Unit IV

Creativity and Innovation

 Creativity, innovation and entrepreneurs

Creativity is thinking new things, and innovation is doing new things

Creativity is the ability to develop new ideas and to discover new ways of looking
at problems and opportunities.
Innovation is the ability to apply creative solutions to those problems and
opportunities in order to enhance people’s lives or to enrich society

Entrepreneurship = creativity + innovation

From Creativity to Entreprenurship
 creativity
• Every problem is an opportunity for a creative person
• Creativity is a major tool for the survival of an entrepreneur
• It not only gives one the edge for recognizing needs, generating business and
marketing ideas, but it also helps in solving problems
• The person who faces a problem and finds a novel solution or is able to quickly
convert the problem into an opportunity that has ready solutions, will be a survivor
in a field where others, less flexible and less creative, will be left behind
• This is particularly true as small businesses are considered to be more flexible and
pro- active than large, bureaucratic organizations and thus, can react better and
faster to changing circumstances
 Rules for creativity
1. Every problem holds an opportunity
2. Problems are not excuses for giving up
3. Every problem has more than one solution
4. Think sideways
5. Creativity is fun- you get more ideas in an uncritical
atmosphere
 The creative process
1. Idea Germination: The seeding stage of a new idea- Recognition
• The germination process is a seeding process. It is not like planting
seed as a farmer does to grow corn, but more like the natural seeding
that occurs when pollinated flower seeds, scattered by the wind, find
fertile ground to take root.
• Exactly how an idea is germinated is a mystery; it is not something
that can be examined under a microscope. However, most creative
ideas can be traced to an individual’s interest in or curiosity about a
specific problem or area of study
 The creative process (con…)
2. Preparation: Conscious search for knowledge- Rationalization

• Once a seed of curiosity has taken form as a focused idea, creative people embark
on a conscious search for answers. If it is a problem they are trying to solve, then
they begin an intellectual journey, seeking information about the problem and
how others have tried to resolve it
• If it is an idea for a new product or service, the business equivalent is market
research
• Inventors will set up laboratory experiments, designers will begin engineering new
product ideas, and marketers will study consumer buying habits
• Any individual with an idea will consequently think about it, concentrating his or
,
her energies on rational extensions of the idea and how it might become a reality
 The creative process (con…)
3. Incubation: Subconscious assimilation of information- Fantasizing
• Individuals sometimes concentrate intensely on an idea, but, more
often, they simply allow ideas time to grow without intentional
effort
• The idea, once seeded and given substance through preparation, is
put on a back burner, the subconscious mind is allowed time to
assimilate information
 The creative process (con…)
incubation is a stage of “mulling• itI over while the subconscious
intellect assumes control of the creative process
• The subconscious mind is allowed to wander and to pursue
fantasies, and it is therefore open to unusual information and
knowledge that we cannot assimilate in a conscious state
• This subconscious process has been called the art of synectics,
a word coined by W.J.J. Gordon in 1961
 The creative process (con…)
• Synectics, means a joining together of
different and often unrelated ideas
• Therefore, when a person has consciously
worked to resolve a problem without success,
allowing it to incubate in the subconscious will
often lead to a resolution
 The creative process (con…)
• 4. Illumination: Recognition of idea as being
feasible- Realization
• Illumination occurs when the idea resurfaces as a
realistic creation
• Reaching the illumination stage separates
daydreamers and tinkerers from creative people
who find a way to transmute(transform) value
 The creative process (con…)
• 5. Verification: Application or test to prove idea has
value- Validation
• An idea once illuminated in the mind of an individual
still has little meaning until verified as realistic and
useful
• Verification is the development stage of refining
knowledge into application
• This is often tedious and requires perseverance by an
individual committed to finding a way to “harvest” the
practical results of his or her creation
• During this stage, many ideas fall by the wayside as
they prove to be impossible or to have little value
 What is innovation?
• Innovation is the process and outcome of creating
something new, which is also of value.

