Innovation is all about making a difference in people life‘s, and it starts with an idea.
This idea needs to resonate with customer needs, create the appropriate market attraction, find the right value network to grow, justify its financial costs and last but not least have a potential return on the investment.
For that many aspects about innovative ideas need to be understood, starting with the person who take the idea from being an abstract idea to be a reality (AKA the entrepreneur) and what qualities he / she should have. What innovation means, and how it can create a real value for all of its stakeholders. What is the industry context we are going to work in and what are the market forces that we need to take for. How we are going to build a sustainable business model to support growing our dreams and business. Last but not least, how we are going to find a real market needs and get the appropriate customer understanding.
All these and more were the topics within this interesting course “Developing Innovative Ideas for New Companies” which was named #1 Entrepreneurship Course on Coursera by CourseTalk’s “Top Rated” MOOCs.
This blog post is an attempt to go through the course material in a moderate way and provide the key insights and knowledge that you can take with you within your entrepreneurial journey! So I hope you find it useful.
What is entrepreneurship?
Entrepreneurship is a hot topic know-days and it will make sense to start thinking about and what does it really mean.
Technology ventures define entrepreneurship as:
“undertaking the creation of an enterprise or business that has the chance of profit or success”
This definition does not distinguish between what is for profit and what is not, nor does is it distinguish between a company, an organization or an enterprise. The main thing about entrepreneurship the to have an aim and succeed in it.
Entrepreneurship, creativity, and innovation
The three topics, entrepreneurship, creativity, and innovation are interrelated topic! But what is the difference?
Creativity can be thought of as “creating a new idea”, the key thing here is the word new! New can be complete new thing or relatively new.
Creativity is an iterative process, where the following can happen:
- Connection of disparate ideas.
- Discovery of opportunities and possible solutions.
- Invention as the application of discovery.
- Application in the feasible adoption of solutions.
That been said, creativity does not imply making it valuable, this where innovation comes to play.
“Innovation is the successful exploitation of new ideas”. Innovation is about taking an idea (could be from the creativity) and making it valuable for it for its stakeholders! Value here means that the idea is desirable by the customer, viable as business concept and feasible as an implementation.
Innovation has the following types as per Dr. green:
- Business Model Innovation: Changing the way business is done in terms how we capture value.
- Marketing Innovation: Development of new marketing methods with improvement in product design or packaging, product promotion or pricing.
- Organizational Innovation: Creation or alteration of business structures, practices, and models, and may therefore include process, marketing and business model innovation.
- Process Innovation: Implementation of a new or significantly improved production or delivery method.
- Offering Innovation: Introduction of a new good or service that is new or substantially improved in some functional characteristics, technical abilities, ease of use, or any other dimension.
- Supply Chain Innovation: Occur in the sourcing of input products from suppliers and the delivery of output products to customers.
Entrepreneurship as we saw is the mindset and the glue links creativity, innovation and execution, where we find what is new, explore how it can the valuable, taking the steps to make it real and finally delivering it to the intended market.
The key learning we all have to take from the above is: entrepreneurship, creativity, and innovation are all skills that can be learned! Yes, it helps to have some kind of qualities with in you as person, but we humans always find a way, when there is a well!
The Opportunity Analysis Canvas
The whole course is built around the The opportunity analysis canvas, which is is a new tool that can help us in the following:
- Help us develop our entrepreneurial mindset (1a, 1b, 1c in the figure below)
- Develop that opportunity analysis skill set (2a, 2b, 2c)
- Identify the entrepreneurial opportunities (3a, 3b, 3c)
And as any canvas, its a way to lay fame our thinking, lay down ideas in a written way that makes them more communicable with others.
The opportunity analysis canvas is a nine stage tools that can be looked at as a step that proceed creating the business model canvas, where First, we look at the element of our entrepreneurship thinking, motivation and find tune it. Second, we zoom out to look at what going in the in the economy, what’s going in industry and competition, with in it. Third, its used as way to look for the value for customers and trying to identify the opportunities.
In this way, the opportunity analysis canvas helps us in Thinking Entrepreneurially, Seeing Entrepreneurially and finally Acting Entrepreneurially. The following material in the course expands on the items in the opportunity analysis canvas in each of its three main categories.
Entrepreneurs, motivations, behaviors and the mindset
Entrepreneurship is all about the people! Its a quality that some people have, while others largely miss. So the question arias: How can you define your self as an entrepreneur or not?
