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Chapter
5
Creativity and the
Business Idea
McGraw-Hill/Irwin
Entrepreneurship, 7/e
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Creativity & Innovation
 Creativity is the ability to develop new ideas and to discover
new ways of looking at problems & opportunities
 Innovation is the ability to apply creative solutions to those
problems & opportunities to enhance or to enrich people’s
lives
 Creativity is thinking new things & innovation is doing new
things
 Entrepreneurs succeed by thinking and doing new things or old
things in new way
 Having a great new idea is not enough; transforming the idea
into a tangible product, service or business venture is the
essential next step
 Leadership expert Warren Bennis says. “ today’s successful
companies live and die according to the quality of their ideas”
Creativity
 Creativity involves generating something from nothing
 Creative ideas springs up from the most unexpected places
Edwin Land, one of America’s most prolific inventors,
credits his three year old daughter with the idea of the
Polaroid instant camera
 Entrepreneurship is the result of a disciplined, systematic
process of applying creativity & innovation to needs &
opportunities in the marketplace
 Millions of people come up with creative ideas for new or
different products & services; most of them, however, never
do anything with them
 Entrepreneurs are those who connect their creative ideas
with the purposeful action & structure of a business
 Thus successful entrepreneurship is a constant process that
relies on creativity, innovation & application in the
marketplace
3000 new product ideas, 4 make it to development stage, 2 are
actually launched & only ONE becomes a success in the market
Sources of New Ideas (1 of 2)
 Consumers
 Informal & formal monitoring of potential ideas and needs- express
their opinions.
 Idea & need represents a large enough market to support new venture
.
 Existing Companies
 Potential (Entpr & Intraprnrs) should also establish a formal method
for monitoring & evluating competitive products & services on the
market
 Distribution channels
 Channel members-Excellent source of new ideas b’coz of their
familiarity with the needs of the market
 Help in marketing the newly developed products
 Example: salesclerks suggesting entrpr changing color of product
Sources of New Ideas (2 of 2)
 Federal government
 Files of the Patent Office contain numerous new product possibilities.
 Suggest more marketable product ideas
 Official Gazette, published summarize list of patents for license or sale
 New product ideas can come in response to government regulations.
(OSHA- eliminating unsafe WC’s in industry)
 Research and development
 Largest source of new ideas is the entrepreneur’s own “research and
development” efforts. May be:
 A formal endeavor connected with one’s current employment.
 An informal lab in a basement or garage.
Methods of Generating New Ideas
 Focus groups
 number of group members from 6-12
 Moderator focuses discussion of the group in a directive or nondirective
manner.
 Co. women’s slipper-concept of “warm & comfortable slipper that’s fits
and old shoe” – 12 women focus group
 An excellent method for initially screening ideas and concepts.
 Brainstorming
 A Group method for obtaining new ideas & solutions
Brainstorming
Conti....
 4 Rules should be followed
No criticism is allowed by anyone in the group
2. Freewheeling is encouraged-wilder the idea the better
3. Quantity of ideas is desired- greater the no. of ideas the greater
the likelihood of the emergence of useful ideas
4. Combinations and improvements of ideas are encouraged- ideas
of others can be used to produce still another new idea
Example: Bank to develop journal for industrial client
1.
Xcitics of market-information content- frequency of issue –promotional value
( issues discussed)
Focus group and brainstorming is different in
the sense that FG is structured or
moderated...while BS is not a debate or
discussion like that....its people giving lots of
ideas without criticism allowed
Methods of Generating New Ideas (2 of 2)
 Problem inventory analysis
 Instead of generating new ideas themselves consumers provided with
list of problems in general product category
 Then asked to identify & discuss products in this category that have
particular problem
 Can be used to test a new product idea.
 Effective method since its easier to relate known products to suggested
problems & arrive at a new product idea than to generate an entirely
new product idea by itself
 Results must be carefully evaluated as they may not actually reflect a
new business opportunity.
Table 5.1
?
Consumers associates particular problems with specific
products & then develop a new product that do not contain the
identified fault
Creative Problem Solving
 Creativity: an important attribute of a successful entrepreneur.
 Creativity tends to decline with:
 Age, education, lack of use, and bureaucracy.
Creative Problem-Solving Techniques
<<Insert Table 5.2>>
Creative Problem-Solving Techniques (1 of 3)
 Brainstorming
 Used in creative problem solving and idea







generation.
Creative problem solving: a method for obtaining
new ideas
Spontaneous contribution of participants
Problem statement-neither too broad nor too narrow
Avoid inhibiting responses
NO group member should be expert in field of
problem
Ideas even if illogical, must be recorded
Prohibit criticizing OR evaluating during BS session
 Reverse brainstorming
 A group method for obtaining new ideas
focusing on the negative.
 Finding fault by asking questions “in how
many possible ways can the idea flop”
 Maintain group morale
 Stimulate innovative thinking
 Often involves identification of everything
wrong with an idea- followed by discussion
how to overcome these problems
 Brainwriting
 Form of written brainstorming.
 It is a silent, written generation of ideas
by a group of people.
