Innovation and Entrepreneurship by Peter F. Drucker

David E. Goldberg University of Illinois at Urbana-Champaign

Text

• Drucker, P. F. (1986).

Innovation and entrepreneurship.

New York, NY: Harper & Row.

• Long career at Claremont College.

Entrepreneur

• J. B. Say, “The entrepreneur shifts resources out of an area of lower and into an area of higher productivity and greater yield.” • Joseph Schumpeter 1911, Theory of creative destruction. Change is normal.

7 Sources of Innovative Opportunity • Systematic innovation consists in the purposeful and organized search for changes and in the systematic analysis of the opportunities such changes might offer for economic or social innovation.

• Internal: unexpected, incongruity, process need, changes in industry structure • External: demographics, changes in perception, mood, and meaning, new knowledge

Unexpected

• Unexpected success: Macy’s and appliance sales.

• Unexpected failure: Example of locks in India.

• Unexpected outside activity: PC & IBM.

Incongruity

• Between is and ought • Types: – Between different economic realities.

– Between industry reality and assumptions.

– Between industry effort and values and expectations of customers.

– Internal logic of a process.

Principles of Innovation

• Begin with analysis of opportunities.

• Innovation as conceptual and perceptual.

• Simple and focused.

• Start small.

• Aims at leadership.

Don’ts

• Don’t be clever.

• Don’t diversify.

• Don’t diversify for the future; diversify for the present.

3 Conditions

• Innovation is work.

• It builds on strength.

• Innovation is an effect in economy and society.

Conservative Innovator

• Tries to minimize risk (cf Vincenti).

• Not the usual stereotype.

Overcoming Resistance to Change • Culture of innovation necessary.

• Need innovation plan.

• Greed for new things.

• Systematic abandonment.

Practices

• Focus on opportunity: Usually focus on problems.

• Create entrepreneurial spirit among team.

• Listen to young people.

Measuring Innovative Performance • Feedback from results to expectations.

• Systematic review across the board.

• Compare results to expectations innovation.

Structure

• Separate old and new.

• Special locus for new.

• Consider different incentives, monetary and administrative.

• Differential returns on innovation.

• Hold new stuff accountable.

4 Strategies

• Fustest with the mostest. High risk.

• Hitting them where they ain’t: creative imitation, entrepreneurial judo.

• Occupy a niche.

• Changing economics of product, market, or industry.

Bad Habits

• NIH • Cream skimming.

• Quality: in eyes of customer not producer.

• Premium price.

• Maximizing not optimizing.

• Toll-gate • Specialty skill • Specialty market

Niches