INNOVATION

The term innovation means a new way of doing something.

A distinction is normally made between invention and innovation.

Invention is the first occurrence of an idea for a new product or process while innovation is the first
attempt to carry it out in practice successfully.

Innovation may refer to incremental, radical and evolutionally changes in thinking, products, process
or organization

All innovation begins with creative e ideas.

We may define innovation as successful implementation of creative idea within an

organization .innovation in an organization may include the following;

 The introduction of a needed good which consumers are not aware of or a new quality of
the goods existing.
 The introduction of a new method of production.
 The opening of a new market where goods have not been sold before whether the market
exists initially or not.
 The conquest of a new source of supply of new materials whether the source already
existed or not.
 A creation of a new organization in any industry.

Innovating in an industry is driven by the need for;

1. Improved quality of goods and services.

2. Creation of new markets.
3. extension of product range
4. reduced labor cost
5. improved production process
6. reduced materials
7. reduced environ mental damage
8. replacement of products/services
9. reduced energy consumption
10. conformance to regulation

Open innovation is a paradigm that assumes that firms can use both internal and external ideas. While
closed innovation is a paradigm that limits firms to using internal ideas only.

The innovation of products, services and processes and formation of new business development
initiated by an individual is called independent entrepreneurship.

Innovation and new business development initiated by an existing firm or organization is called
corporate entrepreneurship.

Generation and source s of business ideas

A good business idea is essential and evens a prerequisite for a successful business venture. Good
business ideas however do not just appear; rather they result from handwork and effort of the part of
the entrepreneurs in generating, identifying and evaluating business opportunities

What is a business idea?

A business idea is the response of a person or organization to solving an identified problem or meeting
perceived needs in the environment (market, community) finding a good idea is the first step in
transforming the entrepreneurs’ desire and creativity into a business opportunity.

However, an idea is just a tool that needs to be developed and transformed into viable business
opportunity.

What is creativity?

It is the ability to design, form, make or do something in a different way. The ability to come up with
creative solutions or need and to make them work often makes the difference between success and
failure in business.
It distinguishes high growth or dynamic from ordinary average businesses.

Real successful entrepreneur creative in identifying a new product, service or business opportunity.

To be creative you need to have your mind and eyes open as you work through the sources for
business idea.

Why should you generate business idea?

1. You need a good business idea which is essential to start a business and stay competitive.
2. Response to market needs. Markets are made of customers who have needs and wants
waiting to be satisfied.
3. Changing fashions and requirements provides opportunities for entrepreneurs to respond to
them and with new ideas, products or services.
4. To stay ahead of competition; if you do not come up with new ideas, products and services,
a competitor will. The challenge is to be different and better than others.
5. Technology; it has become a major competitive tool in today’s market with the rate of
change making many firms to innovate. There are sever al companies in the word today dealing with
electronics and have appliances which come up with new products almost every month. For such
companies, business idea generation is very crucial.
6. Product life-cycle; all products have finite life. Even new products eventually become
obsolete, thus there is need to plan for new products. The firm’s growth and prosperity depends on its
ability to introduce new products and to manage their growth.
7. To spread risk; eighty percent of new products are found to fail. It is necessary therefore for
firms to try and spread their risks and allow failures that may occur from time to time by constantly
gene rating new ideas.

Sources of business ideas

The millions of entrepreneurs throughout the word and their testimonies suggest that there are many
source s of business idea.

Some of the more used ones are;

1. Hobbies/interests-a hobby is a favorite leisure time activity or; occupation. Many people in
the pursuit of their hobbies or interests have founded businesses.
2. Personal skills and experience; over half of the ideas for successful business come from
workplace experiences e.g. a mechanic with an experience of working in a large garage who
eventually sets up his own garage. The background of entrepreneurs plays a crucial role in the
decision to go into the business as well as the venture created.
3. a franchise is an engagement where by, the manufacturer or sole distributor of a trade mark
product or service give exclusive rights of local distribution to independent retailers for their payment
of royalties and conformance to standardized operating procedures.
4. Mass media; the mass media is a great source of information, ideas and opportunities.
Newspapers, magazines, TVs and internet are all mass media examples. Commercial advertisements
are of business ideas. articles may report on changing fashions or needs of consumers
5. Exhibitions; attending trade fares and exhibitions can be a source of business idea. They are
usually advertised on media. You will discover new products, talk to business men over a source of
business information.
6. Surveys; the focal point for a new business idea should be the customer. the needs and
wants of a customer which provide the rational for a product or service can be ascertained through a
survey .such a survey may be by talking to people usually through questionnaires or interview or by
observation. You may start by talking to your family and friends, to find out what they think is needed
and what is not available. You may ask whether they are dissatisfied with an existing product or
service and ask what improvement or changes they desire. You can then move to talk to people in the
distribution chain i.e. manufacturers, wholesalers, retailers, distributors and agents. You should have a
set of questions. Channel members have a good sense of what customers require and what will not sell.
Finally, you should speak to several both existing and potential. Besides talking to people, you can get
information by observation. In deciding whether to open a shop in a given street, you can observe the
number of people passing by as compared to other streets. if you are interested by an area frequented
by tourists you may observe that there is no decent restaurant around.
7. Complaints; complaints and frustrations on part of customers have led to many new
products or services. The idea could be to set up a rival firm offering a better product or service or it
might be a new product or service which could be sold to the firm in question or others.
8. Brainstorming; this is a technique for creative problem solving as well as for generating
ideas. The object is to come up with as m any ideas as possible. It usually s tarts wit h a question or
problem statement e.g. what a re the products and services needed in the home today which are not
available? .each idea leads to one or more additional ideas resulting in the good number.

