Innovation & Entrepreneurship

1. What is Innovation?
“Innovationis the key elementinproviding aggressive top-line growth and for increasing bottom-line
results"
The process of translating an idea or invention into a good or service that creates value or for which
customers will pay.
To be calledaninnovation,anideamustbe replicable at an economical cost and must satisfy a specific
need.Innovationinvolves deliberate application of information, imagination and initiative in deriving
greateror differentvaluesfromresources,and includesall processesbywhichnew ideas are generated
and converted into useful products.
“Effective knowledge managementcanbe a key (ing) ingredientof innovation as it can feed a continual
flow of ideas into the process. “
“While knowledge management focuses, primarily, on learning from the past and on current good
practices,innovationfocusesonexperimentation,prototyping,andthe creationof the goodpractices of
tomorrow.”
In Ernst and Young,theyidentifiedfourmega-processes in each company. All business processes then
become sub-processes of the mega-processes of ‘Sell, Serve, Develop People, and Develop New
Products and Services’. Underpinning each of these mega-processes is knowledge.
Innovationhasthe capacityto improve performance, solveproblems,addvalue and create competitive
advantage for organizations. Innovation can be broadly described as the implementation of both
discoveries - inventionsandthe processbywhichnew outcomes,whetherproducts,systems,processes
or organizational forms, come into being (Williams, 1999).
The process of innovation depends heavily on knowledge, particularly since knowledge represents a
realm far deeper than simply that of data, information and conventional logic.

2. The potential of Knowledge Management(KM) creates the intellectual capital as sources of innovation
and renewal; business strategy should be focusing more on these issues.
To do this, I am going to briefly discuss three things:
• What does innovation really mean, especially in a global knowledge economy?
• What can history teach us about successful innovation in organizations?
• How do we bridge knowledge management and innovation?
Wikipedia says that innovation can be considered as “the useful application of new inventions or
discoveries. “
It distinguisheshere betweeninventionandinnovation.Invention is an idea that is made manifest, and
innovation,isideas that are applied successfully in practice. So the key words here are the ‘successful
application’ of ideas.
• Creativity is an individual ability that can lead to an intact invention or idea by the creative
person.
• Innovation is the process to convert invention or idea into a marketable product or service.
• Entrepreneurshipisanindividual characteristicthatleadsthe innovation processsuccessfully in
bringing a product or offering a new service to market despite many obstacles.
Because entrepreneurship requires a special kind of creativity and entrepreneurship in the entire
process, from initial idea generation to finance sale, all require creativity.
Innovation is synonymous with risk-taking and organizations that create revolutionary products or
technologies take on the greatest risk because they create new markets.
Imitators take less risk because they will start with an innovator's product and take a more effective
approach.Examplesare IBMwithits PC against Apple Computer, Compaq with its cheaper PC's against
IBM, and Dell with its still-cheaper clones against Compaq.
Relationship between Creativity, Invention & Innovation
Creativity is related to ‘imagination’, but innovation is related to ‘implementation’

3. • Creativity is the capability or act of conceiving something original or unusual.
• Invention: An invention is a novel product, device, process, or concept.
• Innovation: An innovation is the introduction of a newer and better solution that meets new
requirements or existing market needs.
Creativityisthe abilitytothinkandact inwaysthat are new and novel.Inourminds,there are twokinds
of creativity, innovation and invention
Considerthe microprocessor.Someoneinvented the microprocessor. But by itself, the microprocessor
was nothing more than another piece on the circuit board. It’s what was done with that piece — the
hundreds of thousands of products, processes and services that evolved from the invention of the
microprocessor — that required innovation.
The following are the major differences between Creativity and Innovation:
1. The qualityof thinkingnewideasandputtingthemintorealityiscreativity.The act of executing
the creative ideas into practice is innovation.
2. Creativity is an imaginative process as opposed to innovation is a productive process.
3. Creativity can never be measured, but Innovation can be measured.
4. Creativity is related to the generation of ideas which are new and unique. Conversely,
Innovation is related to introduce something better into the market.
5. Creativity does not require money. On the other hand, innovation requires money.
6. There is no risk involved in creativity, whereas the risk is always attached to innovation.
Innovation Life Cycle
Life cycle of innovations can be described using the 's-curve' or diffusion curve. The concept of the S-
Curve isusedto determine performance inregardtotime oreffort.These are extremely important due
to the fact that understanding where you are in regard to this system determines how you should
proceed in regard to innovation strategy. It can also assist you in understanding your current risks and
how to avoid certain pit-falls common to products or services in certain phases of maturity.

4. There exist four major stages of innovation. These are Ferment, Takeoff, Maturity, and Discontinuity.
1. Era of Ferment– Thisphase is in the beginning of the S-Curve pattern of innovation. It is when
the product/ industry is completely new. As a result a dominant design in the market hasn’t
beenestablishedyet.Therefore,the competitionbetweenthe various players in the industry is
fierce. As a result, usually at this stage most of the resources are spent on research and
development.
2. Takeoff - In thisphase,due tothe abilitytoovercome a majortechnical obstacle orthe ability to
satisfya demandof the market,the product/industry have been adopted by the early majority
and managed to cross the chasm and a dominant design has been established already. Hence,
the market will be characterized with a rapid growth in production, and the product will move
quickly towards a full market acceptance.
3. Maturity - Here,the product isadoptedalmostcompletelybysocietyandisusuallyapproaching
a physical limit.Due tothe strong competition among the major players in the market which is
clearly defined at this stage, most of the resources at this point are spent on improving the
production processes and making them cheaper. Therefore, oftentimes the products at this
stage become completely standardized and the innovations at this stage are considered
incremental.
4. Discontinuity - Atthisphase the innovationoccurs, as a new S-Curve pattern can rise. Since the
previousproduct/industryreachesaneraof maturity,there isan opportunityforanew product
to appeal to the innovators segment in the population and they will start a new product life
cycle which is usually considered as the Disruption. A great example of this was the transition
from film cameras to digital cameras.
The s-curve maps growth of revenue or productivity against time. In the early stage of a particular
innovation, growth is relatively slow as the new product establishes itself. At some point customers
begin to demand and the product growth increases more rapidly. New incremental innovations or
changesto the product allowgrowthtocontinue.Towardsthe endof itslifecycle,growthslowsandmay
even begin to decline. In the later stages, no amount of new investment in that product will yield a
normal rate of return

