Innovation and Entrepreneurship in Organizations - Case Study Example

Innovation and Entrepreneurship in Today’s Organizations Businesses and organizations thrive on fresh ideas that keep it from being stale and worn-out. These organizations grow when it has dynamic and innovative people behind them who see opportunities for growth and development. Entrepreneurship and innovation are essential at each stage of development (Jablecka, 2001). Kwiatkowski (2000) defines enterprise or entrepreneurship as an attitude towards management that leads to the best use of opportunities. “Irrespective of the type of organization, [when] intellectuals undertake entrepreneurial efforts, they use their expertise and personal networks to mobilize tangible and human resources necessary to achieve success” (Kwiatkowski, 2000, p. 88). Innovation introduces a change, a new combination from what is familiar. Schumpeter, a pioneer in the study of innovation and entrepreneurship, posits that the main force that brings about this structural change is the “perennial gale of creative destruction” (Schumpeter, 1942). Thinking out of the box seems to be one valuable trait of innovators and entrepreneurs. Although related, the processes of innovation and entrepreneurship are different. Innovation is sparked by a new idea. The idea can be a new technology such as a gadget that can provide more convenience to consumers, a new service like an alternative form of relaxation, a new product, or even a new administrative procedure. Such ideas are driven by needs that are seen by the innovators. Innovation requires creativity. Engle, Mah & Sadri (1997) define Creativity as the ability to develop ideas through one of three processes. One is creation or the development of something new. Another is the synthesis or combination of concepts. The third process is modification or the changing or improvement of things (Anderson, 1992). Indulging in such processes makes the entrepreneur a creative thinker who modifies or rejects previously accepted ideas to build innovations from practically anything. In organizations, innovation becomes the growth of a new idea from its initial state into its actualized form as a full-blown innovation (Roberts, 2006). Schumpeter (1939) mentions various types of innovations: the introduction of new products, new methods of production and new forms of business organization as well as the penetration of new input—and output markets. The people who drive and protect the innovative ideas are the entrepreneurs. They are responsible in designing and developing a programme of activities that push the innovative idea forward. They gauge their participation in the innovation in accordance with how popular the idea is, how acceptable it is and how supportive people are to it. For innovation to occur, entrepreneurs are necessary, but they are not sufficient elements for its existence. They may inspire the development of new ideas and propel these forward through the innovation process. They may fail or succeed depending on how their ideas are supported by others. Eventually, the innovative idea may have grown to be an innovation that takes a life of its own. By that time it becomes a separate entity from the entrepreneur, even if he has given it life (Roberts, 2006). Entrepreneurship may be viewed as trying out new ways of “doing” business. It does not follow that all managers or business owners are automatically entrepreneurs. The openness of trying of new ideas and new production methods are what make entrepreneurs and such an endeavor is the innovation itself. Collins (2001) states that great companies have top managers modest enough to make way for the creative entrepreneurial contributions of a large number of managers. This agrees with the definition of Stevenson and Jarillo (1990) that entrepreneurship is “a process by which individuals — either on their own or within organizations — pursue opportunities without regard to the resources they currently control” (p.23). Managers may spot enterprising individuals among their staff. With their collaboration, they can transform a vague vision into a great success ( Collins and Moore 1964; Hébert and Link 1988). Schumpeter makes a clear distinction between entrepreneurship and risk taking in capitalism. Company owners may take risks but they do not necessarily innovate. Likewise, people who introduce new products, processes or new forms of business organizations are innovators and most likely, become capitalists as well (McDaniel, 2000). Schumpeter (1939) also distinguishes innovation from invention. For him innovation transcends invention. Invention becomes an innovation only when it is used productively as applied to a long-known process and a new production function results. Roberts (2006) compares the two processes: The innovation process oversees the evolution of a new idea over time, whereas the entrepreneurial process oversees the activities that entrepreneurs develop to promote and defend the idea against its detractors. In other words, innovation is the function of a sociological type of individual known as the entrepreneur (Sweezy, 1943). Innovation and Entrepreneurship are a big part of Research and Development in organizations. McDaniel (2000) chronicles the development of an idea into an innovation: First, it goes through research. Two types of research are basic and applied. Basic research is like brainstorming of concepts and identification of new phenomena and new activities. Applied research is the process of applying basic research data to evolve into a specific product or process that has some potential, practical use. The next stage is development. The actual potential of the idea is tested in a controlled laboratory setting. This