What is innovation? Is it when you wake up in the morning and discover a new way to reach that part of your back above the spinal cord, and be able to scrub it? Is it when you have no idea of fixing your car, but you manage through a trial and error method? Most people use the famous Greek word Eureka to show a level of accomplishment, where a number of cases do not display any sense of innovation. Innovation activities should result to either creation of new wealth producing resources or endow an existing resource with an enhanced potential of creating new wealth. In the global business world, managers do worry about their personality rather than the innovation process. They constantly ask themselves – “Is my temperament capable of handling ideas? Am I competent enough? These personal traits are not responsible for their innovative ideas. The commitment to search systematically useful and imaginative ideas drives them to success.
Innovation in the business world refers to any activity done in the disciplined effort in the aim of improving business potential. The business world does not limit innovation to an organization of specific size or age. A conscious search for opportunities births innovation. The opportunities can arise within the organization or from the industry and social environment. For a successful innovation, there are three key issues to address. One is the historical factor where the managers obtain insights from ideas that failed in the past. It is essential to recognize the underlying theme the public possesses. Managers should also combine their different knowledge opinions to come up with a successful innovation.
In order to be a successful innovator, an entrepreneur cannot wait for an innovative idea. It is his/her duty to search for the opportunities that have potential to improve the business. Peter Drucker outlines seven distinct areas to look for innovation opportunities in his book Innovation and Entrepreneurship: Practice and Principles. These areas include unexpected occurrences, incongruities, processing needs, changes in the market and industry, changes in demographic patterns, changes in perception, and new knowledge ideas. Some of the opportunities exist within a company or industry while others exist in the social or intellectual environment external to the business. Innovation in the business world does not originate from a flash of innovation. It arises from an in-depth analysis of these seven kinds of opportunities. Since innovation is a process, it should not end at the analysis stage. After identifying the opportunity, there is still a need to attain a leap of imagination to steer the business at arriving at the right response.
Unexpected occurrences are in the form of unexpected success or unexpected failure. The managers in an organization should be able to cultivate an unexpected circumstance to an opportunity. The exploitation of an unexpected success will lead the organization to venture into fields that realize the possible unexpected success. The unexpected failure also poses as a source of innovation. Entrepreneurs analyse the event of unexpected events by determining the factors that lead to the failure. A shift in the market structure may cause an unexpected failure, where consumers require customized products and services. In order for companies to realize opportunities in the area of unexpected occurrences, they should equally acknowledge the areas where the company achieves better results above budget, and the areas where the results fall short of expectations.
Incongruities in business occur when there are inconsistencies in its environment. The managers exploit the incongruities to arrive at opportunities. It may occur within the logic of a process where a single step in the process differs with its overall fundamental rhythm. An example of such incongruity occurred in the eye surgery operation. The surgeons learned to cut the ligament, but it was a different procedure from the rest of the operation. Alcon Laboratories exploited the incongruity to an innovation by dissolving the ligament with the help of an enzyme. This led to Alcon’s worldwide monopoly. An incongruity may also exist in the economic realities of a business, where a company may have a steady growth in the market, but a declining profit margin. The incongruity between expectations and result car open up innovation opportunities. The company may create assumptions in the budget that do not agree to the real costs by the organization. The managers identify the source of the real costs and innovative ideas arise that curb the costs.
The industry and market are susceptible to change. These changes can occur in a fortnight, and provide an opportunity for innovation. In the financial industry for example, knowledge of the structure is key in determining the dominant controllers like institutional investors. The structure of an industry evolves quickly, arriving at figures of 40% growth in ten years or fewer. Traditional leaders neglect the nature of the growing market changes. They tend to concentrate on what they already have rather than competing with the new arising ideas. This provides innovators with a clear platform as new opportunities will require a new way to approach the market, organize, and define it.
The managers can use areas outside the company as sources of innovative ideas. Demographic change is a reliable external source for innovation. Managers who watch the patterns are able to exploit them, and can achieve rewards towards their companies. Many people may watch the patterns and identify them, but acting on them leads to innovation. Demographic changes include age distribution patterns, geographic location, occupation, and education of people. The opportunities are most rewarding and least risky among the pursuits of entrepreneurship. An example is in Japanese robotics industry. Everyone was aware of the change in educational pattern as most people were proceeding with their studies beyond high school. This would lead to a decline in people available in occupation in blue-collar jobs. The Japanese acted on this information and pride in a ten-year lead in robotics.
Changes in perception by the managers of an organization may lead to innovation opportunities. The perception of a manager can shift from viewing a glass as half-full, to viewing it as half-empty. The idea is to shift concentration from improvements in the industry to the problem arising on how far the industry is at attaining its ideal goal. This view originates various opportunities that aim at reaching the goal. The change in perception does not alter the facts, but the meaning. The perception of the computer as a threat changed, and the new perception shows its importance in improving business activities. The managers test and exploit perceptions for innovation opportunities.
New knowledge is the basis of innovation. Historical facts show that knowledge-based innovations – technical, scientific, or social – led to rewarding opportunities. They require long lead times and converging various kinds of knowledge. Managers should take caution on the challenges arising from implementing an opportunity from this field. New knowledge innovations take time to implement, are difficult to predict their outcome, and have a high rate of casualty. Innovation from new knowledge is effective when arrived at from various kinds of knowledge. Success in the innovations requires an in-depth analysis of the intended user. The emphasis on the user needs and capabilities is essential as the innovation is dependent on the market.
Any innovation requires an analysis of the source of the opportunity. The innovator assesses the quality of an innovation that makes it an opportunity. They analyse the potential market, viewing the users’ expectations, capabilities, needs, and values. Although an innovation may end up with modest results, it should be set out with the aim of becoming a standard setter in the industry from the beginning. Innovation is a process that works on knowing rather than working. It requires a high level of knowledge and focus. Innovation coupled with distinct entrepreneurial strategies leads to fundamental business growth, but within the global business world, it is the foundation of entrepreneurship.