5. The s-curve derivesfromanassumptionthatnew productsare likelytohave "productlife" –i.e., a start-
up phase, a rapid increase in revenue and eventual decline. In fact the great majority of innovations
never gets off the bottom of the curve, and never produces normal returns.
Innovative companies will typically be working on new innovations that will eventually replace older
ones.Successive s-curveswill come alongtoreplace older ones and continue to drive growth upwards.
In the figure above the first curve shows a current technology. The second shows an emerging
technologythatcurrentlyyieldslowergrowthbutwill eventually overtake current technology and lead
to even greater levels of growth. The length of life will depend on many factors.
To understandthe conceptof the S-Curve Better,let’suse the audioindustry as an example. At start, at
the ferment stage, there was the Cassette tape which was invented by Phillips. Then, at the Takeoff
phase, Sony has invented the Walkman that had the ability to answer the customers’ demand of
listeningtotheirCassette outside.Asaresultof Sony’ssuccess,the markethasarrived to its maturity as
a number of competitors manufactured similar devices (Phillips, Sony, TDK, Maxwell, etc.)
The Discontinuity phase appeared when Sony and Phillips have developed the compact disk and by
doing so, disrupted the market and started a new S-Curve.
Conclusion
The S-Curve of Innovationis a robust framework that can be used to analyze various industries at their
different stages and to explain their successes and failures. The model has a lot of empirical evidence
and assisted researchers in understanding what occurred in the semiconductors industry, the
telecommunications market, the hard drives global market and many more.
Why Innovation & Entrepreneurship?
“Entrepreneurship cannot survive without innovation”
InnovationandEntrepreneurshipisfocusedondevelopingknowledge, skills and understanding of how
an innovative idea,productorprocesscan be usedto forma new andsuccessful business, or to help an
existing firm to grow and expand.

6. “Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an
opportunityfora differentbusinessoradifferentservice.Itiscapable of beingpresentedasa discipline,
capable of beinglearned,capable of beingpracticed.Entrepreneursneedtosearchpurposefully for the
sources of innovation, the changes and their symptoms that indicate opportunities for successful
innovation. And they need to know and to apply the principles of successful innovation.”
- PeterDrucker
What is Entrepreneurship?
Entrepreneurship has traditionally been defined as the process of designing; launching and running a
newbusiness,whichtypicallybeginsasa small business, such as a startup company, offering a product,
process or service for sale or hire, and the people who do so are called 'entrepreneurs'.
It has been defined as the "capacity and willingness to develop, organize, and manage a business
venture along with any of its risks in order to make a profit."
Accordingto Stevenson,“entrepreneurshipisthe pursuitof opportunitybeyond resourcescontrolled”.
An entrepreneur has been defined as "a person who starts, organizes and manages any enterprise,
especiallyabusiness,usuallywithconsiderable initiativeand risk rather than working as an employee.”
An entrepreneurrunsasmall businessandassumesall the riskand reward of a given business venture,
idea, or good or service offered for sale.
Entrepreneurshipisoftenassociatedwithuncertainty,particularlywhen it involves creating something
new for which there is no existing market. Even if there is a market, it may not translate into a huge
business opportunity for the entrepreneur. A major aspect in entrepreneurship is that entrepreneurs
embrace opportunities irrespective of the resources they have access to.
Entrepreneurship involves being resourceful and finding ways to obtain the resources required to
achieve the setobjectives.Capitalisone such resource. Entrepreneurs need to think out-of-the-box to
improve theirchancesof obtainingwhattheyneedtosucceed.Accordingto management experts, vast
majority of entrepreneurs desire to be in control of their own life and they can’t find this beyond
entrepreneurship. Studies have demonstrated that people derive great satisfaction from their
entrepreneurial work.
A number of entrepreneurs are of the opinion that managing their own business offers far greater
securitythanbeinganemployee elsewhere.Theyfeelentrepreneurshipenablesthemtoacquire wealth
quicklyandcushionthemselvesagainstfinancial insecurity.Additionally,anentrepreneur’s future is not
at peril owing to the faulty decisions of a finicky employer. So, while some people feel that being
employed is less risky, entrepreneurs feel that they are better off starting a business of their own.
Today,there isthe increasingawarenessaboutentrepreneurship.People aren’tconfiningthemselves to
one business. They are following one business with another. Such entrepreneurs are referred to as
“serial entrepreneurs.”Sometimesthese entrepreneursbecomeangel investorsandinvest their money

