ENTREPRENEURIAL REVOLUTION

ENTREPRENEURIAL INNOVATION :

How innovation catalyzes the entrepreneurial process

By Nelson KORKOR, Executive Chairman & Lead Consultant, Strategy and Strategy

Internet business mogul and entrepreneur, Jeff Bezos has been described in some circles as a constant gardener of innovation. He has succeeded in proving to the business world that the internet was just more than the dissemination and exchange of knowledge. The former Wall Street investment banker cum computer engineer is now worth over $5.1billion.But he had to proved skeptics wrong and pioneer the e-commerce , a field as virgin as the virgin forest of the Amazon river itself.

The birth and boom of amazon.com

Jeff Bezos right from childhood stood as a proponent of innovation. Can you imagine that the lad at an unusual age was dismantling his cot with a screw driver into parts! Soon he is seen taking apart his Radio Shack electronics kit and building a burglar alarm to keep his one brother and sister out of his room.The next stage on his route was setting up a workshop in his Exxon engineer father’s garage, building a microwave powered by solar!

That was not all about his ingenuity. His innovative prowess leads to the founding of the world wide successful internet business-amazon.com. Whiles browsing the internet one day he discovered that the internet was growing at a rate of 2,300% a year. The amazing discovery immediately opened his eyes to the many opportunities and the huge market potential therein. That was the birth of the successful online commerce brand.

His next hurdle was what to sell. Jeff Bezos compiled along list of 20 items and finally narrowed them to two: books and music. With the startling fact that more than 1.3milliion books were in print as compared to 300,000 music titles at the time , he is on record to have declared prophetically, thus: I will change the economies of the book industry”. That was when he left Wall Street ¾after establishing “one of the most successful quantitative hedge funds on Wall Street” at Bankers Trust while serving as the vice president. It is worthy to note that irrespective of the successes chalked already by this young lad as a young business executive he had a more compelling dream ¾a burning desire which led to the birth of amazon.com.

Entrepreneurship is all about spotting market opportunities and exploiting them head on. Jeff Bezos spotted a huge opportunity of delivering goods to internet users and utilized it effectively. But his concept wasn’t a creation; rather it was an innovation of an existing concept-the internet. The world’s most successful internet brand ,arguably, was satisfying over 21 million customers worldwide in the first half of 2001 alone yet even more amazing is the fact that with all the teeming number of people and huge revenues ,Amazon.com did not make any profit till the last quarter of 2001 ,after a strategic alliance with internet service provider America Online though one cannot be said to be the single most important factor in this long awaited feat. Can you imagine that by this time Princeton University Graduate had also being named Time magazine’s Person of the Year in 1999. With a mission to ” use the internet to transform the book buying into fastest ,easiest , and most enjoyable shopping experience possible”. Amazon would by the opening of 1999, have a market capitalization of $6billion and be grossing $1 billion in sales by 2000. Entrepreneurs really make things happen for themselves and their communities. Jeff has not only succeeded in creating wealth for himself but also for teeming number of unemployed folks across the world. This is the spirit of entrepreneurship in action.

There are three basic things that are worthy to note about entrepreneurs and entrepreneurship.

· They are individuals who take a concept and convert it into a reality. This could be a product, policy or institution.

· They become the champions of a new process, and serve as the engines of change.

· Entrepreneurship occurs in all areas of life. In business, academy, government and NGOs.

Defining innovation: what then is innovation?

According to Wikipedia, the word innovation comes from the Latin innovationem,the noun of action from innovare. Additionally, the Etymology Dictionary further explains innovare as dating back to 1540 and stemming from the Latin innovatus,which means "to renew or change".

Innovation can therefore be seen as the process that renews something that exists and not, as is commonly assumed, the introduction of something new.

