ENT | 8

Entrepreneurship Part 8 - The innovation process

Welcome back to the next part of the entrepreneurship series. In this article we want to have a look on different ways to develop a business idea. This will also then define the end of the chapter creativity, innovation and entrepreneurship.

In the end we are talking about six different ways and here they are with some examples:

Analyze the state of the art technology
The iPhone is a combination of:
- Telecommunication
- MP3-Player
- Camera
- and much more

Analyze existing products and services
- You can create your own books, calendar, blog, etc. > publishing

Watch science and research
Learn from nature, typically a good advisor, e.g. artificial spider silk:
Advantages:
- biotech chip to replace spinneret
- lighter than cotton, stronger than steel
- perfect eco-balance
Applications:
- Bulletproof vests
- Different kinds of armor
- Aircraft construction
- Automotive construction

Detect trends and mega-trends
- Miniaturization
- Modularization
- Combination
- Instand Operativeness
- Substitution of mechanical systems
- Sustainable/Green energy supply
- Hydrogen as energy supply
- Do we still need human workforce…
- etc.

Monitore demographic trends
- Convenience
- Individualization
- Automation of work
- Need for adventure

Develop new solutions

But how can it be seen, the process model of creativity, innovation and entrepreneurship.

Entrepreneurship as a process

This is all speeded up as new opportunities come across every day as life cycles of goods and services are shortened to the absolute minimum.

Next article of the series in entrepreneurship we will start to have a look at business models and value creation. Stay tuned - and thanks for reading.

ENT | 7

Entrepreneurship Part 7 - Sources of Innovation

Hey there and welcome back to part 7 of the series of entrepreneurship.

Today we will have a talk about sources of innvation, according to Peter Ducker there are four areas of opportunities within industries and organizations:

1. Incongruities
   occur whenever a gap exists between expectations and reality

2. Industry and market changes
   emerge as the result of continual shifts in the marketplace, caused by changes in customer attitudes, advances in technology or industry growth

3. Unexpected occurrences
   are productive sources of innovation because most people dismiss, disregard or even resent them

4. Process needs
   arise whenever a demand arises to innovate as a way of answering a particular need

If you look at the social environment of an organization you will have additional sources of innovation such as:

1. New knowledge
   can create innovations that differ in their predictability as well as in the changes they pose to entrepreneurs. Innovations in bioscience or nanotechnology are cases in point

2. Perceptual changes
   open up new opportunities when members of a community change their interpretation of facts and figures

3. Demographic changes
   are the most reliable changes, providing precise pictures of future ager and population structures

There are different trends an organization should permanently monitor, to recognize relevant developments that can be a source of innovation.

All upfront goes the TECHNOLOGY, which technologies are relevant for the company in the future? Concerning MARKET and CUSTOMERS, are there changes in customer needs and tastes that imply risks or opportunities for the organization? How can information about customer needs be collected? And finally what about COMPETITION? Which innovation is to be expected on the market? Are there any new products, services or processes introduced in the market by competitors and if so, are they successful?

The KANO Model describing the relationship between customer satisfaction and the fulfillment of requirement features.

Want to learn more about the KANO model read here.

When thinking about creativity typically you will be able to divide them into three main components:

1. Creative Thinking Skills
   How do people approach problems?

2. Knowledge
   Everything a person knows and can do

3. Motivation
   What people actually do

Next step is to look at some creativity techniques:

Problem reversal

• State the problem in reverse (change a positive statement into a negative one)

• Figure out what everybody else is not doing

• Change the direction or location of perspective

Forced analogy

• Take a fixed element, such as a product or the idea of a product

• Force it, to take the attributes of another unrelated element

• This should form a free flow of associations

Attribute listing

• List all major attributes of a product, object or idea

• For each of the attributes, list ways each of these attributes could be changed, e.g. CASE > is made out of PLASTIC > can be made out of METAL

Mind maps/concept maps

Brainstorming

But in the end you can’t force creativity, when looking on the distribution of when ideas develop we see that only 24% are developed while working and 76% are developed outside the company:

Where do ideas develop - operations insider

Based on this you might think about what factors are then influencing creativity? Well here are some examples:

Encouragement of creativity
Creativity can be enhanced through:

• Encouragement of risk-taking and of idea generation

• Valuing innovation throughout all management levels

• Perceived supervisor support

• Fair and supportive evaluations and so on

Autonomy
Is creativity fostered when teams have a high autonomy in daily work and a sense of ownership and control over their own work and ideas.

