Entrepreneurship Chapter 4 - Creativity and the Business Idea

Textbook Reference: Entrepreneurship, 8th edition by R.H. Hisrich, M.P. Peters and D.A. Shepherd, Mc Graw Hill Irwin, Copyright 2010. Chapter 4: Creativity and the Business Idea Sources of New Ideas 1. Consumers & Current Customers. 2. Existing Products and Services. 3. Distribution Channels. 4. Government. ƒ U. S. Patent Office, Official Gazette, lists all patents available for license or sale. ƒ New product ideas can come in response to government regulations. 5. Research & Development METHODS OF GENERATING IDEAS Focus Groups ƒ Groups of consumers provide information in a structured format. ƒ A moderator leads the group (8-14 people) through an open discussion to solicit participant response about new products. ƒ This is also an excellent method to initially screen ideas and concepts. Brainstorming ƒ A group method for obtaining new ideas and solutions. ƒ Allows people to be stimulated to greater creativity by meeting with others and participating with the following rules; 1. No criticism is allowed and no negative comments. 2. Freewheeling is encouraged-the wilder the idea the better. 3. Quantity of ideas is desired. The greater the number the greater the likelihood of useful ideas. 4. Combinations and improvements of ideas are encouraged. Problem Inventory Analysis ƒ A method of obtaining new ideas and solutions by focusing on problems. ƒ Usually the focus is on a general product category that has a particular problem. ƒ Results must be carefully evaluated as they may not actually reflect a new business opportunity. CREATIVE PROBLEM SOLVING 1. Brainstorming. 2. Reverse Brainstorming if focusing on the negative. 3. Brain writing provides time for participants to think about the idea. It is a silent written generation of ideas by a group of people. 4. Gordon Method. ƒ Participants are now aware of the exact nature of the problem. ƒ A general concept associated with the problem is presented and the group responds expressing a number of ideas. ƒ Prevents preconceived ideas and behavioral pattern. 5. Checklist Method. ƒ New idea is developed through a list of related issues or suggestions.

ƒ The entrepreneur guides the direction of developing new ideas through the list. ƒ The checklist may take any form and be of any length. 6. Free Association is developing new ideas through a chain of word association. 7. Forced Relationships. Creating new ideas by looking at product combinations. ƒ Isolate the elements of the problem. ƒ Find the relationships between these elements. ƒ Record the relationships in an orderly form. ƒ Analyze the resulting relationships to find ideas or patterns. ƒ Develop new ideas from these patterns. 8. Collective Notebook Method. ƒ Carry a small notebook with the problem written down. ƒ Consider the problem and record ideas and possible solutions 1-3 times per day. ƒ By the end of the week you should have a list of ideas along with suggestions. ƒ A central coordinator will organize each notebook and puts ideas in order of frequency mentioned. 9. Attribute Listing. ƒ List the attributes of the item or problem. ƒ Look at each from a variety of viewpoints. ƒ Originally unrelated objects can be brought together to form new combinations. 10. Big Dream Approach. ƒ Think without constraints. ƒ Think big! ƒ Every possibility should be recorded and investigated without regard to negatives involved or resources required. ƒ Ideas should be conceptualized without constraints until an idea is developed into a workable form. 11. Parameter Analysis. ƒ Analyze variables in the situation to determine their relative importance. ƒ The relationships between the parameters that described the underlying issues are examined. ƒ Through this evaluation one or more solutions are developed and this called creative synthesis. INNOVATION This is the key to the economic development of any company. Types of Innovation 1. Breakthrough Innovation. Create extremely unique innovation that establishes the platform on which future items in this area are developed. (Ex. Dr. Liu) 2. Technological Innovation. Occurs more frequently and is not at the same level of scientific discovery. They are meaningful innovations and need to be protected. (Ex. Laptop Computers) 3. Ordinary Innovation. Occur more frequently and usually extend technological innovation into a better product or service. Ex. Sara Blakely inventing Spanx) Defining a New Innovation ƒ Identifying what is new or unique in an idea is a dilemma. ( New fashion jeans) ƒ It may be called new when only slight modifications have been made.

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To expand sales volume, some companies add products already marketed by other companies and market them as new. Firms are always looking for new markets to exploit in order to increase profits and make more effective use of their resources.

