This literature summary of the book Entrepreneurship (Hisrich et al., 2020) covers all important elements that supplement the Entrepreneurship and Innovation course.
Literature Entrepreneurship and Innovation
Dr. P. W. van der Zwan
Universiteit Leiden
September – oktober 2020
Sources:
Hisrich, R. D., Peters, M. P., & Shepherd, D. A. (2020). Entrepreneurship. New York: McGraw-Hill
Education.
Klotz, A. C., Hmieleski, K. M., Bradley, B. H., & Busenitz, L. W. (2014). New venture teams: A review of
the literature and roadmap for future research. Journal of management, 40(1), 226-255.
Lecture 2 – The entrepreneurial opportunity and innovation
Chapter 4 – Creativity and the business idea
Traits that are common with successful entrepreneurs: determination to overcome personal failure,
intense conviction and a desire to solve big problems. Musk was determined and wanted to focus on
challenges like solar power, space travel and electric cars. Learning to overcome setbacks is critical as
entrepreneur and Musk’s life has demonstrated that. Individuals who can successfully manage
multiple ventures, like Musk, are rare. A rare combination of mental skills: a deep understanding of
technological possibility, strong design instincts, a clear grasp of the economic ecosystem and an
uncanny ability to enter the head of a future customer.
A trend often provides one of the best opportunities for starting a new venture, particularly at the
start of a trend. There are seven trends that provide opportunities. (1) wearable trend: the ability of
carrying computers to monitor and record activity and display relevant information continues to
increase in capability. The wearable tech industry includes: augmented reality, smart watches, body
monitoring. (2) Green trend: it provides inspiration for entrepreneurs around the world. There has
been a shift beyond traditional capital-intensive commodities manufacturing and toward
downstream business models designed to scale quickly with relative capital efficiency (energy
efficiency). (3) payments: money, and the way we manage and exchange it, continues to be an
industry undergoing massive transformation. Services for lending money and products that allows
anyone to accept credit cards, as well as billing and accounting services. Additionally new forms of
currency, like Bitcoin. (4) maker trend: innovators and entrepreneurs throughout the world are
focusing and designing useful new products, making manufacturing, particularly factories more
efficient and creating better materials. (5) mobile trend: the mobile continues to revolutionize the
way individuals make contact, make purchases, and interact with each other. (6) health trend: health
maintenance and concerns about health care provisions together are one of the biggest trends today
that will continue in the next decade as the world population continuous to age. (7) the internet of
things: the potential for nearly everything we interact with to be connected to the internet has given
rise to new products that people never imagined could benefit from having an embedded WIFI
transmitter.
Some of the more fruitful sources of ideas for entrepreneurs include: consumers, existing products
and services, distribution channels, the federal government and research and development. To
,determine what consumers might need now and in the future often requires a market research
study. Entrepreneurs should monitor competitive existing products/services on the market. This
analysis uncovers ways to improve on these competitive offerings that may result in a new
product/service that has more market appeal. Members of the distribution channels are also good
sources for new ideas reflecting their familiarity with the needs of the market. Channel members can
have suggestions for new products, or help in marketing the entrepreneurs new product. The federal
government can also be a source of new product ideas in two ways. (1) the files of the patent office
contain numerous new product possibilities. (2) new product idea can evolve in response to
government regulations. The largest source new ideas is the entrepreneur’s own research and
development efforts, which may be a formal endeavour connected with current employment or an
informal one in a basement or garage.
Methods of generating ideas
Focus groups have been used for a variety of purposes for the last 50 years. A moderator leads a
group of participants through an open interview. In addition to generating new ideas, the focus
group is an excellent method for initially screening ideas and concepts. The result can be analysed
more quantitatively making the focus group an even more useful method for generating new product
ideas. The brainstorming method stimulates individuals to be creative by meeting with others and
participating in an organised group experience. Although most of the ideas generated by the group
have no basis for further development, sometimes a good idea emerges. Brainwriting is a form of
written brainstorming. Problem inventory analysis uses individuals in a manner analogous to focus
groups to generate new product ideas. However, instead of generating new ideas themselves,
consumers in the group are provided with a list of problems in a general product category.
While creativity is an important attribute of a successful entrepreneur, unfortunately, creativity tends
to decline with age, education, lack of use and bureaucracy. Creativity can be unlocked and creative
ideas and innovations generated by using any of the creative problem-solving techniques – a method
for obtaining new ideas focusing on the parameters. Another technique is reverse brainstorming – a
group method for obtaining new ideas focusing on the negative, criticism is allowed. A couple other
methods:
- Gordon method: for developing new ideas when the individuals are unaware of the problem
- Checklist method: developing a new idea through a list of related issues
- Free association: developing a new idea through a chain of word associations
- Forced relationships: developing a new idea by looking at product combinations
- Collective notebook method: developing a new idea by group members regularly recording
ideas
- Attribute listing: developing a new idea by looking at the positives and negatives
- Big-dream approach: developing a new idea by thinking without constraints
- Parameter analysis: developing a new idea by focusing on parameter identification and
creative synthesis
Innovation
Innovation is the key to the economic development of any company, region of a country or country
itself. As technologies change, older products/services decrease in sales and old industries dwindle.