Resources
Resource allocation is directly related to creativity levels of a project.

Pressures
Pressures can support creativity when it is perceived as arising from the urgent, intellectual, challenging nature of a problem, but it can also undermine creativity, when it reaches an undesirable high level.

Mental Blocks
Creativity can be impeded by various mental blocks such as prejudice or functional fixation.

ENT | 6

Entrepreneurship Part 6 - Creativity and ENT

You didn’t come this far to only come this far! Welcome back to part 6 of the series of entrepreneurship.

In part 6 of the series entrepreneurship we will have a look on creativity, innovation and entrepreneurship. By that we’ll go through the three components of creativity, use some techniques of creativity, define and explain the sources of innovation, discuss different types of innovation and in the end explain the links between creativity, innovation and entrepreneurship.

The best way to have a good idea is to have lots of ideas

Linus Pauling (Winner of Peace and Chemistry Nobel Price)

The process of entrepreneurship starts with ideas for new services, products, business models or organizations - both in startups as well as existing organizations. Therefore different concepts of creativity and innovation are intrinsically tied to each other and some minds say that they cannot exist without the other.

Before we continue we want to define the three keywords in this section and what our understanding is of them:

Innovation
is generally understood as the successful introduction of a new thing or method which is the embodiment, combination, or synthesis of knowledge in original, relevant, valued new products, processes or services (Luecke&Katz | 2003).

Creativity
”is the process through which invention occurs - the enabling process by which something new comes into existence.”

Innovation Management
is the discipline of managing processes in innovation, in order to respond to external or internal opportunities and using creative efforts to introduce new ideas, processes or products (Kelley&Kranzburg | 1978)

Idea classification matrix (cf. Neck 2010)

Using this approach we can say that creativity is in general defined as coming up with new ideas and innovation is implementing those. (cf Goddard 2008). But also when you goole the term innovation is often used to refer to the entire process by which an organization generates creative new ideas and converts them into products, services or business models where customers are willing to pay for. Having an idea is always the starting point of an innovation no matter if you have it by yourself or in a team workshop.

Looking on Innovation we have to separate them into different types of innovation:

Service/Product Innovation
Introducing new services or products or a combination of both

Process Innovation
Just think about SMED and the EMIPS methodology (eliminate, minimize, integrate, parallelize and synchronize).

Social Innovation
New developments to get rid of social unacceptable conditions.

Structural/Organizational Innovation
Organizational development that supports all value adding activities of an organization.

Last but not least we differentiate between incremental and disruptive innovation. Those can be described as followed and are relevant for product-, process- or service-innovation:

Incremental Innovation

• Steady improvements

• Based on sustaining technologies

• Obedience to cultural routines and norms

• Can be rapidly implemented

• Immediate gains

• Develop customer loyalty

Disruptive Innovation

• Fundamental rethinking

• Based on disruptive technologies

• Experimentation and play/make believe

• Needs to be nurtured for long periods

• Worse initial performance, potential big gains

• Create new markets

ENT | 3

Entrepreneurship Part 3 - The Key Elements of ENT

Let’s continue our entrepreneurial journey by having a look on opportunities as it seems that these have a crucial impact on our path of self fulfillment. We thereby follow the key elements of entrepreneurship as shown in part 1.

An opportunity can be defined as a situation in which new services, products or processes can be introduced and sold at a greater price than its own costs of production. Entrepreneurs perceive market needs and/or underemployed resources and recognize a “match” between those two.

What may later be called an opportunity may appear as imprecisely defined market needs. These are the sources of market-pulled opportunities. The role of the entrepreneur is to recognize these needs and develop an offer in which customers are willing to pay for.

Under-utilized or unemployed resources may also offer possibilities to create value for customers. This type of opportunities can be called market-pushed opportunities. The role of the entrepreneur is to identify resources that are not optimally used and then seek a better user or combination of these for a specific market.

