ENF123 Lecture 3

BBME/BAAIS/BMPR/BMIS YEAR 1
ENTREPRENEURSHIP FUNDAMENTALS
(ENF123)
COURSE LECTURER: MS FAITH KACHOKA
TITLE: SENIOR LECTURER
COMPILED BY: MS FAITH KACHOKA
SEMESTER: APRIL TO SEPTEMBER 2022

Unit Three: Entrepreneurship &
Innovation
INTRODUCTION
◦ We looked briefly at creativity and innovation.
◦ We also looked at innovation as being the exploitation of new ideas.
◦ This unit will go further, looking at the need for innovation in entrepreneurship.
 WHAT IS INNOVATION?
◦ The term innovation has been defined differently by different people. Below is a selection of some of the more
commonly used definitions of the term:
◦ Innovation is a process of turning new opportunities for value creation into widely used practice. (Modern-day
innovation)
◦ Innovation is the successful commercial implementation and exploitation of a new idea or invention (Roberts, 1988).
◦ Innovation is the process of taking new ideas effectively and profitably to satisfied customers.
 INNOVATION PERSPECTIVES
 There are different perspectives of innovation as follows:
 Innovation and Creative Ideas
• All innovation begins with creative ideas as this is seen as the starting point of innovation.
 Innovation and Entrepreneurs
• Innovation is a specific tool for entrepreneurs and a means by which they can be able to exploit change as an opportunity for business.
 Innovation and Competitive Advantage
• Companies are able to achieve a competitive advantage through acts of innovation.
 Innovation and Creativity
• Innovation is the post hoc recognition of creativity involving a new, valuable discovery of some kind.
 WHAT INNOVATION IS NOT

 Innovation is not any of the following:
 Innovation is not the same as invention. It may be possible for a person to come up with an invention that no one can use, benefit
or receive any gain from.
 Innovation is not only concerned with new services or goods, but also organizational forms, strategies and processes.
 Innovation does not only require wholly original ideas. Mostly, a good idea is made up of two new ideas that are meeting for the
first time.
 Innovation is not always as a result of a one-off inspiration but the result of many years of patient planning and work.
 Innovation is not the same as creativity; it is the after event of creativity when the ideas novelty and value are seen.
 THE DIFFERENT TYPES OF INNOVATION
 Technological Innovation
o Improving business value by working on the product or service’s technological aspects.
 Organizational Innovation
o The implementation of a new organizational method in the firm’s business practices, workplace organizati on, or external relations.
 Strategic Innovation
o The creation of growth strategies, new product categories, services or business models that change the game and generate significant new
value for consumers, customers and the corporation.
 Incremental Innovation
o A series of small improvements made to a company’s existing products or services. They are generally low-cost improvements which
help to further differentiate a company from its competitors while building on current offerings.
 Radical Innovation
o A transformative business model that seeks to completely demolish and replace an existing industry or create a whole new industry.
o It takes an existing system, design or invention and turns into something brand new.
o Also known as Disruptive Innovation.
o E.g. Uber, Airbnb, IPhone
 Transformational Innovation
o The introduction of a technology that creates a new industry and transforms the way we live and work.
o Eliminates or transforms an industry.
o E.g. Online banking, shopping, education, electric cars, self-driving cars.
 MANAGING INNOVATION
 Innovation will require managing for it to continue to be effective and there should be a deliberate approach to achieve this.
 Innovation starts with new ideas which is the main source of innovation.
 However, it is important to understand where the new ideas come from so that innovation is proactively managed.
 According to Peter F Drucker (2006), the 7 Sources of Opportunity are:
• The Unexpected, e.g. 3M Post-It Notes

 Might be an unexpected product failure or unexpected event.
 Cannot be predicted.
 There is need to react quickly.
• The Incongruity, e.g. Self-driving Cars
 There is a discrepancy between what is and what should be in the market place.
• The Inadequacy in Underlying Processes, e.g. Smart Phone Apps
 Improves processes for instance by improving benefits of what is currently available.
 May also reduce costs.
• The Change in Industry or Market Structure, e.g. Online Banking, Online Learning, Online Shopping
 Might be due to new legislation, technology or other outside events.
• Demographic Changes, e.g. Senior Citizen Holidays
 Changing needs of specific demographic groups.
• Changes in Perception, Mood & Meaning, e.g. The Green Food Movement (Organic); Meat Substitutes
 Can be identified through market research
• New Knowledge, e.g. Vaccines
 Can be scientific, non-scientific; a new discovery or invention.
 ADDITIONAL WAYS OF IDENTIFYING OPPORTUNITIES
I. Environmental Scanning, e.g. SWOT, PESTLE analyses

