CS Foundation Entrepreneurship – Creativity and Innovation Notes
→ Entrepreneur and its tools:
Creativity – “Creativity is the capability or act of conceiving something original or unusual.”
Entrepreneurs are naturally creative individuals who are constantly coming up with new ideas. This is a never-ending process; once the business is up and running and products or services are being sold, an entrepreneur studies consumer reaction, conducts market research, and works to improve what his business is offering to stay successful.
Principles of creativity:
- Expertise: All the knowledge and skills the person is having
- Creative thinking skills: approaching problems and trying to find the solutions to it.
- Motivation: desire to do something
- Innovation: “Innovation is the implementation of something new. Innovation in New Product Development could include upgrading an existing product or developing a totally new concept to create an original and innovative.
- Product: This is also true for services and processes, thus innovation is recognized in the literature as ranging from incremental to radical. We tend to think of innovation as a new product but you can innovate with a new process, method, business model, partnership, route to market, or marketing method.
Seven principles of Innovation given by Steve Jobs
1. Do what you love. Think differently about your career. Steve Jobs followed his heart his entire life and that, he said, made all the difference. Innovation cannot occur in the absence of passion and, without it, you have little hope of creating breakthrough ideas.
2. Put a dent in the Universe. Think differently about your vision. Jobs attracted like-minded people who shared his vision and who helped turn his ideas into world-changing innovations. Passion fuelled Apple’s rocket and Jobs’ vision created the destination.
3. Kick start your brain. Think differently about how you think. Innovation does not exist without creativity and for Steve Jobs, creativity was the act of connecting things. Jobs believed that a broad set of experiences broadened the understanding of the human experience.
4. Sell dreams, not products. Think differently about your customers. To Jobs, people who bought Apple products were never “consumers.” They were people with dreams, hopes and ambitions. Jobs built products to help them fulfill their dreams.
5. Say no to 1,000 things. Think differently about design. Simplicity is the ultimate sophistication, according to Jobs. From the designs of the iPod to the iPhone, from the packaging of the Apple’s products to the functionality of the Apple Website, innovation means eliminating the unnecessary so that the necessary may speak.
6. Create insanely great experiences. Think differently about your brand experience. Jobs made Apple stores the gold standard in customer service. The Apple store has become the world’s best retailer by introducing simple innovations any business can adopt to make deep, lasting emotional connections with their customers.
7. Master the message. Think differently about your story. Jobs were a great corporate storyteller, turning product launches into an art form. You can have the most innovative idea in the world, but if you cannot get people excited about it, it doesn’t matter
→ Environmental Scanning
Careful monitoring of an organization’s internal and external environments for detecting early signs of opportunities and threats that, may influence its current and future plans.
Objectives of an environmental scanning system
- Detecting scientific, technical, economic, social and political trends and events important to the institution
- defining the potential threats, opportunities, or changes for the institution implied by those trends and events
- promoting a future orientation in the thinking of management and staff and alerting management and staff to trends that are converging, diverging, speeding up, slowing down, or interacting.
1. SWOT analysis
The SWOT analysis begins by conducting an inventory of internal strengths and weaknesses in your organization. You will then note the external opportunities and threats that may affect the organization, based on your market and the overall environment. The name says it: Strength, Weakness, Opportunity, Threat. A SWOT analysis guides you to identify the positives and negatives inside your organization (S-W) and outside of it, in the external environment (O-T). The primary purpose of the SWOT analysis is to identify and assign each significant factor, positive and negative, to one of the four categories, allowing you to take an objective look at your business. The SWOT analysis will be a useful tool in developing and confirming your goals and your marketing strategy.
What are your own advantages, in terms of people, physical resources, finances? What do you do well? What activities or processes have met with success?
What could be improved in your organization in terms of staffing, physical resources, funding? What activities and processes lack effectiveness or are poorly done?
What possibilities exist to support or help your effort– in the environment, the people you serve, or the people who conduct your work? What local, national or international trends draw interest to your program? Is a social change or demographic pattern favourable to your goal?
Is a new funding source available? Have changes in policies made something easier? Do changes in technology hold new promise?
What obstacles do you face that hinder the effort-in the environment, the people you serve, or the people who conduct your work? What local, national or international trends favour interest in other or competing programs? Is a social change or demographic pattern harmful to your goal?
Is the financial situation of a major funder changing? Have changes in policies made something more difficult? Is changing technology threatening your effectiveness?
2. Pestle Analysis
The term PESTLE has been used regularly in the last 10 years and its true history is difficult to establish.
PESTEL stands for:
- P – Political
- E – Economic
- S – Social
- T – Technological
- E – Environmental
- L – Legal
A PESTLE analysis is a useful tool for understanding the ‘big picture’ of the environment in which an organisation is operating. Specifically a PESTLE analysis is a useful tool for understanding risks associated with market. The six elements form a framework for reviewing a situation and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea.
→ Political Factors:
(a) political factors refer to the stability of the political environment and the attitudes of political parties or movements
(b) government influence on tax policies, or government involvement in trading agreements.
