Introduction to Business Administration Slide 6

Introduction to Business Administration

Session 6 – The Nature, Significance and Sources of Innovation

What is Innovation?

•Drucker (1986) defines innovation as “the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth”.

•La Salle (2002) Change that adds value…the key to success in product creation.

• Australian Institute of Management (2001) Something new or significantly different in a business that creates value directly to the business or indirectly through its customers.

When you think of innovation what comes to mind? Science or Technology?

•Actually innovation is not necessarily based on science or technology.
• Innovation can be social. Social innovation such as schools, universities, banks, hospitals and public service are far more difficult to achieve than building cars and trains.

2. Misconceptions of Innovation
a. Innovation is invention
Although innovation is linked to invention, they are not necessarily the same. An invention is a creative idea, while innovation takes that idea, and puts it to work.

b. Innovation represents new products and services only:
Innovation may result in new products or services, however, it is not solely confined to their development. It embraces new developments in other fields including;

(i) New Markets:
It is innovative to take existing products or services and sell them into new markets.
(ii) New Marketing methods:
The product or service can remain the same and the market does not change; the key to innovation may then come from the marketing of the product to the customer.

c) Innovation has to be original
•Innovation does not take place in a vacuum.
New ideas always have roots in the old; they start with what already exist, and become original from the unique way in which they combined or connected to existing ideas and knowledge.

Sources of Innovation

a) The unexpected A common indicator of underlying change is the unexpected result, either success or failure. Unexpected success, or failure, often gives clues to underlying trends which can lead to innovation.
(i)Unexpected Success
(ii) Unexpected failure

b. Process need
The importance of need as a source of innovation is captured in the proverb: ‘Necessity is the mother of invention’.

c) Industry and market structures
•Industry and market structures can change rapidly, sometimes after a long period of stability.
•Such changes offer exceptional opportunities to innovations.

d) Demographics
• Changes to the environment of an enterprise inevitably contain many possibilities for innovation, but are often hard to see, or understand, until they are past and the opportunities missed.

e) Changes in perception
The facts may not change, however, peoples perception of the facts change, which has an equally powerful effect.

f) New knowledge
The most famous innovations are often based on new knowledge.
•Demographic changes, however, are clear and unambiguous, and signalled well in advance.

Characteristics of imaginative people

i. Self-motivated
ii. Have expertise in chosen field.
iii. Are risk takers.
iv. Possess social skills.


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