Innovation 101: Key Concepts in Innovation and Entrepreneurship

Introduction to Innovation and Entrepreneurship

Rather than a recipe, we will share our understanding of innovation as an open book to all. There is certainly a host of innovation instances and a mountain of information on what innovation is about in business, in technology, in the public sector, or in consumer needs. But, many people do not get to understand what innovation exactly is and how it occurs. There is the perception that it comes as a serendipity, or that it is a process understood by a few, or that it requires genius. Many people are not aware that innovation requires rigor and many disciplines to understand it, manage it, and put it to work. If you agree with Chip in ordering "FAIL FAST to SUCCEED FASTER", then we can begin. Let us "Fail Fast" to learn how we can all "Succeed Faster".

Given the growing recognition that innovation is a key source of economic development and wealth creation, people around the world generally know about it, believe in its power, and want it. So a quick question: do you want innovation too? What's your answer? I bet you want innovation. If you do, then the next issue is more than just wanting it. You need a roadmap to understand the processes and the systems. You must ascertain if there is a fixed model for innovation and if there is a formula that ensures success in international commerce. What are the risks associated with innovation investment? What are the dilemmas? And, where are the problems that produce large rewards? Where is the information about all of this?

Key Terminologies

Spinoff: A business that is created from research developed in an established firm or research institution.

Management Buyout (MBO): The purchase of a business by its managers.

First Mover: The firm that enters a new industry before its competitors.

Entropy: A measure of disorder; a highly ordered state of a system has low entropy.

Creativity: The generation of novel and useful ideas.

Corporate Venture Capital (CVC): Investments made by established companies in start-ups using the company's own capital, either in the form of a minority equity stake or through a more arms-length collaboration.

Complex System: A system with many interacting components (e.g., technologies, people, firms, markets) whose interaction is nonlinear.

Business Angel: An individual that invests in start-ups using his/her own personal capital.

Acquisition: The purchase and combination of different technologies within a company.

1. Innovation

Various types of innovation are produced within organizations, including incremental or evolutionary innovation, which improves a company's products, markets, and its means of organization. On the other hand, employees are motivated, rewarded, organized, and evaluated on the basis of various innovation types requiring different skills and characteristics, including incremental and discontinuous innovation. For familiar firms, incentives to create radical innovation are weak, and increased top-management commitment in innovative ventures is necessary to perform radical innovation and enlarge existing ones. To evaluate new project opportunities, innovative firms must embrace risk, investment, and the future commercial potential of their radical projects that may disrupt their existing ones.

As defined by Schumpeter, innovation is "the striking of new strategies and practices to resolve the present fight in a first-rank type of economy." It all depends on the part of the entrepreneur, who exercises leadership and control. For Schumpeter, in the creation of new industries and processes, pioneering alterations are achieved. The four key groups of innovations recognized by Schumpeter are inventions, the initiation of some new strategy of production, the exploitation of some new market for the aforementioned products and services, and the exploitation of new sources of material supply. The embodiment of invoked inventions in new quantities produced of desired or comfortable products to consumers is accomplished by investments for the entrepreneur, the establishment of technological innovation.

2. Entrepreneur

On the other hand, more entrepreneurs are starting more and more new businesses that are driving the economy. At the same time, the media is encouraging the importance of entrepreneurship. For better or for worse, people who are not aware of the cost of starting or joining a business want to become entrepreneurs. Social policies are also directed at supporting all kinds of entrepreneurship. Some policies aim to eliminate obstacles preventing or limiting women from becoming entrepreneurs, as well as to encourage professionals to go down this path. Some people have a personal interest in helping others. Recent or past entrepreneurs want to thank the people who have helped them by supporting others.

An entrepreneur is defined as "all those who are in charge of implementing innovation" or "managers in the public or private sector who are responsible for creating an innovation, regardless of whether or not they are part of the team that supports and implements that innovation." Thus, the combination of the skills and knowledge that make the innovation successful and the entrepreneur that implements the innovation is referred to as "intrapreneur special knowledge." If there is a shortage of intrapreneurs, many potential new ideas are wasted, since they may never reach the financial stages of new innovation.

