Creativity and the Business Idea

McGraw-Hill/IrwinEntrepreneurship, 7/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 5

Creativity & Innovation Creativity is the ability to develop new

ideas and to discover new ways of looking at problems & opportunities

Innovation is the ability to apply creative solutions to those problems & opportunities to enhance or to enrich people’s lives

Creativity is thinking new things & innovation is doing new things

Entrepreneurs succeed by thinking and doing new things or old things in new way

Having a great new idea is not enough; transforming the idea into a tangible product, service or business venture is the essential next step

Leadership expert Warren Bennis says. “ today’s successful companies live and die according to the quality of their ideas”

CreativityCreativity involves generating something from

nothingCreative ideas springs up from the most

unexpected placesEdwin Land, one of America’s most

prolific inventors, credits his three year old daughter with the idea of the Polaroid

instant camera

Entrepreneurship is the result of a disciplined, systematic process of applying creativity & innovation to needs & opportunities in the marketplace

Millions of people come up with creative ideas for new or different products & services; most of them, however, never do anything with them

Entrepreneurs are those who connect their creative ideas with the purposeful action & structure of a business

Thus successful entrepreneurship is a constant process that relies on creativity, innovation & application in the marketplace 3000 new product ideas, 4 make it to

development stage, 2 are actually launched & only ONE becomes a success in the market

Sources of New Ideas (1 of 2) Consumers

Informal & formal monitoring of potential ideas and needs- express their opinions.

Idea & need represents a large enough market to support new venture .

Existing Companies Potential (Entpr & Intraprnrs) should also establish

a formal method for monitoring & evaluating competitive products & services on the market

Distribution channels Channel members-Excellent source of new ideas

b’coz of their familiarity with the needs of the market

Help in marketing the newly developed products Example: salesclerks suggesting entrpr changing

color of product

Sources of New Ideas (2 of 2) Federal government

Files of the Patent Office contain numerous new product possibilities. Suggest more marketable product ideas Official Gazette, published summarize list of patents for

license or sale New product ideas can come in response to

government regulations. (OSHA- eliminating unsafe WC’s in industry)

Research and development Largest source of new ideas is the entrepreneur’s

own “research and development” efforts. May be: A formal endeavor connected with one’s current

employment. An informal lab in a basement or garage.

Methods of Generating New IdeasFocus groups

number of group members from 6-12 Moderator focuses discussion of the group in a

directive or nondirective manner.Co. women’s slipper-concept of “warm &

comfortable slipper that’s fits and old shoe” – 12 women focus group

An excellent method for initially screening ideas and concepts.

BrainstormingA Group method for obtaining new ideas &

solutions

Brainstorming Conti.... 4 Rules should be followed1.No criticism is allowed by anyone in the group2.Freewheeling is encouraged-wilder the idea the

better3.Quantity of ideas is desired- greater the no. of ideas

the greater the likelihood of the emergence of useful ideas

4.Combinations and improvements of ideas are encouraged- ideas of others can be used to produce still another new idea

Example: Bank to develop journal for industrial client Xcitics of market-information content- frequency of issue –

promotional value ( issues discussed)

Focus group and brainstorming is different in the sense that FG is

structured or moderated...while BS is not a debate or discussion like that....its

people giving lots of ideas without criticism allowed

Methods of Generating New Ideas (2 of 2)

Problem inventory analysisInstead of generating new ideas themselves

consumers provided with list of problems in general product category

Then asked to identify & discuss products in this category that have particular problem

Can be used to test a new product idea.Effective method since its easier to relate known

products to suggested problems & arrive at a new product idea than to generate an entirely new product idea by itself

Results must be carefully evaluated as they may not actually reflect a new business opportunity.

Table 5.1 ? Consumers associates particular problems

with specific products & then develop a new product that do not contain the identified

fault

Creative Problem Solving

Creativity: an important attribute of a successful entrepreneur.

Creativity tends to decline with: Age, education, lack of use, and bureaucracy.

Creative Problem-Solving Techniques

<<Insert Table 5.2>>

Creative Problem-Solving Techniques (1 of 3)

Brainstorming Used in creative problem solving and idea

generation. Creative problem solving: a method for

obtaining new ideas Spontaneous contribution of participants Problem statement-neither too broad nor too

narrow Avoid inhibiting responses NO group member should be expert in field

of problem Ideas even if illogical, must be recorded Prohibit criticizing OR evaluating during BS

session

Reverse brainstorming A group method for obtaining new ideas focusing on the negative.

Finding fault by asking questions “in how many possible ways can the idea flop”

Maintain group morale Stimulate innovative thinking Often involves identification of everything wrong with an idea- followed by discussion how to overcome these problems

Brainwriting Form of written brainstorming. It is a silent, written generation of ideas by a group of people.