7. instartup companies.Asapersongainsgreaterinsightintobusinessandentrepreneurship, his chances
of succeeding in business improve
Importance of Innovation in Entrepreneurship
 The economy is composed of enterprises and businesses. Our economy has survived because
the industry leaders had been able to adapt to the changing times and supplied mostly the
communities’ needs. Any small business is integral to the economy. Without it, our economy
wouldnotsurvive.Buta businessmustalsosustainitself, be able to constantly evolve to fulfill
the demands of the community and the people. In every business, it is imperative to be
industrious, innovative and resourceful.
 Entrepreneurshipproducesfinancial gainandkeepsthe economyafloat, which gives rise to the
importance of innovationinentrepreneurship.Entrepreneursare innovators of the economy. It
is not just the scientist who invents and come up with the solutions.
 The importance of innovation in entrepreneurship is shown by coming up with new way to
produce a product or a solution. A service industry can expand with another type of service to
fulfill the ever changing needs of their clients. Producers can come up with another product
from the raw materials and by-products.
 The importance of innovation in entrepreneurship is another key value for the longevity of a
business. Entrepreneurs and businesses began with a need. They saw the need within the
community and among themselves that they have come up with a solution. They seize the
opportunitytoinnovate tomake the livesmore comfortable.Andthesesolutions kept evolving
to make it better,easierandmore useful.Entrepreneursmustkeepthemselvesabreastwiththe
currenttrendsand demands.Manufacturersare constantlyinnovatingtoproduce more without
sacrificing the quality.
 Companiesandenterpriseskeepinnovationaspart of theirorganization.Innovationscontribute
to the successof the company.Entrepreneur,asinnovators,seenotjustone solutionto a need.
They keep coming up with ideas and do not settle until they come up with multiple solutions.
Innovation is extremely important that companies often see their employees’ creativity as a
solution. They come up with seminars and trainings to keep their employees stimulated to
create something useful for others and in turn, financial gain for the company.
 Other factors that raises the importance of innovation in entrepreneurship is competition. It
stimulatesanyentrepreneurtocome upwithsomethingmuch better than their competition in
a lower price, and still be cost-effective and qualitative.
 Small businesses see the importance of innovation in entrepreneurship. They were able to
compete withlarge industryandsee theirvalue inthe economy.Small businessesare important
as theyare directlyinvolved in the community and therefore, contribute to their financial and
economicgain.These small businessesknow exactlywhatcommunityneedsandfulfill them. All
things start small.

8.  Innovation is important not just in entrepreneurship. As individuals, we are innovators by
adapting well to our needs and create our own solutions. Entrepreneurs are the same. The
innovation in entrepreneurship helped the country by changing with the times and producing
new products and service from ones that already exists. And, being innovative has helped us
become successful in all our endeavors.
Types of Innovation
Broadly, four categories of Innovation:
1. Breakthrough
2. Sustaining
3. New Market
4. Disruptive
Thisgivesusa goodbasicframeworkfordeterminingwhat type of innovationwe mightwant to pursue.
Sometimes, we have well defined problems, sometimes we don’t. Sometimes it’s clear who is best
equipped to tackle a problem, sometimes it isn’t. By asking ourselves those two questions, we can
outline a successful approach.
Breakthrough –
Breakthrough innovations are generally considered “out-of-the-blue” solutions that cannot be
compared to any existing practices or techniques. These innovations employ new technologies and
create new markets.
For example,TimBerners-Lee,asoftware engineer,created a network of interconnected computers to
share and distribute informationeasily and cheaply in 1980. This network developed into the Internet.
Tim never thought about what customers wanted when he created his network.
From a strategic perspective, breakthrough innovations are usually along the lines of high benefit or
differentiation potential. Thomas Kuhn called this “revolutionary science” because it involves a

9. paradigmshift. Inthiscase,the problemiswell defined,butthe path to the solution is unclear, usually
because those involved in the domain have hit a wall.
Transistors and the discovery of the structure of DNA are both good examples of breakthrough
innovation.
But in getting back to the original point – companies who live and die through premium products will
need to continually innovate with breakthrough products in order to remain successful.
Examples:
 One of the bestcitedexamplesof breakthroughinnovationonthe tech front is the first iPhone.
By harnessingnewtechnology,Apple wasable tobringafundamentallynew productto market,
creating new demand in the process.
 Microsoft has also rethought its business model to develop a breakthrough innovation in the
form of Office 365. This saw the company go from selling its Office suite as a product, paid for
on a one-off basis, to offering it as a monthly or annual subscription.
Sustaining – Sustaining innovations in products or services are incremental. Also called Incremental
Innovation.
Sustaininginnovationsevolve existingtechnologiestobe more accessible, efficient, cost effective, etc.
They do not establish a new market but rather offer an evolutionary version or add-on to existing
technology. Sustainingideashave todowith improving the current product by developing generations
2, 3, 4, 5 and so onuntil the productreachesthe endof itslife cycle.Normallylarge companies are very
good at creating sustaining innovations because their resources, business processes and cultures are
setup in a way to enable sustaining efforts
Withregards to strategy,sustainingproductsare all about milking the breakthrough product (a benefit
leadershipstrategy) byextendingit’slife cycle aslong as it can go. Most breakthrough products will not
lastverylongwithouta sustainingeffortbehindthem.Andthissustainingeffortiswhere profitability is
maximized because unnecessary costs can be removed and the benefits of the product (the value
proposition) can steadily improve. For example, Windows XP is an incremental innovation
New Market - A lot of managers think of new markets in terms of geography such as entering an
emergingmarket like India or China. New market innovations refers to applying a current product in a
new way and sometimes even for a different segment of customers. New market innovations can be
extraordinarilysuccessful if executed well. In some cases, all it takes to introduce a product into a new
marketiseducatingyourcustomers,bothcurrentand new,aboutthe other things your product can do.
The strategybehindnewmarketinnovationscanfall oneithercostleadershiporbenefitleadership.The
reasonisbecause if youhave a productthat isbasicallyapremiumvalue product(benefitleadership) in
itsexistingformandyoumanage to successfullyapplythat product to a new use case then the value of
your product will need to be weighed in light of the alternatives for the new use case.