The central meaning of innovation thus relates to renewal. For this renewal to take place it is necessary for people to change the way they make decisions they must choose to do things differently, make choices outside of their norm. One management philosopher, Schumpeter C.S. stated that innovation changes the values onto which the system is based. So when people change their value (system) the old (economic) system will tumble over to make room for the new one. When that happens innovation has occurred. So innovation must be seen as something that does not something that is

In recent times,innovation has become an important topic in the study of economics, business, entrepreneurship, design, technology, sociology, and engineering among others.

In sum, innovation can be concluded as :

· the capacity to create new approaches and concepts to deal with old and new challenges

· the perceptivity to see possibilities in the combination of old and new concepts

· the creation ,development and application of untested ways of solving old and new problems

· the capacity to think beyond the known ,to defy the norm ,and to believe in ones abilities to solve problems

The above definitions portray entrepreneurial innovation as ; an untried ,untested and a risky venture a journey into the world of the unknown.

The types of entrepreneurial innovations

David Zilberman of the Department of Agricultural and Resource Economics, university of California, Berkeley, has identified five major types of entrepreneurial innovations. Here they are:

o Mechanical innovation: What is behind the various brands of vehicles released by companies such as Toyota, Honda, Ford, and Hyundai just to name a few? All the various brands of taxis pick –ups, buses as well as tractors of all shades and sizes are spearheaded by innovation.

o Chemical innovation: In Agriculture today, innovation has helped to develop various chemicals including pesticides and insecticides to boast crop production

o Biological innovation: The concept is used in the introduction of new varieties of seeds or crops. In human biology, innovation has improved the practice of medicine in many dimensions.

o Managerial innovation: Companies use different strategies today to motivate their employees as well as competing in the global market place. All these rely on the entrepreneurial innovation of the team. Customer service, front line service as well as departmental management can foster organizational growth and effectiveness if innovation is institutionalizing within the team.

o Institutional innovation: Various groups can also use the innovation process to enhance work effectiveness and promote development of their members. Associations such as banking institutions, stock brokerage firms all rely on innovation to enhance their business. For instance, the recent converging of the Ghana Stock exchange into an electronic trading platform can be described as a form of innovation.

The preschool, the remedial school as well as the pre-university were some of the most powerful innovative concepts that revolutionize the educational systems. Today, most universities have adopted some of these concepts and are creating wealth of out of it. Innovation can also inspire others who can see into the future and create a concept that will bite!

Corporate innovation and entrepreneurship

The truth is that innovation has not been that easy in larger corporations. Perhaps, among other things, the challenge of legacy revenues. Internet entrepreneur, Jeff Bezos intimated that :

“ rapid change is always scary for incumbents, but if you’re not an incumbent, you have nothing to lose. Large incumbents have to worry about legacy revenues. Innovation is hard for large companies because you need to be long-term oriented. And since the innovative projects are such a tiny part of a large company, there is tendency to be dismissive of the innovation”. You need a culture that high-fives small and innovative ideas and senior executives [that] encourage ideas. In order for innovative ideas to bear fruit, companies need to be willing to “wait for 5-7 years, and most companies don’t take that time horizon. At Amazon.com, we do make business decisions in a very deliberate way.We work backwards from customer needs.”

How can entrepreneurs become more innovative?

Here are a few requirements for entrepreneurial innovation:

· The willingness to fail

Jeff Bezos listed a few prerequisites for innovation and inventing, but the biggest one is willingness to fail. You need to think for the long term and be misunderstood for a long period of time. “If you can’t do those things, then you need to limit yourself to sustainable innovation.” In other words, seek incremental change to grow your business.

In talking about the need for thinking long term, Bezos said you need conviction. I totally agree — if you take a short-term approach, then you are constantly stuck with trying to deal with minutiae. He noted how much hated the idea of “sticking to one’s knitting” and not taking chances.

