MGT602 Highlighted Handouts Pages 48-127

Author: Marriyam Bukhari, Instructor Business Administration, Virtual University of Pakistan

Technical Articles Theme 07 · Title: Entrepreneurship and Creativity · Videos: 70-86 · Topics Covered

Q70. What is innovation?

Q71. What is creativity?

72. Barriers to innovation and creativity
73. Creativity, innovation, opportunity and entrepreneurship: the link

Q74. Protecting your business idea: what is Intellectual property (IP) and what is intellectual property rights (IPRs)?

75. Protecting your business idea (Patent, Trademarks, and Copyrights etc.)

Q76. The interview with an entrepreneur: How to open third eye for opportunity hunting?

Q77. What makes entrepreneurs entrepreneurial?

78. The effectual reasoning: (The problem, The process)
79. Effectual reasoning: the principles
80. Bird-in-hand
81. The affordable loss principle
82. The crazy quilt principle
83. The lemonade principle
84. Pilot-in-the-plane
85. Effectuation: The workshop activity

Q86. The interview with an entrepreneur: How entrepreneurs can use their available resources for quick start?

What is innovation?

Innovation, creativity and entrepreneurship are closely related. Innovation is defined as “the process of translating an idea or invention into a good or service that creates value for which customer will pay.” In large organizations, it is a complex process to bring innovation because of certain limitations. On the other hand, small firms are more prone to innovation and every small startup is thought to be innovative. The reason is; less complex structure of small firms, quick decision making, easy resource pulling, and easier product testing.

Innovation is also defined as: “Making a product or service better, faster, cheaper, greater satisfaction and/or greater value.” Another comprehensive definition of innovation is “the company’s capability to implement a range of coordinated actions and strategies for the purpose of developing and delivering new products and/or new services to the new or existing market in a manner that outperforms competitors.” Two critical components of innovation are: invention and commercialization. Commercialization adds social and economic value to the invention through the creation of a business, or/and licensing/intellectual property protection. You need to commercialize the new idea to solve the society’s problem. Without commercialization, no matter how unique the idea is, it won’t be converted into a product and offered in the market. The most common types of innovation are: incremental innovation, disruptive innovation, architectural innovation and radical innovation.

Most of the firms go for incremental innovation with existing market and existing technology. Incremental innovation is referred to the series of improvements a company make in its existing products and services with time. For example, Apple or Samsung mobile companies launch a new model of their smartphones every year with a slight improvement in certain features. Incremental innovation is not risky. Disruptive Innovation is related with implementing new processes, technologies (disruptive business models) in existing markets. In the beginning, new models look inferior as compared to the current solutions, but with the passage of time, they surpass the old technology due to their efficiency and efficacy. Amazon was the first online book store which disrupted the old business model of conventional book stores. There was an existing market of books and they changed the way books are sold. Architectural innovation is what the giant companies like Google and Amazon do. They take their domain related technology, expertise and skills and then implement it to a different market. This is the way they increase their customer base by expanding the market. Radical innovation is the type of innovation which people actually think as innovation stereotypically. It is the rarest type of innovation. It involves innovating new technologies, business models or services which create new markets. The examples of radical innovations are invention of microwave, airplane etc.

In Harvard business review, the types of innovation are defined in terms of how well the problem is defined and how well the domain is identified and defined. Innovation types are (according to HBR): sustaining innovation, breakthrough innovation, disruptive innovation, and basic research. Sustaining innovation involves improving the existing capabilities. Organization tries to get better at what it has. Entrepreneur has a clear idea of what problems will come and which skill domains are needed to solve them. On the other hand, breakthrough innovation involves getting into a well-defined problem for which it is hard to get the solution. In this case, entrepreneur has to explore the skill domains which will be able to solve the problem. Researchers have discovered that with the changes in competition and shifts in technology and marketplace, companies improve and become better and better at the things (product/services) which customers want less. At this point, innovation in products or services won’t help rather the companies have to innovate their business models. This type of innovation is called disruptive innovation. Basic research involves doing research on something you don’t know. Every invention must have had a background research when the inventor did not even know what he is exploring.

Other most common types of innovation are: product innovation, business model innovation, process/technology innovation, social innovation, market-pull innovation and technology-push innovation. Product innovation involves innovation in products and intangible services such as services that meet customer needs. The business model is the way a company functions and earns money. The business model innovation encompasses innovations in strategy, marketing, supply chains, value creation, pricing or cost structures. The major examples of business model innovation are Food panda Uber, Careem, and Foodpanda. Process and technology innovation involves creating the process efficient or cost effective in order to improve quality or production. Social innovations are innovations where the benefit lies with society and the purpose is not primarily profit. Examples include innovation in education, poverty reduction, equal opportunities, health, pollution reduction, plastic use reduction, and green trends. Market pull innovation originates from the market and initiates by a specific customer request. Lastly, technology-push innovation is the result of new technologies for which suitable application possibilities are sought and implemented.

What is creativity?

As we know, creativity is what distinguishes humans from other creatures. Business managers and entrepreneurs are more interested in creativity as they think it as a linkage to innovation which ultimately leads to new product, process, firm growth, or stronger competitive advantage (Ko & Butler, 2007). Different academics define creativity as a process which results in novel or new products or ideas which are appropriate and valuable to the society as a whole. The traditional approach to creativity was person-centered which assumed that creativity is innate in individuals. Contrary to the traditional approach, the contemporary approach to creativity believes that all humans having normal capabilities can produce at least moderate creative work, for some time, and in some domain. Research showed that creativity is not only innate quality of an individual, but it is also the function of environmental factors and individual characteristics which can be developed (Amabile, 1996; Sternburg, 2006). Creativity is about seeing the things same as everyone else is seeing but making the connections between them which no one else has made. It’s an ability to produce or use original, unusual and unique ideas. Business dictionary defines creativity as “mental