is to transform the idea into a more concrete example such as a physical product or process. Once the potential product or process has been created, it moves to the demonstration stage when a prototype is created. Once development of a product or process in a contrived and controlled setting has been accomplished, it is tested against reality. Real world application is tested to prove its operational success. Finally, the next stage is commercialization which takes the demonstration model or prototype to be offered for sale in the marketplace. Many factors are considered. Foremost is profitability. This usually requires a combination of increasing the efficiency of the innovation, reducing costs of production as output increases, and continued refinements to improve usefulness of the innovation. These steps increase marketability of the innovation and thus usually increase profitability (McDaniel, 2000). Thus, innovation can be thought of as consisting of a series of challenges and revisions that move the new idea from an initial state to its final state (Roberts, 2006). Dynamic organizations put much priority on their Research and Development Department. When the innovation is successful, there is a clamor for more improved versions or alternative uses. Thus, research and development go on overdrive. As the organization hires more people as research staff, there becomes a tendency for this division to become separated and isolated from other divisions of the company. The downside may be that the goal of this research division becomes a theoretical proof of potential rather than the ultimate goal of commercialization at a profit. Another negative effect is that the marketing division of the company becomes estranged from the research division due to the many tasks between them. Usually when this happens, the success of research projects subside (Mansfield, 1987). It is ideal that the marketing division and the research division maintains its harmonious relationship and close links at all times, so when customers or potential clients inquire about the innovation, any member from the marketing or research division can answer in accordance to the common knowledge of both divisions. It is safe to conclude that the closer the link between marketing and Research & Development divisions, the greater the probability of commercialization (Mansfield, 1987). The literature yields much association between entrepreneurship and opportunity. Shane (2000), for one claims that entrepreneurs discover opportunities related to the information that they already possess, and before technological change leads to new processes, products, markets, etc. entrepreneurs must discover opportunities in which to exploit the new technology. The significance of prior knowledge comes into the picture as people discover opportunities on a probable goldmine they might have access to simply because they know what its possibilities (Venketaraman, 1997). Equilibrium theories conceptualize that everyone can recognize all entrepreneurial opportunities, but there are fundamental attributes of people rather than mere information about opportunities which determine who becomes an entrepreneur (Shane, 2000). Psychologists identify human attributes such as need for achievement (McClelland, 1961), willingness to bear risk (Brockhaus and Horowitz, 1986), self- efficacy (Chen et al. 1998) internal locus of control, and tolerance for ambiguity (Begley and Boyd 1987)—lead .some people and not others to choose entrepreneurship. To illustrate how innovation and entrepreneurship works in an organization, the following case study is considered: Creating a product due to a felt need is one surefire step in succeeding in business. Bruce Johnson, inventor of nasal strips that allowed him to breathe more comfortably despite his chronic nasal congestion, was a godsend to CNS, Inc. The company envisioned the marketability of the nasal strips they named Breathe Right, which proved effective in opening up nasal passages. They knew that there was a population of customers which would benefit from the use of such nasal strips. This included athletes who need to breathe better especially those who use mouth guards, snorers, allergy, sinusitis and cold sufferers who longed to be relieved from nasal congestion through drug-free means (Kerin, et al, 2005). The demand for Breathe Right nasal strips upped when athlete Jerry Rice of the San Francisco 49ers scored two touchdowns in their 1995 Super Bowl victory. He was wearing Breathe Right nasal strips. News and sports reporters were furnished with press kits about the product so they had the opportunity to talk about it when people asked what Rice had on his face. True enough, sales soared after people discovered the product’s effectivity. The business suddenly ballooned into a multi-million enterprise in just one year (Kerin et al, 2005). Other countries learned about the product and soon, CNS was in the process of expanding to the international market. Their criteria for choosing the countries to expand their business to were those with huge “over-the counter” buying market and prospect for growth. They hooked up with local partners in different countries to help them market the product. These partners customized the marketing schemes to suit the local culture. The innovation of the product Breathe Right nasal strips spurred from a particular need. Surprisingly, there was a huge market for such a product. When a well-known athlete such as Jerry Rice used it and attracted much attention with it, the entrepreneurship of the makers was heightened. The decision of CNS to go global was a calculated risk they were able to get away with. A three-stage approach in penetrating and developing new