By definition, entrepreneurs are risk takers who offer innovative goods and services to the marketplace. By doing so, entrepreneurs often change not only their industry but society itself. Innovation in the twenty-first century is more than the invention of new products that can be brought to market, however. To be considered innovative, a product or process must not only be new or a significant improvement over what was previously available, it must also have been successfully introduced in the marketplace or used in production. Such innovations do not occur by luck alone. More and more entrepreneurs are implementing a process of sustainable innovation that keeps them on the leading edge in their field rather than focusing on transforming from an entrepreneurial organization into a traditional one. Sustainable innovation can be aided through the analysis of several sources of innovation and leveraging these into goods or services that continue to change both industry and society.
Keywords Entrepreneur; Innovation; Strategic Planning; Technological Diffusion; Technology
Entrepreneurship: Technological Innovation
There are many reasons that people and businesses purchase goods and services. Sometimes they have an obvious need for a product or service to ease their lives or keep their businesses profitable. Other times, they have a perceived need created by marketing efforts to sell the product or service. Although some of the new goods or services represent only minor changes to what was previously available (this season's fashions offer changes in color or style, not an elemental change in the nature of clothing or of cloth), some are innovations: products or processes that are new or significant improvements over previous products or processes and that have been introduced in the marketplace or used in production. Although established organizations offer innovative products or services, they also tend to strive for stability and managed growth rather than risk taking. Entrepreneurs, on the other hand, are risk takers who by definition are involved in the process of innovation.
Entrepreneurs are often thought of simply as persons who start a new business venture. However, as early as the 1930s, Joseph Schumpeter — one of the foremost theorists about the nature of modern entrepreneurship — observed that entrepreneurship is "the process of creative destruction" and that it stimulates fundamental changes in society. According to Schumpeter, the entrepreneurial process is instigated by the discovery of new technologies, products, processes, or markets that create alternatives to those already existing and, as a result, stimulate societal change. More recently, theorists have begun to think of sustainable innovation as a fundamental force for change both in business and in society in general. In this view, innovation becomes the operational definition of entrepreneurship.
By this definition, entrepreneurs are not necessarily found in small, start-up organizations. They can be found in organizations large and small, emerging or established. However, it is in the nature of most business organizations to strive toward stability rather than to the long-term risk taking that is essential to both entrepreneurship and successful innovation. As a result, it is typically easier for small firms to be innovative than large firms. Plehn-Dujowich, in a 2013 study sponsored by the US Small Business Administration, found that innovation in young, small firms (with 290 or fewer employees and under eighteen years since going public or being listed in Standard and Poor’s CompuStat database) averaged more than six as many patents per million dollars of research and development stock, as compared to older, larger firms (averaging 1.75 and 0.34, respectively).
Although at its most basic, innovation is just something that is new, the term also carries with it the connotation of an improvement — something that is better than past versions. Innovation is also often thought of as the result of the creative process, a product or service that is different from what has gone before and not an obvious solution. Innovation can be something revolutionary, such as the first desktop computer or the first patented soft drink. Innovation can also be evolutionary, such as a different user interface for application software or sugar-free soft drinks.
Innovation is more than mere invention. An invention is a new product, process, or service that has been developed after a process of analysis and experimentation. Innovation, on the other hand, goes beyond this definition and includes the act of successfully introducing that product, process, or service to the marketplace. For example, if the new widget I just invented sits on my desk, it is no less an invention than if it is sold to millions of customers. However, until it is put in use that is widely accepted within the industry, marketplace, or society at large, it is not an innovation. The difference between invention and innovation is use and acceptance.
Innovation also differs from improvement. An improvement is the same thing that works better (a faster math coprocessor). An innovation, on the other hand, may be used for the same purpose as a previous device or process but does so in a way that changes the way that people do the thing. For example, toasting bread over an open flame on top of the stove is much the same as toasting bread under an open flame in a broiler. The electric toaster, however, was an innovation: Toast no longer required an open flame but — more importantly for the definition — it no longer required careful watching by the cook. The innovation of the electric toaster changed the way we make toast. Since that time, there have been other changes to toast science: We have four-slice toasters and toasters that toast bagels. However, these are improvements, not innovations. The basic toast-making process is the same no matter what toaster is used.
In the twenty-first century, however, neither invention nor innovation necessarily involves the development of tangible new products (steam locomotives, radio receivers, personal computers). Rather, the term "technology" has acquired a broader meaning that reflects the changing nature of the workplace. In particular, technology in the twenty-first century includes advances in information technology and knowledge-based services. Most jobs in the industrialized world involve knowledge-based services rather than the production of goods. Such services typically add intangible value to the consumer (convenience, amusement, timeliness, comfort, health). Organizations in the business of providing service manage intellect rather than physical resources. For example, although firms are still needed to build ships, the infrastructure necessary to successfully design, develop, and operate those ships (engineering, logistics, manning, training, sonar) require more workers than does the actual shipbuilding process itself. To be successful in the postindustrial marketplace requires not necessarily a new product that is marketable to broader society (although such products are also innovations), but advancements in knowledge design that allow better design and development of such products. Innovative organizations that are successful in this environment often tend to focus on their individual competencies and outsource the rest of the process, operating in teams to bring innovative technologies to market.
To operate under the principle of sustainable innovation, innovative firms need two kinds of skills. First, successful innovation requires strategic skills, including the ability to synthesize market data in such a way as to identify trends and extrapolate these in order to anticipate new markets. Successful innovators turn these observations and analyses into strategic plans, articulating ways in which the organization can meet these anticipated market needs and specifying ways that the organization's resources can be applied to successfully create or meet the needs of the anticipated market. Second, successful innovative firms need to have the organizational skills necessary to implement these plans. This requires the ability to take and tolerate risks. In addition, successful innovation requires the investment of time, money, and human capital in the development of the new idea into a viable, marketable innovation. This requires the support and involvement of the entire firm not only on the working level, but also from top-level management in order to ensure success.
The innovation process does not end once an innovation enters the marketplace, however. The innovation needs to spread through various channels to different organizations, markets, industries, or geographical regions through the process of technological diffusion. This process is often lengthy as the innovation slowly changes the...
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