10. For example, if Arm and Hammer baking soda costs $4/box while most other baking soda brands cost
around $2/box then it’s safe to assume that the Arm and Hammer baking soda is viewed as a benefit
leader product. In other words, it performs the job of baking better than the lower cost alternatives.
However, when used as a fridge deodorizer that same $4/box price will need to be weighed against
other deodorizer products. For example if most fridge deodorizers costed an average of $8/bottle (or
whateverthe embodiment) then the Arm and Hammer baking soda is essentially a cost leader against
the alternative deodorizers. This scenario is often what can make some products so successful when
applied in a new way.
Disruptive -
Disruptive innovation generates new markets and values, in order to disrupt existing ones
A disruptive innovation is an innovation that helps create a new market and value network, and
eventually goes on to disrupt an existing market and value network (over a few years or decades),
displacing an earlier technology
Disruptive Innovation = Simple, Low Cost Solution to Your Customer’s Problem
ClaytonChristensenintroducedthe conceptof disruptive innovationinhisclassicbook “The Innovator’s
Dilemma”. These tend to be new approaches to old products and services. Example: Google Glass
There are many examples of disruptive innovation over the years. One classic example is Dell. When
Michael Dell was a college student he realized that he could order parts, assemble computers on his
ownand shipthemdirectlytohiscustomersoverthe internetcheaperthan he could buy a computer at
retail store. This insight led him to create a new business model (disruptive) for selling computers –
orderonline directlyfromDell andhave it shipped within a few days to the customer. The cost savings
were substantial simplybecauseDell wasable tocutout the middle meninthe channel.The benefitsfor
the consumer were also slightly higher because it allowed them to customize their computer to meet
theirexactspecifications.Thismodel usheredinaneraof dis-integrationforthe computerindustry.Dell
was technically not a manufacturer of the computer components but rather an assembler of other
outsourced components into a final product. This led to further modular designs in computers and to
further modularity in the computer industry.
7 Sources of Innovative Opportunity
Reference: http://mylesclarku.blogspot.in/2012/09/7-sources-of-innovation-by-peter-drucker.html
The Unexpected
The Unexpectedisexactlywhatitsoundslike,youhave toexpectthe Unexpected if you want to have a
successful business. The unexpected could mean failure, success, surprised etc. We must be ready for
anything. The whole market could change dramatically by people’s unexpected decisions.

11. The Incongruity
Incongruitiesare basicallythinkingdifferently.Notonlythinking differently from your competitors, but
also thinking differently from society. What it says to you need to find a creative idea to sell, and you
can only do this by thinking differently to discover a new invention or idea. When I think of thinking
differently Steve Jobs comes to mind and all of his inventions. A good example of this would be how
Steve Jobs and apple created the iphone it was one of a kind at the time, no one else combined both
music and a cell phone in one Facebook is a company that nailed it.
Prior to the social network’s prolific rise Myspace was the dominant player, but it had its downfalls.
Facebook wisely noted what Myspace was vs. what should be and built that platform.
Process Need
Process need. Process need is similar to Incongruities in that you must think differently than the
everyone else. If there is a glitch or something missing in society or in a business you must find a
innovative way to fix it.
Process need involves identifying your company’s process weak spots and correcting or redesigning
them. This is a task oriented solution meaning that the source of innovation comes from within your
existing capabilities and ways of doing business – not the market.
An example might be a restaurant that identifies that people wait too long for their entrees and so
decides to hire another chef to speed up creation times.
Essentially your company will want to look for all weak links and eliminate them.
Industry and Market Structure Change
Thistopic isrelatedtothe "Unexpected"if youare a businessowneryoumustexpectthe unexpectedin
your industry ormarket.Other business's from within or even from without your market could change
your market.
Your industryandthe marketare in continual flux. Regulations change and some product lines expand
while others shrink. Firms should continually be on the watch for this.
One example is deregulation. When a previously regulated industry becomes open there is historical
precedence forcompanies that enter early to be very successful. Other things to watch out for are the
convergence of multiple technologies and structural problems that occur from time to time (often
immediately following an industry boom).
Demographics
Demographics are essentially the change in population. We constantly see changes occur in
populations,income levels,humancapital (education) andage ranges.Smartfirmsare constantlypaying
attention to this.