 This sheet can b passed around on email as well
 Pass the sheet around – reach its owner
 The only thing wrong with it is that there
is no excitement of verbal discussion
Creative Problem-Solving Techniques (2 of 3)
 Gordon method
 Method for developing new ideas when the
individuals are unaware of the problem.
 u don’t give away too much detail about the problem
 headline would be “i wish there was something v cud
do about the bad colors in my TV screen” Or Latest
trends in fashion world”
 Checklist method
 Developing a new idea through a list of related issues.
Product Planning & Development Process
Establishing Evaluation Criteria
 Criteria for evaluation need to be established at each stage of
the product planning and development process.
 Criteria should be:
 All inclusive and quantitative to screen the product carefully.
 Established to evaluate the new idea in terms of:
 Market opportunity
 Competition
 Marketing system
 Financial factors
 Production factors.
 Market opportunity
 Competition
•Need for the product idea must exist
•Characteristics & attitudes of consumers that might buy the
product, size & nature of market
•Share of that market that product could capture
• competing producers, prices, & marketing policies should be evaluated
•Product should be able to compete successfully with products already
on the market by having features that will meet or overcome current or
anticipated competition
•New product should be compatible with existing management
capabilities & marketing strategies
 Marketing system •Firm should be able to use its marketing experience & other
expertise in this new product effort
•Example: GE would have less difficult time adding a new kitchen
appliance to its line than P&G
• product should be able to be supported by & contribute to Co.
financial structure
 Financial factors •Break even point & Long term profit outlook for product need to
be determined
 Production
• if the new product idea cannot be integrated into existing manufacturing
not only is the new idea is less positive- but new plan &
factors.processes,
production cost – plant space need to be determined
Product Planning and Development Process
 Divided into five major stages:
 Idea stage.
 Concept stage.
 Product development stage.
 Test marketing stage.
 Commercialization.
The Product Planning and
Development Process (1 of 3)
 <<Insert Figure 5.6>>
The Product Planning and
Development Process (2 of 3)
 Idea stage
 Promising new product/service ideas should be identified.
 Impractical ones eliminated.
 Evaluation method – systematic market evaluation checklist.
 Concept stage
 Refined idea is tested to determine consumer acceptance.
 Consumer acceptance can be measured through the
conversational interview method.
The Product Planning and
Development Process (3 of 3)
 Product development stage
 Determines consumer reaction to the physical product/service.
 A tool frequently used – consumer panel.
 Consumer preference is determined through:
 multiple brand comparisons, risk analysis, level of repeat purchases, or
intensity of preference analysis.
 Test marketing stage
 Increases certainty of successful commercialization.
 Provides actual sales results, which indicate the acceptance level of
consumers.
 Positive test results indicate probability of successful product launch
E-commerce and Business Start-up
 E-commerce offers entrepreneurs an opportunity to be
creative and innovative.
 Factors that facilitate a high-growth in electronic
commerce:
 Widespread use of personal computers.
 Adoption of intranets in companies.
 Acceptance of the Internet as a business communications
platform.
 Faster and more secure systems.
Using E-Commerce Creatively
 Entrepreneurs starting an Internet commerce venture need
to address the same strategic and tactical questions as any
other entrepreneur.
 Entrepreneurs have to decide to:
 Run Internet operations within the company, or
 Outsource these operations to Internet specialists.
•Internet
operationscompany primary
business
•Availability of
resources –web
professional
 Another option is to use the packages for e-commerce.
Components of Internet Commerce
 Two major components of Internet commerce are:
 Front-end operations.
 Back-end operations.
 Integration of front-end and back-end operations
 represents the greatest challenge for doing Internet business.
 provides the opportunity for developing a sustained
competitive advantage.
The biggest mistake of many companies on the internet is
believing that an attractive & interactive website will secure
success- leads to underestimating imp of end operations
Web Sites- connection btw Co & its
Customers professional
design
 Keys to a good Web site:
 Ease of use ( info product /services )
 Structure and organization of information
 Visibility
 Search capability
 E-mail response system
 Speed.
Shopping
cart- credit
card
payments
Indicator
of
legitimacy
Web
designer
Secure
servers
https
Advertise- search
engines, banner ads,
email
 Technical aspects
 Should work properly in different browsers and platforms.
 Should appear in all marketing materials.
Secure servers
https
Tracking Customer Information
 Database:
 Tracks activity of the:
 Industry.
 Segment.
 Company.
 Supports personal marketing targeted at individual
clients.
 Should be able capture customer attention with
customized one-to-one marketing.
Doing E-Commerce as an Entrepreneurial
Fresh fruits &
Company
vegitables ?
 To do business through the Internet:
 Products should be delivered economically and
conveniently.
 Products need to interest a wide market
 Company must be ready to ship the product outside its own
geographical location.
 Online operations have to bring significant cost
reductions-as compare to brick & mortar operation
 Company must possess the ability to economically draw
customers to its Web site.
Summary
 Starting point –successful Co.- product/Service they offer
 Sources of ideas ranges – comments of consumers TO
changes in Govt regulations
 Monitoring comments of Consumers
 Evaluating new products offered by competitors
 Familiar with the ideas contained in previously granted
patents
 Becoming actively involved in R&D
 Specific tech’s entrepreneur use to generate ideas
Focus group-Brainstorming-Problem
inventory analysis
 After idea generation the planning and developing process begins
 Large number ideas screened/ evaluated
 Potential ideas moved- concept, product development, test
marketing, commercialization stage