Small business management and Entrepreneurship David Stokes Nicholas

Small business management and Entrepreneurship David Stokes Nicholas Wilson Small Business Management and Entrepreneurship Fifth Edition

Lecture outline Definition of innovation Innovation in detail Measuring innovation Innovation in small firms Managing innovation Sources of innovative opportunity

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 concepts Innovation as achievement The impact of those achievements Capacity to change or innovation as dynamic capabilities

Innovation as achievement In technological context not in social or commercial context New technologies evolve over time Introduction of new technology is a risky process in terms of uncertainties

Innovation as the impact of achievement Making a social or commercial impact Some consequences or impacts may not be anticipated. E. g. the telephone, the car

Innovation as dynamic capabilities It focuses on the idea of innovation as the capacity to change. It is a process Dynamic 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.

Innovation in detail Misinterpretations of innovation Innovation = invention Invention is a creative idea and innovation takes it a step ahead and puts it to work Innovation = 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

Measuring innovation Can it be measured? Four factors can be used Conceptual novelty Technological uncertainty Market uncertainty Extent to which a firm has committed ‘sunk costs’ to the project. The first three factors require judgment and forth can be measured

Do you think small firms are more innovative?

Sources of innovative opportunity The unexpected The incongruous Process need Industry and market structures Demographics Changes in perception New knowledge

The unexpected Unexpected 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

The incongruous An 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

Process need ‘necessity is the mother of invention’ It means the way or process through which products or services are produces

How do you think market and industry structures, demographics and changes in perceptions have lead to innovation?

Innovation and the entrepreneurship To 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.

Innovating for the marketplace Technology Task environment Changing preferences More levels of management

Approaches to the market Product based Concerned with product development Lead to successful products Inflexible and maybe arrogant attitudes towards customers Market 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

Which one would you prefer and why?

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

Who is the customer? Why segment the market?

New ideas Resources available Market opportunity Possible customer And end user segments Selection of best-fit (with firm’s resources) Research and precise Definition of needs of Selected segments Analysis of distribution

why will the customer buy from me? Features - characteristics Benefits – value of a product feature to the customer Price Comparisons Substitute products e. g. book or a cassette programme Benefits offered Competitive edge Compare text books and those targeted at the coffee table