Innovation and Entrepreneurship: Practice and Principles

Innovation and Entrepreneurship: Practice and Principles

The first book to present innovation and entrepreneurship as a purposeful and systematic discipline, this classic business title explains and analyzes the challenges and opportunities of America's entrepreneurial economy....

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Title:Innovation and Entrepreneurship: Practice and Principles
Author:Peter F. Drucker
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Edition Language:English

Innovation and Entrepreneurship: Practice and Principles Reviews

  • David Garza

    Even though this book is relatively old, its principles apply in every era. Drucker presents innovation as an ageless art form, in which all that changes is the approach. Any business owner, or out of the box thinker, should definitely read this book.

  • Nicholas

    Peter Drucker is awesome.

    He turns innovation into a discipline. I need to read more of this guy.

    Drucker lists the seven places where innovation takes place and then goes into detail for each one. The interesting thing is that few of them are what people normally think of as innovation.

    Quotes:

    "Entrepreneurs are a minority among new businesses. They create something new, something different; they change or transmute values."

    "Entrepr

    Peter Drucker is awesome.

    He turns innovation into a discipline. I need to read more of this guy.

    Drucker lists the seven places where innovation takes place and then goes into detail for each one. The interesting thing is that few of them are what people normally think of as innovation.

    Quotes:

    "Entrepreneurs are a minority among new businesses. They create something new, something different; they change or transmute values."

    "Entrepreneurship is thus a distinct feature whether of an individual or of an institution. It is not a personality trait; in thirty years I have seen people of the most diverse personalities and temperaments perform well in entrepreneurial challenges."

    "The essence of any decision is uncertainty."

    "The entrepreneur always searches for change, responds to it, and exploits it as an opportunity."

    "Nothing could be as risky as optimizing resources in areas where the proper and profitable course is innovation."

    "Entrepreneurship is "risky" mainly because so few of the so-called entrepreneurs know what they are doing. They lack the methodology. They violate elementary and well-known rules. This is particularly true of high-tech entrepreneurs."

    "Innovation, then, is an economic or social rather than a technical term. It can be defined the way J.B. Say defined entrepreneurship, as changing the yield of resources. Or, as a modern economist would tend to do, it can be defined in demand terms rather than in supply terms, that is, as changing the value and satisfaction obtained from resources by the consumer."

    "Entrepreneurs will have to learn to practice systematic innovation. Successful entrepreneurs do not wait until "the Muses kisses them" and gives them a "bright idea"; they go to work. Altogether, they do not look for the "biggie," the innovation that will "revolutionize the industry," create a "billion-dollar business," or "make one rich overnight." Those entrepreneurs who start out with the idea that they'll make it big - and in a hurry - can be guaranteed failure."

    "Systematic innovation therefore 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."

    "Within the enterprise:

    The unexpected - the unexpected success, the unexpected failure, the unexpected outside event;

    The incongruity - between reality as it actually is and reality as it is assumed to be or as it "ought to be";

    Innovation based on process need;

    Changes in industry structure or market structure that catch everyone unawares.

    Outside the enterprise:

    Demographics (population changes);

    Changes in perception, mood, and meaning;

    New knowledge, both scientific and nonscientific."

    "For all the visibility, glamour, and importance of science-based innovation, it is actually the least reliable and least predictable one."

    "One reason why it is difficult for management to accept unexpected success is that all of us tend to believe that anything that has lasted a fair amount of time must be "normal" and go on "forever." Anything that contradicts what we have come to consider a law of nature is then rejected as unsound, unhealthy, and obviously abnormal."

    "It takes an effort to perceive in the "enemy one's own best opportunity."

    "The unexpected success is an opportunity, but it makes demands. It demands to be taken seriously."

    "But such opportunities require more than mere luck or intuition. They demand that the enterprise search for innovation, be organized around it, and be managed so as to exploit it."

    "The innovation that successfully exploits an incongruity between economic realities has to be simple rather than complicated, "obvious" rather than grandiose."

    "The reaction of the typical producer and supplier is then to complain that customers are "irrational" or "unwilling to pay for quality." Whenever such a complaint is heard, there is reason to assume that the values and expectations the producer or supplier holds to be real are incongruous with the actual values and expectations of customers and clients. Then there is reason to look for an opportunity for innovation that is highly specific, and carries a good chance of success."

    "Ten years later, by the time they are in their late twenties, Japanese do just as poorly on mathematics tests as do westerners."