(c) freedom of press
(d) environmental and consumer protection legislation
(e) trade restrictions
(a) economic growth rates,
(b) levels of employment and unemployment
(c) costs of raw materials such as energy, petrol and steel,
(d) interest rates and monetary policies
(e) exchange rates and inflation rates.
→ Social Factors:
(a) culture of the society that an organization operates within.
(c) age distribution
(d) population growth rates
(e) level of education
(f) distribution of wealth
(g) social classes, living conditions and lifestyle.
→ Technological Factors:
(a) the effect of new and emerging technology
(b) changes in information and mobile technology,
(c) changes in internet and e-commerce or even mobile commerce
(d) and government spending on research.
(e) Technological developments on digital and internet-related areas, but it should also include materials development and new methods of manufacture, distribution and logistics.
→ Legal Factors:
(a) the effect of legislation
(b) employment laws
(c) foreign transaction laws
(d) tax laws
→ Environmental Factors:
(a) environmental legislation
(b) issues such as limited natural resources,
(c) waste disposal and recycling procedures.
(d) energy available and costs
3. Porter’s Approach:
Michael E. Porter while working for the Harvard Business School and the Boston Consulting group applied the principles of microeconomics and business strategy to analyze requirements in individual sectors. Developing the five forces in line with the business goals of utilizing an organizations/projects limited resources on its greatest potential opportunities. Porter identified five factors that act together to determine the nature of competition within an industry.
1. Threat of new entrants to a market:
- If new entrants move into an industry they will gain market share and rivalry will intensify
- The position of existing firms is stronger if there are barriers to entering the market.
- If barriers to entry are low then the threat of new entrants will be high and vice versa
2. Bargaining power of suppliers:
- If a firm’s suppliers have bargaining power they will
- Exercise that power
- Sell their products at a higher price Squeeze industry profits
3. Bargaining power of customers (“buyers”):
Customers tend to enjoy strong bargaining power when:
- There are only a few of them
- The customer purchases a significant proportion of output of an industry
- They possess a credible backward integration threat – that is they threaten to buy the producing firm or its rivals
- They can choose from a wide range of supply firms
- They find it easy and inexpensive to switch to alternative suppliers
4. Threat of substitute products:
The extent of the threat depends upon
– The extent to which the price and performance of the substitute can match the industry’s product
– The willingness of customers to switch
– Customer loyalty and switching costs
5. Degree of competitive rivalry:
If there is intense rivalry in an industry, it will encourage businesses to
- engage in Price wars (competitive price reductions)
- Investment in innovation and new products
- Intensive promotion
→ Environmental Scanning process:
Careful monitoring of an organization’s internal and external environments for detecting early signs of opportunities and threats that may influence its current and future plans is Environmental Scanning.The goal of environmental scanning is to alert decision-makers to potentially significant changes before they crystallize so that decision makers have sufficient lead time to react to the change.
Types of environmental scanning
- Passive scanning: ongoing scanning is passive scanning. It has been traditionally the major source of information about the external world.
- Active scanning: the resources to be scanned are specially selected it involves the conscious selection of continuous resources and supplementing them with existing resources as needed
- Directed scanning: active scanning of an existing resource for a specific item is directed scanning.
→ Market assessment:
- To penetrate a market, the usual starting point is to undertake a market assessment which would assess market attractiveness and potential of the product by looking at the size, distribution channels, patterns growth/decline and trends.
- Marketing is the process of developing and implementing a plan to identify, anticipate and satisfy consumer demand, in such a way as to make a profit.
Various steps involved in market research are:
- Defining the problem: Formulating a problem is the first step in the research process. Thus you should know the object of market analysis before beginning the research
- Analysing the situation: it is actually trying to find whatever information is available regarding the problem that is being faced. The purpose of the situation analysis is to indicate to a company about the organizational and product position, as well as the overall survival of the business, within the environment.
- Obtaining data specific to the problem: next step is to gather all the information to make a market strategy. Data can be collected in many ways like survey, observation etc. The purpose is to collect the data and to see how the market will react to particular product.
- Data analysis: thus the data which has been collected is analyses which involves statistics. Conclusions are to be drawn with the help of data. This is the time of the entry of experts cause one wrong analysis could lead to major loss.
- Fostering ideas: The summary report, as its name implies, summarizes the research process and presents the findings and conclusions as simply as possible. These ideas are now to be used for marketing decisions.
- Marketing Plan: Thus by making a marketing plan a real and focused plan can be made by a business owner for selling his product.
As soon as a company initiates development strategy and planning activities, the time is right to start thinking about the creation of a business plan. Developing a business plan is an intense and time-consuming process and yet can have many significant benefits:
- A Business Plan identifies key areas of your business so you can maximize the time you spend on generating income.
- Key investors will want to look at your Business Plan before providing capital.
- A Business Plan helps you start and keep your business on a successful path.
- You should prepare a Business Plan, although, in reality, many small business owners do not.
- A Business Plan is a written document that defines the goals of your business and describes how you will attain those goals.
→ A Business Plan is worth your considerable investment of time, effort and energy.
