Part 2 (Chapter 5-8)

Question 1

What are the 8 sources of innovative ideas?

Answer 1

TUIPP IDK

1. Trends
2. Unexpected occurrences (unplanned events)
3. Incongruities (difference between expectation and reality).
4. Process needs (occur when an answer to a particular need is required “pain”).
5. Industry and market changes (consumer attitudes).
6. Demographics.
7. Perceptual changes (Gen x, y, z).
8. Knowledge based concepts (mobile phone now has a built in camera etc).

Question 2

Describe (1) Trends and give an example.

Answer 2

Trends signal shifts in the current paradigm (or thinking)

PEES

SOCIETAL TRENDS: ageing demographics, health and fitness growth, senior living, social media; technology trends: smartphone technology, e-commerce, Internet advances, drones, miniaturisation;

Eg. Ubiquity of smartphones have changed the way we pay, apps such as Skip have emerged that allow you to pay ahead of the queue using your phone

ECONOMIC TRENDS: higher disposable income, dual wage-earner families, performance pressures, rising fuel costs;

Eg. Rising fuel costs have welcomed electricity-powered cars such as Tesla, where Honda have previously failed

POLITICAL TRENDS: increased regulations, terrorism, sovereign debt, military alliances, free trade agreements;

Eg. Free trade agreements have made imports more easily accessible, leading to the rise of the Kyoto ceremony-grade matcha craze in Melbourne.Spawned businesses such as Matcha Maiden, Kenko Tea

ENVIRONMENTAL TRENDS: global warming, drought, increased severity of storms , increased frequency of bushfires, pollution.

Eg. Melbourne’s PMS-y weather makes the Rain Parrot app suitable (real-time notifications of rain)

Question 3

Describe (2) Unexpected occurrences (unplanned events) and give examples

Answer 3

Definition: An event or result that is unplanned.

Explanation: Success or failures that lead to major innovative surprises within the business / industry due to their unplanned nature.

Example:
Unexpected success: Discovery of penicillin, Viagra, Apple Computer

Unexpected failure: 2008-09 GFC lowered cost of labour supply and spawned new businesses

Question 4

Describe (3) Incongruities (difference between expectation and reality) and give examples

Answer 4

Definition: Occur when differences exists between expectations and reality

Explanation: Innovation is the creation of solutions to incongruities

Example:
Solving the problem of how to fly in a vacuum gave us rockets and satellites.

Switching to electrons through insulators gave us transistors -> microchips -> Silicon Valley -> Digital Age
Overnight package delivery

Question 5

Describe (4) Process needs (occur when an answer to a particular need is required “pain”) and give examples

Answer 5

Definition: An answer to a particular need is required -> Bottlenecks.

Explanation: Venture capitalists often refer to these as ‘pain’ that exists in the marketplace. Thus, the entrepreneur must recognise an innovative solution, a ‘painkiller’.

Example: Creation of new medical devices, health foods pharmaceuticals, time-saving devices, eco-sustainable green manufacturing, sugar-free products, caffeine-free coffee, microwave ovens, etc.

Question 6

Describe (5) Industry and market changes (consumer attitudes) and give examples

Answer 6

Definition: Continual shifts in the marketplace occur all the time, caused by developments such as consumer
attitudes, advancement in technology, industry growth, etc.

Explanation: Industries and markets are always undergoing changes in structure, design or definition. Entrepreneurs need to be aware of and seize these emerging opportunities as the industry undergoes change.

Example: The healthcare industry where hospital care has undergone radical change - where home health care and preventive medicine have replaced hospitalisation and surgery as primary focus areas.
(Healthcare industry - changing to home healthcare).

Question 7

Describe (6) Demographics and give examples

Answer 7

Definition: Trend changes in population, education, income change, age, occupations, geographic locations, etc.

Explanation: Demographic shifts are important as they often provide new entrepreneurial opportunities.

Example: As the average population age in Australia’s Gold Coast has increased (due to the influx of retirees), land development, recreational and healthcare industries have all profited. (Retirement communities for older people).

Question 8

Describe (7) Perceptual changes (Gen x, y, z) and give examples

Answer 8

Definition: These changes occur in people’s interpretation of facts and concepts - intangible yet meaningful. Can cause major shifts in ideas to take place.

People’s desire to use their personal time better - as a result, the travel industry has capitalised on the consumers’ need to see the world while they are young and healthy, so timeshare condominiums and travel clubs have increased.