    "Innovations that exploit changes in industry structure are particularly effective if the industry and its markets are dominated by one every large manufacture or supplier, or by a very few. Even if there is no true, monopoly, these large, dominant producers and suppliers, having been successful and unchallenged for many years, tend to be arrogant. At first they dismiss the newcomer as insignificant and, indeed, amateurish. But even when the newcomer takes a larger and larger share of their business, they find it hard to mobilize themselves for counteraction."

    "An innovation, to be effective, has to be simple and it has to be focused. It should do only one thing, otherwise, it confuses. If it is not simple, it won't work."

    "The first is simply not to try to be too clever. Innovations have to be handled by ordinary human beings, and if they are to attain any size and importance at all, by morons or near-morons. Incompetence, after all, is the only thing in abundant and never-failing supply."

    "Entrepreneurship is not "natural"; it is not "creative." It is work."

    "Everything takes longer than we hope or estimate; everything also requires more effort."

    "To render an existing business entrepreneurial, management must take the lead in making obsolete its own products and services rather than waiting for a competitor to do so."

    "The forces that impede entrepreneurship and innovation in a public-service institution are inherent in it, integral to it, inseparable from it."

    "In so many new ventures, especially high-tech ventures, the techniques discussed in this chapter are spurned and even despised. The argument is that they constitute "management" and "We are entrepreneurs." But this is not informality; it is irresponsibility."

    "Above all, the entrepreneur who has succeeded in being "Fustest with the Mostest" has to make his product or his process obsolete before a competitor can do it. Work on the successor to the successful product or process has to start immediately, with the same concentration of effort and the same investment of resources that led to the initial success."

    "Creative imitation, these cases show, does not exploit the failure of the pioneers as failure is commonly understood. On the contrary, the pioneer must be successful...But the original innovators failed to understand their success...The creative innovator exploits the success of others. Creative imitation is not "innovation" in the sense in which the term is most commonly understood. The creative imitator does not invent a product or service; he perfects and positions it. In the form in which it has been introduced, it lacks something."

    "These cases show what the strategy of creative imitation requires: It requires a rapidly growing market. Creative imitators do not succeed by taking away customers from the pioneers who have first introduced a new product or service; they serve markets the pioneers have created but do not adequately service. Creative imitation satisfies a demand that already exists rather than creating one."

    "The first point, therefore, is that in the early stages of a new industry, a new market, or a new major trend, there is the opportunity to search systematically for the specialty skill opportunity - and then there is usually time to develop a unique skill. The second point is that the specialty skill niche does require a skill that is both unique and different...Thirdly, a business occupying a specialty skill niche must constantly work on improving its own skill...While the specialty skill niche has unique advantages, it also has severe limitations. One is that it inflicts tunnel-vision on its occupants...A second, serious limitation is that the occupant of a specialty skill niche is usually dependent on somebody else to bring his product or service to market. It becomes a component."

    "There is no high technology here, nothing patentable, nothing but a focus on the needs of the customer."

    [David Ricardo:] "Profits are not made by differential cleverness, but by differential stupidity. The strategies work, not because they are clever, but because most suppliers - of goods as well as of services, businesses as well as public-service institutions - do not think."

    "Anyone who asks the question, What does the customer really buy? will win the race."

    "Anyone who is willing to use marketing as the basis for strategy is likely to acquire leadership in an industry or a market fast and almost without risk."

    "Surely one "secret" of the Japanese is their officially encouraged "tax evasion" on capital formation. Legally a Japanese adult is allowed one medium-sized savings account the interest on which is tax-exempt. Actually Japan has five times as many such accounts as there are people in the country, children and minors included. his is, of course, a "scandal" against which newspapers and politicians rail regularly. But the Japanese are very careful not to do anything to "stop the abuse." As a result they have the worlds largest capital formation."

    "In an entrepreneurial society individuals face a tremendous challenge, a challenge they need to exploit as an opportunity: the need for continuous learning and relearning."

  • Mohammad Shaker

    As always, Peter Drucker is one of my favourites on the subject. A book from the 80s that still a great read today, on a very changing and challenging subject such as entrepreneurship, is a sole indicator of how great the book is.

  • Robert

    Most people probably think that innovation and entrepreneurship is something that happens by chance or by magic. Reading this book by Peter Drucker should dispel this notion totally. Not only is innovation and entrepreneurship something that can be measured but it is something that can be learned.

    The book initially provides definitions of what innovation and entrepreneurship is, what the different types and aspects of each are and where they are most likely to occur. Drucker then con

    Most people probably think that innovation and entrepreneurship is something that happens by chance or by magic. Reading this book by Peter Drucker should dispel this notion totally. Not only is innovation and entrepreneurship something that can be measured but it is something that can be learned.

