All Rights Reserved Fundamentals of Entrepreneurship © Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1

All Rights ReservedFundamentals of Entrepreneurship © Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1


CHAPTER 5

ENTREPRENEURIAL CREATIVITY AND INNOVATION


Objectives

The objectives of this chapter are to:provide students with a better understanding of the issues on creativity and innovation especially those that are related to entrepreneurship.provide students with creativity techniques that can be applied in their course works


Learning Outcomes

At the end of this chapter, students should be able to:be more open minded and ready to accept new ideasgain an understanding of issues on creativity, innovation and learn to apply creativity techniques


Entrepreneurial Creativity and Innovation

In free market economy—entrepreneur has to be creative and innovative—in order to be more competitive, to improve market share and to increase profitability.

Creativeness and innovativeness are valuable assets—help entrepreneurs to beat their competitors by being able to offer better quality products, at competitive prices and with better service delivery.


Peter Drucker (1986) has stated that, ‘Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service.

According to Kuratko (2009), creativity is a process that can be developed and improved. Everyone is creative to some degree, some individuals have a greater aptitude for creativity than others.

Schaper and Volery (2007) stated that creativity is the process through which invention occurs, the enabling process by which something new comes into existence.

Baron and Shane (2008) define creativity as a production of ideas for something new that is also potentially useful.

Entrepreneurial Creativity and Innovation (cont.)


Creative ideas can be worked out or extracted from three different perspectives as suggested by Bessant and Tidd (2007):Creativity at the personal level includes creative style, inclination, ability to identify, assess and develop new ideas and concepts.Group or social creativity stresses the contribution of teams and groups such as creativity through the discussion of a cross-functional team—may provide a better interface between departments or a more synergistic approach that improve effectiveness and efficiency for the whole group or organization.Contextual creativity focuses on creativity that relates to internal and external context such as processes, tools work method, lay out, structures, strategy, concept, environment, climate, logistic, location, etc.





Components Of CreativityCreative Thinking Skills

– refers to how a person identifies a problem and seeks its solution—the capacity and ability to put existing ideas and knowledge together to explore new possibilities.

– an entrepreneur identifies opportunities based on market demand, develops a new product concept, formulates a business strategy and mobilizes the required resources to undertake the project.

– this requires a lot of creative thinking, resourcefulness and execution skills as it is about being creative at finding the right concept, formula, strategy, products, etc. to make the proposal practical, affordable, viable and acceptable to the customers and various stakeholders.



Knowledge– Expertise or knowledge encompasses everything a person

knows and can do—can be acquired in different ways: formal and informal education—education and training are major factors that distinguish the founders of technical ventures from other types of entrepreneurs.

– In order to be creative, a person should have an adequate level of knowledge and skills in the area of his interest as specialized knowledge can enable a person to focus on his specific area of interest—should also have broad general knowledge to enable him to think divergently and integrate or apply other technologies that have been developed in other fields.



Motivation– Motivation determines what people actually want and will do. – There are two types of motivation: intrinsic and extrinsic. Intrinsic

motivation is internally driven through a person interest, desire, aspiration and passion.

– Extrinsic motivation can be divided into financial and non-financial motivation.

– Non-financial rewards can be in terms of compliments, words of encouragement, acknowledgement, peer pressure and encouragement to promote creativity.



Example of sources for new ideas Consumers—the feedback and complaints from consumers will

trigger ideas on how to fulfil the needs and want of the customers.

Existing products and services—existing products and services in the market will give new ideas to entrepreneurs to further improve and upgrade their products and services from time to time.

Distribution channels—members of distribution channels are also excellent sources of market information because of their familiarity with the needs of the market.

Government—government policy, regulation and support can be a source of new product ideas that push entrepreneurs to be innovative and creative.



Creativity TechniquesEntrepreneurs can use several techniques to help generate new ideas such as:

– problem reversal– lateral thinking– forced analogy – mind mapping – brainstorming – attribute listings



Creativity Techniques



Problem Reversal It looks at the opposite of things, see things inside out, backwards or upside down. This technique is based on the premise that the world is full of opposites where the action of viewing a problem from an opposite angle and by asking questions can yield a awareness or realization of issues that hitherto is not obvious or noticeable.



Problem Reversal



Forced Analogy This technique takes a fixed element such as the product or some idea related to the product and forces it and compares it to the attributes of another unrelated object or element. It is also called forced relationship meaning the action of making an association between two unlike things in order to obtain new insights. There are five steps on processes for forced analogy:

– Isolate and list the elements of the problem.– Find and establish possible relationships or connection between the

elements.– Record the relationships in an orderly form.– Analyze the resulting relationships to find new ideas or patterns.– Develop new ideas from this pattern.