Example:
The fitness fad, caused by the perceived need to be healthy and physically fit, has created a demand for both health foods and health facilities throughout the country. Eg. ClassPass

Question 9

Describe (8) Knowledge based concepts (mobile phone now has a built in camera etc) and give examples

Answer 9

Definition: The basis for the creation / development of something brand new.

Explanation: Invention are knowledge-based; they are the product of new thinking, new methods and new knowledge. Impossible to create something completely brand new with current thinking and level of knowledge.

This form of innovation often requires the longest time period between initiation and market implementation - due to the need for testing and modification.

Example:
Smartphone technology has advanced to transform the mobile phone into a camera, Internet access platform and music provider
Robotics
Pharmaceutical industry

Question 10

What are the 4 models of opportunity?

Answer 10

1. Mature market model of opportunity.
2. New market model of opportunity.
3. Alertness model of opportunity.
4. Social innovation model of opportunity.

Question 11

What topic can the Models of Opportunity link to?

Answer 11

Kinzer’s Theory of Alertness (Chapter 7)

Question 12

Describe the (1) Mature Market Model of Opportunity.

Answer 12

• Arbitrage trading opportunity - buy low; sell high
• Leverages off demand and supply discrepancies
• Think of forex/commodity trading
• This market must be highly competitive and mature for this to be sustainable
• This activity introduces dynamics that alter the supply and demand in the existing market (i.e. Entering an existing market as a new player)
• Drives supply and demand to a new equilibrium
• By finding improving the supply chain
• Or by exploiting and creating shifts in demand

Example -> Under Armour entering the footwear market in 2006, taking on Adidas and Nike, etc.

Question 13

Provide an example from the textbook of an entrepreneur who applied the (1) Mature market model of opportunity.

Answer 13

Carman’s Granola Bars.

BUYING LOW- Carolyn Creswell found herself offering her life savings to buy out her employer. ‘It was a small business that made homemade muesli for a few cafes and delis in and around Melbourne’, Carolyn says. ‘I worked there one day a week while I was at uni, and loved it. When the owners put the business up for sale, I thought my job would be in jeopardy so I offered them $1000 which was initially dismissed, then, finally they took up my offer.’

In 1992, despite the presence of such large market players such as Kellogg’s, Sanitarium and Uncle Tobys, Carolyn entered the muesli business and the mature breakfast cereal market with the Carman’s brand. By defining a niche market to exploit a demand opportunity, riding nutrition trends, using smart packaging and design and with the determination and persistence, Carolyn now operates a multinational business that exports to 25 countries.

Question 14

Describe the (2) New market model of opportunity

Answer 14

• Needs innovation
• Highly disruptive in an existing market OR creates a new market
• Introduces new supply and demand dynamics
• Creates a demand for the new good or service
• Thus, a new market is introduced
• Pros behind this is it creates new jobs and businesses
• Con might be that these new markets kill off existing markets, causing a loss in the economy.
• However, the overall output of new products / services is increased for the better
• Therefore, the pros usually outweigh the con
• This form of entrepreneurship requires a commitment to R&D and creative forces

Question 15

Provide a textbook example of the New market model of opportunity

Answer 15

Cochlear Australia.

In the mid-1960s, Professor Graeme Clark began researching the possibility of an electronic, implantable hearing device that implants the cochlea, the inner ear that contains the sense of hearing. His colleagues said a cochlear implant wouldn’t work while others warned of the unknown risks.

There was also the lack of funding and the technological challenge of fitting electrodes into the tiny inner ear. In 1978, Professor Clark’s drive to innovate paid off and the first cochlear implant surgery took place - the surgery was a success.

From this success, Cochlear Australia, the company, was born. Its purpose: to make Professor Clark’s innovative multi-channel cochlear implant commercially available all over the world. Today, over 80k severely or profoundly deaf children and adults have received a cochlear implant thanks to Graeme Clark’s radical new product that revolutionised the market for the hearing impaired.