II. Market Research
III. Open Source Innovation
IV. Internal Processes, e.g. staff suggestion schemes, customer suggestions and feedback.
V. Continuous Improvement
 THE INNOVATION MANAGEMENT PROCESS
 There are four stages to the innovation management process as follows:
 Stage 1
o This stage involves scanning the environment to find relevant signals that indicate threats as well as opportunities needed for change.
 Stage 2
o This stage involves the decision on which signals to respond to depending on the strategic view of the enterprise and how best it can
develop.
 Stage 3
o This stage looks at acquiring the resources that will enable the response; this may be a result of acquiring the resources from elsewhere.
 Stage 4
o This stage involves the implementation of the project and developing the market as well as the technology need to respond effectively.
 There is a particular approach that has been developed by a toy maker called LEGO to manage innovation and it aims at looking at the process where the
project is conceived, assessed and developed.
 The following steps are followed for innovation to be managed at LEGO:
 THE LEGO APPROACH TO INNOVATION MANAGEMENT
 No Change: the product is fit for the customer.
 Adjust: minor changes or adjustments are made in order to modify the product to become fit for the customer.
 Reconfigure: putting together existing techniques in a new way with the aim of meeting the needs of the customer and the business.
 Redefine: introducing a new approach for satisfaction of the customer.
 BARRIERS TO INNOVATION
 There are a number of barriers to innovation which are both internal and external.
 Business Sector: innovation is highly context and sector sensitive. As such, there is the tendency of overlooking the potential for it to take place in areas
where one might not expect to find it. Networks and collaborations are fundamental to innovation and the collaborations that happen between businesses and
their suppliers lead to major innovations.
 Size of Organization: in the past it was considered that large firms are the ones that are the sole engines of innovation but lately it has been discovered that
the small firms also play their role in innovation in many industries. There may be differences in how much innovation is done, the capacity and the
potential. Small firms contribute to innovation much more than large firms.
 Innovation Life Cycle: the innovation cycle will differ depending on the organization doing the innovation. The life cycle includes:
 The Fluid Phase: in this phase most enterprises (often SMEs) compete with different designs hoping that their innovation will make it big.
 Transition Phase: in this phase there are a lot of innovative designs and there is need to sort out the alternatives and this increases the volume of sales.
 Distinct Phase: in this phase a dominant design is established and large companies now move in and use their economies of scale and financial leverage and
push out the smaller companies.
 Motivation and reward: most enterprises do not offer enough motivation for staff to become involved in the innovation process. The motivation can be due
to:
 The relationship between the innovation strategy and the overall strategic management process.
 The rewards that encourage behavior likely to raise innovation.
 Raising a climate that is friendly towards innovation within the organization.
 INNOVATION AND ENTREPRENEURSHIP
 A key issue for entrepreneurs is making sure that ownership of the idea is not lost in the implementation process.

 Innovation, Stabilization and Imitation
• Innovation is closely related to new ideas but it is not just about change and transformation or that the entrepreneur must be skilled in
generating new ideas and introducing them onto the market.
• A big part of innovation is the ability to stabilize processes and market conditions so that customers are able to buy the product for a
sustained period of time.
• The essence of innovation is the successful exploitation of the new ideas and the process of entrepreneurship will focus on both the skills
required to transform an existing market and to standardize a new product or service.
• Innovation brings change to the environment and there are two issues that arise because of that:

 Is innovation always the best response to changing market conditions?
o The most important thing to consider in this sense is the value. Innovation may offer value in one area whilst it may not be the same in
another area.
 Is it better to follow or lead; innovate or imitate?
o Most organizations will respond differently to the changes in the market according to their maturity, nature of their industry, history,
resources, skills and technology capabilities.
o If an organization sticks to what has worked before they may fall in a competence trap where what has worked in the past may not as well
work in the future.
o Innovation in general requires a deep commitment in terms of resources and investment that is mostly too risky and also not within reach
of many SMEs.
o This can be left for other organizations to invest in the innovation of new products and services while the rest follow the new
technologies and imitate rather than innovate.

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BBME/BAAIS/BMPR/BMIS YEAR 1

SEMESTER: APRIL TO SEPTEMBER 2022

 WHAT INNOVATION IS NOT

• The Unexpected, e.g. 3M Post-It Notes

I. Environmental Scanning, e.g. SWOT, PESTLE analyses

 THE INNOVATION MANAGEMENT PROCESS

 There are four stages to the innovation management process as follows:

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