    The book initially provides definitions of what innovation and entrepreneurship is, what the different types and aspects of each are and where they are most likely to occur. Drucker then continues on with an analysis of how these factors can be fostered within any business.

    This is great book if you are looking to improve you business as it provides concrete analysis and steps you can take to encourage and promote innovation and entrepreneurship in your business.

  • Herve

    Far from my previous post about Perkins, Peter Drucker’s book Innovation and Entrepreneurship was a paradoxical reading. The first chapters were painful even if brilliant. I understood there that innovation is a process which will be successful if carefully planned and managed. Fortunately, chapter 9 completely changed my perception when the author dealt with knowledge-based innovation, which includes innovations based on science and technology. So let me summarize the main points of this chapte

    Far from my previous post about Perkins, Peter Drucker’s book Innovation and Entrepreneurship was a paradoxical reading. The first chapters were painful even if brilliant. I understood there that innovation is a process which will be successful if carefully planned and managed. Fortunately, chapter 9 completely changed my perception when the author dealt with knowledge-based innovation, which includes innovations based on science and technology. So let me summarize the main points of this chapter:

    1- the characteristics of knowledge-based innovation:

    a. the time span between the emergence of the technology and its application is long, 20 to 30 years,

    b. it is a convergence of several knowledge and until all the needed ones are available, this innovation can not succeed,

    2- the requirements:

    a. a careful analysis of the required factors, i.e. the available knowledge and the missing ones,

    b. a clear focus on the strategic position, i.e. you have to be right the first time or others will take your place,

    c. learn and practice entrepreneurial management, because most tech. innovators lack management skills ,

    3- the risks:

    a. first, even after a careful analysis, knowledge-based innovation remain unpredictable and turbulent (see also Moore’s books about the chasm and the tornado), and this is linked to its characteristics above; this has two important implication:

    i. time plays against innovators,

    ii. survival rate is low,

    b. there is a limited window where new ventures start, and when it closes, there is a general shakeout, where few survive; who survives is also unpredictable. The only chance of surviving is to have a strong management and resources,… and luck;

    c. there is also a receptivity gamble. Even market research does not work with these innovations and the reason why an innovation is accepted or not is also unpredictable.

    I have to admit this confirms an intuition I had since my VC years: you have to make a bet and then work hard. But there is no way, you can really plan the success of knowledge-based innovations.

    The end of the book is quite good, in particular its conclusion: “The first priority in talking about public policies is to define what will not work: Planning is actually incompatible with an entrepreneurial society and economy. Innovation has to be decentralized, ad hoc, autonomous, specific. It had better start small, tentative, flexible. […] It is popular today [1983!], especially in Europe, to believe that a country can have “high-tech entrepreneurship” by itself. But it is a delusion. In fact a policy which promotes high-tech and high-tech alone will not even produce high tech. All it can come with is another expensive flop, another Concorde. […] The French are right, economic and political strength requires high tech but there must be an economy full of innovators with vision and entrepreneurial values, with access to venture capital, and full of economic vigour.”

  • Adam McNamara

    Innovation and Entrepreneurship is about how to find opportunities to innovate, how to manage entrepreneurship within an organization, and how to manage entrepreneurial strategy in the market.

    In each of these three major sections, Drucker presents frameworks that help organize your thoughts. For example, he proposes seven sources of innovation opportunities, like The Unexpected, Process Needs, and New Knowledge. He's quick to provide relevant case studies for each, helping to make th

    Innovation and Entrepreneurship is about how to find opportunities to innovate, how to manage entrepreneurship within an organization, and how to manage entrepreneurial strategy in the market.

    In each of these three major sections, Drucker presents frameworks that help organize your thoughts. For example, he proposes seven sources of innovation opportunities, like The Unexpected, Process Needs, and New Knowledge. He's quick to provide relevant case studies for each, helping to make the classifications memorable. His ideas are important, and they've withstood the test of time. Drucker seems to be an authoritative source upon which later thinkers have built their ideas (and careers).

    That said, the book itself was not an enjoyable read. Drucker relies heavily on lists - three points for this, and five for that - that run on across paragraphs and pages. The reader often has to hunt among examples and anecdotes to piece together the actual bullets of the list.

    Similarly, Drucker often chooses folksy names for ideas, like "Fustest with the Mostest", where a more straightforward title like "First to Dominate" would serve everyone better.

    What this comes down to, I think, is interesting thinking paired with poor editing. If you want to understand innovation, read this book as many newer books build on top of its ideas. However, as with all business books, beware of academics prescribing ultimate theories.