12. Whenit comesto the babyboomersbusinesseshave beenfollowingthem constantly as they got older.
At presenttheyare one of the largestas well asthe most affluent demographic groups with high levels
of disposable income.
Combining demographic data with segmentation and targeting is a powerful method of accurately
meeting a target market’s desires.
Changes in Perception, Meaning, and Mood
Perception is the way people perceive something. In the business world the general public might
perceive aindustryacertainway thatcould be goodor bad. Perceptionchangesovertime.For example
50 years ago people did not know the affects of tobacco. So now more and more people are staying
away from cigarettes so there is less advertising.
Over time populations and people change. The way they view life changes, where they take their
meaningfrom,andhowtheyfeel aboutthingsalsoismodifiedovertime andsmartcompaniesmustpay
attention to this in order to capitalize (and avoid becoming forgotten, a relic of ages past).
Here are tworeallygoodexamples. First is a principle called “down aging” which refers to people who
look at 50 as being 40. Industries have responded to this, most notably in the cosmetic and personal
care industrywhichprovidesplentyof solutions to help these people look younger. Full industries are
creeping up that make people feel younger. Have you spotted any lately?
Religion is another example. Across the world we’ve seen Islam and atheism rise. Companies should
adapt as overall meaning changes in culture.
New Knowledge
Newknowledge of technologybothscientificandnonscientific.Business owners must be in touch with
today’stechnology to run their business. There are new discoveries all the time that could affect your
business.
As the speed of technological revolution increases there will be an ever increasing number of
opportunitiesthatopenup.The internethasbeenthe most notable one in the last couple decades but
there have beenaplethoraof otherindustriesandopportunitiespopupas a resultof this technological
revolution.
New knowledge is about more than just technology though; it’s about finding better ways of doing
things and improving processes. Your company should look to this new knowledge for ways it can
improve incrementally.
Intel doesthisconstantlyandit’sa majorpart of whythey’re the leadingprocessormanufacturer today.
Constantlypayingattentiontothe latestin both academic research as well as investing heavily in their
own R&D, the company has managed to find continual sources of innovation, driving its success.

13. Opportunity recognition/ recognizing opportunities
An opportunity is a favorable set of circumstances that creates a need for a new product, service or
business.
According to Drucker, identifying opportunities is about “a systematic examination of the areas of
change that typically offer opportunities”.
Opportunityrecognitionmeansproactivelybrainstorminga new business venture or expansion idea. A
small-businessownertypicallyengagesinopportunityrecognitionatthe pointwhere he realizes he has
an idea, strength or capability that matches well with a particular target market. Entrepreneurial
business owners constantly seek new revenue streams. Those that seize ripe opportuniti es tend to
perform best financially.
Example:Shri MahilaGrihaUdyog LijjatPapadstartedin the year1959 witha modestloanof Rs 80, , the
cooperative nowhasannual sales exceeding Rs 301 crore (Rs 3.1 billion). Shri Mahila Griha Udyog Lijjat
Papad,popularlyknownasLijjat,isanIndianwomen’scooperative involvedinmanufacturingof various
fast moving consumer goods. In this way a small idea and initiative by few women became a huge
business entity, expanded all over India and even abroad, it provided employment opportunities to a
numberof people andlivelihoodtoitsemployeeswithasense of belongingandrespect and standing in
the society.
Example:Forlong-termviabilityandsuccess,acompanyneedssome abilityto recognize opportunities.
Industries usually evolve based on societal changes, customer preference changes or technological
advances.The mostinnovative companyleaderswhoseize opportunitiesstayahead of the competition
indeliveringprogressivesolutionstocustomers.Steve Jobs recognized the tremendous opportunity to
make Apple a cutting-edge innovator in mobile technology. Amazon.com founder Jeff Bezos similarly
recognized the power of online book sales long before traditional book sellers. He continued to seize
opportunities for product diversification after making a big splash with books.
Opportunity Recognition Process

14. Alertness is defined as a process and perspective that helps some individuals to be more aware of
changes,shifts,opportunitiesandoverlooked possibilities.Entrepreneursare successfulbecause of their
alertness to information on the market condition and opportunity movements.
Priorknowledge referstoanindividual’sdistinctiveinformationaboutaparticular subject matter which
may be a result of work experience, education or other means. With the stock of information and
knowledge gainedthroughlife experiences,certainpeople are able tomake the connectiontorecognize
the opportunity as it is related to their available information.
The entrepreneurial activitiesdonotexistinastate of vacuumbut ratherit is embedded in cultural and
social context. Hence, it can be said that entrepreneurship is embedded in social networks which
facilitatesthe entrepreneurial processby linkages among entrepreneurs, resources and opportunities.
Social network is a resource and a potential capital while social capital is a network which is used to
engage in productive economic activities
Innovation strategies and management
A strategy is nothing more than a commitment to a set of coherent, mutually reinforcing policies or
behaviors aimed at achieving a specific competitive goal. Good strategies promote alignment among
diverse groups within an organization; clarify objectives and priorities, and help focus efforts around
them. Companies regularly define their overall business strategy (their scope and positioning) and
specify how various functions—such as marketing, operations, finance, and R&D—will support it. But
duringmy more thantwo decadesstudying andconsultingforcompaniesinabroadrange of industries,
I have found that firms rarely articulate strategies to align their innovation efforts with their business
strategies.
Withoutan innovationstrategy,innovationimprovementeffortscaneasily become a grab bag of much-
touted best practices: dividing R&D into decentralized autonomous teams, spawning internal
entrepreneurial ventures, setting up corporate venture-capital arms, pursuing external alliances,
embracingopeninnovationandcrowd-sourcing,collaboratingwithcustomers,and implementing rapid
prototyping,toname justa few.There isnothingwrongwithanyof those practicesper se. The problem
is that an organization’s capacity for innovation stems from an innovation system: a coherent set of
interdependent processes and structures that dictates how the company searches for novel problems
and solutions,synthesizesideasintoabusinessconceptandproductdesigns,andselectswhich projects
get funded. Individual best practices involve trade-offs. And adopting a specific practice generally
requires a host of complementary changes to the rest of the organization’s innovation system. A
companywithout an innovation strategy won’t be able to make trade-off decisions and choose all the
elements of the innovation system.

