Chapter 5

Creativity and the

Business Idea

McGraw-Hill/Irwin
Entrepreneurship, 7/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Creativity & Innovation
Creativity is the ability to develop new ideas and to
discover new ways of looking at problems &
opportunities

Innovation is the ability to apply creative solutions to

those problems & opportunities to enhance or to enrich
people’s lives
Creativity is thinking new things & innovation is doing
new things

Entrepreneurs succeed by thinking and doing new things

or old things in new way
Having a great new idea is not enough; transforming the
idea into a tangible product, service or business venture
is the essential next step
Leadership expert Warren Bennis says. “ today’s
successful companies live and die according to the
quality of their ideas”
 Creativity
Creativity involves generating something from nothing
Creative ideas springs up from the most unexpected places

Edwin Land, one of America’s most prolific

inventors, credits his three year old daughter with
the idea of the Polaroid instant camera
 Entrepreneurship is the result of a disciplined, systematic
process of applying creativity & innovation to needs &
opportunities in the marketplace
Millions of people come up with creative ideas for new
or different products & services; most of them, however,
never do anything with them
Entrepreneurs are those who connect their creative ideas
with the purposeful action & structure of a business
Thus successful entrepreneurship is a constant process
that relies on creativity, innovation & application in the
marketplace
3000 new product ideas, 4 make it to development stage, 2 are
actually launched & only ONE becomes a success in the
Sources of New Ideas (1 of 2)
 Consumers
 Informal & formal monitoring of potential ideas and needs-
express their opinions.
 Idea & need represents a large enough market to support new
venture .
 Existing Companies
 Potential (Entpr & Intraprnrs) should also establish a formal
method for monitoring & evaluating competitive products &
services on the market
 Distribution channels
 Channel members-Excellent source of new ideas b’coz of their
familiarity with the needs of the market
 Help in marketing the newly developed products
 Example: salesclerks suggesting entrpr changing color of
product
Sources of New Ideas (2 of 2)
 Federal government
 Files of the Patent Office contain numerous new product
possibilities.
 Suggest more marketable product ideas
 Official Gazette, published summarize list of patents for license or sale
 New product ideas can come in response to government
regulations. (OSHA- eliminating unsafe WC’s in industry)
 Research and development
 Largest source of new ideas is the entrepreneur’s own
“research and development” efforts. May be:
 A formal endeavor connected with one’s current employment.
 An informal lab in a basement or garage.
Methods of Generating New Ideas
Focus groups
number of group members from 6-12
Moderator focuses discussion of the group in a directive or
nondirective manner.
Co. women’s slipper-concept of “warm & comfortable slipper
that’s fits and old shoe” – 12 women focus group
An excellent method for initially screening ideas and concepts.
Brainstorming
A Group method for obtaining new ideas & solutions
 Brainstorming Conti....
 4 Rules should be followed
1. No criticism is allowed by anyone in the group
2. Freewheeling is encouraged-wilder the idea the better
3. Quantity of ideas is desired- greater the no. of ideas the
greater the likelihood of the emergence of useful ideas
4. Combinations and improvements of ideas are encouraged-
ideas of others can be used to produce still another new
idea
Example: Bank to develop journal for industrial client
Xcitics of market-information content- frequency of issue –
promotional value ( issues discussed)
Focus group and brainstorming is different in the
sense that FG is structured or moderated...while
BS is not a debate or discussion like that....its
people giving lots of ideas without criticism
allowed
Methods of Generating New Ideas (2 of 2)
Problem inventory analysis
Instead of generating new ideas themselves consumers provided
with list of problems in general product category
Then asked to identify & discuss products in this category that
have particular problem
Can be used to test a new product idea.
Effective method since its easier to relate known products to
suggested problems & arrive at a new product idea than to
generate an entirely new product idea by itself
Results must be carefully evaluated as they may not actually
reflect a new business opportunity.
Table 5.1 ?
Consumers associates particular problems with specific
products & then develop a new product that do not
contain the identified fault
Creative Problem Solving
Creativity: an important attribute of a successful
entrepreneur.

Creativity tends to decline with:

Age, education, lack of use, and bureaucracy.
Creative Problem-Solving Techniques

<<Insert Table 5.2>>

Creative Problem-Solving Techniques (1 of 3)
 Brainstorming
 Used in creative problem solving and idea generation.
 Creative problem solving: a method for obtaining new
ideas
 Spontaneous contribution of participants
 Problem statement-neither too broad nor too narrow
 Avoid inhibiting responses
 NO group member should be expert in field of
problem
 Ideas even if illogical, must be recorded
 Prohibit criticizing OR evaluating during BS session
 Reverse brainstorming
 A group method for obtaining new ideas
focusing on the negative.
 Finding fault by asking questions “in how
many possible ways can the idea flop”
 Maintain group morale
 Stimulate innovative thinking
 Often involves identification of everything
wrong with an idea- followed by discussion
how to overcome these problems
 Brainwriting
 Form of written brainstorming.
 It is a silent, written generation of ideas by
a group of people.
 This sheet can b passed around on e-mail as
well
 Pass the sheet around – reach its owner
 The only thing wrong with it is that there is
no excitement of verbal discussion
Creative Problem-Solving Techniques (2 of 3)
Gordon method
Method for developing new ideas when the individuals
are unaware of the problem.
u don’t give away too much detail about the problem
headline would be “i wish there was something v cud
do about the bad colors in my TV screen” Or Latest
trends in fashion world”