3. Startup

A startup is a flexible and innovative, temporary organization in search of a scalable and repeatable business model which can have a significant impact on the competitive dynamics of a new industry or application with a small team. A startup is often created to commercialize a business concept, also known as a business target, a product or component, a market in which the team has substantial personal supply-chain experience or an expressed need for a manufactured, installed, serviced, generated, or use-based service. Startups are primarily created to commercialize rapidly the new, market-changing discoveries of university researchers and or co-innovators with combined academic, federal, foundation, nongovernmental organization, or other private and public investment. High-growth, high-technology startups, therefore, create new products or services at substantially lower costs (e.g., via biotechnology, biologics, nanotechnology, integration, prototypes, cloud computing, agile, lean, six sigma, knowledge-based community standards) or advance them incrementally through frequent upgrades. The Restructuring, Educational, Adjustment, Differentiation, Efficiency, and Substance Test subsection provides a detailed analysis of these risk factors.

A startup is a temporary organization in search of a scalable, repeatable, profitable business model to fuel future growth and to create a firm that will be at the top of the competitive food chain. Most successful startups go through several significant transformations of their business model and the individuals in the startup team must be extremely flexible and creative. Startups are at the epicenter of the U.S. innovation ecosystem; they are the source of a substantial part of the significant innovations which have led to technological leadership and economic prosperity in the United States. There are two very different types of startup companies: first, "life science or high technology startups" with a concentration of research-based scientists, and other specialists that have interacted with each other in the business schools and have developed a substantial personal relationship as well as a shared strategic vision for their new product, service, or market. Second, a "small business" that generally serves a local market and does not necessarily have any advanced, proprietary technology.

4. Entrepreneurship

On the one hand, to cope with change and to innovate, entrepreneurs have to be flexible in order to adapt to the changing environment and to (re)design the organization. On the other hand, for growth to occur, it needs to be channeled not only into technological innovation, but also into organizational innovation and management practices, while these too can be harnessed to improve the ability to manage and absorb technological and other forms of innovation in a dynamic way. Moreover, the organization or, in particular, the people within the organization (i.e., management and employees) need to possess or develop the ability to embrace and cushion change. This kind of ongoing internal development of the firm is connected to the organizational platform of a firm, or inter-organizational, involving a network of suppliers and customer relationships, to create the basis on which new technologies can be created, not only to enable technological change to occur but also as an intrinsic part of the way of doing business rapidly and flexibly within much more dynamic environments than markets previously demanded.

Entrepreneurship is a complicated subject, closely linked to innovation. At first glance, an entrepreneur may be depicted as someone who creates wealth or is a founder of a new business (small, medium, or large). A closer view reveals a more complex and broader concept: the ability to develop a business, an organization, or an activity by acquiring and coordinating resources (human, physical, or financial) and by implementing a business plan while also assuming risk. True, entrepreneurship implies many other notions, such as creativity, restructuring, insight, innovation, and so on. Thus, we notice that entrepreneurship is a concept much less ambiguous. It is associated with a wealth of implications and connections to other key concepts in economics and management.

5. Intrapreneurship

Intrapreneurship is the source of a significant part of group cohesion and corporate identity, thereby impacting bottom-line calculations and profitability in a meaningful way. In the broader context, this phenomenon influences the lives of individual company employees and families, as it supports social well-being and expatriate-friendly policies. Our approach considers both top management and employee-level activities. This guide concludes with a pair of vital checklists, one for employees and one for top managers, to recapitulate the individual concepts and provide practical guidance.

The vital role of intrapreneurship has come to be recognized the world over. While intrapreneurship stimulates innovation within established, stable organizations, it can also play a vital role in newly created organizations in need of robust management structures. This book offers a holistic look at the best practices and theoretical concepts related to intrapreneurship and its many aspects: innovation culture, creativity, communications, incentives, independence, collaboration, developing and retaining talent, corporate social responsibility, diversity and proactivity.

6. Intrapreneur

Intrapreneurs have the same character traits as an entrepreneur. They are creative people who are individuals. They are required to take risks and experiment with new ideas until a breakthrough occurs. They are people who demonstrate passion and obsessions with sharing their knowledge with the world. "They are prepared to initiate change and improvements in business processes". Every employee should be encouraged to become an intrapreneur because they are innovative, forward thinkers. "The creation and development of new project realm ideas emanates from motivated individuals in a firm".

Intrapreneurs are an asset to any firm because they provide the same benefits to the firm as that of an entrepreneur.

