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OPERATIONS RESEARCH AND ENTREPRENEURSHIP
DR R USSEL L M.
VISITING
VICTORIA
KNIGHT
PROFESSOR
UNIVERSITY
OF WELLI NGT ON
GRADUATE SCHOOL Oh B U S I N E S S AND GOVERNMENT MANAGEMENT
1. Abstract
This paper d isc u sse s o p tio n s a v a ila b le to O p eratio n s R esearch
specialists to innovate and act as entrepreneurs in introducing O.R.
models into o rg an isa tio n a l d ec isio n m aking.
1 his v aries from
individuals introducing new O.R. softw are and selling it on the open
market to groups and organisations, such as ORSNZ, encouraging the
development and use of O.R. m odels in today's society.
In the final
stage of entrepreneurship, we are all aim ing to make New Z ealand a
more innovative, entrepreneurial society.
2. Introduction
The opportunity exists for O perations Research professionals to behave
in a much m ore en trep ren eu ral m anner in introducin g O p eratio n s
Research models, or com puter m odels in general, into org an isatio n s
today.
T his m ay be done by in d iv id u a ls , w h eth e r w o rk in g
independently or w ithin an existing large corporation.
H ow ever, in tro d u c tio n
o f any in n o v a tio n o ften re q u ire s th e
development of an innovative or entrepreneurial team or group.
In
fact, the w hole org an izatio n , such as O RSN Z, may becom e very
innovative or entrepreneurial .
Some w hole industries, such as the
computer softw are industry, have becom e entrep ren eu rial, often via
the use of O perations R esenrr^ nr com puterised m odels.
F inally, a
whole society, such as New Zealand, can become more innovative and
e n tre p re n e u ria l.
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3. D efinitions
We shall define, for the purposes of this paper, innovation as the
process of bringing new ideas to com m ercialization. T b i' may he as a
m ark etab le product or service, an im provem ent in p ro d u ctiv ity or
quality, opening of nev. markets, or the introduction of new sources of
supply of raw m aterial, products or alternatives.
It may also be the
creation of a new organization.
An e n tre p re n e u r is an in d iv id u al w ho m akes in n ovation happen,
usually in four distin ct stages.
He or she seeks an opportunity,
d e v e lo p s a strateg y to p u rsu e th a t o p p o rtu n ity , assem b les the
necessary resources and takes an initiative, often that of launching a
new business.
But m ost entrepreneurs do not work alone, at least not for long. They
often becom e the center of an entrepreneurial group, whose mem bers
w ork to achieve the four steps listed above. This group or team often
ev o lv es in to an entrepreneurial o rg an izatio n , w hich in turn
may
becom e p art of an entrepreneurial industry.
In the final stage, we
m ay all be w o rk in g to w ard s th e e s ta b lis h m e n t o f a m ore
en tre p re n e u ria l society.
C onsider E xhibit 1 for exam ples of each o f these stages, w ithin the
field o f O perations Research.
An O.R. individual may discover an
o p p o rtu n ity by dev elo p in g a new piece o f O p eratio n s R esearch
softw are, such as a expert system program to make decisions in the
health care industry. He then develops a strategy, such as franchising,
to expand the sales of his concept across the country and around the
w orld.
He needs to assem ble resources, such as m oney, people and
facilities, to develop and launch his innovation. Finally, his initiative is
taken by opening his business to sell his softw are package, w hich
serves as the prototype franchise.
The next stage may be to encourage others to join him, as franchisees
in his business, to expand the concept, or as partners, in contributing
other softw are package ideas, w hich may also be sold through the
b u sin e ss created .
T his group or team may evolve into a large
o rg an izatio n , w hich may be entrep ren eu rial in term s of introducing
this innovative softw are package into the operation o f many health
care units.
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The so ftw are industry, as a w hole, is only one exam p le o f an
in n o v a tiv e en tre p re n eu ria l in d u stry and the O p e ra tio n s R esearch
society is only one exam ple of an entrepreneurial, innovative society.
But it can become much more innovative. The individual may already
be in a large organization, such as the O perations R esearch Society of
New Zealand.
Let me propose several ways in which this group, ORSNZ, can become
m ore innovative and entrepreneurial.
4. ORSNZ Innovation
Suppose mi inuividual, such as your P resident, Bob C avana, here,
decided to introduce an innovation through the Society, in a sort of
cooperative. Suppose the innovation is a new softw are package or O.R.
consulting services. He m ight start by assem bling a group or team of
his colleagues to discuss the idea. All of them might know particular
softw are packages that they, or people they know, have developed, or
consulting skills available within the ORSNZ association.
There is the opportunity for individuals, groups and the organizations
in which they are em ployed, to innovate and act as entrepreneurs, in
the introduction of new ideas, w hether com puter program s, consulting
services or even teaching methods, such as the use of cases.
The latter is one type of innovation about which I will be speaking in
furth er d etail at this aftern o o n 's session "U sing C ases to T each
O perations Research."
5. Types of innovation
Several different types of innovation have already been discussed, but
they can vary in several dimensions, as shown in Exhibit 2. First is the
breakthrough innovation, w hereby its introduction rev o lu tio n ises the
way things are done.
The developm ent and introduction of radar by
British O perational Research groups during W orld W ar II is perhaps a
classic exam ple.