The following rules must be followed;

-don’t criticize the idea of others

-ideas that seem to be crazy are welcome.

-the greater the number of ideas, the better

-combine and improve upon ideas of others

-all ideas must be recorded.

IDENTIFYING AND ASSESSING BUSINESS OPPORTUNITIES
A good idea is not necessarily a good business opportunity
A business idea becomes business opportunity when it is viable and it can give the owner good returns
A business opportunity may be defined as an attractive business idea or preposition that provides the
possibility of a return for the person taking the risk.

The opportunity must be viable in terms of demand of goods and services, technical production,
commercialization and management

An illustration of selecting a business opportunity is as follows

“It is very simple. I select a project where raw materials are not easily available. Once I have found out
how I get raw materials, I am not worried about the market. It will be automatically be good because
not many people will go in this line because of the scarcity of raw materials”

Because the entrepreneur had a good plan for procuring raw materials, the availability of raw materials
was the starting point of the project idea.
This is a good example of entrepreneurial decision making for selecting a product. What it indicates is
that out of many criteria, you have to select only those where your own strengths becomes highly
relevant. You may not have an idea that is positive on all counts E.g. if the market is very good, the
technology may be complicated. If the returns are very good, cost of investment may be very high.

IDENTIFYING A BUSINESS OPPORTUNITY

1 Resource based ideas; industries based on minerals, marine, agriculture and forestry resources, waste
based resources such as wood waste, metal waste, and paper waste.

2 linkage related ideas; industries arising out of various types of linkages such as backward and
forward integration from the existing lines of manufacture. Industries based on substitution of products
which are imported.

3 export/import ideas

4 market shift or cloth related ideas; industrial products that have growth potential as a result of
increased population or change in composition of population, purchasing power or changes in
lifestyles.

5 special product ideas; research and invention based products. Skills/knowledge based products.
Product based on institutional /government purchases.

6 service sector ideas; household repair and maintenance, service facilities, workshops or
establishment to cater to industrial and household needs.

QUALITIES OF A GOOD BUSINESS OPPORTUNITY

 there should be a good market scope for the products and services
 Returns of investment; the level of investment required vs. expected returns
should be assessed. if the returns are attractive e then the opportunity can be exploited
 Availability of resources; the necessary raw materials and production
machinery should be available. if they are available then the opportunity is viable
 Skill requirement; specialized skills to start and run a business, technical and
managerial skills required. If the skills are available, then the business opportunity can be exploited.

ASSESSING A BUSINESS OPPORTUNITY

Ideas and opportunities needs to be screened and assessed for viability once they have been identified
or generated. it is a difficult task that is very important. It does not guarantee success but certainly
minimizes risks.

1) Industry and market.

The key question we answer here is whether there is the market for the idea.

A market refer to actual and potential customer with needs and wants, who have the ability to purchase
your intended products and services and consider whether on e can provide what the customer wants at
the right price in the right place and in the timely manner. On e should consider the size of the market
and growth rate of the Industry .the best situation is the market that is large and growing where getting
even a small market share can represent a significant and increasing sales volume. For this reason
there is need for the entrepreneur to gather information. One can collect information at source
(primary data) by interviewing people such as customers and suppliers. Secondary data can be gotten
from several sources of published information including libraries, chambers of commerce, foreign
embassies, newspapers and the internet.

2) Length of the window of opportunity.

Opportunities are said to have a window i.e. they do exist but do not remain open forever. markets
grows at different rates over time and as market gets bigger and established, conditions are not
favorable .the issue then is to determine the length of time where the window will be opened and
whether one can operate, create or seize the opportunity before the window closes.

3) Personal goals and competences of entrepreneur.

An important question with anyone opening the business is whether they want to undertake that
particular venture. personal innovation is a special attribute of a successful enterprise’s related
question is whether one has the competence(knowledge, skills and abilities) and if not whether they
could be brought in for the requirement of the business.

4) Management team

In many ventures particularly those involving a large amount of capital, high risk, sophisticated market
or high competition, the management team is usually the most important dimension determining
attractiveness.

The experiences and skills of the team in the same industry, technology and market often determine
success and failures. This explains why venture capitalists (people who provide finance for the
business) put a big stress on management factor and say that they would rat her have a good
management with an average idea, product or service than a brilliant idea, product or service with bad
management.

5) Competition

To be attractive, an opportunity should have certain competitive advantage .e.g. lower costs in terms of
production and marketing or better quality. Also if a firm cannot keep new entrants out of its market
through protection such as patent rights, legal regulation action, or contractual advantages such as
exclusive rights to a market, then the opportunity will not be attractive

6) Capital technology and other resource requirements

The availability and access to capital, technology and other resources such as skills determine whether
certain opportunities can be achieved and to what extent. as a general rule, the more difficult the
requirement have, the more attractive the proposition provided there is the market for the product,
service or idea.

7) Environment

The environment within which the business will operate has a profound influence on the attractiveness
of any opportunity. By environment, we are referring not only to green issues (physical environment)
but also the political economic, geographical, legal and the regulatory contexts. Political instability
renders many business opportunities unattractive in many countries .similarly inflation, fluctuation in
exchange rate or a weak judiciary do not go down well with investments.

8 feasibility study and business plan.

The process of examination of the above factor as often referred to as the feasibility study. In resent
times, investors and leaders require these issues in the form of a business plan.