© 2007 John Wiley & Sons Australia, Ltd. Chapter 3 Creativity, innovation and entrepreneurship.
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Transcript of © 2007 John Wiley & Sons Australia, Ltd. Chapter 3 Creativity, innovation and entrepreneurship.
© 2007 John Wiley & Sons Australia, Ltd
Chapter 3
Creativity, innovation
and entrepreneurship
Chapter outline
• Creativity• Innovation• The role of knowledge, social networks
and strategic resources
Learning objectives
• List the three components of creativity• Use a series of creativity techniques• Define and explain the sources of
innovation• Discuss the different innovation types
Learning objectives
• Explain the link between creativity, innovation and entrepreneurship
• Define the types and attributes of resources within a resource-based view of entrepreneurship
The need for creativity
‘You have to kiss a lot of frogs to find a prince’, said Art Fry, the inventor of Post-it notes at 3M. ‘But remember, one prince can pay for a lot of frogs.’
Source: The Economist (1999), Leaps of Faith, A Survey of Innovation in Industry,
February 20th, pp. 12–16.
Creativity
• Creativity is often associated with the arts.
• In business, creativity can be defined as the production of new and useful ideas.
• Successful, innovative companies do systematically encourage the development of ideas.
The three components of creativity
• Creativity does not only consist of creative thinking, this is only one part of creativity.
• Knowledge and motivation are two other important elements.
Creative thinking skills
• Creative thinking is how people approach problems and solutions
• Depends strongly on the personality as well as how a person thinks or works
• People are more creative if they feel comfortable disagreeing with others
Knowledge
• Expertise or knowledge encompasses everything a person knows and can do.
• Knowledge can be acquired in different ways: – through formal education– practical experience– or interaction with other people.
Knowledge
• Knowledge constitutes a ‘network of possible wandering’; the larger the space, the better.
Motivation
• Motivation determines what a person will actually do.
• 2 types of motivation exist:– intrinsic motivation (motivation from
inside, such as enjoyment of work)– extrinsic motivation (motivation from
outside, such as financial rewards)
Motivation
• People will be most creative when they feel motivated mainly by the interest, satisfaction and challenge of the task itself.
Creativity techniques
• Problem reversal• Forced analogy• Attribute listing• Mind maps• Brainstorming
Factors influencing creativity
• Encouragement of creativity• Autonomy• Resources• Pressures• Mental blocks
Innovation
• Innovation is the successful implementation of creative ideas within an organisation.
• Entrepreneurship can occur with little, if any, innovation.
Innovation
• Newness or uniqueness of innovation is a matter of degree both in terms of the tangible characteristics and in terms of the relevant market.
Incremental vs disruptive innovation
Incremental innovation:• steady improvements• based on sustained technologies• obedient to cultural routines and norms• immediate gains• develops customer loyalty
Incremental vs disruptive innovation
Disruptive innovation: • Change value proposition• Cause fundamental changes in
marketplace• Experimentation and play/make believe• Needs to be nurtured for long periods• Worse initial performance, potential big
gains• Creates new markets
Types of incremental innovation
• Extension• Duplication• Synthesis
Sources of innovation within companies or industries
Drucker identified 4 sources of innovation within a company or an industry:– Unexpected occurrences– Incongruities– Process needs– Industry and market changes
Sources of innovation in the social environment
3 additional sources of opportunities exist outside a company in its social and intellectual environment:– demographic changes– perceptual changes– new knowledge
A process model of creativity, innovation and entrepreneurship
Figure 3.1
Knowledge development during the entrepreneurial process
• During the creativity stage, knowledge is present in a very raw form. It might just consist of ideas and sketches drawn on a piece of paper.
Knowledge development during the entrepreneurial process
• During the innovation stage, knowledge is further refined and the initial idea should pass the ‘feasibility test’. At this stage, knowledge is often codified, for instance, in the form of a formula or patent.
Knowledge development during the entrepreneurial process
• During the entrepreneurship stage, knowledge is embedded in the product or service sold.
Developing and disseminating knowledge through social networks
• Social networks are the catalyst for the development and dissemination of knowledge both for emerging and established organisations.
Developing and disseminating knowledge through social networks
• Nascent entrepreneurs’ personal networks — the set of persons to whom they are directly linked — affect their access to social, emotional and material support.
Developing and disseminating knowledge through social networks
• Network relationships and contacts are fundamental: firstly, to identify opportunities and secondly, to obtain the knowledge and resources required to exploit opportunities.
A resource-based theory of entrepreneurship
• The most creative ideas and cutting-edge innovations are, however, not sufficient to set up a business venture.
• Without resources to exploit an opportunity, even the best opportunity cannot create an entrepreneur.
Principles of resource-based theory
• Resources are necessary to exploit opportunities and to create entrepreneurs.
• The resource-based theory considers that firms have different starting points for resources (called resource heterogeneity) and that other firms cannot get them (called resource immobility).
Principles of resource-based theory
• In order to be successful, entrepreneurs must exploit market imperfections based upon imperfect information or variations in expectations about prices, while adhering to the following simple formula:
Principles of resource-based theory
– buy (or acquire) resources and skills cheaply
– transform the resources into a product or service (production)
– deploy and implement (strategy)– sell dearly (value creation)
Resources types
• Financial resources• Physical resources• Human resources• Technological resources• Reputation• Organisational resources
Attributes of strategic resources
• Sustainable competitive advantage is created when firms possess and use resources that are:– valuable– rare– non-substitutable– hard to copy (historical conditions,
ambiguous causes and effects, complex social relationships)
The role of stories in attracting resources
• A well-crafted story about entrepreneurial resources encapsulates the strategic goals and management of the new venture and indicates why it merits investment.
Summary
• Creativity can be described as the production of new and useful ideas in any domain.
• Creativity stems from creative thinking skills, knowledge and motivation.
• Innovation is the successful implementation of creative ideas within an organisation.
Summary
• It can be distinguished between radical and incremental innovation.
• The successive stages of idea generation (creativity), ideas evaluation (innovation) and ideas implementation (entrepreneurship) can overlap.
Summary
• Sustainable competitive advantage is based on the strategic resources a firm can harness.