Classification of New Products ƒ May be classified from the viewpoint of the consumer or the firm. ƒ Consumer: 1. Some viewed according to how much behavioral change or new learning is required by the consumer to use the product. 2. Most new products fall into the “continuous innovations” continuum. (Ex would be automobiles model.) 3. “Dynamically Continuous” portion of the continuum would be items like the iPod. 4. “Discontinuous Innovations” are rare. Require a great deal of new learning by the consumer and perform a previously unfulfilled function. Example would be the internet. ƒ Firm’s Viewpoint 1. Must recognize what the consumer perceives as new. 2. New Product Classification System 3. New technology and new markets is the most complex. 4. The firm will need new carefully planned marketing strategies. 5. The difficulty level will depend on the firms experience with similar products.

OPPORTUNITY RECOGNITION ƒ Fundamental to the entrepreneurial process is recognizing business opportunity. ƒ The opportunity represents a possibility for the entrepreneur to successfully fill a large enough unsatisfied needs that enough sales and profits result. ƒ Recognition comes from the knowledge and experience of the individual entrepreneur. ƒ The entrepreneur needs to be aware of this knowledge and experience and have the desire to understand and make use of it. ƒ Must have entrepreneurial alertness and entrepreneurial networks. Opportunity Analysis Plan 1. A description of the idea and its competition. 2. An assessment of the domestic market and international market for the idea. 3. An assessment of the entrepreneur and the team. 4. A discussion of the steps needed to make the idea the basis for a variable business venture. PRODUCT PLANNING & DEVELOPMENT PROCESS 1. The product life cycle is the stages each product goes through from introduction to decline. 2. The development process is the steps in bringing a new product to market. 3. The new idea should have synergy with existing management capabilities and marketing strategies. 4. The proposed product should be able to be supported by and contribute to the company’s financial well being. 5. The new product should be compatible with existing plant, machinery and personnel.

6. Concerns regarding ethics and ethical behavior when dealing with competition frequently arise and should be assessed. Stages 1. Idea Stage. The initial stage of development that identifies promising new ideas and eliminates impractical ones. Must determine the need for the new idea and its value to the firm. 2. Concept Stage. The refined idea is tested to determine consumer acceptance. 3. Product Development Stage. Reaction by the consumers to the product. Review for multiplicity in the market, risk analysis, level of repeat purchases, and intensity of preference. 4. Test Marketing Stage. Provides actual sales results which will indicate the acceptance level of the consumers. E-COMMERCE AND BUSINESS START-UP ƒ The role of e-commerce must be assessed. ƒ Offers the entrepreneur the opportunity to be creative and innovative. ƒ What would be the level of business to business and business to consumer sales? ƒ The acceptance of the internet as a business platform has increased the potential for this marketing. ƒ The interactive nature of the Internet will continue to expand the volume of e-commerce. Using E-Commerce Creatively ƒ Small firms can minimize marketing costs through internet while reaching larger markets. ƒ Support for servers and transaction must be maintained. ƒ You can outsource this process and eliminate payroll costs. ƒ Front end operations are encompassed in the Web sites functionality. Must be interactive and easy to use. ƒ The back end operation is the seamless integration of customers orders and distribution channels. Web Sites ƒ The use of Web sites has been increasing at a significant rate. ƒ However, a majority of small business owners and entrepreneurs do not believe they have the technical capability to create and maintain a site. ƒ Focus on your core competencies and outsource the non-core activities. ƒ The key to a good site is ease of use. Speed! Speed! Speed! ƒ A Web site is a communication vehicle and should address; 1. Who is the audience? 2. What are the objectives of the site? 3. What do you want consumers to do upon entering the site? 4. Is the site an integral part of the firms overall communication program? ƒ The material should be interactive to engage the consumer. ƒ It should be easy to find information about the product and firm. ƒ This requires that the material be fresh with new material added daily. ƒ Need a shopping cart. ƒ Secure server connection for customer privacy. ƒ Need to be able to accept credit cards. ƒ Need a customer feedback feature. ƒ Email response system to keep customers aware of their orders, thank you, and keep informed of new occurrences. ƒ Needs to track customer information.