· Looking at things from the customers stand point

In tough times, focus on the customer. In the aftermath of the dot-com bust, Amazon was one of the many Internet companies that saw its stock price dive faster than a flying seagull in search of food. “The stock price deflated but the business continued to grow,” he recalled. “As a result, Amazon refocused its energies on the customer.Focusing on the customer makes a company more resilient,” he added. “We had to tell employees that they shouldn’t feel smarter because the stock went up 35 percent, because then they would feel 35 percent dumber if the stock price went down.” His tip on managing during tough times such as those faced by Amazon during the bust was to communicate more with its employees. With too many external inputs, Bezos thinks it’s important for companies to be talking with its people more often, easing their concerns.

· Avoiding the ‘errors of commission’

Many people make too much about the errors of commission. What does this mean? According to Jeff,”People overemphasize their failures when trying something new” And this is what he calls the ‘errors of commission.” Actually, failure is not that expensive and it’s part of work. If something fails, then you’re going to shut it down and cut your losses”, Bezos said. “The focus”, he said, “should be on errors of omission”. According to him, these are the chances that are often abused.

· Creating an infocentric organization

Innovation thrives in an environment where knowledge sharing is encouraged by all levels of the organizational ladder. An infocentric organization describes one that is obsessed with collating, analyzing and applying the results of the information analysis to effective decision making. Times of brainstorming at corporate retreats and regular meetings tailored at birthing out innovative concepts are worthy of emulation. An organization that is obsessed with innovation sees every information as knowledge tools that will enable them catalyze the innovation process.

· Building flexibility

To be innovative, you need to be stubborn about the vision but flexible about the tactics.The difference between founders and professional managers are that founders are stubborn about the vision of the business, and keep working the details. Professional managers, when things don’t work, want to change the vision. The trick to being an entrepreneur is to know when to be stubborn and when to be flexible: Be stubborn about the vision, but flexible about tactics, Bezos said. For instance, you can be flexible about reducing costs, but you don’t change your vision to reduce costs. Great point, because more often than not, founders get caught up in the tactics and change their direction as a result.

Too much control over departments in businesses stifles entrepreneurial innovation. A certain amount of freedom is needed for the entrepreneurial spirit to thrive.

· Continually ask questions and challenge the status quo

Jeff had a problem with the use of the internet at the time. His problem was:”why do we restrict the use of the internet to only searching for information? Can’t we use it for something else that will make life better and easier? And it was this question that led to the birth of the company, Amazon.com.

Satisfaction with the state of things as regards your business kills the spirit of innovation. Righteous anger and unsatisfaction of the state of issues invokes the spirit of innovation. To move from where you are to another level, you need to worry about the current state of affairs with regards to your enterprise.

· Keeping an eye on competitors and the competition

Innovation is an easy thing to do. You don’t need to climb mount Everest in order to birth out innovative concepts. One of the best things to do is to keep an eye on the competition. When it comes to innovation you don’t need to do something that new. Entrepreneurial innovation is all about the ability to add to an existing product or service. Therefore, keep an eye on what your competitors are doing!

· A positive spirit

The fear of the unknown causes people not to try things. When the members of a team are so doubtful of the result of a venture, you can be sure that innovation cannot thrive. Such a team would always worry themselves over issues such as:”what about if it doesn’t work? What about what if we lose? Instead of thinking: what if we get it right and overtake our competitors and increase our market share?

The breeding ground of entrepreneurial innovation is a place of strong and confident belief and self and your team to succeed.

Entrepreneurs, government regulators, incumbent corporations including start-up companies and venture capitalists,universities,including research scientists, university administrators, and designated officers of technology transfer, environmental and other special interest organizations as well as consumers who are notable stakeholders in innovation continue to make the world better by their unending ability to innovate various products and services.

Innovation is the driving force behind successful entrepreneurship. There cannot be successful entrepreneurship without the spirit of innovation at work. Entrepreneurial innovation can revolutionize your life and enterprise at all levels. Why don’t you imbibe this attitude?

There is more to come. Let’s meet next week and continue our discussion on entrepreneurship. Blessed weekend!

For more information, please visit http://www.nelsonbusiness.com.blogspot.com