chapter 2 ee

CHAPTER 2INNOVATION

INENTREPRENEURSHI

PThe era of the intelligent

man/woman is almost over and a new one is emerging

– the era of the creative and innovative man/woman.-Pinchas Noy

1EUW 224 ENGINEERING ENTREPRENEURSHIP

Learning Objectives:After studying this chapter you should be able to describe:

1. The Business Idea and How to Develop New business Idea.

2. The Definition of Technology and How to Create a Product (product life cycle).

3. The Important of Leadership, Innovation and Consultancy Skills in Business.

4. The Government and Private Agencies Related with the Innovation Activities.


DEVELOPING BUSINESS IDEAIdentifying and Recognizing

OpportunitiesOpportunity = is a favorable set of

circumstances that creates a need for a new product, service or business.

An opportunity has four essential qualities.


Three Ways to Identify an Opportunity 1. Observing Trends


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2. Solving a Problem

Sometimes identifyingopportunities simply

involves noticing a problemand finding a way to

solve it.

These problems can bepinpointed through observing

trends and through more simplemeans, such as intuition,serendipity, or chance.

Some business ideas are clearlyinitiated to solve a problem.

For example, Symantec Corp. created Norton antivirus

software to guard computersagainst viruses.

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3. Finding Gaps in the Marketplace

A third approach to identifying opportunities is to find a gap in the marketplace.

A gap in the marketplace is often created when a product or service is needed by a specific group of people but doesn’t represent a large enough market to be of interest to mainstream retailers or manufacturers.This is the reason that small clothing boutiques and

specialty shops exist.The small boutiques, which often sell designer clothes or

clothing for hard-to-fit people, are willing to carry merchandise that doesn’t sell in large enough quantities for Wal-Mart.


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Five Steps to Generating Creative Ideas


Preparation

Elaboration

Incubation

Evaluation

Insight

Is the stage during which a person considers an idea or thinks about a problem.

Is the background, experience and knowledge that an entrepreneur brings to the opportunity recognition process.

Is the flash of recognition – when the solution to a problem is seen or an idea is born. It is sometimes called the “eureka” experience.

Is the stage during which the creative idea is put into a final form.

Is the stage of the creative process during which an idea is subjected to scrutiny and analyzed for its viability.


Techniques for Generating Ideas1. Brainstorming

Is a technique used to generate a large number of ideas and solutions to problems quickly.

A brainstorming “session” typically involves a group of people, and should be targeted to a specific topic.

Rules for a brainstorming session:No criticism.Freewheeling is encouraged.The session should move quickly.Leap-frogging is encouraged.


2. Focus Groups

A focus group is a gathering of five to ten people, who have been selected based on their common characteristics relative to the issues being discussed.

These groups are led by a trained moderator, who uses the internal dynamics of the group environment to gain insight into why people feel they way they do about a particular issue.

Although focus groups are used for a variety of purposes, they can be used to help generate new business ideas.


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3. Surveys( A survey is a method of gathering information from a

sample of individuals. The sample is usually just a fraction of the population being surveyed.The most effective surveys sample a “random” portion of

the population, meaning that the sample is not selected haphazardly or only from people who volunteer to participate.

The quality of survey data is determined largely by the purpose of the survey and how it is conducted.

Surveys generate new product, service, and business ideas because they ask specific questions and get specific answers.


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Other Techniques

4. Customer Advisory BoardsSome companies set up customer advisory boards that meet

regularly to discuss needs, wants, and problems that may lead to new ideas.

5. Day-In-The-Life ResearchA type of anthropological research, where the employees of

a company spend a day with a customer.


TECHNOLOGY AND CREATING PRODUCTSEntrepreneurs need to keep up with the ever-changing phase of technology which would affect their production in terms of:

i. New product developmentii. Packagingiii. Marketingiv. Product quality

Having up-to-date technological skills gives them the competitive edge in the business world.