Question 16

Describe the (3) Alertness model of opportunity

Answer 16

• Combination of the first two opportunity models; Mature market model + New market model
• Places a higher emphasis on the knowledge of the entrepreneur
• Assumes that opportunities are out there, waiting to be discovered
• This entrepreneur has the advantage to see things differently and act upon insights through their superior knowledge

Eg. AirBnB

Question 17

Describe (4) Social innovation model of opportunity

Answer 17

• Dedicated non-profits as well as hybrid business have given life to this new model of opportunity in the past few decades
• Does not care too much about innovating to improve economic growth
• Cares more about expanding market utility and social innovation
• Stanford researchers have stated that social innovations are products of the times, of a particular period in history

Question 18

Provide examples of areas in (4) Social Innovation

Answer 18

Community-centred planning
Emissions trading
Fair trade
Habitat conservation
International labour standards
Microfinance
Socially responsible investing
Supported employment

Question 19

List 4 Types of Innovation. (innovation process)

Answer 19

DIES

(1) Invention
(2) Extension
(3) Duplication
(4) Synthesis

Question 20

Describe the 4 Types of Innovation and provide examples.

Answer 20

DIES

(1) INVENTION

Creation of a new product, service or process, often one that is novel or untried. These tend to be revolutionary.

Example: Telephone, Taxi Services, Hotel Accommodation, Airplanes, Lightbulb

(2)EXTENSION
The extension of a product, service or process already in existence. Such concepts make a different application of a current idea.

Example: Uber, AirBnB, Facebook, Solar panel, Yacht, McDonalds

(3) DUPLICATION.
The replication of an already existing product, service or process. However, different to simply just copying - but adds the entrepreneur’s own creative touch to improve on competition.

Example: Uber -> Lyft, Uber Eats Foodora Deliver

(4) SYNTHESIS
Combination of existing concepts and factors into a new formulation or use. Taking current ideas or current inventions and finding a way so together they form a new application.

Example: Starbucks, FedEX, Smartphones

Question 21

What are the 10 principles of innovation?

Answer 21

These principles can be taught and learnt, when combined with opportunity, can enable innovation.

1) Be action oriented - Be active and searching for new ideas, opportunities or sources of innovation.

2) Make the product, process or service simple and understandable - People must readily understand how the innovation works. If it’s too difficult to learn or out of this world, it’ll scare people away. Hence why people sometimes say that a certain innovation is too ahead of its time. e.g. The Microsoft SPOT - smartwatch from 2004.
Noticed how you probably don’t know what it is? That’s because it was too ahead of its time :)

3) Make the product, process or service customer-based - Keep the end-user in mind, this gives you the best chance that the concept will be accepted and used.
4) Start small - Build and develop when the time is right, plan for growth and expansion.
5) Aim high - Seek a niche in the marketplace for success.
6) Try / Test / Revise - Helps to work out any flaws in the product, process or service.
7) Learn from failures - Failures often give rise to innovations.
8) Follow a milestone schedule - Allows for panning and evaluation of the project.
9) Reward heroic activity.
10) Work, work, work. - #rih

Question 22

What are the 4 Phases in the Creative Process

Answer 22

Phase 1: Background or Knowledge Accumulation (Preparation Phase)
Phase 2: Mind Incubation Process
Phase 3: Idea Experience
Phase 4: Evaluation and Implementation

Question 23

Describe the 4 Phases in the Creative Process

Answer 23

PHASE 1: PREPARATION PHASE (knowledge accumulation)

• Successful creations generally require investigation and information gathering via:
• -Extensive reading
• -Conversations with others working in the field
• -Workshops & meet-ups
• -Anyway to improve and soak up information relative to the problem or issue being focussed on

Research into unrelated fields also sometimes works as this allows for a variety of perspectives on the problem

PHASE 2: MIND INCUBATION PROCESS

This incubation phase often occurs while individuals are engaged in activities unrelated to the subject or problem after they’ve spent a great deal of time soaking in information during the preparation phase. Let the subconscious mind work on the problem allows for creativity sometimes.

1) Engage in routine, ‘mindless’ activities (cutting the grass, painting the house)
2) Exercise regularly
3) Play (sport, board games, puzzles)
4) Think about the project or problem before falling asleep
5) Meditate or practise self-hypnosis
6) Sit back and relax on a regular basis

PHASE 3: IDEA EXPERIENCE

This is sometimes referred to as the eureka factor, this phase is also the one the average person incorrectly perceives as the only component of creativity.
Textbook honestly has jackshit on this, kind of just repeats itself on top of phase 2.

Here are some ways to speed up the idea experience

1) Daydream and fantasies about your project
2) Practise your hobbies
3) Work in a leisurely environment (e.g. at home instead of the office)
4) Put the problem on the back burner
5) Keep a notebook at your bedside to record late-night or early-morning ideas
6) Take breaks while working

PHASE 4: EVALUATION & IMPLEMENTATION
Most difficult step of a creative endeavour.
Needs perseverance and self-discipline. Needs to also know what ideas will work and what will fail. Fail early if possible. But don’t simply just give up when you run into a temporary obstacle. All about refining the idea until it works well enough.