Intrapreneur is an innovator within an existing firm that is running on an innovative project within a framework that has been introduced by visionary leadership, usually a project manager. It is important to note that intrapreneurs are not necessarily hired from outside a firm. They can exist within a firm already and they should be nurtured to help a firm stay innovative. "Well, intrapreneurs provide the right type of space for innovations to incubate, develop and have a chance".

7. Enterprise

So when enterprises create wealth, why do so many efforts focus on smaller and new enterprises? There are specific reasons for such a focus. First of all, many of these new enterprises are very sensitive to their innovation input. They often also explore unknown compound innovation areas. Thus, they might have a proportionally larger impact on overall societal direction when their first explorations open up whole new directions. And even small explorations might create unexpected, enormous value. The observation lists for recent startup companies suggest real marketing opportunities along such areas. These unexpectedly large markets are where disruptive innovations might settle. Secondly, there are proportionally quite a lot of new enterprises starting and all new employment might statistically be linked to new enterprises. These observations are, however, not universally valid and do not mean that focus or support for startups needs to employ other priority-setting methods than those commonly used to support bigger enterprises, politicians, researchers, and private entrepreneurs.

Enterprise is a synonym of company. Enterprise is normally somewhat more generic and might also include, for instance, organizations active in social work or public services. Note that entrepreneurship is not correlated with the company size or its age, but more with the approach, ideas, initiatives, and the individual drive that together create wealth. These innovation attributes can be present in small firms as well as big international enterprises. Also, the significance of entrepreneur-type enterprises does not necessarily grow with their direct employment effect. They are service providers and economic generators in many areas and provide their specific products and services. Enterprise is also not a small business. It is rather about the talent and drive of a group of entrepreneurs starting, acting jointly in and leading an enterprise as they construct and grow a platform for value creation.

8. Minimum Viable Product (MVP)

Think big, start small. A minimum viable product is not the smallest possible product; it is a version of a product or solution that allows a team to collect the maximum amount of validated learning about customers with the least effort. The product is the tip of the iceberg. It comes after strategy, and customer and market discovery. Launching an MVP at the building and testing stage encourages the option to learn, pivot, or improve from the data obtained. As much as a foundation uses blueprints to ensure that a building or structure is sound, an MVP can be utilized as an architectural tool to guarantee that the underlying business elements of a new product are adequately functioning. The epiphany that needs to dawn on a new venture is the realization that the planning (optimize) phase should not be startup and go live but an experiment phase. Premier tool for entrepreneurs these days is the proven, scientific methodology known as the Lean Startup which collaborates knowledge and innovation.

A minimum viable product is a product or service with enough features to provide early adopters value and to get feedback from them. The primary goal of an MVP is to start the learning process, not to make money. Learning about customer behavior and looking at solution relevance is the primary basis for evolving the product or service. Offering an MVP enhances speed of innovation, keeps cost under control, and allows for risk mitigation as the project proceeds. The feedback loop for a minimum viable product is Build - Measure - Learn. The Build phase involves working on the product, while the Measure phase involves obtaining feedback by customer interaction. Learning is derived from analyzing the feedback and then making quick and informed decisions to stop, pivot, or make refinements to the existing MVP. The core concept of Lean Startup is to iterate the feedback loop as quickly as possible.

9. Persona

These and other examples have led to the evolution of the "business line executive" to run a large potential customer segment. Who hasn't heard about the "teenage segment" or the "Gen X, Y, or Z." Everyone in the marketing organization seems to know what age the mother is at the household budget who shops every month for the family. This is what the month in life wants for the product, but actually knowing the mother so that product and collection decisions can be made, totally focusing marketing and advertising messages requires a much more detailed persona. Aunt Jemima, Mrs. Butterworth, and the Quaker Oats Quaker, all cooking from vague ideas that begin with the words, "Well, she's in her middle 30s, married and has three kids. She's a stay-at-home mom looking for value when she starts her monthly shopping." These are just a couple of quick examples of personas. There are several more to describe other market segments because pancake syrup and oatmeal are produced in two different market environments. All use the customer's needs on a daily basis, but they have specific timing needs on a monthly basis.