Dr. James Green stated some of the characteristics entrepreneurs have, such as:
- They are people with goals to achieve! The goal could be to help the society or even be motived by money, as long as they have a goal they are pursuing, they are entrepreneurs.
- They are people with high Independence! Entrepreneurs tend to have some individuality when it comes to how they work and make decisions, which results in needing less support or approval from others.
- They are people with freedom! Entrepreneurs love freedom when it comes to what they do, how they do things and when they do it. Thats why they favor freedom from been in in another type of profession or career that limit them to do so.
- They are people with high focus! Entrepreneurs have both attention and commitment. They also able to leads others individuals to react and to become successful with them.
- They are people who create! Successful entrepreneurs connect the dots and see things other did not see or are blind to see. They also have the ability to create relationships with in the market they operate in, which for sometimes, be the real differentiator.
- They are people with high optimism! Entrepreneurs make judgments in a positive way. They have the tendency to overlook critical elements and discount uncertainties.
- They are people with risk taking! This is what really makes an entrepreneur an entrepreneur! The ability to take risks and have the courage to fail. They also risk there money, because they see that there is an opportunity, the higher the risk, the higher the return.
- Against all the odds! Entrepreneurs have the ability to see things other don’t see, so grounded to their vision, entrepreneurs proceed to take actions that other may see unrealistic or sometimes even silly.
In an nutshell, entrepreneurs develop ideas into actions!
Entrepreneurs may succeed but also they may fail along the way, they are people how have the passion and the motive to move things from point A to point B, so its worth studying these success stories and try to to learn from them how did they succeed, what are the best practices / lessons we can take from them and hopefully trying to avoid the failures they have been to.
Behaviors of an entrepreneur
Entrepreneurs have certain type of behaviors that distinguish them from others.
They first have Confidence, where they believe in themselves and their abilities. Maintaining Relationships, where entrepreneurs are driven by likeability and good communication skills, they also have the skills to connect to others with ease. Building Social capital, entrepreneurs build find many resources in and through personal and professional networks. Last but not least, Risk tolerance, where entrepreneurs have the natural tendency to take big risks.
Entrepreneurs and decision making
If we imagine going inside an entrepreneur mindset, we are likely to see a lot of brain activity, where a lot of pushing and pulling to make decisions smartly and relatively quickly. Trying to understand how entrepreneurs make decision making on a fundamental level is a key to know how unique and significant entrepreneurs are!
Decision making is cognitive activity, and by cognitive we mean it involves a thinking process of goals / objectives / process and taking choice out of set of choices. When we take a decision we have a set of alternative options at the time of decision, we may not know the exact outcomes, but we can try to estimate it.
The process of strategic decision making
By strategy we mean, a means to achieve a goal or an objective and for that strategic decisions is typically a process that has the following steps:
- Recognizing a problem or the situation
- Generating alternatives options to overcome the problem or the situation
- Evaluating the various alternatives
- Selecting the alternative that best satisfies our evaluation criteria
Strategic decisions involve critical analysis, resource investment, and commitment. It also comes with an objective that can be for example:
- Revenue and profit goals
- Market share and competitive advantage
- Product superiority and technical advantage
Strategic decisions at the high-level share four fundamental characteristics:
- Complexity: facts, variables, and contingencies relevant for the decision at hand
- Uncertainty: all possible outcomes are not known and / or are difficult to forecast
- Rationality: a specific goal is intended by making a decision
- Control: intentional and deliberate actions are made by decision-makers
Why its important to study how entrepreneurs make there decisions?
Studying how entrepreneurs make there decisions may help us in finding ways to make our decisions better when it comes to the normal management practices!
Entrepreneurs take decisions while under the following:
- Limited information to operate within
- Taking decisive and action-oriented decisions
- Taking risks that involve could involve major consequence
Looking at the their strategic decision making process and trying to learn how entrepreneurs actually do it, may of us could find patterns that we can benefit from in normal management practices in the highly uncertain world we live and under the extreme conditions surrounding our businesses today.
From an entrepreneur point of view, strategic decision making can be thought of as the first step to discover opportunities, which is the key first step to build the business venture.
Understanding the industry and the market
Dr. James Brown defined an industry as a type of an economic activity that is running at a large scale, and it can be thought as batching or grouping set of companies based on there economic activity. For entrepreneurs its important to look and think about industries that are off interest to them, especially when they are thinking, and searching for the business concepts.