1) Increase your energy level with proper exercise, diet and rest
2) Educate yourself in the business planning process and all facets of business
3) Test your ideas with knowledgeable people
4) Take notice of your intuitive hunches and feelings
5) Educate yourself in the selling process
6) Learn about organisational policies and practices
7) Seek advice from others (for example, friends, experts)
8) View the problems you encounter while implementing your ideas as challenges to be overcome

Question 24

What is cradle-to-cradle design and social innovation?

Answer 24

Cradle-to-cradle design is a philosophy of innovation based upon the cyclical flows of the Earth.

One organism’s waste becomes the next organism’s nourishment.

Cradle-to-cradle products produce virtually no waste and provide the nutrients for both nature and for the next products of industry.

Every action - commercial, lifestyle, educational or governmental - ought to have a net positive effect on the environment.

Eg. edible cutlery by Bakeys

Question 25

What topic can be linked to cradle-to-cradle design?

Answer 25

Sources of Innovative Ideas (Environmental Trends)

Question 26

Name the 6 common business creation pathways

Answer 26

BMSEFS

(1) Bootstrapping
(2) Mini-preneurship.
(3) A New Business Start-up (New-new, new-old)
(4) Acquiring An Existing Venture.
(5) Buying A Franchise.
(6) Establishing A Social Venture / Enterprise.

Question 27

What is (1) Bootstrapping?

Answer 27

Means of starting a new venture through highly creative acquisition and use of (sometimes other people’s) resources.
- Sometimes noted as starting a new business without financing.

Relies greatly on networks, trust, cooperation and wise use of existing resources.
- As opposed as going into debt or giving away equity.

Low-hanging fruit

• Use a copycat idea
• Find quick, break-even, cash-generating products
• By making money through this approach, you build credibility in the eyes of investors
• Keep growth in check and focus on cash

Bootstrapped organisations cannot afford to pursue strategic goals
- Such as; building a market share or a customer base

There are a number of government business development programs to help the growth of small businesses and startups. The Australian/Victorian government recently introduced this not too long ago.

Question 28

What topic can bootstrapping be linked to?

Answer 28

Sources of Capital

Bootstrapping is the self-funded stage which is ideal for Idea Development Stage. After that, it’s Seed-Friends and Startup-Business Angels.

Question 29

How does one bootstrap a business in a nutshell?

Answer 29

(1) PRODUCT DEVELOPMENT
- Prepaid licences, royalties or advances from customers
e.g. Paying $ for early access to an app
-Customer-funded research and development
Crowdfunding - Kickstarter
- Development of product at night and on weekends while working elsewhere

(2) BUSINESS DEVELOPMENT
- Foregone, delayed or reduced compensation
- Working from home using personal savings
- Deals with professional service providers at below-competitive rates
- Space at below-market or very low rent
- Personal credit cards and home equity loans

(3) MINIMISE THE NEED FOR CAPITAL
- Buy used equipment instead of new
- Employ relatives or friends at non-market salaries
- Deliberately choose customers who pay quickly

(4) MEET THE NEED FOR CAPITAL (should be avoided)
- Obtain loans from relatives and friends
- Withhold entrepreneur’s salary payment for short or long period of time
- Pay employees with company shares (give employees some ownership)

Question 30

Describe (2) Mini-preneurship

Answer 30

Online

Think of people who sell goods and services online through platforms like eBay and Gumtree
- e.g. Trading sneakers

Also consider content creators and online figures as mini-preneurs

• Youtube/Snapchat/Vine celebrities are now a thing
• Some have such a strong following and fanbase that they’ve managed to secure partnership deals with notable brands
• Bloggers
• Podcasts

Low cost to set up

• Accounting, promotion and marketing is largely taken care of through the online platform
• Skype for phone calls
• Paypal / Stripe for accepting credit card payments

Next level of e-commerce platforms would be launching your own online business / website

Mini-preneurs have access to a range of tools and services which makes starting out easy and hassle free

Only limit is your own imagination and a clever new business model

Mini-preneurs require extensive knowledge or experience on how to leverage the Internet

Question 31

Describe (3) A New Business Start-up.

