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A world-class business education in a single volume.
- Principles of Innovation: Getting Rid of Yesterday
- Innovation and Entrepreneurship by Peter F. Drucker
- Innovation and Entrepreneurship Summary and Review
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Drucker defined innovation as the task of endowing human and material resources with new and greater wealth-producing capacity. He expanded on this with "Managers must convert society's needs into opportunities for a profitable business. That, too, is a definition of innovation. Innovation is a term of economics rather than technology. With regard to types of innovation, Drucker said: "It is not enough for the business to provide just any economic goods and services; it must provide better and more economic ones.
Principles of Innovation: Getting Rid of Yesterday
Has Innovation and Entrepreneurship by Peter Drucker been sitting on your reading list? Pick up the key ideas in the book with this quick summary. All it takes is knowing how to employ the right strategies and understanding the key to being a successful entrepreneur — innovation.
How do entrepreneurs become successful? Some say luck, others say hard work. But the truth is — to be a successful entrepreneur you must always be on the look-out for sources of innovation.
That is, events that offer the impetus for innovation. As a result, they lost a lot of their market share. Another internal source of innovation comes from changes or development in an industry or market.
For instance, in the s the automobile industry suddenly changed from a market where each country was led by local companies to an international market dominated by multinationals.
Companies like Volvo took advantage of this change and aggressively marketed themselves globally. Consequently, Volvo went from a small manufacturer that was barely able to break even to a worldwide success. So the more you can utilize the unexpected and know how to leverage a changing market, the more you will benefit.
So far we have talked about two internal sources of innovation. But there are two more — process need and incongruities — which we will explore in this book summary. Process need focuses on finding a weak link in a process, because a weak link is a perfect opportunity for an entrepreneur to innovate.
In the s, one of the most common eye operations was cataract removal. Although the process was nearly perfect, there was one problematic step where a ligament had to be severed. This sometimes led to bleeding, which could damage the eye.
Pharmaceutical salesman William Connor spotted this weak link and found a solution. He discovered a way to use an enzyme that could dissolve the ligament without cutting it, and a way to store this enzyme for long periods of time. Connor's innovation became an accepted stage in the cataract-removal process and allowed him to sell his company for a handsome profit.
For example, before the s, shipping companies tried to make their ships faster in order to move from port to port more quickly. But at the same time, shipping costs rose dramatically. This gap was closed through the innovation of the container ship, which could be loaded and unloaded much more quickly.
As a result, shipping costs fell by 60 percent. Not all the opportunities for innovation come from within an industry, market or business. Some come from the outside world, like social, political and academic fields. These are known as external sources of innovation. One external source of innovation comes from understanding demographics , because when the population changes, so does the market. Demographic changes can refer to changes in the make-up of a population, such as its size and age.
This alters market demands as different people desire different products and services. Melville, a shoe retailer, took advantage of this. This strategy proved highly successful. This source, which involves the development of a new idea or invention, is what people often picture when they think of innovation.
But the use of knowledge to create a successful innovation is usually an extensive process and requires many different types of know-how. Take the computer, for instance. This was the result of centuries of work in mathematics, electronics and programming. Development for the computer really began in the seventeenth century with the invention of a binary number system.
In the early nineteenth century came a system used to create a simple calculating machine. Then, in , a way of programming instructions into a machine was invented. Obviously, not all inventions take centuries, but we can see that knowledge-based innovation can be a very drawn-out process.
Businesses can also be innovative. However, in order to do so they must follow certain steps. The first is to have standardized policies that create an environment where innovation can flourish. To answer this question, a business needs to adopt a policy where they can be ready to abandon outdated practices as necessary and look for innovative changes.
It is important to realize that every product, service and technology has a limited lifespan, which means that alternatives need to be found. Finally, the business needs to make a plan of when innovations are likely to be needed in order to be ready to take advantage of them. The second step a business needs to take is to create an organizational structure that rewards entrepreneurship.
New innovative projects should be structured separately from old ones, given their own space and have their own high-level manager in charge. Lastly, there should be an appraisal system within the company to improve its entrepreneurial performance, as it is essential to know if the results of its efforts meet its expectations.
For example, one major bank built a feedback system that allowed them to know what they could expect from new ventures.
By building up this feedback they could estimate when new ventures should start producing results. All new enterprises need to have a plan. Specifically, they need to plan what they are doing now so they can continue in the right direction. To build an effective business you need to follow four steps.