A persona is the name given to the archetype of a typical, key group of potential users of your product. It is a way to humanize your consumers and put a face to their needs and wants. This helps the product development team to keep a sense of user empathy during specification and creation. The persona states more than the customer's age, income, and family size. It keeps in perspective a day in the customer's life and the specifics of the moment when the customer wants or needs to use the product. Tourist companies, with so many important high-level ideas at the priority of being is how people travel, make extensive use of personas in the specification and creation of new and worthwhile travel products.

10. Business Model

Business models derive from a static economic conceptual framework that helps managers understand the drivers of net present value in business, where it comes from, and what tactics and strategy marketers can use to increase value. Different business models propose and organic growth play different roles in the creation of shareholder value. There are two types of organic growth business models: complex organic businesses and networks. All businesses generate value but differ in how that value can be increased and what actions the firm with the relevant competitive advantages should take. The competitive position is critical. While all competitive propositions should be self-reinforcing, organic or inorganic growth propositions build self-strengthening mechanisms that are mutually reinforcing across all three legs of the competitive position tripod.

The business model is critical, whether for an established business seeking to rediscover/reinvigorate itself or an entrepreneur seeking to create a successful new business. Only when it makes sense interlinked logic around making money will the business model attract customers, deliver a desired satisfaction, create assets and capabilities that are valuable, and generate profits for the creators. There is no "right" answer - business models have to be unique based on the unique industry and company conditions. The purpose of the business model is to capture and articulate how a firm's strategy develops, refines, and integrates choices of the company.

11. Venture Capital

Entrepreneurs and innovation researchers have praised this organizational model, creating a hybrid organization that is both market and hierarchy. This new firm structure allows the innovative entrepreneur to obtain the missing resources required to exploit a new commercial opportunity, while only giving up a small piece of the firm's equity and the entrepreneur's control of the commercial projects that they are passionate about. For this reason, Metrick believes that "venture capitalists serve as a complement, rather than a substitute, for other forms of financing." Examples of these venture-capital-backed firms embody the vertically integrated biotechnology firms founded by Robert Swanson and Robert Cohen, that included in their ranks Genentech and Amgen, or high technology firms that owe their start as successful companies to venture capital funding companies like Apple, Microsoft, and Intel, among others.

Venture capital is an important source of equity funding and represents a popular way to finance high-risk innovation-based startup firms in the high-technology and service sectors of the economy. Venture capitalists are professional investors who provide equity, or quasi-equity (convertible debentures, bonds, and equity-related instruments), capital to companies in the growth stage of development. The Venture Capital Research advisory group explains that "venture capital typically flows to small, risky, potentially highly innovative, and fast-growing companies in Canada, the USA, and other countries. These funds are provided at critical points in the growth cycle of the company when the financial risk of failure is still high." The high financial risk of investing in a new venture is countered by the potential high returns that can be realized if the firm does succeed. As former President Clinton's National Advisory Council on Economic Growth and Investment explained, "when it works... Venture Capital enriches us in products, profits, knowledge, competitors, and workers."

12. Venture Building

Stage two of the development stage includes innovation and expansion. Our fund will be better invested in funding a company in the growth stage because risks are reduced over time. Investment reviewing some or the majority reasons an early-stage is that PE funds or investment organizations may want to review the industry's purpose and be more secure. Medium to long-term profits. These others, a range of resources include developing a performance plan that includes instruction and monitoring, preparing and determining strategies, data review, and coordinating technical competence, which would support the company to retain reasonable comprehensive planning. Thorough preparation to quickly assess the company in its development important business priority categories is investment and investment times. Knowing the most reliable and productive market investment and obtaining the opportunities for trade where they likely did those the weighting is applied.

Venture building - In seven early-stage companies, projects, or new ventures, team members hold managerial and specialized roles. These kinds of businesses are normally small-scale in comparison to more seasoned businesses. In comparison to corporate ventures or startups, they are not small-scale operations. There is generally greater flexibility with these kinds of businesses, although all facets of the company's management and preparation may also call for capital. The growth or expansion of ideas or business models takes a cyclic point. At the phase of design and evaluation, innovation building is at the forefront, where they may be more vulnerable to more conventional business material.

Strategies and Approaches

The development of microcomputers has resulted in the application of technological innovations at all of these levels. A number of different groups within the corporation – the research laboratory, production, logistics, product design, marketing, and administration – are being affected. The most successful of the new technology-using corporations are those that are taking advantage of the microprocessor in all of these areas, not just for new product applications. The spread of new technology to a wide range of applications in turn provides more demand for the microprocessor producers.