Using forced analogy to compare new start-up business with a new born baby.



BrainstormingThe brainstorming term was popularized by Alex Faickney Osborn in 1953.Peters, Hisrich and Shepherd (2008) suggest that when using brainstorming, 4 rules must be adhered to:

– No criticism is allowed by anyone in the group especially negative comments.

– Freewheeling is encouraged because as the idea is wilder, it becomes better.

– Quantity of ideas is desired. The greater the number of ideas, the greater the likelihood of the emergence of the useful ideas.

– Combinations and improvements of ideas are encouraged because ideas of others can be used to produce other new ideas.



Attribute ListingThe attribute listing technique is where the problem is broken down into smaller parts or characteristics and analysis is made on each of these parts to develop ideas on how to improve them. In this technique, the entrepreneur is required to list the attributes of an item or problem and look at each from a variety of viewpoints, looking at the positives and negatives aspects. This technique allows entrepreneurs to process some unrelated ideas and form it into a new combination for new uses.



Mind MappingMind mapping technique was developed and made famous by Tony Buzan. A mind map is a diagram used to represent words, ideas, tasks, or other items linked to and arranged around a central key word or idea. Mind maps are used to generate, visualize, structure, and classify ideas, and as an aid to studying and organizing information, solving problems, making decisions, and writing.



Mind Mapping



Lateral Thinking Lateral thinking technique was introduced and developed by Edward De Bono. Lateral thinking requires a person to explore the possibility of new solutions to a problem from a different approach or perspective. Looking at and analyzing problems from a different perspective may give new insight and new solutions to an old problem or the problem itself may already be irrelevant.



The Process Of Creativity



Knowledge Accumulation This phase focuses more on the study of the background for the subject matter which requires extensive reading, discussion with experts, practitioners, academicians, researchers in the field, attending workshops and seminars. This exploration exposes and helps entrepreneurs to have a better understanding on the subject matter.



IncubationIn the incubation stage, an individual will immerse oneself by allowing the subconscious mind to muse or ponder on the information gathered. The individual may not be directly involved in the creative task. Incubation may be induced by engaging in ‘relaxing activities’ such as painting, meditating or playing sports or board games. The rationale is that new ideas or new insight often emerge when one is busy doing something unrelated to the matter.



According to Davenport and Prusak (2000), ideas are free. Ideas to innovate can come from various sources as mentioned by Drucker (1986):The unexpected sources—sources of innovation might be derived from unexpected success, unexpected failure or unexpected events which trigger ideas and creativity in firms.The incongruity—the uneasiness of customers in dealing with their daily lives could give firms ideas to create something new for the customers. For example, paying bills on the Internet.Process need—opportunity is the source of innovation. Ideas could be derived from the market information.



Changes in industry or market changes that caught everyone unawares—the effect of globalization that has an impact on the industry.

Demographic changes—population change is one of the innovation sources in meeting consumers needs.

Changes in perception, mood and meaning—trend and lifestyles are among the sources of innovation under this source of innovation.

New , scientific and non-scientific knowledge—knowledge-based innovation is based on this source— is unique as the competitors could have a hard time to imitate the innovation.



Evaluation and ImplementationIn this phase, a person transforms the idea into a workable solution. The process of evaluation and implementation requires continuous development and assessment so that a raw idea can be conceptualized, modeled, strategized, refined, reworked, improved, adjusted to make it practical, affordable, viable and acceptable to the customers and stake holders.



Factors Influencing Creativity





InnovationInnovation can be defined as the process by which entrepreneurs convert opportunities (ideas) into marketable solutions. It is the means by which they become catalysts for change (Kuratko, 2009). Innovation is commonly defined as ‘the introduction of something new’ or ‘a new way of doing something’.



According to Kinicki and Williams (2003), innovation is finding ways to deliver new or better goods or services.

Chell (2001) stated that innovation is also deemed as the creation of something new in the marketplace that alters the supply–demand equation.

Peter Drucker said ‘Innovation is change that creates a new dimension of performance.

Many successful innovations improve on an existing product to make it a better product in terms of quality, cost (price), or service delivery.



Innovation, according to Schumpeter (1934), covers:• the introduction of a new good or a new quality of the good• the introduction of a new method of production• the opening of a new market• the conquest of a new source of supply• the carrying out of the new organization of an industry





Sources of Innovation Professor Thomas W. Mason states that successful innovation is seldom the outcome of a brilliant idea. Peter Drucker emphasized looking for unexpected events, stupid situations, needs within current processes and changes in industry structure, demographics and perception.



The following are four sources of innovation for entrepreneurs.– unexpected events or occurrence– new-knowledge concept– changes of demographics– process needs




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All Rights Reserved Fundamentals of Entrepreneurship © Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1