Inventions and innovations are the building blocks of the future of any economic unit. There are
various levels of the degree of innovation based on the uniqueness of the idea. Breakthrough
innovation, technological innovation and ordinary innovation.
,One of the dilemmas faced by entrepreneurs is determining the degree of newness of a
product/service or identifying what is actually new or unique in an idea. Fashion jeans became very
popular even though the concept of blue jeans was not new. The name on these jeans was new. The
newness was in the consumer concept. A product can be new to the manufacturer but not new to
the consumer. Firms are constantly looking for new markets to enter to increase profits and make
more effective use of their resources. Other firms are changing one or more of the marketing mic
elements to give old products a new image.
Classification of new products
New products may be classified from the viewpoint of either the consumer or the firm. Both points
of view should be used by the entrepreneur to facilitate the successful launch of any new product.
From a consumer’s viewpoint there is a broad interpretation of what is a new product. One attempt
to identify new products classifies the degree of newness according to how much behavioural change
or new learning is required by the consumer to use the product. This technique looks at newness in
terms of its effect on the consumer rather than whether the product is new to a company, is
packaged differently, has changed physical form, or is an improved version of an old or existing
product. The internet is an example of a discontinuous innovation that has radically altered our
society’s lifestyle. Another is digitalization and digital media. The basis for identifying new products
according to their effect on consumer consumption patterns is consistent with the marketing
philosophy that satisfaction of consumer needs is fundamental to a venture’s existence.
From a firm’s viewpoint the innovative entrepreneurial firm, in addition to recognising the
consumer’s perception of newness, should also classify its new products on some dimensions. Others
include nanotechnology and social media. New products/services are defined in terms of the amount
of improved technology, whereas market development is based on the degree of new segmentation.
The situation in which there is new technology and a new market is the most complicated and
difficult with the highest degree of risk. Since the new product involves new technology and
customers that are now being served, the firm will need a new and carefully planned marketing
strategy.
Opportunity recognition
Some entrepreneurs need the ability to recognize a business opportunity: this is fundamental to the
entrepreneurial process as well as growing a business. A business opportunity represents a possibility
for the entrepreneur to successfully fill a large unsatisfied need that enough sales and profits results.
Recognizing an opportunity often results from the knowledge and experience of the individual
entrepreneur and where appropriate, the entrepreneurial business. This prior knowledge is a result
of a combination of education and experience and the relevant experience could be work related or
could result from a variety of personal experiences or events. The entrepreneur needs to be aware of
this knowledge and experience and have the desire to understand and make use of it. The other
important factors are entrepreneurial alertness and entrepreneurial networks. Those entrepreneurs
who have the ability to recognize meaningful business opportunities are in a strategic position to
successfully complete the product planning and development process to successfully launch new
ventures.
Product planning and development process
Once ideas emerge, they need further development and refinement. This refining process – the
product planning and development process – is divided into five major stages: idea stage, concept
stage, product development stage, test marketing stage, and commercialization which starts the
, products life cycle. Product planning and development process – the stages in developing a new
product:
1. Idea stage
2. Concept stage
3. Product development stage
4. Test marketing stage: final stage before commercialization in product development process
Chapter 2 – Corporate entrepreneurship
Causes for interest in corporate entrepreneurship
Interest in entrepreneurship within established businesses has intensified due to a variety of events
occurring on social, cultural and business levels. On social level, there is an increasing interest in
doing your own thing and doing it one one’s own terms. Individuals who believe in themselves have
the desire to create something of their own. When meaning is not provided within the organisation,
individuals often search for an institution that will provide it. Corporate entrepreneurship is one
method of stimulating individuals in an organisation who think that something can be done
differently and better. Hyper competition has forced companies to have an increased interest in such
areas as new product development, diversification, increased productivity and decreasing costs by
methods such a reducing the company’s labour force. Entrepreneurial activities consist of creating
something new of value either by redefining the company’s current products or services, developing
new markets or forming more formally autonomous or semiautonomous units or firms.
Establishing a culture for corporate entrepreneurship
There are nine general characteristics of a high entrepreneurial environment.
1. The organisation operates on the frontiers of technology. Since R&D are key sources for
successful new product ideas, the firm must operate on the cutting edge of the industry’s
technology, encouraging and supporting new ideas instead of discouraging them, as
frequently occurs in firms that require a rapid return on investment and a high sales volume
2. Entrepreneurial firms encourage experimentation to facilitate trial and error learning.
Successful products evolve, often through this process of trial and error. A company has to
establish an environment that allows mistakes and failures in developing new and innovative
products, opposite to an established career with promotion system
3. Entrepreneurial firms remove obstacles to creativity in the new product development
process.
4. Entrepreneurial firms make highly accessible resources for experimentation – they have slack
resources such as money and time. often insufficient funds are allocated not to creating
something new, but instead to solving problems that have an immediate effect on the
bottom line
5. Entrepreneurial firms construct and encourage multidisciplinary teams to work on new
ventures. The corporate environment must establish a long time-horizon for evaluating the
success of the overall program as well as the success of each individual venture.
6. The spirit of corporate entrepreneurship cannot be forced upon individuals: it must be on a
volunteer basis. There is a difference between corporate thinking and entrepreneurial
thinking.
7. Entrepreneurial firms create a reward system that encourages creativity, risk taking and even
failure. The corporate entrepreneur needs to be appropriately rewarded for all the energy,
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