- A Business Plan sets objectives, defines budgets, engages partners and anticipates problems before they occur.
- It has four different phases Identify and evaluate the opportunity
- Before investing time and money into a business it is important to have as clear as possible of a picture of what an entrepreneur is getting into. An entrepreneur has to see if it’s worth his time and money to pursue an idea. He has to see if the idea is good and there is possible opportunity then the first stage towards the development of a business plan starts.
Whether the business is being started as a new business or a new venture of an existing business, opportunity does not arise in a day it has to be constantly monitored so that a hit can be made at the best time. Thus survey is a basic source to look out for opportunities.
Once the purpose of the business plan has been clearly defined and the target audience has been identified, innovators should tap into their networks to clearly understand what the target audience looks for in a business plan. Opportunity assessment includes o Description of product or services
- Assessment of opportunity
- Details about the entrepreneur and team (success factors)
- Details of all the resources needed
- Source of finance
→ Developing a business plan:
A good business plan is to use the opportunity and look out for the resources for bringing the business into action. The critical first step, an entrepreneur should do is to create a business plan to communicate this opportunity. This document serves various purposes. First and perhaps most importantly, it forces the entrepreneur to answer the difficult questions and nail down the key elements of his or her concept. The business plan is also the operating guideline for the new venture; it articulates the goals, as well as the means for achieving them. The plan serves as the means of communication with potential sources of funding, describing both the business and the entrepreneur’s ability to organize and conceptualize the details.
→ Determine the resources required:
Develop a cash flow statement so you understand what your needs are now and will be in the future. Although there are many investors across much of the country, their desire for privacy makes them difficult to identify and contact. It takes much less time, on average, to meet with and receive funds from a private investor than a venture capital firm.
While many investors take a board position or an important advising role, funded entrepreneurs can be dissatisfied with the level of involvement. Venture capitalists often provide considerably more support in the management of the business, setting of targets and staffing.
Before accepting angel financing, the entrepreneur should understand the investor’s motivations and goals and establish guidelines for their respective roles.
An entrepreneur should try that at the beginning of the business most of the ownership should be with him so that he has greater freedom for taking decisions.
→ Manage the enterprise:
The operational problems of the enterprise should be looked upon. A control system must be established so that problems can be identified.
- This section should include who’s on the board (if you have an advisory board) and how you intend to keep them there. What kind salary and benefits package do you have for your people? What incentives are you offering? How about promotions? Reassure your reader that the people you have on staff are more than just names on a letterhead Entrepreneural motivation
- Entrepreneurial Motivation is the drive of an entrepreneur to maintain an entrepreneurial spirit in all their actions. Motivation has its origin from Latin word “movere” meaning to move. Thus a spirit to move brings into picture entrepreneur. He is the person who is ready to take a risk for his dreams. Motivation may be diverse, multiple and dynamic.
- It is not just the money which attracts the people for becoming entrepreneur. The reasons are autonomy that is People want to be their own boss. The other is identity fulfilment, which is more about people having a vision about a product or a service. But their employers do not give them the freedom to develop within the company structure. That is a key driver. Other is to do something that you love and making money out of it is simply an extremely liberating thing to do.”
- It is not just motivation which forces people to become entrepreneur but other things which are also a part of the person becoming an entrepreneur are:
it is the believe in himself or herself, self-efficacy is self-confidence based on an individual’s perceptions of their own skills and abilities. They are the people with strong efficacy.this characteristic is must for entrepreneur because the environment is very difficult and even hostile for entrepreneurs.
Entrepreneurial self-efficacy is best seen as a multidimensional construct made up of goal and control beliefs and propositions for how these two different dimensions will play a role during phases in the process of starting-up a new business are developed.
creativity is producing something new, improving the product, using the same product to cater new needs, painting, writing, sculpting etc. Entrepreneurs have always relied on their creativity to produce wealth, but the modem creative entrepreneurs goes further. John Howkins defines creative entrepreneurs as people who ‘use creativity to unlock the wealth that lies within themselves’ (may emphasis) rather than external capital. The value they create lies not in their physical products (if any) but in intangible assets such as their brand, reputation, network and intellectual property. They are adept at projecting a desired image and creating a personal brand, both online and offline.
these are the people who are taking risk in business. Starting a new venture in market is a calculated risk. Entrepreneurs do recognize potential risks and they prepare themselves to face and prepare effective strategies to deal with them. Entrepreneurs also design “contingency plans”, or alternative courses of action. Contingency plans show that the entrepreneur is sensitive to important risks and is prepared to handle risks as they occur.
Entrepreneurial Leadership is the ability of an entrepreneur to think strategically and creatively in order to implement changes within an organization. Some of the big entrepreneurs are not great leaders but successful mangers need to have some part of leadership.
Communication is necessary for the establishment, survival and growth of anyentrepreneurship. Communication is defined as the activity of conveying meaningful information. It requires a sender, message and an intended recipient. He should be able to present his lengthy business plan in a way that can be easily understood As well as impressive. So these people have great communication skills.