This sheet can b passed around on e-mail as well

Pass the sheet around – reach its owner The only thing wrong with it is that there is no excitement of verbal discussion

Creative Problem-Solving Techniques (2 of 3)

Gordon methodMethod for developing new ideas when the

individuals are unaware of the problem.u don’t give away too much detail about the

problemheadline would be “i wish there was

something v cud do about the bad colors in my TV screen” Or Latest trends in fashion world”

Checklist methodDeveloping a new idea through a list of related issues.

Product Planning & Development Process

Establishing Evaluation Criteria Criteria for evaluation need to be established at

each stage of the product planning and development process.

Criteria should be: All inclusive and quantitative to screen the product

carefully. Established to evaluate the new idea in terms of:

Market opportunity Competition Marketing system Financial factors Production factors.

Market opportunity

Competition

Marketing system

Financial factors

Production factors.

•Need for the product idea must exist•Characteristics & attitudes of consumers that might buy the product, size & nature of market •Share of that market that product could capture

• competing producers, prices, & marketing policies should be evaluated•Product should be able to compete successfully with products already on the market by having features that will meet or overcome current or anticipated competition

•New product should be compatible with existing management capabilities & marketing strategies•Firm should be able to use its marketing experience & other expertise in this new product effort•Example: GE would have less difficult time adding a new kitchen appliance to its line than P&G• product should be able to be supported by & contribute to Co. financial structure•Break even point & Long term profit outlook for product need to be determined • if the new product idea cannot be integrated into

existing manufacturing processes, not only is the new idea is less positive- but new plan & production cost – plant space need to be determined

Product Planning and Development ProcessDivided into five major stages:

Idea stage.Concept stage.Product development stage.Test marketing stage.Commercialization.

The Product Planning and Development Process (1 of 3)

<<Insert Figure 5.6>>

The Product Planning and Development Process (2 of 3)

Idea stage Promising new product/service ideas should

be identified. Impractical ones eliminated. Evaluation method – systematic market

evaluation checklist. Concept stage

Refined idea is tested to determine consumer acceptance.

Consumer acceptance can be measured through the conversational interview method.

The Product Planning and Development Process (3 of 3)

Product development stage Determines consumer reaction to the physical

product/service. A tool frequently used – consumer panel. Consumer preference is determined through:

multiple brand comparisons, risk analysis, level of repeat purchases, or intensity of preference analysis.

Test marketing stage Increases certainty of successful commercialization. Provides actual sales results, which indicate the

acceptance level of consumers. Positive test results indicate probability of

successful product launch

E-commerce and Business Start-up E-commerce offers entrepreneurs an

opportunity to be creative and innovative.

Factors that facilitate a high-growth in electronic commerce: Widespread use of personal computers. Adoption of intranets in companies. Acceptance of the Internet as a business

communications platform. Faster and more secure systems.

Using E-Commerce Creatively Entrepreneurs starting an Internet commerce

venture need to address the same strategic and tactical questions as any other entrepreneur.

Entrepreneurs have to decide to: Run Internet operations within the company, or Outsource these operations to Internet

specialists.

Another option is to use the packages for e-commerce.

•Internet operations-company primary business•Availability of resources –web professional

Components of Internet Commerce Two major components of Internet

commerce are: Front-end operations. Back-end operations.

Integration of front-end and back-end operations represents the greatest challenge for doing

Internet business. provides the opportunity for developing a

sustained competitive advantage.

The biggest mistake of many companies on the internet is believing that an attractive & interactive website will

secure success- leads to underestimating imp of end operations

Web Sites- connection btw Co & its Customers

Keys to a good Web site: Ease of use ( info product /services ) Structure and organization of information Visibility Search capability E-mail response system Speed. Technical aspects

Should work properly in different browsers and platforms.

Should appear in all marketing materials.

professional

design Web

designer

Indicator of

legitimacy

Shopping cart- credit card

payments Secure

servers https

Advertise- search

engines, banner ads,

emailSecure servers https

Tracking Customer Information Database:

Tracks activity of the: Industry. Segment. Company.

Supports personal marketing targeted at individual clients.

Should be able capture customer attention with customized one-to-one marketing.

Doing E-Commerce as an Entrepreneurial Company

To do business through the Internet:Products should be delivered economically and

conveniently. Products need to interest a wide market

Company must be ready to ship the product outside its own geographical location.

Online operations have to bring significant cost reductions-as compare to brick & mortar operation

Company must possess the ability to economically draw customers to its Web site.

Fresh fruits &

vegitables ?

Summary Starting point –successful Co.-

product/Service they offerSources of ideas ranges – comments of

consumers TO changes in Govt regulationsMonitoring comments of ConsumersEvaluating new products offered by

competitorsFamiliar with the ideas contained in

previously granted patents

Becoming actively involved in R&D Specific tech’s entrepreneur use to generate

ideas

After idea generation the planning and developing process begins

Large number ideas screened/ evaluated Potential ideas moved- concept, product

development, test marketing, commercialization stage

Focus group-Brainstorming-Problem inventory analysis