T oday's parallel m ight be the use of C om puter
A ssisted D esign (CAD) and Com puter A ssisted M anufacturing (CAM )
m odels in production systems.
N ext w ould be tech n o lo g ical in n o v a tio n , as ex e m p lifie d by the
introduction of the desktop m icrocom puter, w hich has rev o lu tio n ised
the use of m anagem ent decision models in business today.
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T here also exists a level called ordinary innovation.
A lthough a
c o n tra d ic tio n in term s, this r e f e r s to g en eral im p ro v em en ts in
pro d u cts, services or processes, such as a new softw are statistics
package.
A n o th e r e x tre m e , m uch m ore fre q u e n tly e n c o u n te re d , is the
increm ental innovation.
T his represents an increm ental im provem ent
in a product, service, process or system .
It may not seem very
s ig n ific a n t, but c o lle c tiv e ly these are m uch m ore com m on and
im portant than other types.
A nother dim ension of innovation is developm ental versus adoptive.
T hese may be characteristic of producers or users, w ithin adoptive
innovations, and are typically much more frequent.
E xam ples given in E xhibit 2 include the developm ent and adoption of
C A D /C A M sy stem s at the b rea k th ro u g h le v el, d ev e lo p m e n t and
adoption of the m icrocom puter at the tech n o lo g ical innovation level
and d ev e lo p m e n t and adoption of B e elin e, a new m ath em atical
program m ing package, at the increm ental innovation level.
6. Types of E ntrepreneurship
T here are alm ost as m any types of en trep ren eu rsh ip
entrepreneurs, since many of them are quite different.
as
there
are
F irst is the independent individual entrep ren eu r, operating his own
business and controlling
his own destiny. Many of these are spinoff
enterpreneurs, who have left large firm s, often in frustration, to start
hiisinecsrs of their own.
These are often called corporate refugees,
sim ilar to society or political im m igrant refu g ees, who often start
businesses on arrival in their new country.
O th er types o f entrep ren eu rs include fran ch ise en trep ren eu rs, who
w ork together to duplicate a concept proven by a franchisor in another
city, country oi c u ltu re . Franchisees are not nearly as independent as
o th e r en tre p re n e u rs, sin ce they rely on the fra n ch iso r for the
o p portunity, m anagem ent, supplies and equipm ent, in return for the
paym ent of fees and royalties.
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At the other extrem e from independent en trepreneurs are co rp o rate
entrepreneurs, who operate w ithin a large com pany, w ith very lim ited
independence and little control over the venture.
Between these two extrem es exist a wide variety of other types, such
as the partner entrepreneur, the coo p erativ e e n tre p re n eu r and the
rrnglom erate or acquisitive entrepreneur, all discussed in E xhibit 3.
7. Conclusion
In summary, there are many d iffe ren t types o f inn o v atio n and of
entrepreneurship. But the opportunity exists for members o f O RSNZ to
innovate by introducing new m odels, softw are and ideas in to their
own companies or the organizations for which they currently work.
I wish you luck and success at introducing these new ideas into your
organization.
8. References
Knight,R.M ., 1987 "C orporate Inno v atio n and E n trep ren e u rsh ip : A
Canadian Study", Journal of Product Innovation M a n a g e m e n t. Vol. 4,
pp 284-297.
Knight, R.M.. 1984, "The Independence of the Franchise Entrepreneur",
Journal of Small Business M anagem ent. V ol.22.
Knight, R.M., Product Innovation by Sm aller High Technology Firm s in
Canada", 1986, Journal of Product Innovation M anagem ent. V ol.3.
Kao, R.W.Y.and Knight, R.M., 1987, E ntrepreneurship and New V enture
Management: Readings and Cases , Prentice Hall Canada.
CAN NEW ZEALAND
ESTABLISH AN
ENTREPRENEURIAL
SPECI \LIZE
INHKiH
TECHNOLOGY
EXHIBIT 1
INCENTIVES
PEOPLE,
MONEY,
SET UP AN
ENTREPRENEURSHIP
INSTITUTE
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E xh ib it 2
Innovatio n Typ o lo g y
D e v e lo p m e n ta l
A d o p tiv e
B reakthrou gh
C A D /C A M
M odel Producers
C A D /C A M
U sers
Technological
M ic ro c o m p u te r
Producers
M ic ro c o m p u te r
Users
O rd in ary
S o ftw a re C o m p a n ie s
Producing N ew
S ta tis tic s P a c k a g e
S o ftw a re U se rs
of S ta tis tic s
P ackag e
Incremental
B e e lin e M a th e m a tic a l
P rog ram m ing P a c k a g e
U se r of B ee lin e
P ac k ag e
Exhibit 3
Z . i t r e p r e n e u r s h ip Typology
In d e p e n d e n t Individual
O w ns his own business,
M a ke s his own decisions.
P a r tn e r
M ust o p erate with one or
m ore p a rtn ers, sharing
decision m aking.
C o o p e ra tiv e
W orks in cooperation with
oth er e n tre p re n e u rs ,e .g .
buying group.
F ra n c h is e
M u st w o rk with fran c h iso r
and o th er fran ch isees.
A c q u ire d
Runs an acquired firm as an
in d e p en d en t division of a
large com pany.
C o n g lo m e ra te
O n e who acquires other
firm s and o p e ra te s th em .
C o rp o ra te
O n e who ope ra te s within a
larg e firm , often with a
te am , to innovate.