Product Life CycleA new product progresses through a sequence of stages - from introduction to - growth, - maturity, and - decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix.

The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below:

Product Life CycleProduct Life Cycle Diagram

Product Life Cycle Diagram

Introduction Stage

This is the stage where a product is conceptualized and first brought to market.

The firm seeks to build product awareness and develop a market for the product.

The impact on the marketing mix is as follows:

Product branding and quality level is established, and

Intellectual property protection such as patents and trademarks are obtained.

Introduction StageThe introduction of a new product can be broken down into five distinct parts: .Idea validation:

Which is when a company studies a market, looks for areas where needs are not being met by current products, and tries to think of new products that could meet that need.

The company's marketing department is responsible for identifying market opportunities

Introduction Stage Conceptual design:

1. Occurs when an idea has been approved and begins to take shape.

2. The company has studied available materials, technology, and manufacturing capability and determined that the new product can be created.

3. Once that is done, more thorough specifications are developed, including price and style.

4. Marketing is responsible for minimum and maximum sales estimates, competition review, and market share estimates.

Introduction StageSpecification and design is when the product is nearing release.

Final design questions are answered and final product specs are determined so that a prototype can be created.

Introduction Stage

Prototype and testing 1. First version of a product is

created and tested by engineers and by customers.

2. The marketing department is extremely important at this point.

3. It is responsible for :a. developing packaging b. conducting the consumer tests c. tracking customer responses

Introduction Stage

Manufacturing ramp-up 1. The final stage of new product

introduction. 2. This is also known as

commercialization. 3. Product goes into full production

for release to the market. 4. Final checks are made on product

reliability and variability.

Introduction Stage

Pricing may be low penetration pricing to build market share rapidly, or high skim pricing to recover development costs.

Distribution is selective until consumers show acceptance of the product.

Promotion is aimed at innovators and early adopters. Marketing communications seeks to build product awareness and to educate potential consumers about the product.

Introduction Stage

Promotion is aimed at innovators and early adopters.

Marketing communications seeks to build

- product awareness and - to educate potential consumers

about the product.

Growth StageIn the growth stage, the firm seeks to build brand preference and increase market share.Product quality is maintained and additional features and support services may be added.Pricing is maintained as the firm enjoys increasing demand with little competition.Distribution channels are added as demand increases and customers accept the product.Promotion is aimed at a broader audience.

Growth StageThe growth phase occurs when a product has 1. Survived its introduction and is 2. Beginning to be noticed in the marketplace. 3. A company can decide if it wants to go for

increased market share or increased profitability. 4. It is boom time for any product. 5. Production increases, leading to lower unit

costs. 6. Sales momentum builds as advertising campaigns7. Competition grows as awareness of the product

builds. 8. Minor changes are made as more feedback is

gathered or as new markets are targeted. 9. The goal for any company is to stay in this

phase as long as possible.

Growth StageIt is possible that the product will not succeed at this stage and move immediately past decline and straight to cancellation. Marketing staff needs to evaluate what costs the company can bear and what the product's chances for survival are. Tough choices need to be made—sticking with a losing product can be disastrous.

Growth StageIf the product is doing well. 1. The goal is to build brand

loyalty by adding first-time buyers and retaining repeat buyers.

2. Sales, discounts, and advertising are important role in that process.

3. Creating variations of the initial product that appeal to additional audiences.

Maturity Stage

Strong growth in sales diminishes.

Competition may appear with similar products.

The primary objective at this point is to defend market share while maximizing profit.

Maturity Stage

At the maturity stage, 1. Sales growth has started to slow

2. Decline will begin.

3. Defending market share becomes the chief concern.

Maturity Stage More competitors have stepped

forward to challenge the product Some of which may offer a

higher quality version of the product at a lower price.

This can touch off PRICE WARS, Lower prices mean lower profits, Some companies to drop out of

the market for that product altogether.

