Entrepreneurship Chap 4

Hisrich
Peters
Shepherd
Chapter 4
Creativity
and
the Business Idea
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

4-2
Trends
 The start of a trend that lasts for a
considerable period of time provides one of
the greatest opportunities for starting a
new venture.
 Trends that will provide opportunities
include: green trend, clean-energy trend,
organic-orientation trend, economic trend,
social trend, health trend, and Web trend.

4-3
Sources of New Ideas
 Consumers
 Informally monitor potential ideas and needs.
 Formally arrange for consumers to express their
opinions.
 Existing Products and Services
 Analysis uncovers ways to improve offerings
that may result in a new product or service.
 Distribution Channels
 Channel members can help suggest and market
new products.

4-4
 Federal Government
 Files of the Patent Office can suggest new
product possibilities.
 New product ideas can come in response to
government regulations.
 Research and Development
 A formal endeavor connected with one’s current
employment.
 An informal lab in a basement or garage.
Sources of New Ideas (cont.)

4-5
Methods of Generating New Ideas
 Focus Groups
 A moderator leads a group of 8 to 14
participants through an open, in-depth
discussion in a directive or nondirective manner.
 An excellent method for generating and
screening ideas and concepts.

4-6
 Brainstorming
 Allows people to be stimulated to greater
creativity.
 Good ideas emerge when the brainstorming
effort focuses on a specific product or market
area.
 Rules of brainstorming:
 No criticism.
 Freewheeling is encouraged.
 Quantity of ideas is desired.
 Combinations and improvements of ideas are
encouraged.
(cont.)

4-7
 Brainwriting
 A form of written brainstorming.
 Participants write their ideas on special forms or
cards that circulate within the group.
 Problem Inventory Analysis
 Consumers are provided with a list of problems
and are asked to identify products that have
those problems.
 Results must be carefully evaluated as they may
not actually reflect a new business opportunity.
(cont.)

4-8
Creative Problem Solving
 Creativity tends to decline with age,
education, lack of use, and bureaucracy.
 Latent creative potential can be stifled by
perceptual, cultural, emotional, and
organizational factors.
 Creativity can be unlocked by using any of
the creative problem-solving techniques.

4-9
 Brainstorming
 Session starts with a problem statement.
 No group member should be an expert in the
field of the problem.
 All ideas must be recorded.
 Reverse Brainstorming
 A group method that focuses on the negative
aspects of a product, service, or idea as well as
ways to overcome these problems.
 Care must be taken to maintain group morale.
Creative Problem Solving (cont.)

4-10
 Gordon Method
 Method for developing new ideas when the
individuals are unaware of the problem.
 Solutions are not clouded by preconceived ideas
and behavioral patterns.
 Checklist Method
 Developing a new idea through a list of related
issues.
 Free Association
 Developing a new idea through a chain of word
associations.

4-11
 Forced Relationships
 Developing a new idea by looking at product
combinations.
 A five step process which focuses on generating
ideas from relationship patterns between
elements of a problem.
 Collective Notebook Method
 Developing a new idea by group members
regularly recording ideas.

4-12
 Attribute Listing
 Developing a new idea by looking at the
positives and negatives.
 Big-Dream Approach
 Developing a new idea by thinking without
constraints.
 Parameter Analysis
 Developing a new idea by focusing on parameter
identification and creative synthesis.

4-13
Figure 4.1 - Illustration of
Parameter Analysis

4-14
Innovation
 Types of Innovation
 Breakthrough
 Fewest number of innovations.
 Establishes the platform on which future innovations in
an area are developed.
 Should be protected by patents, trademarks, and
copyrights.
 Technological
 Occurs more frequently; not at the same level of
breakthrough inventions.
 Offers advancements in the product/market area.
 Needs to be protected.

4-15
 Ordinary
 Occurs most frequently.
 Extends a technological innovation into a better
product or service or one that has a different market
appeal.
 Usually come from market analysis and pull, not
technology push.
Innovation (cont.)

4-16
 Defining a New Innovation (Product or
Service)
 Newness can be:
 In the consumer concept.
 A change in the package or container.
 Slight changes or modifications in the appearance of
the product. (Industrial market)
 Companies also add products to their product
line that are already marketed by other
companies; products are new to the
manufacturer but not the consumer.
Innovation (cont.)

4-17
 Classification of New Products
 Consumer’s Viewpoint
 The continuum proposed by Thomas Robertson is
based on the disrupting influence that use of the
product has on established consumption patterns.
 Continuous innovations.
 Dynamically continuous.
 Discontinuous innovations.
 This approach is consistent with the marketing
philosophy that “satisfaction of consumer needs” is
fundamental to a venture’s existence.
Innovation (cont.)

4-18
Figure 4.3 - Continuum for
Classifying New Products

4-19
 Firm’s Viewpoint
 Distinction can be made between new products and
new markets.
 Situations with a new technology and a new market
are the most complicated and pose the highest degree
of risk.
Innovation (cont.)

4-20
Figure 4.4 - New Product
Classification System

4-21
Figure 4.5 - A Model of the
Opportunity Recognition Process

4-22
Product Planning and Development
Process
 Establishing Evaluation Criteria
 Criteria should be established at each stage of
the product planning and development process.
 It should be all-inclusive and quantitative in
nature.
 Criteria should evaluate the idea in terms of:
 Market opportunity.
 Competition.
 Marketing system.
 Financial factors.
 Production factors.

4-23
Figure 4.6 - The Product Planning
and Development Process

4-24
 Idea Stage
 Promising ideas should be identified and
impractical ones eliminated.
 Evaluation method – Systematic market
evaluation checklist.
 Determine the need for the new idea as well as
its value to the company.
 Concept Stage
 Refined idea is tested to determine consumer
acceptance which can be measured through the
conversational interview method.
Process (cont.)

4-25
 Product Development Stage
 Consumer reaction to the product/service is
determined.
 A consumer panel is given a product sample and
preference is determined through methods such
as multiple brand comparisons, risk analysis,
etc.
 Test Marketing Stage
 Increases certainty of successful
commercialization.
 Actual sales reflect consumer acceptance.
Process (cont.)

4-26
E-commerce and Business Start-up
 E-commerce offers entrepreneurs an
opportunity to be creative and innovative.
 Factors that facilitate 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.

4-27
 Using E-Commerce Creatively
 Entrepreneurs have to decide whether to:
 Run Internet operations within the company.
 Outsource these operations to Internet specialists.
 Use e-commerce packages provided by software
companies.
 The integration of front-end and back-end
operations represents the greatest challenge for
doing Internet business.
(cont.)

4-28
 Web Sites
 Ease of use.
 Structure and organization of information.
 Search capability.
 E-mail response system.
 Speed.
 Compatibility with different browsers and
platforms.
(cont.)

4-29
 Tracking Customer Information
 Electronic databases track the activity of the
industry, segment, and company.
 It supports personal marketing targeted at
individual clients.
 Care must be taken to follow the laws protecting
the privacy of individuals.
(cont.)

4-30
 Doing E-Commerce as an Entrepreneurial
Company
 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 should bring significant cost
reductions.
 Company must be able to economically draw
customers to its Web site.
(cont.)

Entrepreneurship Chap 4

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