Innovation, opportunity identification and screening ideas
Innovation turns ideas into value: incremental, radical or disruptive. Entrepreneurs spot opportunities through creativity and Drucker's seven sources, then screen ideas before investing.
Types of innovation
| Type | Meaning | Example |
|---|---|---|
| Product | A new or improved good or service | Electric scooters |
| Process | A new or better way of producing or delivering | Toyota's just-in-time production |
| Marketing | New design, packaging, pricing or promotion | Shampoo sold in small, low-priced sachets |
| Organisational | New business practices or structures | Amul's three-tier cooperative |
| Incremental | Small, continuous improvements to existing products | A slightly better camera in each new phone model |
| Radical | A breakthrough that creates a new technology or market | The first mobile phone; the internet |
| Disruptive | Starts simple and cheap at the low end or in a new market, then displaces leaders | Digital photography displacing film |
| Frugal or reverse | Low-cost design for emerging markets, sometimes later sold in rich ones | GE's portable ECG machine designed in India; the Jaipur Foot |
Sustaining vs disruptive (Christensen)
Radical describes the size of the technical leap; disruptive describes the business-model effect on incumbents. A radical innovation need not be disruptive.
Drucker's seven sources of innovation (1985)
| Source | Where | Example |
|---|---|---|
| The unexpected (success, failure or event) | Inside the firm or industry | A product selling to an unplanned customer group |
| Incongruities | Inside | Demand is rising but profits are falling |
| Process need | Inside | A weak link in an existing process |
| Changes in industry or market structure | Inside | Deregulation opening a sector |
| Demographic changes | Outside | An ageing population needing elder care |
| Changes in perception, mood and meaning | Outside | Health-consciousness boosting millet foods |
| New knowledge | Outside | Advances in biotechnology |
Finding opportunities
- Idea sources: customer complaints, existing products, distribution channels, government policy, research and development.
- Creativity techniques: brainstorming (Alex Osborn), mind mapping, SCAMPER, focus groups, problem inventory analysis, attribute listing, the Delphi technique.
- Lateral thinking is Edward de Bono's idea.
- An idea becomes an opportunity only if it is attractive, durable and timely, and creates value for a buyer.
- Timmons' model: opportunity, resources and team must fit together, led by the founder.
Screening business ideas
- 1Generate a long list of ideasQuantity first
- 2Preliminary screening with a checklistFit with skills and resources, legality, market need, competition
- 3SWOT and a rough market assessmentDrop weak ideas cheaply
- 4★Pre-feasibility (techno-economic) studyQuick check before spending more
- 5Detailed feasibility study and business planTechnical, market and financial
- 6Go or no-go decisionRobert Cooper's Stage-Gate uses such gates between stages
★ one-way, controls the pace
NET asks you to classify an innovation (incremental, radical, disruptive, process), to match authors (Christensen, Drucker, Chesbrough, Wallas, Osborn), and to order the creative process or idea-screening steps.
Typical MCQ: “Who developed the idea of disruptive innovation?” Clayton Christensen, first with Joseph Bower in a 1995 article, then in The Innovator's Dilemma (1997). Trap: not Schumpeter.
Typical MCQ: “Which of Drucker's seven sources lie outside the firm and industry?” Demographic change, changes in perception, and new knowledge.
Wallas' creativity: 'Please Invent Ideas Visibly' = Preparation, Incubation, Illumination, Verification.