“Entrepreneurship and Innovation Management 318
Chapter 1: Introduction
Innovation- what’s the big deal?
• Newness and novelty are key aspects of innovation; derived from the Latin word Novus, meaning
new or novel.
• Figure 1.1, pg. 4, shows that ‘newness’ can take many different forms ranging from a completely
new product to new uses for an existing product or simply a product that is new to a firm.
• Rodgers’ (2003) definition of innovation which refers to differences in ‘newness’:
‘An innovation is an idea, practice or object that is perceived as new by an individual or other unit of
adoption.’
• An invention is something new but is not the same thing as innovation. Atkinson and Ezell note
that notions of newness and novelty are limiting, because innovation is about much more.
• Innovation, as well as being novel and new, has to be ‘a viable business concept’. Innovation is
about the development of something new and its implementation into a viable product that one
can purchase.
Figure 1.1: Different forms of ‘newness’
• Only when something new appears on the market so that it can be bought and sold, can the idea
be said to be innovation. This is captured in the OECD definition of innovation which defines it as:
‘the implementation of a new or significantly improved product (good or service), or process, new
marketing method, or a new organisational method in business practices, workplace organisation or
external relations’
,• Innovation also involves turning the idea into a viable product and getting it onto the market so
that consumers can acquire it.
The phases of innovation
Exploration – exploitation – diffusion
• Exploration is an exploratory phase. It is where innovation begins and it is the most creative of all
three phases, where a mix of qualities are required ranging from originality, openness, creativity
and vision to inquisitiveness, ingenuity, intuition and the ability to improvise. Exploration involves
a search for new ways of doing things, trying out new or certainly different technologies and
finding new ways to meet customer needs. Exploration tends to be associated with the research
part of the research and development (R&D).
• Exploitation is concerned with the search for things that are new and different but are with the
commercialisation of potential new products and services that have been developed into
inventions as part of the exploration phase. Exploitation is the ‘use and development of things
already known’. Similarly, it is in the exploitation phase that difficult decisions about how the new
product or service will be made and delivered have to be agreed in order to ensure that at least
some profit is the end result.
• Diffusion does not actually involve innovation directly, see figure 1.2, pg. 5. It is concerned with
the rate at which an innovation, once launched onto the market, is taken up and adopted by
consumers. Quite literally, it is about the rate at which innovation “catches on”.
Figure 1.2: The phases of innovation: exploration, exploitation ad diffusion
,Exploration versus Exploitation: a matter of balance
• Exploration presents a real risk that not enough new products and services will actually reach the
market and the enterprise will fail to get a return on the knowledge and know-how it has created.
• Failure to devote sufficient resources to exploitation is likely to lead to enterprise being a ‘cash
burner’. That is to say, it eats up cash spent on R&D, without sufficient number of new products
reaching the market and generating revenue.
• Companies that do comparatively little R&D are likely to produce innovations that incorporate
only minor improvements. In the process they may well miss out on the bigger changes taking
place, resulting in their being left behind in the market as their product portfolio becomes
increasingly obsolete.
• Why do some firms tend to ‘over-exploit’ and get the balance wrong by emphasising exploitation
at the expense of exploration? Chen and Katila suggest that over time there is a natural
organisational tendency towards exploitation. They put forward three main reasons for this
tendency:
➢ Firms become set in their ways with well-established routines tending to favour the familiar
rather than the unknown
➢ The application and implantation of process management techniques aimed at improving
efficiency and quality (e.g. TQM) can be at the expense of exploratory work
➢ Emphasis upon short-term financial performance.
Exploration
• Exploration is closely associated with invention - that is, the development of new artefacts that
perform a specific function.
• Typically, this process involves much experimenting with variations and refinements, some of
which prove ultimately to be blind alleys.
• In the exploration phase inventions is typically preceded by some kind of trigger event that fires
the inventor to start experimenting. The three main types of trigger event (Figure 1.3, pg. 8) are:
➢ Idea generation
➢ Scientific discovery
➢ Technological breakthrough
, Figure 1.3: Three triggers to innovation
Idea generation
• Idea generation is essentially a cerebral process whereby individuals conceive something new. It is
often described as involving a ‘eureka’ moment or an ‘aha’ moment, where an individual suddenly
has a moment of inspiration leading to an idea for a potential innovation.
• Idea generation is typically the product either of a very deliberate and intentional process
designed to initiate something new, or of a much less deliberate and informal process, where the
idea emerges in a much more haphazard, even accidental way. Some of the better-known
techniques are brainstorming, nominal group technique and mind-mapping.
• However, while formal processes for idea generation are often a feature of large corporation,
elsewhere idea generation tends to be more formal and more personal. Where this occurs, idea
generation tends to take place as part of one of three possible scenarios in which the process may
be described as:
➢ Problem-related
➢ Associative
➢ Serendipitous
• With the first of these, some kind of problem or bottleneck tends to be the trigger that generates
an idea for a potential new product or service that will help in solving or ameliorating a problem.
• Associative process tends to revolve around an individual rather than a group. Again, they are
informal rather than structured. It is the sight of one device performing a particular function in a
particular way that provides the trigger.
• Serendipitous process is even more haphazard and informal. They rely entirely on chance,
especially chance events that have nothing to do with innovation. Quite literally, a chance event
Chapter 1: Introduction
Innovation- what’s the big deal?
