small business and entreprenership 4
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David StokesNicholas Wilson
Small Business Management and Entrepreneurship
Fifth Edition
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Lecture outlineDefinition of innovationInnovation in detailMeasuring innovationInnovation in small firmsManaging innovationSources of innovative opportunity
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Innovation It comes from a Latin word ‘innovare’, which
means ‘to make something new’.It can be defined as the successful exploitation
of ideas – or turning ideas into profitable products, processes, services or business practices.
There are three underlying conceptsInnovation as achievementThe impact of those achievementsCapacity to change or innovation as dynamic
capabilities
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Innovation as achievementIn technological context not in social or
commercial contextNew technologies evolve over timeIntroduction of new technology is a risky
process in terms of uncertainties
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Innovation as the impact of achievementMaking a social or commercial impactSome consequences or impacts may not be
anticipated. E.g. the telephone, the car
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Innovation as dynamic capabilitiesIt focuses on the idea of innovation as the
capacity to change.It is a processDynamic capabilities means a learned and
stable pattern of collective activity through which the organization systematically generates and modifies its operating routines in pursuit of improved effectiveness.
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Innovation in detailMisinterpretations of innovation
Innovation = invention Invention is a creative idea and innovation takes it a
step ahead and puts it to workInnovation = new products or services only
New markets, new marketing methods, new operating methods
Innovation = original Old ideas can be combined to make them new
Innovation = one-off inspiration It is a gradual and ongoing process
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Measuring innovationCan it be measured?
Four factors can be used Conceptual noveltyTechnological uncertaintyMarket uncertaintyExtent to which a firm has committed ‘sunk
costs’ to the project.The first three factors require judgment and
forth can be measured
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Do you think small firms are more innovative?
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Sources of innovative opportunityThe unexpectedThe incongruousProcess needIndustry and market structuresDemographicsChanges in perceptionNew knowledge
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The unexpectedUnexpected success or failure often gives
clues to underlying trends which can lead to innovation.
Success – computers were basically designed for scientific purposes
Failure – restaurant with sales of jacket potatoes rather than the main courses
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The incongruousAn incongruous event or result is a
discrepency between what is said and what everyone expects.
Its is a further sign that changes are taking place
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Process need‘necessity is the mother of invention’It means the way or process through which
products or services are produces
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How do you think market and industry structures, demographics and changes in perceptions have lead to innovation?
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Innovation and the entrepreneurshipTo help those that remain small and yet wish
to innovate, it has been suggested that cooperation and collaboration among smaller enterprise can help overcome some disadvantages
The concept of networked innovation is becoming popular
The aim is to promote individual projects by pooling ideas, technology, and commercial experiences.
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Innovating for the marketplaceTechnologyTask environmentChanging preferencesMore levels of management
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Approaches to the marketProduct based
Concerned with product developmentLead to successful productsInflexible and maybe arrogant attitudes
towards customersMarket based
It seeks to find out what the customers want and is willing to pay for
Market research is conducted and then products are developed
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Which one would you prefer and why?
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It may be a mixture of both!!Entrepreneurs tend to take an idea first and then
seek a market. They understand that research can not always predict needs because sometimes customers do not know what is possible through a breakthrough
Owners usually have a specific skill or knowledge that they wish to exploit
The business is already established and wishes to add to its existing range without diversification
The business has established products which it wishes to sell to new customers
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Who is the customer?Why segment the market?
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why will the customer buy from me?Features - characteristicsBenefits – value of a product feature to the customerPrice
ComparisonsSubstitute products e.g. book or a cassette programmeBenefits offered
Competitive edge
Compare text books and those targeted at the coffee table