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
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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
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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
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NIH
Cream skimming.
Quality: in eyes of customer not producer.
Premium price.
Maximizing not optimizing.
Niches
• Toll-gate
• Specialty skill
• Specialty market