15. To be sure,there’snoproven formula for success, particularly when it comes to innovation. While our
years of client-service experience provide strong indicators for the existence of a causal relationship
between the attributes that survey respondents reported and the innovations of the companies we
studied,the statisticsdescribedhere canonlyprove correlation.Yetwe firmlybelieve that if companies
assimilate and apply these essentials—in their own way, in accordance with their particular context,
capabilities,organizationalculture,andappetite forrisk—theywillimprovethe likelihoodthatthey,too,
can rekindle the lost spark of innovation. In the digital age, the pace of change has gone into
hyperspeed, so companies must get these strategic, creative, executional, and organizational factors
right to innovate successfully.
Aspire

16. President John F. Kennedy’s bold aspiration, in 1962, to “go to the moon in this decade” motivated a
nation to unprecedented levels of innovation. A far-reaching vision can be a compelling catalyst,
provided it’s realistic enough to stimulate action today.
But in a corporate setting, as many CEOs have discovered, even the most inspiring words often are
insufficient, no matter how many times they are repeated. It helps to combine high-level aspirations
with estimates of the value that innovation should generate to meet financial-growth objectives.
Quantifying an “innovation target for growth,” and making it an explicit part of future strategic plans,
helpssolidifythe importance of andaccountabilityforinnovation.The targetitself mustbe large enough
to force managers to include innovation investments in their business plans. If they can make their
numbers using other, less risky tactics, our experience suggests that they (quite rationally) will.
Establishingaquantitativeinnovationaspiration is not enough, however. The target value needs to be
apportioned to relevant business “owners” and cascaded down to their organizations in the form of
performance targetsandtimelines.Anythinglessrisksencouraginginactionorthe beliefthatinnovation
is someone else’s job.
For example,Lantmännen,abigNordicagricultural cooperative, was challenged by flat organic growth
and directionlessinnovation.Topexecutives created an aspirational vision and strategic plan linked to
financial targets:6 percent growth in the core business and 2 percent growth in new organic ventures.
To encourage innovationprojects,thesequantitativetargetswere cascadeddowntobusinessunitsand,
ultimately,toproductgroups.Duringthe developmentof eachinnovationproject,ithad to show how it
was helping to achieve the growth targets for its category and markets. As a result, Lantmännen went
from 4 percent to 13 percent annual growth, underpinned by the successful launch of several new
brands.Indeed,itbecame the marketleaderin premade food only four years after entry and created a
new premium segment in this market.
Such performance parameters can seem painful to managers more accustomed to the traditional
approach. In our experience, though, CEOs are likely just going through the motions if they don’t use
evaluations and remuneration to assess and recognize the contribution that all top managers make to
innovation.
Choose
Fresh, creative insights are invaluable, but in our experience many companies run into difficulty less
from a scarcity of new ideas than from the struggle to determine which ideas to support and scale. At
biggercompanies,thiscanbe particularlyproblematic during market discontinuities, when supporting
the nextwave of growthmay seemtoorisky,at leastuntil competitive dynamics force painful changes.
Innovationisinherentlyrisky,tobe sure,andgettingthe most from a portfolio of innovation initiatives
ismore aboutmanagingriskthan eliminatingit.Since noone knowsexactlywhere valuable innovations
will emerge,andsearchingeverywhere isimpractical,executivesmustcreate some boundaryconditions
for the opportunityspacestheywanttoexplore.The process of identifying and bounding these spaces
can run the gamut from intuitive visions of the future to carefully scrutinized strategic analyses.

17. Thoughtfully prioritizing these spaces also allows companies to assess whether they have enough
investment behind their most valuable opportunities.
Duringthisprocess,companiesshouldsetin motion more projects than they will ultimately be able to
finance,whichmakesiteasiertokill those that prove less promising. RELX Group, for example, runs 10
to 15 experiments per major customer segment, each funded with a preliminary budget of around
$200,000, throughitsinnovationpipeline everyyear, choosing subsequently to invest more significant
fundsinone or two of them,and dropping the rest. “One of the hardest things to figure out is when to
kill something,”saysKumsal Bayazit,RELXGroup’schief strategyofficer.“It’saheckof a lot easier if you
have a portfolio of ideas.”
Once the opportunitiesare defined,companiesneed transparencyintowhatpeople are working on and
a governance process that constantly assesses not only the expected value, timing, and risk of the
initiativesinthe portfoliobutalsoitsoverall composition.There’s no single mix that’s universally right.
Most established companies err on the side of overloading their innovation pipelines with relatively
safe, short-term, and incremental projects that have little chance of realizing their growth targets or
stayingwithintheirriskparameters.Some spreadthemselvesthinlyacrosstoomany projects instead of
focusing on those with the highest potential for success and resourcing them to win.
These tendenciesgetreinforcedbyasluggishresource-reallocation process. Our research shows that a
companytypicallyreallocatesonlyatinyfractionof its resources from year to year, thereby sentencing
innovation to a stagnating march of incrementalism.1
Discover
Innovation also requires actionable and differentiated insights—the kind that excite customers and
bring new categories and markets into being. How do companies develop them? Genius is always an
appealingapproach,if youhave orcan getit.Fortunately,innovationyieldstootherapproachesbesides
exceptional creativity.
The rest of us can look for insights by methodically and systematically scrutinizing three areas: a
valuable problem to solve, a technology that enables a solution, and a business model that generates
money from it. You could argue that nearly every successful innovation occurs at the intersection of
these three elements. Companies that effectively collect, synthesize, and “collide” them stand the
highestprobabilityof success.“If yougetthe sweetspotof what the customer is struggling with, and at
the same time geta deeperknowledge of the new technologiescomingalongand find a mechanism for
howthese twothingscan come together,then you are going to get good returns,” says Alcoa chairman
and chief executive Klaus Kleinfeld.
The insight-discovery process, which extends beyond a company’s boundaries to include insight-
generating partnerships, is the lifeblood of innovation. We won’t belabor the matter here, though,
because it’salreadythe subjectof countlessarticlesandbooks.2One thing we can add is that discovery
isiterative,andthe active use of prototypescanhelpcompaniescontinue tolearnastheydevelop,test,
validate, and refine their innovations. Moreover, we firmly believe that without a fully developed