markets worldwide was set as follows: the first stage was exploring the market and how it accepts the product. It is also a time of searching for local partners in that country. The second stage was establishing the product and developing marketing strategies to push it to potential customers. The third stage was managing and maintaining the business and coming up with new and dynamic ways to make profit by expanding product use and the product line to include other markets. The marketability of the product may be attributed to a cultural perspective on “over-the counter” cures. Knowing that a product is effective in giving relief to a suffering person is one thing. Being aware that it is readily available not only in drug stores but also in groceries and convenience stores makes it more attractive to customers. The value of a local partner lies in its ability to read the country’s culture and come up with marketing strategies to suit its specific needs. This is where the concept of prior knowledge comes in, as the local partners may push entrepreneurship to a greater level. However, CNS still needs to stay on top of the situation by constant and consistent supervision and monitoring of local partners to ensure that they share the company’s goals and vision at all times. CNS is fortunate to have stumbled upon a gold mine in Breathe Right nasal strips. The anticipated glory brought about by Jerry Rice’s concrete endorsement of the product turned it into an overnight sensation. Being ready for the responses of their prospective clientele regarding a sports hero’s use of the product by giving out press kits to media personalities was a wise marketing move, as the product was able to sell itself at the most appropriate time when it got the attention of millions of people. The marketing scheme fell together quite perfectly, as it was able to bring in the desired results, that of shooting up sales and attracting the global market. Smart timing was key in CNS’s success. Taking advantage of the worldwide interest in the Breathe Right product by choosing the right local partners to help them out is another brilliant move. Their proposed three-stage approach is a sound one to follow for all other businesses intending to conquer international markets. However, they must be cautious in introducing new products too soon because of the market’s tendency to divide their attention and resources on two or more products simultaneously. If the new product is not as effective as the original product, then it runs the risk of affecting the reputation of the original product. Concentrating on improving the original product and extending its use through research and development will be worth the investment. Maintaining product quality or even surpassing its current one is owed to the buying public who has put its faith and trust in the company which manufactured the product. Hence, CNS should uphold its good name brought about by the success of Breathe Right nasal strips. Should it manufacture other products, then they are expected to match the quality of the original one. There are a lot more similar success stories of innovation and entrepreneurship available in the literature. However, there are also an abundance of failed attempts. The important thing is the lesson learned from such failures. Innovation and entrepreneurship are concepts that inspire people towards success. Personally, I have always been in awe of innovations that are presented to make life in general more convenient. Many new products, practices and processes have been introduced which have been borne in the minds of very creative. Entrepreneurs are on the look out for needs that need to be filled and for strategies attractive enough to do so. I marvel at how these people have come up with novelty or alternative solutions, without being aware that I myself have that potential to be an innovative entrepreneur! I have yet to gain enough confidence to claim ownership of original ideas my mind usually holds and courage to bring them out to the open, maybe share with others so it can be concretized. My prior knowledge of things I am good at may offer a plethora of ideas on how to make some areas better to serve various needs and various markets. Schumpeter’s concept of “creative destruction” may make me cringe, being trained to follow a strict routine, however, there is a part of me that believes it can be a refreshing and even a liberating principle and need to make myself more comfortable in thinking outside the box. As a probable innovator, I have to have the courage to pursue my ideas, however strange they might seem at first, but of course, followed through with thorough research and development. As an entrepreneur, it has been mentioned by Stevenson and Jarillo (1990) that entrepreneurs pursue opportunities without regard to the resources they currently control. I believe this is true if my organization will be supportive enough to lend me the resources I need to bring my ideas to fruition. In that case, my managers and I should maintain an open communication with each other and an openness to and respect for various perspectives. As an entrepreneur, I must be able to acquire and hone business acumen and a sensitivity to consumer needs to be able to exploit opportunities. The market is always craving for novelty and progress and in this world of abundance of opportunities, there is always room for more. References Anderson, J.V. (1992) Weirder than fiction: the reality and myths of creativity. Academy of Management Executive, Vol. 6, pp. 40-47 Begley, T.. D. Boyd. 1987. Psychological characteristics associated with performance in entrepreneurial firms and smaller businesses. 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