Entrepreneurship A1 Notes
Chapter 1: Introduction
INNOVATION: WHAT’S THE BIG DEAL?
Key aspects of innovation = newness and novelty
• Derived from Latin word “novus” à meaning new or novel
Rogers’ (2003) definition: “An innovation is an idea, practice or object that is perceived as
new by an individual or other unit of adoption”
Atkinson and Ezell (2009:129) note that notions of newness and novelty are limiting à
because innovation is about much more
Innovation is also a viable business concept
• Develop something new
• Implement it into a viable product that one can purchase (so consumers can acquire
it)
An idea can be called an innovation à only when something new appears on the market so
that it can be bought and sold
OECD definition of an innovation: “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”
1
,THE PHASES OF INNOVATION:
1. Exploration
2. Exploitation
3. Diffusion
Exploration:
• Where innovation begins, most creative phase
• Mix of qualities are required à originality, creativity, vision, ability to improvise
• Exploration involves à search for new ways of doing things, trying new/different
technologies and finding new ways to meet customer needs
• Associated with à research part of R&D
Exploitation:
• Part of exploration phase
• Search for things that are new and different but that are with the commercialisation
of potential new products and services
• Use and development of things that are already known
• Decision made à how product or service will be made and delivered to ensure profit
at the end result
Diffusion:
• Does not involve innovation directly
• Concerned with à rate at which innovation (once launched into market) is adopted
by customers
EXPLORATION VS EXPLOITATION: A MATTER OF BALANCE
Balance between exploration and exploitation = critical issue
• Too much emphasis on exploration à risk of not enough products/services actually
reaching the market
• Failure to allocate sufficient resources to exploitation à lead to enterprise being a
cash burner – eats up all cash spent on R&D without enough products reaching
market and generating revenue
2
,Companies that do little R&D à produce innovations with only minor improvements
• Miss out on bigger changes taking place
• Result in being left behind in the market à their product portfolios become
increasingly obsolete
Chen and Katila (2009: 199) suggest à there’s a natural organisational tendency towards
exploitation. Three main reasons for this tendency:
• Firms too set in their ways – well established routines, favour the familiar
• Application and implementation of process management techniques = expense of
exploratory work
• Emphasis on short-term financial performance
EXPLORATION:
Exploration = closely associated with invention à the development of new artefacts that
perform a specific function
• This process is associated with experimenting and refinements
• Invention is often proceeded by a trigger event à causes the inventor to start
experimenting
THREE TRIGGERS TO INNOVATION:
Three main types of trigger events:
1. Idea generation (eg: Twitter)
2. Scientific discovery (eg: Penicillin)
3. Technological breakthrough (eg: Internet)
Idea generation:
Process where individuals conceive something new
• Either a product of a very deliberate, intentional process (designed to initiate
something new) or a much less deliberate, informal process (emerges in a
haphazard/accidental way)
• Well-known techniques à brainstorming, nominal group technique, mind-mapping
Possible scenarios where idea generation may take place:
• Problem-related à some sort of problem/bottleneck triggers an idea to help with
solving/ameliorating a problem
• Associated à revolved around an individual (not a group) – sight of one device
performing a particular function in a particular way that provides the trigger
• Serendipitous à replies entirely on chance - no planning, no structure, and normally
no connection to the context in which the resulting product will be used
It is often the context in which an individual finds themselves that motivates him/her to
come up with something new
3
, Scientific discovery:
Science = associated with systematic acquisition of knowledge à through observation and
experiments in order to understand and explain natural phenomena
• Although science is systematic and methodical, it is often serendipitous
Technological breakthrough:
Involves the application or development of technology that advances capability or
improves performance
• Product of human ingenuity and purpose activity
• Involves application of technology
Invention:
Ideas are turned into workable inventions
• Function of experimentation = prove a concept and arrive at something workable
• Classic model of invention à lone inventor works on his/her own without support
or resources
• Closed model of innovation (corporate model) à most activities associated with
invention take place in a single vertically integrated organisation
• Open model of innovation à recognise that inventions can come from the outside
Exploitation:
The essence of the exploitation element of innovation is to find a way to unlock what
Chestbrough (2006) describes as the latent value of technology in order to generate real
value
BUSINESS MODELS:
Exploitation mechanisms are increasingly described as business models
Business model = enabling device that allows investors to profit from their ideas and
inventions
4
Chapter 1: Introduction
INNOVATION: WHAT’S THE BIG DEAL?