• Innovation involves the whole process from

opportunity identification, ideation or invention to
development, prototyping, production marketing
and sales, while entrepreneurship only needs to
involve commercialization (Schumpeter).
 What is innovation?
• Today it is said to involve the capacity to quickly
adapt by adopting new innovations (products,
processes, strategies, organization, etc)

• Also, traditionally the focus has been on new

products or processes, but recently new business
models have come into focus, i.e. the way a firm
delivers value and secures profits.
 Sources of New Ideas
• Consumers
– Informally monitor potential ideas and needs.
– Formally arrange for consumers to express their
opinions.
• Existing Products and Services
– Analysis uncovers ways to improve offerings that
may result in a new product or service.
• Distribution Channels
– Channel members can help suggest and market
new products.
 Sources of New Ideas (cont.)

• Federal Government
– Files of the Patent Office can suggest new product
possibilities.
– New product ideas can come in response to
government regulations.
• Research and Development
– A formal endeavor connected with one’s current
employment.
– An informal lab in a basement or garage.
 Methods of Generating New Ideas
• Focus Groups
– A moderator leads a group of 8 to 14 participants
through an open, in-depth discussion in a directive
or nondirective manner.
– An excellent method for generating and screening
ideas and concepts.
Methods of Generating New Ideas (cont.)

• Brainstorming
– Allows people to be stimulated to greater creativity.
– Good ideas emerge when the brainstorming effort
focuses on a specific product or market area.
– Rules of brainstorming:
• No criticism.
• Freewheeling is encouraged.
• Quantity of ideas is desired.
• Combinations and improvements of ideas are encouraged.
Methods of Generating New Ideas (cont.)

• Brainwriting
– A form of written brainstorming.
– Participants write their ideas on special forms or
cards that circulate within the group.
• Problem Inventory Analysis
– Consumers are provided with a list of problems and
are asked to identify products that have those
problems.
– Results must be carefully evaluated as they may not
actually reflect a new business opportunity.
 What is innovation?
• Schumpeter argued that innovation comes
about through new combinations made by an
entrepreneur, resulting in
– a new product,
– a new process,
– opening of new market,
– new way of organizing the business
– new sources of supply
 Innovation
• Types of Innovation
– Breakthrough
• Fewest number of innovations.
• Establishes the platform on which future innovations in an
area are developed.
• Should be protected by patents, trademarks, and copyrights.
– Technological
• Occurs more frequently; not at the same level of
breakthrough inventions.
• Offers advancements in the product/market area.
• Needs to be protected.
Innovation (cont.)

– Ordinary
• Occurs most frequently.
• Extends a technological innovation into a better product
or service or one that has a different market appeal.
• Usually come from market analysis and pull, not
technology push.
Innovation (cont.)

• Defining a New Innovation (Product or Service)

– Newness can be:
• In the consumer concept.
• A change in the package or container.
• Slight changes or modifications in the appearance of the
product. (Industrial market)
– Companies also add products to their product line
that are already marketed by other companies;
products are new to the manufacturer but not the
consumer.
Innovation (cont.)

• Classification of New Products

– Consumer’s Viewpoint
• The continuum proposed by Thomas Robertson is based
on the disrupting influence that use of the product has
on established consumption patterns.
– Continuous innovations.
– Dynamically continuous.
– Discontinuous innovations.
• This approach is consistent with the marketing
philosophy that “satisfaction of consumer needs” is
fundamental to a venture’s existence.
Classifying New Products
Innovation (cont.)

– Firm’s Viewpoint
• Distinction can be made between new products and new
markets.
• Situations with a new technology and a new market are
the most complicated and pose the highest degree of
risk.
New Product Classification System
 Figure 4.5 - A Model of the
Opportunity Recognition Process
 Product Planning and Development
Process
• Establishing Evaluation Criteria
– Criteria should be established at each stage of the
product planning and development process.
– It should be all-inclusive and quantitative in nature.
– Criteria should evaluate the idea in terms of:
• Market opportunity.
• Competition.
• Marketing system.
• Financial factors.
• Production factors.
The Product Planning and Development
Process
Product Planning and Development
Process (cont.)
• Idea Stage
– Promising ideas should be identified and impractical
ones eliminated.
– Evaluation method – Systematic market evaluation
checklist.
– Determine the need for the new idea as well as its
value to the company.
• Concept Stage
– Refined idea is tested to determine consumer
acceptance which can be measured through the
conversational interview method.
Product Planning and Development
Process (cont.)
• Product Development Stage
– Consumer reaction to the product/service is
determined.
– A consumer panel is given a product sample and
preference is determined through methods such
as multiple brand comparisons, risk analysis, etc.
• Test Marketing Stage
– Increases certainty of successful
commercialization.
– Actual sales reflect consumer acceptance.
 The Human Side of Enterprise
In 1960 management book, The Human Side of Enterprise,
Douglas McGregor suggested two very different
management views on how employees behave and how to
achieve employee motivation.
He referred to these nearly opposite management approaches
as Theory X and Theory Y.
Both of these theories assume that management's role is to
organize human resources - employees, in a way that
maximises productivity. But how the two types of manager
achieve this objective are very different.
 Motivational Theories X & Y

SA Theory Y - a set of
assumptions of how to
Esteem manage individuals
motivated by higher
Love (Social) order needs
Theory X - a set of
Safety & Security assumptions of how to
manage individuals
Physiological motivated by lower
order needs
 Theory X and Theory Y managers have
completely different views of workers.

If a manager has a Theory X approach to management , he will

always set objectives for workers without consulting them,
will give instructions without feedback and will punish or
reward according to strict rules.

In contrast, a manager who has a Theory Y view of workers will

involve them in decision making, encourage feedback during
communication and empower workers.
 Behaviour of Theory X Managers

Theory X managers take the view that

• Workers must be forced or controlled in work to do a good job
• Workers prefer to be told what to do – supervised and instructed
• Work is unpleasant to most people, who will attempt to avoid work
whenever possible.
• Most employees are not ambitious, have little desire for responsibility,
and prefer to have simple, understandable tasks.
• Motivation occurs only at the physiological and security levels of Maslow's
Hierarchy of Needs – forget Hertzberg’s motivators
Most workers have little capacity for creativity in solving problems.
 Applying Theory X Management – the
business impact
If Theory X managers are in charge, the a business is likely to use
the principles of Taylors scientific management to control
and ensure quality. So we would see:

• Motivation through financial means - even piece rate pay

• High levels of supervision
• Jobs broken down into simple tasks
• A strict hierarchy – each worker having clear understanding of their role
• An authoritarian management
 Behaviour of Theory Y Managers

Theory Y managers take the view that :

• Workers learn to accept and seek responsibility

• Workers will be self-directed and creative in their efforts to meet their
work and organizational objectives.
• Workers will be committed to quality and productivity objectives if
rewards are in place that address higher needs such as self-fulfilment.
• The capacity for creativity spreads through all layers of the work place –
everyone has something to contribute.
 Applying Theory Y Management – the
business impacts

If Theory Y managers are in control the organization is likely to use the

principles of management more like Hertzberg's motivators to improve
employee performance:

• Decentralization and delegation - If firms decentralize control and reduce

the number of layers of hierarchy, managers will have wider spans of
control and will delegate some responsibility and decision making to
them.

• Job enlargement / enrichment/empowerment - Broadening the scope of

an employee's job adds variety and opportunities to satisfy higher level
needs like self fulfilment.
 Theory Y Management – the business
impacts

• Workers will be consulted during the decision making process, which

motivates them and takes advantage of their creativity and problem
solving skills and provides workers with more control over their work
environment.

• Performance Appraisals can be used to have each employee set their own
objectives and take part in the process of evaluating how well they were
met.
.