18. innovation system encompassing the other elements described in this article, large organizations
probably won’t innovate successfully, no matter how effective their insight-generation process is.
Evolve
Business-model innovations—whichchange the economics of the value chain, diversify profit streams,
and/or modify delivery models—have always been a vital part of a strong innovation portfolio. As
smartphones and mobile apps threaten to upend oldline industries, business-model innovation has
become all the more urgent:establishedcompaniesmustreinventtheir businesses before technology-
drivenupstartsdo. Why, then, do most innovation systems so squarely emphasize new products? The
reason, of course, is that most big companies are reluctant to risk tampering with their core business
model until it’s visibly under threat. At that point, they can only hope it’s not too late.
Leadingcompaniescombatthistroublingtendency in a number of ways. They up their game in market
intelligence,the bettertoseparate signal fromnoise.Theyestablishfundingvehiclesfornew businesses
that don’t fit into the current structure. They constantly reevaluate their position in the value chain,
carefullyconsideringbusinessmodelsthatmightdelivervalue toprioritygroupsof new customers.They
sponsorpilotprojectsandexperimentsawayfromthe core businesstohelpcombatnarrow conceptions
of whattheyare anddo. Andtheystress-testnewlyemergingvalue propositions and operating models
against countermoves by competitors.
Amazon does a particularly strong job extending itself into new business models by addressing the
emerging needs of its customers and suppliers. In fact, it has included many of its suppliers in its
customer base by offering them an increasingly wide range of services, from hosted computing to
warehouse management. Another strong performer, the Financial Times, was already experimenting
withitsbusinessmodel inresponse tothe increasing digitalization of media when, in 2007, it launched
an innovative subscription model, upending its relationship with advertisers and readers. “We went
againstthe receivedwisdomof popularstrategies at the time,” says Caspar de Bono, FT board member
and managing director of B2B. “We were very deliberate in getting ahead of the emerging structural
change, and the decisions turned out to be very successful.” In print’s heyday, 80 percent of the FT’s
revenue came fromprintadvertising. Now, more than half of it comes from content, and two-thirds of
circulation comes from digital subscriptions.
Accelerate
Virulent antibodies undermine innovation at many large companies. Cautious governance processes
make it easyforstiflingbureaucraciesinmarketing,legal,IT, and other functions to find reasons to halt
or slow approvals. Too often, companies simply get in the way of their own attempts to innovate. A
surprisingnumberof impressiveinnovationsfromcompanieswere actually the fruit of their mavericks,
whosucceededinbypassingtheirearly-approvalprocesses.Clearly,there’sabalance to be maintained:
bureaucracy must be held in check, yet the rush to market should not undermine the cross-functional
collaboration,continuouslearningcycles,andcleardecisionpathwaysthat help enable innovation. Are
managers with the right knowledge, skills, and experience making the crucial decisions in a timely

19. manner, so that innovation continually moves through an organization in a way that creates and
maintains competitive advantage, without exposing a company to unnecessary risk?
Companies also thrive by testing their promising ideas with customers early in the process, before
internal forces impose modifications that blur the original value proposition. To end up with the
innovationinitiallyenvisioned,it’snecessarytoknockdownthe barriersthat standbetweenagreatidea
and the end user. Companies need a well-connected manager to take charge of a project and be
responsible for the budget, time to market, and key specifications—a person who can say yes rather
than no. In addition, the project team needs to be cross-functional in reality, not just on paper. This
meanslocatingitsmembersinasingle place andensuringthattheygive the projectasignificantamount
of their time (at least half) to support a culture that puts the innovation project’s success above the
success of each function.
Cross-functional collaboration can help ensure end-user involvement throughout the development
process.Atmany companies,marketing’srole istochampionthe interestsof endusersasdevelopment
teamsevolve productsandtohelpensure that the final resultiswhateveryone firstenvisioned.But this
responsibility is honored more often in the breach than in the observance. Other companies,
meanwhile, rationalize that consumers don’t necessarily know what they want until it becomes
available.Thismaybe true,butcustomers can certainly say what they don’t like. And the more quickly
and frequently a project team gets—and uses—feedback, the more quickly it gets a great end result.
Scale
Some ideas,such as luxury goods and many smartphone apps, are destined for niche markets. Others,
like social networks,workatglobal scale.Explicitlyconsideringthe appropriate magnitude and reach of
a given idea is important to ensuring that the right resources and risks are involved in pursuing it. The
seeminglysaferoptionof scalingupovertime canbe a deathsentence.Resourcesandcapabilities must
be marshaledtomake sure a newproductor service can be deliveredquicklyatthe desiredvolume and
quality.Manufacturingfacilities,suppliers,distributors,andothersmustbe prepared to execute a rapid
and full rollout.
For example, when TomTom launched its first touch-screen navigational device, in 2004, the product
flew off the shelves. By 2006, TomTom’s line of portable navigation devices reached sales of about 5
million units a year, and by 2008, yearly volume had jumped to more than 12 million. “That’s faster
market penetration than mobile phones” had, says Harold Goddijn, TomTom’s CEO and cofounder.
While TomTom’sinitialaccomplishmentlayin combiningawell-definedconsumerproblem with widely
available technology components, rapid scaling was vital to the product’s continuing success. “We
doubleddownonmanagingourcash, ouroperations,maintainingquality,all the partsof the iceberg no
one sees,” Goddijn adds. “We were hugely well organized.”