Maturity Stage

The maturity stage is usually the LONGEST of the four life cycle stages, and it is not uncommon for a product to be in the mature stage for several decades.

Maturity StageA smart company will seek to:

Streamline Operations, Cost efficiencies sought, and Hard decisions made.Lower unit costs as much as possible So that profits can be maximized.

The money earned from the mature products is used in research and development to come up with new product ideas to replace the maturing products.

Maturity StageMarketing experts argue that the right promotion can make more of an impact at this stage than at any other.

Two primary marketing strategies at this stage.Offensive 1. Looking beyond current markets and

2. Attempting to gain brand new buyers. 3. Re-launching the product

4. Changing the price of a product (either higher or lower) to appeal to an new audience or

5. Finding new applications for a product.Defensive - special sales, promotions, cosmetic product changes,

Maturity StageProduct: features may be enhanced to

differentiate the product from that of competitors.

Pricing: may be lower because of the new competition.

Distribution: becomes more intensive,

Promotion: emphasizes product differentiation.

Decline Stage1. This occurs when the product

peaks in the maturity stage and then begins a downward slide in sales.

2. Eventually, revenues will drop to the point where it is no longer economically feasible to continue making the product.

3. Investment is minimized.

Decline Stage

As sales decline, the firm has several options:

- Maintain the product, possibly - rejuvenating it by

..adding new features and

..finding new uses.- Harvest the product –

..reduce costs and

..continue to offer it to loyal niche segment.

Decline Stage

- Discontinue the product, - liquidating remaining inventory or - selling it to another firm

that is willing to continue the product.

Decline Stage

The marketing mix decisions in the decline phase will depend on the selected strategy. E.g.the product may be changed if it is being rejuvenated, or left unchanged if it is being harvested or liquidated. The price may be maintained if the product is harvested, or reduced drastically if liquidated.

LEADERSHIP, INNOVATION AND CONSULTANCY SKILLS IN BUSINESS

Leadership = the process of influencing others to achieve group or organizational goals.

Visionary Leadership = leadership that creates a positive image of the future that motivates organizational members and provides direction for future planning and goal setting.


Leadership TraitsDesire to leadHonesty and integritySelf-confidenceEmotional stabilityCognitive abilityKnowledge of the businessDriveHave VisionIntegrityDedication


Leadership & Skills Successful Leaders Don’t Procrastinate

Successful Leaders Don’t Delegate Accountability

Successful Leaders Develop Other Leaders


Innovation and the EntrepreneurInnovation:

Is the process by which entrepreneurs convert opportunities into marketable ideas.

Is a combination of the vision to create a good idea and the perseverance and dedication to remain with the concept through implementation.

Is a key function in the entrepreneurial process.

Is the specific function of entrepreneurship.42


The Innovation ProcessTypes of

InnovationInventionExtensionDuplicationSynthesis

Sources of InnovationUnexpected

occurrencesIncongruitiesProcess needsIndustry and market

changesDemographic changesPerceptual changesKnowledge-based

concepts43


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Type Description Examples

Invention Totally new product, service, or process

Wright brothers—airplaneThomas Edison—light bulbAlexander Graham Bell—telephone

Extension New use or different application of an already existing product, service, or process

Ray Kroc—McDonald’s Mark Zuckerberg—FacebookBarry Sternlicht—Starwood Hotels & Resorts

Duplication Creative replication of an existing concept

Wal-Mart—department storesGateway—personal computersPizza Hut—pizza parlor

Synthesis Combination of existing concepts and factors into a new formulation or use

Fred Smith—Fed ExHoward Schultz—Starbucks


Principles of Innovation Be action oriented. Make the product, process, or service simple

and understandable. Make the product, process, or service customer-

based. Start small. Aim high. Try/test/revise. Learn from failures Follow a milestone schedule. Reward heroic activity. Work, work, work.