Checklist method
Developing a new idea through a list of related issues.
Product Planning & Development Process

Establishing Evaluation Criteria

 Criteria for evaluation need to be established at each stage of
the product planning and development process.
 Criteria should be:
 All inclusive and quantitative to screen the product carefully.
 Established to evaluate the new idea in terms of:
 Market opportunity
 Competition
 Marketing system
 Financial factors
 Production factors.
 •Need for the product idea must exist
 Market opportunity•Characteristics & attitudes of consumers that might
buy the product, size & nature of market
•Share of that market that product could capture
• competing producers, prices, & marketing policies should be
evaluated
•Product should be able to compete successfully with products
 Competitionalready on the market by having features that will meet or
overcome current or anticipated competition
•New product should be compatible with existing
management capabilities & marketing strategies
Marketing system •Firm should be able to use its marketing experience &
other expertise in this new product effort
•Example: GE would have less difficult time adding a new
kitchen appliance to its line than P&G
• product should be able to be supported by & contribute to
Co. financial structure
 Financial factors•Break even point & Long term profit outlook for product
need to be
• if the determined
new product idea cannot be integrated into existing
manufacturing processes, not only is the new idea is less positive-
Production factors.
but new plan & production cost – plant space need to be
determined
Product Planning and Development Process
Divided into five major stages:

Idea stage.
Concept stage.
Product development stage.
Test marketing stage.
Commercialization.
The Product Planning and
Development Process (1 of 3)

<<Insert Figure 5.6>>

The Product Planning and
Development Process (2 of 3)
 Idea stage
 Promising new product/service ideas should be
identified.
 Impractical ones eliminated.
 Evaluation method – systematic market evaluation
checklist.
 Concept stage
 Refined idea is tested to determine consumer
acceptance.
 Consumer acceptance can be measured through the
conversational interview method.
The Product Planning and
Development Process (3 of 3)
 Product development stage
 Determines consumer reaction to the physical product/service.
 A tool frequently used – consumer panel.
 Consumer preference is determined through:
 multiple brand comparisons, risk analysis, level of repeat purchases,
or intensity of preference analysis.

 Test marketing stage

 Increases certainty of successful commercialization.
 Provides actual sales results, which indicate the acceptance
level of consumers.
 Positive test results indicate probability of successful product
launch
E-commerce and Business Start-up
 E-commerce offers entrepreneurs an opportunity to be
creative and innovative.

 Factors that facilitate a 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.
 Using E-Commerce Creatively
 Entrepreneurs starting an Internet commerce venture
need to address the same strategic and tactical
questions as any other entrepreneur.
•Internet
operations-
 Entrepreneurs have to decide to: company
primary business
 Run Internet operations within the company, or •Availability of
 Outsource these operations to Internet specialists.resources –web
professional

 Another option is to use the packages for e-

commerce.
 Components of Internet Commerce
 Two major components of Internet commerce are:
 Front-end operations.
 Back-end operations.

 Integration of front-end and back-end operations

 represents the greatest challenge for doing Internet
business.
 provides the opportunity for developing a sustained
competitive advantage.
The biggest mistake of many companies on the
internet is believing that an attractive & interactive
website will secure success- leads to underestimating
imp of end operations
 Indicator
Web Sites- connection btw Co & its Customers
profession
of
legitimac
al design y

 Keys to a good Web site: Shopping Web

cart- credit designer
 Ease of use ( info product /services )
card
 Structure and organization of information payments
 Visibility Secure
servers
 Search capability https
 E-mail response system
Advertise- search
 Speed. engines, banner
 Technical aspects ads, email
 Should work properly in different browsers and platforms.
 Should appear in all marketing materials. Secure servers
https
Tracking Customer Information
 Database:
 Tracks activity of the:
 Industry.
 Segment.
 Company.
 Supports personal marketing targeted at individual
clients.

 Should be able capture customer attention with

customized one-to-one marketing.
Doing E-Commerce as an Entrepreneurial
Fresh fruits
Company & vegitables
?
To do business through the Internet:
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 have to bring significant cost reductions-as
compare to brick & mortar operation
Company must possess the ability to economically draw
customers to its Web site.
Summary
Starting point –successful Co.- product/Service they
offer
Sources of ideas ranges – comments of consumers TO
changes in Govt regulations
Monitoring comments of Consumers
Evaluating new products offered by competitors
Familiar with the ideas contained in previously granted
patents
 Becoming actively involved in R&D
 Specific tech’s entrepreneur use to generate ideas

Focus group-Brainstorming-Problem
inventory analysis
 After idea generation the planning and developing process
begins
 Large number ideas screened/ evaluated
 Potential ideas moved- concept, product development, test
marketing, commercialization stage