20. Extend
In the space of only a few years, companies in nearly every sector have conceded that innovation
requires external collaborators. Flows of talent and knowledge increasingly transcend company and
geographicboundaries.Successful innovatorsachieve significant multiples for every dollar invested in
innovation by accessing the skills and talents of others. In this way, they speed up innovation and
uncover new ways to create value for their customers and ecosystem partners.
Smart collaboration with external partners, though, goes beyond merely sourcing new ideas and
insights;itcan involve sharing costs and finding faster routes to market. Famously, the components of
Apple’sfirstiPodweredeveloped almost entirely outside the company; by efficiently managing these
external partnerships,Apple was able to move from initial concept to marketable product in only nine
months.NASA’sAmesResearch Center teams up not just with international partners—launching joint
satellites with nations as diverse as Lithuania, Saudi Arabia, and Sweden—but also with emerging
companies, such as SpaceX.
High-performing innovators work hard to develop the ecosystems that help deliver these benefits.
Indeed, they strive to become partners of choice, increasing the likelihood that the best ideas and
people willcome theirway.Thatrequiresasystematicapproach. First, these companies find out which
partnerstheyare alreadyworkingwith;surprisinglyfew companies know this. Then they decide which
networks—say,fourorfive of them—theyideallyneedtosupporttheir innovation strategies. This step
helpsthemtonarrow andfocus theircollaborationeffortsandtomanage the flow of possibilities from
outside the company. Strong innovators also regularly review their networks, extending and pruning
them as appropriate and using sophisticated incentives and contractual structures to motivate high-
performingbusinesspartners.Becomingatrue partner of choice is,among otherthings,aboutclarifying
what a partnership can offer the junior member: brand, reach, or access, perhaps. It is also about
behavior. Partners of choice are fair and transparent in their dealings.
Moreover,companiesthatmake the mostof external networkshave a good idea of what’s most useful
at whichstagesof the innovationprocess.In general, they cast a relatively wide net in the early going.
But as theycome closerto commercializinga new product or service, they become narrower and more
specific in their sourcing, since by then the new offering’s design is relatively set.
Mobilize
How doleadingcompaniesstimulate,encourage,support,andrewardinnovativebehavior and thinking
amongthe rightgroupsof people?The bestcompaniesfindwaystoembedinnovationintothe fibers of
their culture, from the core to the periphery.
They start back where we began: with aspirations that forge tight connections among innovation,
strategy, and performance. When a company sets financial targets for innovation and defines market
spaces,minds become far more focused. As those aspirations come to life through individual projects
across the company, innovation leaders clarify responsibilities using the appropriate incentives and
rewards.

21. The Discovery Group, for example, is upending the medical and life-insurance industries in its native
SouthAfricaand alsohas operationsinthe UnitedKingdom, the United States, and China, among other
locations. Innovation is a standard measure in the company’s semiannual divisional scorecards—a
process that helps mobilize the organization and affects roughly 1,000 of the company’s business
leaders.“Theyare all requiredtoinnovate every year,” Discovery founder and CEO Adrian Gore says of
the company’s business leaders. “They have no choice.”
Organizational changesmaybe necessary,notbecause structural silverbulletsexist—we’ve lookedhard
for themanddon’tthinktheydo—butratherto promote collaboration,learning, and experimentation.
Companiesmusthelppeople to share ideas and knowledge freely, perhaps by locating teams working
on different types of innovation in the same place, reviewing the structure of project teams to make
sure theyalwayshave new blood, ensuring that lessons learned from success and failure are captured
and assimilated, and recognizing innovation efforts even when they fall short of success.
Internal collaboration and experimentation can take years to establish, particularly in large, mature
companieswithstrongculturesandwaysof workingthat,inotherrespects,mayhave servedthemwell.
Some companies set up “innovation garages” where small groups can work on important projects
unconstrained by the normal working environment while building new ways of working that can be
scaledup and absorbed into the larger organization. NASA, for example, has ten field centers. But the
space agencyreliesonthe AmesResearchCenter,inSiliconValley,tomaintainwhatitsformer director,
Dr. Pete Worden,calls“the character of rebels” to function as “a laboratory that’s part of a much larger
organization.”
Big companies do not easily reinvent themselves as leading innovators. Too many fixed routines and
cultural factorscan getin the way. For those that do make the attempt, innovation excellence is often
built in a multiyear effort that touches most, if not all, parts of the organization. Our experience and
researchsuggestthatany companylookingtomake thisjourneywill maximize its probability of success
by closelystudyingandappropriatelyassimilating the leading practices of high-performing innovators.
Taken together, these form an essential operating system for innovation within a company’s
organizational structure and culture.

22. National Innovation System (NIS)
The National InnovationSystem(alsoNIS,National Systemof Innovation) is the flow of technology and
information among people, enterprises and institutions which is key to the innovative process on the
national level. According to innovation system theory, innovation and technology development are
results of a complex set of relationships among actors in the system, which includes enterprises,
universities and government research institutes.