According to Peter Drucker, Austrian-born American management consultant, educator, and author (1909-2005), there are three different categories of opportunities:

1. Inefficiencies within existing markets due to either information asymmetries or the limitations in technology in terms of satisfying certain known but unfulfilled market needs

2. The emergence of significant changes in social, political, demographic and economic forces

3. Inventions and discoveries that produce new knowledge

The tendency to discover these opportunities are dependent on psychological characteristics, information and knowledge availability, creative processing and cognitive heuristics.

Good entrepreneurial opportunities fulfill the following four criteria:

1. They generate additional value for the customer and thereby for parts of society or society as a whole

2. They satisfy desires and needs for which some people are willing to pay for

3. They have a solid market potential, i.e. generate revenues and yield, so that the entrepreneurs can easily show a clear value proposition to their stakeholders

4. They are in accordance with entrepreneur’s characteristics and balance risk and return

The heterogeneous field of entrepreneurship - by Bruyat & Julien (2001)

With the opportunities on the one hand we have to have a look on the resources on the other.

The term resource includes a variety of different things. Basically any thing or quality that is useful in doing something can be considered as a resource.

The resource based view of companies recoginzes six different types of resources:

1. Financial

2. Physical

3. Human

4. Technological

5. Social

6. Organizational

The third key element of entrepreneurship is the organization.

Many different types of organizational arrangements exist for the exploitation of entrepreneurial opportunities. Although most attention has been paid to new independent start-ups, other possible types of organizational structure include corporate ventures, spin-offs/spin-outs, franchises, joint ventures or business acquisitions.

Entrepreneurship can take place in diverse environments and there are many ways to become an entrepreneur also MBO or MBI (Management Buyout/Management buy-in).

Looking at the key elements of entrepreneurship next in line will be the surrounding environment.

The environment plays a crucial role on the entrepreneurial journey as it can be more or less rich of opportunities. Several conditions influence the pursuit of these opportunities. For example, opportunities can emerge because of market inefficiencies that result from information asymmetry across time and place, or as a result of political, regulatory, social or demographic changes.

There are two relevant levels of the environment:

1. At the community level, both the number of organizations in an industry and the strength of relationships between these organizations are important to entrepreneurs.

2. At the social level, cultural norms and values shape the environment for an organization as well as government activities and policies.

This was it for today - in part 4 will be discussing the entrepreneurial journey as a process.

ENT | 2

Entrepreneurship Part 2 - Social Skills

What there is in our business is plenty of plans, plenty of entrepreneurs and plenty of money. But there is a shortage of great teams.

John Doerr | Silicon Valley Venture Capitalist

According to Baron and Markmann (2000) there are several social skills that are described in the following that have potential relevance to entrepreneurial success:

Social skills relevant to entrepreneurs’ success | Baron & Markmann (2000)

The flow of entrepreneurial success starts with high level of social skills.

The short way is that social skills will broaden social networks with enhanced reputation. This leads to an increased social capital which enhances the success of an entrepreneur.

The second way of the cause effect chain is that a high level of social skills will lead lead to positive affective reactions on the part of others. Through the enhanced judgements and decisions about the entrepreneur. This will automatically improve relations between the founders. Improve the performance of key tasks (e.g. raising capital, recruiting employees and gaining customers. And nevertheless shows the ability to form successful business alliances. The result again: Enhanced success of an entrepreneur.

The assertion of Baron and Markmann that social skills can play an important role in the entrepreneurial journey of success has some implications for entrepreneurs and others wishing to assist them in their efforts to start new ventures:

1. Training in social skills can help many entrepreneurs succeed

2. Training in social skills is readily available - and it works

3. Training in social skills is already included in the curricula of many business schools and is used by many organizations

4. Enhanced social skills can contribute to entrepreneurs’ social capital

5. Training in social skills - or at least a discussion of this topic - should be part of all programs in entrepreneurship

6. Entrepreneurs can be persuaded to seek much training

In order to describe an entrepreneur we will follow the 10 Ds defined by Bygrave (2010) that symbolize the spring of entrepreneurial behavior:

1. Dream: Entrepreneurs have a vision of what the future could be like for them and their businesses. And they have the ability to implement it.