Answer 31

Two ways to go about this new business approach

• Creating a unique product or service (new-new)

—-Have to think and test whether or not there will be high demand for it if it were to exist

• Adapt something that is currently on the market or extend it into an area where it’s not available (new-old)

—-i.e. bringing a service into a different country where it doesn’t exist - there is an infamous German company which does this to preexisting ideas

Question 32

Describe the New-New Approach in detail

Answer 32

New products / services enter the market all the time

• e.g. smartphones, 4k screens, GPS
• These products are introduced as a result of R&D

How to go about discovering or inventing new products?

• One method is to make a list of annoying or hazardous - experiences with various products or services - attempt to better these - PAIN IN THE ASS (PITA) products
• e.g. Facebook was born because Mark Zuckerberg was frustrated by the lack of networking facilities on campus at Harvard

Needs a degree of awareness of what is going on around to develop a new business idea - refer to chapter 5

Question 33

Describe the New-Old approach in detail

Answer 33

Piggyback on someone else’s existing idea by either improving a product or offering a service in an area it is not available

e.g. Setting up restaurants, clothing stores, similar outlets in sprawling suburban areas

These are risky as powerful competitors can easily move into the area and be a threat

If you want to do this, should try to offer a product or service that is difficult to copy

Question 34

Describe (4) Acquiring An Existing Venture

Answer 34

Complex transaction and advice of professionals should be sought

Advantages of acquiring an ongoing venture:

• Likely to have a successful future if the business is already in operation, all things considered

—- No fear of going bankrupt due to lack of market for its good or services - has an existing customer base and must make some degree of profit

• Time and effort associated with starting a new business are gone
• —Don’t have to worry about assembling inventory, equipment, personnel and facilities to run the business - this is time consuming
• —Relationship with suppliers, bankers and other business people exist as well (but may not want to work with you due to change in new management - textbook was quite naive to assume this as a strong reason)
• Possible to buy an ongoing business for a bargain (arguably most important thing to look for)
• —Reasons for an owner selling at a good price might be due to retirement decisions or illness - forced to sell
• —OR, they might be aware of a new opportunity and want to take advantage of it quickly

Be aware that there may be hidden problems that exist in the venture you are looking to acquire.

Below are things to consider before finalising the acquisition.

Question 35

Describe (5) Buying A Franchise

Answer 35

Backing and support of a larger corporation

A franchise is any arrangement in which the owner of a trademark, tradename or copyright has licensed others to use it in selling goods or services

A franchisee is legally independent, but economically dependent on the franchisor

Advantages of Franchising

• Training and guidance
• Brand-name appeal
• A proven track record
• Financial assistance

Disadvantages of Franchising

• Franchise fees
• Franchisor control
• Unfulfilled promises

Eg. McDonalds

Question 36

Describe (6) Establishing A Social Venture / Enterprise.

Answer 36

For entrepreneurs driven by a desire to help social injustice or the environment

Private foundations and private individuals are giving early funding for promising social businesses
e.g. One of ThankYou Water’s biggest funders is a private investor

Challenge with social ventures is finding the business model that will allow for both:

• Accomplishing lasting social change
• Creating a self-sustaining viable profit-making business

Needs the best of entrepreneurial innovation with cutting-edge strategies to:

• Solve real-world challenges
• Capture opportunities in new market niches

Stronger emphasis on market-research is needed

• Really strong requirement to understand who the customers are and to respond to their wants and desires
• Cannot adopt a build-and-they-will-come approach

Social ventures differ to profit-driven ventures by a stronger emphasis on achieving the double bottom line - social and business objectives - or the triple bottom line (chapter 15)

Question 37

What topic can Social Ventures link to?

Answer 37

Customer Co-creation

3 Models of Social Enterprises

Question 38

What are the 3 Models of Social Enterprise?

Answer 38

MODEL 1: ENTREPRENEUR MODEL

Sells needed business products and services directly to the target population to improve their business income

Target population usually = self-employed poor or disadvantaged

This is a classic model of Business Development and Microfinance Programs

MODEL 2: MARKET INTERMEDIARY MODEL

Acts as an intermediary between the target population and the market

Achieves visibility through the sale of client-made products to the final customer and helps clients reach markets otherwise inaccessible to them

Purchases the products from the clients and then sells to the market at a higher price

Creating jobs for the target population

MODEL 3: EMPLOYMENT MODEL

Direct employer of the target population

Target population = disadvantaged, at-risk individuals

Attains visibility through the sales of its products and services to an external market

Eg. Homie is a social enterprise which employ homeless youths in Melbourne at a retail store and provide them with the training and skills needed to assimilate back into society and get back on track