Given the fact that with few exceptions, the most successful new product introductions over the years have been going after new markets or taking market share away from competitors (as opposed to shortening product life cycles), there are strong strategic reasons for pursuing innovative activities within the firm. In more recent years, innovation has become recognized as an area not limited to new product developments. New ways of producing, marketing, and managing can also create significant corporate advantages and opportunities, and these activities are becoming known as process or organizational innovation.

1. Design Thinking

The design thinking method is made up of a five-stage process and some user-centered approaches. The first stage, which is empathizing, requires team members to be connected to emotions through experiencing the feeling of the end user to gain a deeper understanding of such key stakeholders' needs and experiences. The second stage, define, is where the needs and insights gathered from the empathize process are synthesized and used to form clear problem statements that reflect the end user's needs, behaviors, and experiences. The design stage requires the realization of ideas, prototyping, and feedback from end users to evaluate the efficacy of potential solutions for unmet user needs. The fourth stage, named the test stage, leads to testing and learning through iterative design and testing with real end users. The final stage of the design thinking process is precisely the implementation of the validated new solutions in the venture's business model and market.

With the understanding that non-linear thinking is important in creative problem solving, the journey goes into design thinking. Design thinking is a structured approach to innovation that thrives on simplifying complexity in order to deliver human-centered solutions. The notion behind the design thinking method is that innovators can reduce resistance to innovation by taking a user-centered approach to seeing and understanding the world using the creativity and tools of designers in order to better implement ideas that could result in significant changes in behavior and technological innovation. The design thinking process collaboratively identifies, creates and innovates new ways of doing things and makes them more impactful by understanding who we are designing for and what the problem is and benchmarking solutions.

2. Mentorship

The current term 'mentorship' has Greek and Roman origins, the story of Odysseus leaving to fight in the Trojan War and leaving his kingdom and son, Telemachus, in the care of a trusted friend, Mentor. Pallas Athena, a Greek goddess, takes the form of Mentor to guide Telemachus in growing up and preparing for the time when his father would return. Thus, it can be seen that mentorship has had ancient origins as a tool for development. Mentorship implies a deeper commitment to the mentee than the word 'consulting' and is often assumed to last longer than a consulting engagement. The broader impact of a specific mentor on an entrepreneur can be quite varied. Some well-respected entrepreneurial founders, such as Vinod Khosla or John Doerr, will bring strong networks, fund-raising prowess, and deep operational experience to the mentee. Other mentors may focus more narrowly, across strategic business areas or on specific vertical issues. Some firms may even have the luxury of having a product visionary as a mentor. For example, in Nolan Bushnell and Ted Dabney's relationship at Atari, Dabney was the one who was indispensable for the production of Pong, building the prototype arcade machines, and staffing the company, while Bushnell served as the company's visionary.

Mentorship is the guidance provided by experienced entrepreneurs, usually for start-ups. It can be valuable for two reasons. First, mentorship imparts a mentor's local knowledge of the market to the start-up, often knowledge that is only gained through being embedded in the market. This accelerates discovery and learning for the entrepreneur. Second, the mentor's knowledge effectively provides a filter for the noise in the environment. By having trusted mentors, entrepreneurs can gain better insights into their businesses and the environment in which they operate. Mentorship can be an informal or formal process. For mentorship through formal programs, such as Ewing Marion Kauffman Foundation or TechStars, there is a competitive process for inclusion in these programs. To be included in a program, the start-up must apply for slots, typically handing over a small piece of equity for mentorship provided by the program's 'distinguished roster of successful entrepreneurs and investors.'

3. Incubation

Son (2007) supports and extends that incubation provides a conducive platform for entrepreneurs to raise their business babies with the guidance of the specialized incubation system. Dakhli and de Clercq (2004) and Chandra (2006) in their studies of incubation propose that start-ups that leverage external support from business incubators would outperform their rivals. The North American experience in business incubation is widely cited in this regard. Data from the National Business Incubation Association in North America, for example, shows that 87% of incubated businesses are still operating after five years, while the US Small Business Administration estimates that 44% of all incubated companies are still operating after being one to four years in the market.