• Newness and novelty are key aspects of innovation; derived from the Latin word Novus, meaning
new or novel.
• Figure 1.1, pg. 4, shows that ‘newness’ can take many different forms ranging from a completely
new product to new uses for an existing product or simply a product that is new to a firm.
• Rodgers’ (2003) definition of innovation which refers to differences in ‘newness’:
‘An innovation is an idea, practice or object that is perceived as new by an individual or other unit of
adoption.’
• An invention is something new but is not the same thing as innovation. Atkinson and Ezell note
that notions of newness and novelty are limiting, because innovation is about much more.
• Innovation, as well as being novel and new, has to be ‘a viable business concept’. Innovation is
about the development of something new and its implementation into a viable product that one
can purchase.
Figure 1.1: Different forms of ‘newness’
• Only when something new appears on the market so that it can be bought and sold, can the idea
be said to be innovation. This is captured in the OECD definition of innovation which defines it as:
‘the implementation of a new or significantly improved product (good or service), or process, new
marketing method, or a new organisational method in business practices, workplace organisation or
external relations’
,• Innovation also involves turning the idea into a viable product and getting it onto the market so
that consumers can acquire it.
The phases of innovation
Exploration – exploitation – diffusion
• Exploration is an exploratory phase. It is where innovation begins and it is the most creative of all
three phases, where a mix of qualities are required ranging from originality, openness, creativity
and vision to inquisitiveness, ingenuity, intuition and the ability to improvise. Exploration involves
a search for new ways of doing things, trying out new or certainly different technologies and
finding new ways to meet customer needs. Exploration tends to be associated with the research
part of the research and development (R&D).
• Exploitation is concerned with the search for things that are new and different but are with the
commercialisation of potential new products and services that have been developed into
inventions as part of the exploration phase. Exploitation is the ‘use and development of things
already known’. Similarly, it is in the exploitation phase that difficult decisions about how the new
product or service will be made and delivered have to be agreed in order to ensure that at least
some profit is the end result.
• Diffusion does not actually involve innovation directly, see figure 1.2, pg. 5. It is concerned with
the rate at which an innovation, once launched onto the market, is taken up and adopted by
consumers. Quite literally, it is about the rate at which innovation “catches on”.
Figure 1.2: The phases of innovation: exploration, exploitation ad diffusion
,Exploration versus Exploitation: a matter of balance
• Exploration presents a real risk that not enough new products and services will actually reach the
market and the enterprise will fail to get a return on the knowledge and know-how it has created.
• Failure to devote sufficient resources to exploitation is likely to lead to enterprise being a ‘cash
burner’. That is to say, it eats up cash spent on R&D, without sufficient number of new products
reaching the market and generating revenue.
• Companies that do comparatively little R&D are likely to produce innovations that incorporate
only minor improvements. In the process they may well miss out on the bigger changes taking
place, resulting in their being left behind in the market as their product portfolio becomes
increasingly obsolete.
• Why do some firms tend to ‘over-exploit’ and get the balance wrong by emphasising exploitation
at the expense of exploration? Chen and Katila suggest that over time there is a natural
organisational tendency towards exploitation. They put forward three main reasons for this
tendency:
➢ Firms become set in their ways with well-established routines tending to favour the familiar
rather than the unknown
➢ The application and implantation of process management techniques aimed at improving
efficiency and quality (e.g. TQM) can be at the expense of exploratory work
➢ Emphasis upon short-term financial performance.
Exploration
• Exploration is closely associated with invention - that is, the development of new artefacts that
perform a specific function.
• Typically, this process involves much experimenting with variations and refinements, some of
which prove ultimately to be blind alleys.
• In the exploration phase inventions is typically preceded by some kind of trigger event that fires
the inventor to start experimenting. The three main types of trigger event (Figure 1.3, pg. 8) are:
➢ Idea generation
➢ Scientific discovery
➢ Technological breakthrough
, Figure 1.3: Three triggers to innovation
Idea generation
• Idea generation is essentially a cerebral process whereby individuals conceive something new. It is
often described as involving a ‘eureka’ moment or an ‘aha’ moment, where an individual suddenly
has a moment of inspiration leading to an idea for a potential innovation.
• Idea generation is typically the product either of a very deliberate and intentional process
designed to initiate something new, or of a much less deliberate and informal process, where the
idea emerges in a much more haphazard, even accidental way. Some of the better-known
techniques are brainstorming, nominal group technique and mind-mapping.
• However, while formal processes for idea generation are often a feature of large corporation,
elsewhere idea generation tends to be more formal and more personal. Where this occurs, idea
generation tends to take place as part of one of three possible scenarios in which the process may
be described as:
➢ Problem-related
➢ Associative
➢ Serendipitous
• With the first of these, some kind of problem or bottleneck tends to be the trigger that generates
an idea for a potential new product or service that will help in solving or ameliorating a problem.
• Associative process tends to revolve around an individual rather than a group. Again, they are
informal rather than structured. It is the sight of one device performing a particular function in a
particular way that provides the trigger.
• Serendipitous process is even more haphazard and informal. They rely entirely on chance,
especially chance events that have nothing to do with innovation. Quite literally, a chance event