When looking looking at industries, two type of conditions are very important for entrepreneurs:
Industry Knowledge conditions: which are the mount and type of knowledge creation that is required to generate products/services within these industries. We may ask questions like, do we need specific expertise, or is success based more on financial capabilities, location, relationships or any other factors.
For entrepreneurs building on the expertise they have, they can can create favorable knowledge conditions by themselves or by finding the right partners within that industry space. Also its important for entrepreneurs to seek opportunities to build knowledge of the business space, market and technologies within the selected industry. Finally, entrepreneurs showed have a look at adjacent industries to avoid the disruptions and to have a broader vision about what other options are available to there prospect customers.
Industry Demand conditions:
The other set of conditions entrepreneurs need to look at are demand conditions. Within it, entrepreneurs examine three aspects of customer demand conditions:
- The magnitude of customer demand
- The rate of growth of that demand
- The heterogeneity of that demand across customer segments
At this stage, its important for entrepreneurs to do market segmentation to determine who to serve / who not to serve, who is the most attractive segment to start targeting and how to better address the needs of that target segment. Market segmentation also presents and attractive opportunity for entrepreneurs to specialize and find something that seizable enough, yet unattractive to the exiting large player.
Looking at these both type of conditions (knowledge and demand) within the industry your pursuing your next business idea, will give as an entrepreneur a broader understanding and a knowledge advantage that you can use to assess the viability of the market, disrupt the exiting market, find the right partners or any other pre-commercialization decision.
There are many ways to segment the market and find customer segments, options include segmenting the market by demographics, socialgraphics, lifestyle, interests, etc.
The most powerful way to segment customers is by understanding there needs and wants and starting from there. This way an entrepreneur can make sure that he / she is find a solution for a real problem.
Strategy and strategic positioning
Strategic positioning is all about defining the company’s position, making trade-offs, and forging fit among company activities. Hence, strategy is the creation of a unique and valuable position, involving a different set of activities, which can be serving few needs of many customers or serving broad needs of few customers.
To have a strategy, as strategic planning process need to be undertaken, where the formulation of long-range plans for the effective management of opportunities and threats in-light of a venture’s strengths and weaknesses. This is where the entrepreneur try to define the venture mission, specifying achievable objectives and setting timelines and measures of how to access what have been achieved.
After that comes the the step of strategy formulation, which is the process of developing the identified strategy.
Creating a sustainable competitive advantage
With in the workable industry, entrepreneurs need to find a venture that has a strategy that other companies do not duplicate in some form and for sometime. The competitive advantage is a unique feature set, unique business relationships, a unique business model, which is only an advantage if it’s in place and it’s not easily copied.
To analyze the right competitive advantage that could be selected by an in a certain industry, two models can be helpful to understand where the new venture will be positioned and how it can develop a sustainable strategy:
The Poter five forces: Porter five forces analysis is a framework to analyse level of competition within an industry and business strategy development. The five forces helps us determine the competitive intensity and therefore attractiveness of a market.
Five Forces Analysis assumes that there are five important forces that determine competitive power in a business context, which are:
- The Supplier Power: here we assess how easy it is for suppliers to drive up prices with in that market. The fewer the supplier choices we have, and the more powerful the suppliers are.
- The Buyer Power: here we assess how easy it is for buyers to drive prices down. This will be driven by the number of buyers, the cost of switching to someone else, and so on.
- Competitive Rivalry: if we have many competitors, and they offer equal products and services, then most likely that we have little power in the situation.
- Threat of Substitution: this is where customers are able to find different way of doing what we are doing but with a different method. The more options are there, the more weaken we are.
- Threat of New Entry: if it costs or time or money to enter your market and compete effectively is to little, this is a way to weaken our position within that market and losing any competitive advantage in it.
The Blue Ocean strategy: Blue Ocean is all systematic strategic way of making competitors irrelevant by creating new market spaces that did not exist. Blue Ocean strategy emphasis on finding new market spaces that were untapped before using its methodology, and stress on leaving the “like them” follow strategies that let the company struggle in an exciting red ocean.
The heart of blue ocean strategy is the concept of Value Innovation which is all about creating the right mix by both increasing the value proposition to customers and reducing the cost structures of the business. Which is a simultaneous pursuing of both differentiation and low cost.
Within the Blue Ocean strategy, the strategy canvas can be used as way to current state of play in market space and drive action by reorienting focus from competitors to alternatives and from customers to noncustomers.
Building the assets
When entrepreneurs are entering a certain industry, its very important for them to understand what assets are most critical in that industry and market of interest. This will help them in building the right muscles to compete with exiting players.
