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

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

3. 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

4. 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

5. 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

6. 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.

7. 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

8. 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

9. Do you think small firms are more innovative?

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

11. 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

12. 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

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

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

15. 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.

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

17. 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

18. Which one would you prefer and why?

19. 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

20. Who is the customer?
Why segment the market?

21. (with firm’s resources)
Resources available
New ideas
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

22. 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