Most entrepreneurs actually end up succeeding in a completely different market than that in which they expected to, so it is important for a new venture to keep an eye on a variety of markets.
For example, one small Indian company bought a license for a European-designed bicycle with a small engine which they thought would be ideal for India. Surprisingly, no one wanted the bicycle, yet the engine was in high demand. As it turned out, it was perfect for irrigation pumps.
Because of this finding, the company owner was able exploit the unexpected market and profit from it. One good guide is to have a clear view of how much cash is needed 12 months in advance, and for what purposes.
The final two steps are: build the best management team as soon as possible, and decide on the role of the founding entrepreneur. The founder should start building a management team before the business becomes too big for one person to control.
With the team in place, the founders should ask themselves how they can best serve the company. It is important to realize that in some cases it may be better for the founder to leave the company if they can no longer add value to it. When you enter a market as an entrepreneur, you need to find a way of securing yourself a market share. In order to stand the best chance of doing this, you should adopt an entrepreneurial strategy.
To get there first you need to go all-out. You only get one chance to be the first entrepreneur in your field, so you have to push hard to get there.
For example, in the s, Hoffmann-La Roche was a small chemicals company manufacturing dyes in a competitive market. Then it look a gamble in a new field. This field was vitamins, which were newly discovered but had attracted little interest elsewhere. After acquiring their patents, Hoffmann-La Roche hired discoverers with huge salaries and invested all the money it could come up with, including large borrowed sums, to manufacture and market the vitamins.
Their gamble paid off. The company got to the vitamin market first and remained the world leader 60 years later. To hit the top spot you need to ensure that you know the market inside out, that the opportunities you are aiming for are viable. If you make the wrong choice, you will fail. This is much like aiming a rocket at the moon: you need to get the calculations and measurements right at the beginning, before you launch.
The next entrepreneurial strategy involves finding the gaps that your rivals ignore. There are two ways to do this: creative imitation and entrepreneurial judo. Creative imitation is where an entrepreneur imitates a pre-existing idea but applies it in a way that is more appealing to customers. But very soon after, they abandoned their work on it. Often, companies think that their way of doing something is the best, which causes them to dismiss new ideas.
Fortunately for other companies, this can be exploited. For example, in the s, the transistor was invented by a small company in the United States. But one little-known company at the time did recognize the potential of the transistor. Quite often, an entrepreneur can be successful if they specialize in one particular area. The author defines this strategy as ecological niches , and there are various ways to discover them.
The first is that you can follow a toll-gate strategy , where you gain market control through a product or service which is a vital aspect of another product or service. A perfect example of this is the enzyme developed by William Connors, which became a crucial stage in the removal of cataracts. It is important to note the danger of this strategy, though, as it is dependent on the other product.
These two are very similar. For example, in the early years of the automobile industry, manufacturing companies were expert mechanics, but they knew very little about the electronics needed in each car.
So many electronics firms who had those missing skills profited from this. Bear in mind, however, that there is a risk that your specialty skill could eventually become universal, meaning that you lose your niche.
It centers on taking an established product and creating a new customer demand for it. So The Lenox China Company had an idea. The Lenox China Company cunningly found a way of satisfying the customer demand without changing the product.
Innovation and Entrepreneurship by Peter F. Drucker
Abstract: A quantitative methodology is presented to analyze the extent to which the degree of the various types of innovation influence the growth of the various types of business in the small enterprise and whether entrepreneurial capacity drives these types of innovation. Four types of business were considered high-tech companies, specialized services, companies with own brand products, and companies with conventional processes and the four classic types of innovation. The methodology is exploratory and supports empirical study applied to a sample of companies. The results showed that the appropriation of some additional value, like own brand, potentiates the differences in the relationship between entrepreneurship, innovation and revenue growth. Keywords: Organizational Performance, Competitiveness.
PDF | On Jan 1, , William B. Gartner and others published to you. Innovation and Entrepreneurship, by. Peter. F. Drucker. New.
Innovation and Entrepreneurship Summary and Review
Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. Drucker has postulated that entrepreneurship is the? As such, he has outlined that it is knowledge-based, and that like any other practice such as medicine or engineering it can be learned.
Has Innovation and Entrepreneurship by Peter Drucker been sitting on your reading list? Pick up the key ideas in the book with this quick summary. All it takes is knowing how to employ the right strategies and understanding the key to being a successful entrepreneur — innovation. How do entrepreneurs become successful? Some say luck, others say hard work.
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