Assets to build could involve:
- Tangible assets: like money, equipment, real estate, patents, etc.
- Intangible assets: like knowledge, relationships, reputation, customer experience, brand name, etc.
Entrepreneurs will need these assets to create advantage over competitors, so its wiser to start with the intangible assets as they are not that easy to replicate, once established in a right way.
Understanding the changes at the macro-level
One of the key things entrepreneurs need to be in the look out for are the changes that are happening in the intended market on a macro level. This includes monitoring changes in technology, changes in social and demographic factors and changes in political and regulatory rules.
Technological changes for example are one of the most important triggers of change that allows for the expansion of new innovations and create new market spaces. Social & demographic changes also opens up the opportunities by creating demand for things where demand had not existed before. Political & regulatory change can be a two way sword, where it can create the opportunity or even demolish it, based on that change.
Understanding the customers
For entrepreneurs to build a successful venture, they need to introduce a product or service that satisfies customer needs in a better than competition, the right cost structures for the business and at a price that fits the business model for this venture.
For that its very important to to find that unsolved customers problem first and then find a better way of solving a customer’s problem than whats is existing.
Finding the real customer problem
Entrepreneurs must study current customers and “see” what are there needs and wants. This can be done by applying both ethnographic research methods along side market research method.
The key thing is to find the sources of customers pain or unmet needs and prime that to find the opportunities for new innovations. The entrepreneur need to look for clues from the customers and find expressions of an
unfulfilled wishes. Finding the needs is only a start, once identified, the entrepreneur can start developing the product that fulfill the necessities grounded to the insights gathered.
Design Thinking can be used as a process to understand customers current needs, there current obstacles and as way to overcome it by formulating solutions based on the gathered insights. If you are interested more about how to apply Design Thinking for business innovation, I would recommend to visit this extended post about it here.
Understanding customer adoption cycle
On of the mistakes entrepreneur do when they think about customer acceptance for there innovations, is to assume that innovations are mass market ready from day one! Tough the innovation in it self may be valuable and desirable by customers, but the reality that it has to undergo a certain cycle when it comes to customer adoption.
The theory of innovation diffusion breaks down the customer and there adoption to any new innovation to five different segments as follows:
- The Innovators: are at the forefront of the curve. “Innovators” do not just try out whats new, but they can also aid in the innovation process itself.
- The Early Adopters: they come into the picture once the benefits of a certain innovation start becoming clearer. They are always on the lookout for new things and are quick to adopt new innovations to suit their needs. They normally have the resources like time and money needed to adopt new innovations. They also are inherently risk taking and see the need to be trendsetters.
- The Early Majority: are the first of the group that adopts an innovation once it gains sufficient traction and widespread acclaim. They are influenced by the media and other social channels and follow the crowd.
- The Late Majority: are conservative in nature and risk averse. The only reason for them to adopt new innovations is to fit in and not get left behind.
- The Laggards: are the bitter end of the curve. They share many of the fears and concerns of the late majority. It’s probably safe to ignore them during the early phases of innovation, but they can provide valuable input during the late phases of innovation.
Working with each segment requires different strategies from the entrepreneur and understanding this adoption cycle is a key to understand how innovations can be taken to the next level.
Opportunity identification and business modeling
When entrepreneurs find the real customer needs, this is where the opportunity arise for innovation. Here the entrepreneur need to find the opportunity that can bring value innovation to the market.
Value innovation is all about creating the right mix by both increasing the value proposition to customers and reducing the cost structures of the business. Which is a simultaneous pursuing of both differentiation and low cost.
Blue Ocean strategy if you recall, has a framework that is very useful to be used by entrepreneurs, which is the four actions framework. In the action framework, the entrepreneur should look at the current company factors and competition factors and see what you can do to these factors in terms of creation, raising, reduction and elimination to create a new value curve.
Entrepreneurs use the four actions framework to reconstruct buyer value elements in crafting a new value curve and to break the trade-off between differentiation and low cost and to create a new value curve by answering four key questions, what to raise? what to eliminate? what to reduce? and what to create?
Opportunity identification & verification
Entrepreneurs opportunities become real when they find a solution that leverages strategic advantage and solve an important problem for others.
Its vey important for entrepreneurs to validate their ideas and solutions by talking with prospective customers very early in the product development process. This can provide insights on what features, values, and price are important to customers (before even the first prototype).
What are the “real” needs that we are building our compelling value for? Are we are providing customers something that will really match their needs? To know this, we need to start from the customers not from our intuition.
