

Innovation = invention Invention is a creative idea and innovation takes it a

step ahead and puts it to workInnovation = new products or services only

New markets, new marketing methods, new operating methods

Innovation = original Old ideas can be combined to make them new

Innovation = one-off inspiration It is a gradual and ongoing process

Measuring innovationCan it be measured?

Four factors can be used Conceptual noveltyTechnological uncertaintyMarket uncertaintyExtent to which a firm has committed ‘sunk

costs’ to the project.The first three factors require judgment and

forth can be measured

Do you think small firms are more innovative?

Sources of innovative opportunityThe unexpectedThe incongruousProcess needIndustry and market structuresDemographicsChanges in perceptionNew knowledge

The unexpectedUnexpected success or failure often gives

clues to underlying trends which can lead to innovation.

Success – computers were basically designed for scientific purposes

Failure – restaurant with sales of jacket potatoes rather than the main courses

The incongruousAn incongruous event or result is a

discrepency between what is said and what everyone expects.

Its is a further sign that changes are taking place

Process need‘necessity is the mother of invention’It means the way or process through which

products or services are produces

How do you think market and industry structures, demographics and changes in perceptions have lead to innovation?

Innovation and the entrepreneurshipTo help those that remain small and yet wish

to innovate, it has been suggested that cooperation and collaboration among smaller enterprise can help overcome some disadvantages

The concept of networked innovation is becoming popular

The aim is to promote individual projects by pooling ideas, technology, and commercial experiences.

Innovating for the marketplaceTechnologyTask environmentChanging preferencesMore levels of management

Approaches to the marketProduct based

Concerned with product developmentLead to successful productsInflexible and maybe arrogant attitudes

towards customersMarket based

It seeks to find out what the customers want and is willing to pay for

Market research is conducted and then products are developed

Which one would you prefer and why?

It may be a mixture of both!!Entrepreneurs tend to take an idea first and then

seek a market. They understand that research can not always predict needs because sometimes customers do not know what is possible through a breakthrough

Owners usually have a specific skill or knowledge that they wish to exploit

The business is already established and wishes to add to its existing range without diversification

The business has established products which it wishes to sell to new customers

Who is the customer?Why segment the market?

why will the customer buy from me?Features - characteristicsBenefits – value of a product feature to the customerPrice

ComparisonsSubstitute products e.g. book or a cassette programmeBenefits offered

Competitive edge

Compare text books and those targeted at the coffee table