Strategies to Encourage Creativity and Innovation

1.Recognize personal abilities.2.Change your perception.3.Change the organizational

culture.4.Dare to fail.5.Create an organization conducive

to creativity and innovation.


Consultancy Skills in BusinessTwo definitions of "consultant." "A person who consults with another

or others." "An expert who is called on for

professional or technical advice or opinions."

Professionals in many fields use consultation services to help solve problems,improve quality and increase skills and knowledge.


Below are listed some generalcharacteristics of most consultation relationships:

It involves a helping or problem solving process to achieve goals

It occurs between a professional helpgiver and a helpseeker who has responsibility for the welfare of another person

It is a voluntary relationshipThe helpgiver and helpseeker share in solving the problemThe goal is to help solve a current work problem of the

helpseekerThe helpseeker benefits from the relationship in such a

way that future problems may be handled more skillfully

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The Stages of ConsultationStage 1: Preparation for ConsultationDevelop an introductory statement to

identify yourself and your services briefly when you make the first contact by phone, in person, or in writing.

Make arrangements to meet at a convenient time and location.

Prepare your “consultant’s tool kit” based on needs you anticipate the consultee has.


Stage 2: Initiation of ConsultationArrive promptly for your consultation visit.Begin building a working relationship by

introducing yourself and your services, describing your role as a consultant, and fees.

Find out what kind of consulting services the program is interested in, and/or is required to receive.

Develop a preliminary plan for consultation needs.

Set an agenda for the rest of the visit based on perceived needs.


Stage 3: AssessmentFocus on concerns identified by the

consultee.Collect information through

discussions, observation.


Stage 4: Identify Needs/ConcernsAnalyze information collected during

the assessment stage and jointly identify needs and/or areas of concern.

Prioritize needs to address.Work with consultee to set goals.


Stage 5: Select StrategyUse a collaborative, problem-solving

approach to generate options and discuss consequences of each.

Select most feasible and potentially successful strategy that can also be implemented with minimal guidance from the consultant.

Incorporate methods of evaluation into the strategy.


Stage 6: ImplementationSet a timeline for implementing the

strategy selected.Identify responsibilities of consultee

and consultant to implement strategy.


Stage 7: EvaluationEvaluate the effectiveness of the strategy

upon completion. Reassess periodically. Provide positive reinforcement for

changes. Adjust plan as needed. Evaluate effectiveness of consultation

relationship periodically . Bring closure to consultation relationship

if no longer needed and/or desired.EUW 224 ENGINEERING ENTREPRENEURSHIP 55

GOVERNMENT AND PRIVATE AGENCIES RELATED WITH THE INNOVATION ACTIVITIES

Kementerian Sains,Teknologi & Inovasi (MOSTI): Jabatan/Agensi Kerajaan:

National Space Agency (ANGKASA) Department of Chemistry Malaysia (JKM) Malaysia Nuclear Agency (ANM) Malaysian Meteorological Services (MMS) Department Standard Malaysia (DSM) Atomic Energy Lecencing Board (LPTA)

Syarikat Milik Kerajaan: MIMOS Bhd (MIMOS) Multimedia Development Corporation (MDeC) SIRIM Bhd (SIRIM) Technology Park Malaysia Corporation Sdn. Bhd . (TPM) Malaysia Biotechnology Corporation (MBC) Astronautic Technology (M) Sdn. Bhd . (ATSB) National ICT Security and Emergency Response Centre (NISER) Malaysia Network Information Centre (MYNIC)


GOVERNMENT AND PRIVATE AGENCIES RELATED WITH THE INNOVATION ACTIVITIES

Syarikat Subsidiari Khazanah:Malaysian Technology Development

Corporation (MTDC)

Badan Statutory:Malaysia Science Academy (ASM)

Badan Bukan Kerajaan (SWASTA):Malaysian Industry Group High

Technology (MIGHT) Inno Biologics Sdn. Bhd.


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