One method to apply opportunity identification & verification is to use lean development methods. Lean development is all about about applying a scientific methodology to validate a certain hypothesis or a theory. Its all about having the mindset to accept the changes in the enterprise that shift the thinking from the “Ship it!” or the organization driven opportunity development mindset to a more customer driven opportunity development mindset.
If you want to read more about lean thinking and how it can be applied to startups (also to big established companies), I would recommend to view this blog post.
Building a business model
A business model in its essence, describes the rationale of how an organization creates, delivers, and captures value.
To better understand your business model and the business model of other, a very nice and helpful tool called “The Business Model Canvas” can be used to demystify business models. It provide with a way to look at you business from different angles like from value proposition point of view, from customers point of view, from partners point of view and so.
In the business model canvas, we look at the following:
- Customer Segments: where we define the different groups of people or organizations to serve
- Value Propositions: where we describe the bundle of products or services that create value for a specific customer segment
- Channels: how we are going to reach our customer segments
- Customer Relationships: what type of relationships we want to establish with the customer segments
- Revenue Streams: how we are going to generate money
- Cost Structure: what are the costs we are going to incur to operate our business model
- Key Resources: what are the important assets we need to make our business model work
- Key Activities: what are the important things we need to do to make our business model work
- Key Partnerships: who are the suppliers / partners how are going to help us in our business model
The following video gives you a premier on business model canvas, here.
Creating business plans
After we have done all the amazing work to find the opportunity, understand the customers, understand the market / industry, find the business model that we are planning to operate with, its time to formulate the business plan.
A business plan is plan for the creation and management of the business that details exactly how the company will materialize from concept to maturity, it also explains the market size and the competitive environment we are going to operate in. A business plan is more of an owner manual for the new venture.
In a business plan we put a special attention to:
- The marketing plan: describing match of products and strategy to current and future markets
- The operations plan: discussing our processes for operation
- The financial plan: assessing all revenues, costs, and financial requirements and sources for the venture
Why write a business plan?
A business plan is a great tool to:
- Helps to focus ideas and serves as a feasibility study of the business’s chances for success and growth
- Finished plan serves as an operational tool to define the company’s present and future possibilities
- Helps us manage the business and prepare for success or adaptation
- Serves as a strong communication tool for the business purpose, competition, management, financial goals, etc.
- Provides the basis for your financing proposal, which is required by most banks and investors
Its worth noting that the business plan is a working document. It requires significant research and thought, needs regular, recurring updates and must stand up to criticism and challenges.
For the sake of simplicity we are not going to nitty gritty details of a business plan, but there are many online resources that to can look up on the subject.
This course is a great eye opener to many subjects with in the field of entrepreneurship, it has nearly every thing you can imagine on a very basic level. Tough, I think that each one of the subjects with in this course need its own course, to get us entrepreneurs on a clear and solid understanding.
Also, the videos in the course where a bit long compared to other MOOC’s I have attended, which demand really a very long time and attention to manage to go through.
All in all, I have enjoyed this course very much and I would recommend it to any one in the field of startup, innovation or Entrepreneurship.
Kudos James Green :)
More from Dr. James Green
If you are interested more about the topic, an online master degree called the “Master of Technology Entrepreneurship” is available 100% Online within 15 Months period and for the pice of $19,500 from the University of Maryland.
Dr. Jamess also has a book that expand on the course topic, The Opportunity Analysis Canvas, which can be obtained from the following link or by clicking the book image below.
About the Developing Innovative Ideas for New Companies course
The Developing Innovative Ideas for New Companies course was provided as a Massive Online Open Course (MOOC) on the Coursera platform and provided by University of Maryland in 6 weeks timeframe.
The course was designed to assists aspiring entrepreneurs in developing great ideas into great companies. Using proven content, methods, and models for new venture opportunity assessment and analysis. The course helps in enhancing the entrepreneurial mindset of entrepreneurs and help develop their functional skill sets to see and act entrepreneurially.
This course was instructed by James Green the director of entrepreneurship education in University of Maryland. For more information about the course and its future schedules, kindly visit the course Coursera page.
I have successfully finished this course in July 2013 and the following still image provide a verification of my course completion.
About the author
Mussab Sharif, an innovation manager and practitioner in a leading Middle East telecom operator. Having a major of computer engineering and in the process of finishing my MBA specialized in Service Innovation & Design from Laurea university for applied sciences in Espoo, Finland.