2. Decisiveness: They don’t procrastinate, they make decisions swiftly

3. Doers: Once they decide a course of action, they implement it quickly

4. Determination: They provide total commitment and they seldom give up

5. Dedication: They are totally dedicated to their business, sometimes at considerable cost to their personal relationships

6. Devotion: They love what they do

7. Details: The devil is a squirrel. Entrepreneurs are on top of critical details

8. Destiny: They want to be in charge of their own destiny

9. Dollars: They assume that if they are successful, they will be rewarded

10. Distribute: Entrepreneurs distribute the ownership of their businesses with key employees who are critical to the success of the business

ENT | 1

Entrepreneurship Part 1 - The Nature of Entrepreneurship

Some people see the entrepreneur as a mangy wolf, which must be beaten to death. Others see the cow, which one can milk continuously. Only a few recognize the horse that pulls the wagon.

Winston Churchill (1874-1965) | British Statesman and Prime Minister

Before we get starting to have a deep dive in entrepreneurship we to explain how we will handle it. In this article, “The Nature of Entrepreneurship” we will go through some definitions of entrepreneurship, state the key elements of entrepreneurship, explain the process of new venture creation and finally explain the role of entrepreneurship in economic growth.

You never know what will happen when things change. But do you know what will happen when things don't change?

Elias Canetti (1905-1994) | Author

Where does Entrepreneurship come from?

The word Entrepreneurship comes from the french word entreprendre meaning “to undertake” or “to take in ones own hands”. The term ENTREPRENEUR was first used by the Irish Banker Richard Cantillon in the end of the 18th century to describe a person that realizes an income stream under uncertain conditions.

Jean-Babtiste Say defined it even further: “An entrepreneur is a person that shifts economic resources from an area of lower productivity into an area of higher productivity and greater yield”.

During the industrial revolution the term “Entrepreneur” was used to describe an individual that strived for venture ideas, developed it, assembled resources and created a new business venture. Some famous entrepreneurs by that time have been: Rockefeller, Andrew Carnegie, James Watt, Thomas Edison and Gottlieb Daimler, just to name a few.

But before we go ahead, let’s make some definitions for a common understanding:

Entrepreneur:

A person that destroys the existing economic order by introducing new services or products, by creating new forms of organization or by exploiting new raw materials. The entrepreneur doesn’t have to be the owner of a company.

Entrepreneurship:

A process that brings out new business opportunities and converting them into marketable services and goods.

Entrepreneurial opportunities:

A new solution to the market that can be sold at a price that is higher than its manufacturing costs.

To sum it up:

Entrepreneurs use innovation to exploit or create change and opportunity for the purpose of making profit. They do this by shifting economic resources from an area of lower productivity into an area of higher productivity and greater yield, accepting a high degree of risk and uncertainty in doing so.

Burns (2005)

... a slippery concept... not easy to work into a formal analysis because it is so closely associated with the temperament or personal qualities of individuals.

Penrose (1959)

According to J.A. Schumpeter (1883-1950) a former Austrian political economist three statements on “Creative Destruction” are key:

1. Economic growth is the result of new technologies, processes and organizational structures, generated by innovative entrepreneurs.

2. As productivity rises, enterprises that are less productive disappear from the market.

3. This process of foundation, expansion and displacement ist the main characteristic of Creative Destruction.

Concerning the model of entrepreneurship, there are five key elements that describe the necessity of entrepreneurship in order to occur:

1. An individual (> The Entrepreneur)

2. A opportunity in the market

3. Adequate resources

4. A business organization

5. A favorable environment

These five factors are considered as something that must be present in order to have a fruitful journey on the path of entrepreneurship.

The Key Elements of Entrepreneurship

The entrepreneur is the basis of the entrepreneurial process - the chief conductor who perceives an opportunity, marshals the resources to pursue this opportunity and builds an organization which combines the resources necessary to exploit the opportunity.

Five factors have been identified that influence the way in which opportunities are recognized.

1. Internal locus of control

2. Prior knowledge

3. Social Networks

4. Active search for opportunities

5. Entrepreneurial alertness

A famous Malaysian entrepreneur, Tan Sri Francis Yeoh, once said when asked about the role of luck he said:

Don't read these books about being lucky. If you want to do something better for humanity, it's a very good start. If you want to make it because you want to be rich, I guess you will make it one day, but you are likely to be unhappy.

Tan Sri Francis Yeoh (2007)