Incubation is seen as a necessary step in support of nascent entrepreneurs. Famine (1990) explains that start-up companies usually follow a pattern from incubation to acceleration and other forms of development. Incubation mainly concentrates on creating and nurturing feasible concepts in developing businesses. Incubation programmes have been developed and institutionalized, with specific objectives of enhancing the survival and growth prospects of start-ups by supporting them with services such as business planning and accessing to capital resources as well as infrastructure, among others. The perception that start-ups fail due to the embryonic and unstructured state of their ventures causes incubation support. The collapses or failures of first-time entrepreneurs to establish a successful business explain the need for incubation support. Smit and Swart (2003) support the need for nurturing businesses for survival. They document that one of the seven reasons for the failure of businesses is attributed to incompetence and neglect of attention to certain areas, which require nurturing and support for survival and success.

4. Accelerator Program

An accelerator is usually a fixed-term, cohort-based program, which includes mentorship and educational components, that culminates in a public pitch event or demo-day. Accelerators invest small amounts of money, typically less than $100,000, and accept a small amount of equity, ideally less than 10%, to support startups as they scale their businesses. Accelerator funds are often referred to as seed funds, pre-seed, or micro-VC. Accelerators then do things like run pitch weeks or even pitch competitions at their parent universities or invest in local startups who receive a proof-of-concept grant before they apply. When a SBIR/STTR grantee applies, they sign a memo as described above. Well-managed accelerators can only have so many applicants participate, as the accelerator's high-touch focus on education and experiential learning requires economies of scale. Accelerators are set up in diverse sectors such as technology, clean energy, protein trend, or fintech. Furthermore, accelerators have geographic restrictions, often focusing 85-90% of their portfolios with startups from a 25-50-mile radius of the sponsor. Accelerators are also incentivized by the sponsors through grants from a regional economic development corporation, a university grant program, or the sponsor itself. Accelerators, like any capital provider, require a fund to make the investments. Accelerators often have a domestic or foreign location focus, such as an African-based accelerator for the food and agriculture technology sector. Accelerators traditionally have an equity negotiation to advance toward an accelerator-funded and free-education model. The special sauce in accelerators is their investment in the experiential learning of the startups. Participants are not just teaching startups on how to do something. Rather, the sponsor helps the accelerator by taking that risk and being accountable. The program must demonstrate a win-win proposition to the startups and a return to the sponsor. As investors move toward an impact model, accelerators offer connectivity to a broader network of value-added resources to include the sponsor's employees, customers, and strategic partners. For firms that emerge from an accelerator, the sponsor has de-risked the process such that those "graduates" have a fundable model that exhibits "traction."

Future Trends in Innovation and Entrepreneurship

Some very promising future trends are already emerging in the field of innovation and entrepreneurship. The role of the government in fostering entrepreneurship is the first trend. More and more policy makers are contemplating the idea that the creation of radically new firms requires a new model of government involvement in the entrepreneurial process, and that such governmental 'seed' should be designed to solve the specific market failures and anti-trust concerns that are unique to the actual dynamics of new ventures. The new reality of an innovation economy is the second trend. Society now faces a set of new realities that require a broader view of the purpose of business, as well as with an educational infrastructure that fosters the appropriate thinking and the proper skills in our future innovators. The evolution of a dual venture market is the third trend. An increasing number of empirical findings demonstrate that high-technology ventures, of all sorts, receive most of their financial backing from a small subset of investing organizations, mainly from a small number of venture capital organizations and a handful of angel investors. The impacts of external and internal venturing will be the fourth trend. When large and established corporations become dissatisfied with their capacity to innovate, they are increasingly able to experiment with various types of corporate venturing, including strategic alliances with technology.

Our model of innovation and entrepreneurship with the CAPLE framework is based on the best research and on the greatest minds who have devoted their lifework to the study of innovation and the fostering of entrepreneurial skills. We believe this is an enduring and comprehensive model that can be successfully applied at several levels: by policy makers in their efforts to construct regional environments that foster innovation and entrepreneurship; by educators, particularly at the graduate levels, where entrepreneurship needs to be taught as the complex and intricate discipline it is; by practicing entrepreneurs, as an additional tool in their education and as a philosophy of life in fostering change for the better; and by academic researchers who continue to explore and learn, thereby adding new layers of understanding and depth to the field.