Thursday, February 02, 2012

Innovation & Entrepreneurship

Successful innovation needs entrepreneurship. As I explained in "Types of Innovation" - there are four types of innovation: incremental, radical, new ventures, new business models. Of the four, only incremental innovation fits into the existing business structure, the other three will need entrepreneurship to make that innovative idea into a commercial success.

Entrepreneurship is needed for introducing new products, new services, new business models or new business ventures. Entrepreneurship can imply starting new companies or it can also be internal - where managers start a new business within the existing organization. For organizations to succeed in innovation, they must foster an environment of entrepreneurship within the organization - i.e., enable managers to implement new business models or new ventures to support innovations - thereby ensure that the organization prospers.

In a startup or small business, the inventor/innovator and the entrepreneur will be the same person. Since most innovators/inventors may not have the necessary entrepreneurship skills to exploit the intellectual property of their invention/innovation - many startups fail.
For example see: Greatest Running Shoe Never Sold Leaves Inventor Without Deal. Lenn Rockford Hann, the inventor of new type of running shoe could not succeed as he did not have the necessary entrepreneur skills.

Entrepreneurship Skills

Entrepreneurship is an act of starting a new business. This can be an individual starting a new venture or an existing organization (including governments) starting a new venture. Entrepreneurship is exemplified by:

1. Starting a new business
2. Introducing a new product/service.
3. Changing the existing business process/practice to enhance profitability.

The key to be an entrepreneur is to act with limited information and take a financial risk.

Entrepreneurs can be individuals who are employed in a large organization, or can even be self-employed - working on their own venture. Many managers in large organizations are entrepreneurs in the sense that they are acting on limited information and facing a level of business risks.

Organizations need to develop entrepreneurial skills within its employee base to grow and succeed. Entrepreneurial abilities and attitudes increase business productivity and encourages innovations. This involves building a level of risk tolerance and risk taking abilities within the organization by managers and employees.

Entrepreneurs have a stronger preference for independence and autonomy in decision making, and tend to take control of things. Such behaviors must be supported within an organization with adequate control systems to encourage autonomy while being responsible for their decisions.

Entrepreneurship is inherently more risky than general business. The lack of information regarding needs/wants of potential customers, development time/costs, technical issues/problems, manufacturing costs/process, etc. This lack of information results in experimentation in business practices and processes - which impacts the bottom line. While large companies can absorb some losses, for small startups it could be fatal. Manager entrepreneurs in large companies are shielded from personal risks of innovation when compared to lone inventor/entrepreneur.

Innovation & Entrepreneurship Attitudes

Innovation and entrepreneurship go hand-in-hand and share similar attitudes/skills:

  • Creativity
  • Vision
  • Idea Generation
  • Lateral Thinking
  • Problem Solving
  • Opportunity recognition
  • Viability Screening

These skills are needed for innovation and entrepreneurship. In addition, successful businessmen will also need strong skills in:

  • Business Planning
  • Strategic Marketing
  • Selling
  • Financial Management
  • People Skills
  • Leadership
  • Persuasion

Since, no single individual many have all these skills, inventors will have to tie up with people with business skills to take an innovation and make it a business success. (Think of Steve Jobs & Steve Woz, Bill Gates and Paul Allen.)

Closing Thoughts

Innovation is vital for business rejuvenation and business growth. But it takes entrepreneurial skills to bring an innovative idea into market. Inventive individuals and organizations alike must develop entrepreneurship skills - if they want to succeed with innovation. Just having an innovative idea is not enough, it takes entrepreneurship to bring that idea into reality.

No comments: