The seminal book Innovation and Entrepreneurship by widely respected management consultant Peter Drucker argues that innovation and entrepreneurship have a close, synergistic relationship. Because entrepreneurs establish new businesses, they need to innovate. Drucker argues:
This defines entrepreneur and entrepreneurship - the entrepreneur always searches for change, responds to it, and exploits it as an opportunity.
Because a new company is unlikely to be able to compete with ones established first on economies of scale, funding, market share, or supply chain efficiency, it needs to do more than simply replicate existing business models. It needs to create disruptive change.
It is much harder for established companies to innovate than it is for newer, smaller entrepreneurial ones to do so. Established companies have entrenched ways of doing things, often multiple layers of management, and the inability to change course rapidly. Thus Drucker sees entrepreneurs as a primary engine for innovation. He also recommends that larger companies create small units to act as entrepreneurial incubators in order to innovate.
Innovation and entrepreneurship. These two words are often tossed around interchangeably by talking heads who muddle their meaning. Despite overuse and misuse, innovation and entrepreneurship are more than buzzwords. They convey crucial messages defining our new economy, and while often used synonymously, their subtle, significant nuances distinguish one from the other. The difference between innovation and entrepreneurship might seem trivial at first, but understanding and applying their correct definitions is crucial to navigating the new economy.