Small business management and Entrepreneurship

1. Small business management andEntrepreneurship 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?

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