Key aspects of innovation = newness and novelty
• Derived from Latin word “novus” à meaning new or novel
Rogers’ (2003) definition: “An innovation is an idea, practice or object that is perceived as
new by an individual or other unit of adoption”
Atkinson and Ezell (2009:129) note that notions of newness and novelty are limiting à
because innovation is about much more
Innovation is also a viable business concept
• Develop something new
• Implement it into a viable product that one can purchase (so consumers can acquire
it)
An idea can be called an innovation à only when something new appears on the market so
that it can be bought and sold
OECD definition of an innovation: “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”
1
,THE PHASES OF INNOVATION:
1. Exploration
2. Exploitation
3. Diffusion
Exploration:
• Where innovation begins, most creative phase
• Mix of qualities are required à originality, creativity, vision, ability to improvise
• Exploration involves à search for new ways of doing things, trying new/different
technologies and finding new ways to meet customer needs
• Associated with à research part of R&D
Exploitation:
• Part of exploration phase
• Search for things that are new and different but that are with the commercialisation
of potential new products and services
• Use and development of things that are already known
• Decision made à how product or service will be made and delivered to ensure profit
at the end result
Diffusion:
• Does not involve innovation directly
• Concerned with à rate at which innovation (once launched into market) is adopted
by customers
EXPLORATION VS EXPLOITATION: A MATTER OF BALANCE
Balance between exploration and exploitation = critical issue
• Too much emphasis on exploration à risk of not enough products/services actually
reaching the market
• Failure to allocate sufficient resources to exploitation à lead to enterprise being a
cash burner – eats up all cash spent on R&D without enough products reaching
market and generating revenue
2
,Companies that do little R&D à produce innovations with only minor improvements
• Miss out on bigger changes taking place
• Result in being left behind in the market à their product portfolios become
increasingly obsolete
Chen and Katila (2009: 199) suggest à there’s a natural organisational tendency towards
exploitation. Three main reasons for this tendency:
• Firms too set in their ways – well established routines, favour the familiar
• Application and implementation of process management techniques = expense of
exploratory work
• Emphasis on short-term financial performance
EXPLORATION:
Exploration = closely associated with invention à the development of new artefacts that
perform a specific function
• This process is associated with experimenting and refinements
• Invention is often proceeded by a trigger event à causes the inventor to start
experimenting
THREE TRIGGERS TO INNOVATION:
Three main types of trigger events:
1. Idea generation (eg: Twitter)
2. Scientific discovery (eg: Penicillin)
3. Technological breakthrough (eg: Internet)
Idea generation:
Process where individuals conceive something new
• Either a product of a very deliberate, intentional process (designed to initiate
something new) or a much less deliberate, informal process (emerges in a
haphazard/accidental way)
• Well-known techniques à brainstorming, nominal group technique, mind-mapping
Possible scenarios where idea generation may take place:
• Problem-related à some sort of problem/bottleneck triggers an idea to help with
solving/ameliorating a problem
• Associated à revolved around an individual (not a group) – sight of one device
performing a particular function in a particular way that provides the trigger
• Serendipitous à replies entirely on chance - no planning, no structure, and normally
no connection to the context in which the resulting product will be used
It is often the context in which an individual finds themselves that motivates him/her to
come up with something new
3
, Scientific discovery:
Science = associated with systematic acquisition of knowledge à through observation and
experiments in order to understand and explain natural phenomena
• Although science is systematic and methodical, it is often serendipitous
Technological breakthrough:
Involves the application or development of technology that advances capability or
improves performance
• Product of human ingenuity and purpose activity
• Involves application of technology
Invention:
Ideas are turned into workable inventions
• Function of experimentation = prove a concept and arrive at something workable
• Classic model of invention à lone inventor works on his/her own without support
or resources
• Closed model of innovation (corporate model) à most activities associated with
invention take place in a single vertically integrated organisation
• Open model of innovation à recognise that inventions can come from the outside
Exploitation:
The essence of the exploitation element of innovation is to find a way to unlock what
Chestbrough (2006) describes as the latent value of technology in order to generate real
value
BUSINESS MODELS:
Exploitation mechanisms are increasingly described as business models
Business model = enabling device that allows investors to profit from their ideas and
inventions
4