  • Jacob Mclaws

    I picked this up with the intent to read it and have it under my belt so I could say I've read it just because it is a "classic". I expected a lot of out of date references and antiquated principles of innovation.

    I did find A LOT of out of date references to companies that are no longer the innovation powerhouses that they once were (which just highlights the transient nature of being an innovation factory), but the principles and practices seem as true as ever and I don't think it is too bold

    I picked this up with the intent to read it and have it under my belt so I could say I've read it just because it is a "classic". I expected a lot of out of date references and antiquated principles of innovation.

    I did find A LOT of out of date references to companies that are no longer the innovation powerhouses that they once were (which just highlights the transient nature of being an innovation factory), but the principles and practices seem as true as ever and I don't think it is too bold to say they are the roots of almost everything that has been written on innovation since. Below are some highlights:

    7 Sources for Innovative Opportunity:

    1. The unexpected - the unexpected success, the unexpected failure, the unexpected outside event;

    2. The incongruity - between reality as it actually is and reality as is assumed to be or as it "ought to be";

    3. Innovation based on process need;

    4. Changes in industry structure or market structure that catch everyone unawares;

    5. Demographics (population changes);

    6. Changes in perception, mood, and meaning;

    7. New knowledge, both scientific and nonscientific.

    (pg. 35)

    "Innovation- and this is a main thesis of this book- is organized, systematic, rational work... Intuition is not good enough... [it] requires a willingness to say: "I dont know enough to analyze, but I shall find out. I'll go out, look around, ask questions and listen."

    (pg. 50)

    "The incongruity within a process, its rhythm or its logic, is not a very subtle matter. Users are always aware of it. Every eye surgeon knew about the discomfort he felt when he had to cut eye muscle- and talked about it. What was lacking, however, was someone willing to listen, somebody who took seriously what everybody proclaims: That the purpose of a product or a service is to satisfy the customer. If this axiom is accepted and acted upon, using incongruity as an opportunity for innovation becomes fairly easy- and highly effective. There is, however, one serious limitation. The incongruity is usually available only to people within a given industry or service. It is not something that somebody from the outside is likely to spot, to understand, and hence is able to exploit."

    (pg. 68)

    The section starting on pg. 85 that begins with "Innovations that exploit changes in industry structure are particularly effective if the industry and its markets are dominated by one very large manufacturer or supplier, or by a very few..." is essentially the gist of Clayton Christensen's book The Innovator's Dilemma (written 12 years later).

    For a good list of DO's on innovation start on pg. 134...

    "Innovation is both conceptual and perceptual... the imperative of innovation is therefore to go out and look, to ask, to listen. This cannot be stressed too often."

    (pg. 135)

    "An innovation, to be effective, has to be simple and it has to be focused. It should do only one thing, otherwise, it confuses... the greatest praise an innovation can receive is for people to say: "That is obvious. Why didn't I think of it?"

    (pg. 135)

    "A successful innovation aims at leadership," not necessarily at becoming a big business, but "if an innovation does not aim at leadership from the beginning, it is unlikely to be innovative enough, and therefore unlikely to be capable of establishing itself."

    (pg. 136)

    Don'ts are simple:

    1. Don't try to be clever

    2. Don't diversify, don't splinter, don't try to do too many things at once

    3. Don't try to innovate for the future. Innovate for the present!

    (pg. 136)

    When it comes to why big companies usually suck at innovation the crux is this:

    "It is not size that is an impediment to entrepreneurship and innovation; it is the existing operation itself... The one thing that can be guaranteed in any kind of operation is the daily crisis. The daily crisis cannot be postponed, it has to be dealt with right away. An the existing operation demands high priority and deserves it. The new always looks so small, so puny, so unpromising next to the size and performance of maturity... It thus takes special effort for the existing business to become entrepreneurial and innovative."

    (pg. 148-149)

    "Entrepreneurial businesses treat entrepreneurship as a duty."

    (pg. 150)

    In order to make an existing business "greedy for new things" we need to "face up to the fact that all existing products, services, markets, distributive channels, processes, technologies, have limited- and usually short- health and life expectancies."

    (pg. 152)

    "The entrepreneurial, the new, has to be organized separately from the old and existing."

    (pg. 161)

    It is the duty of the founder or founders to build a management team as their new venture grows. He takes this really seriously.

    "In an entrepreneurial society individuals face a tremendous challenge, a challenge they need to exploit as an opportunity: the need for continuous learning and relearning... The correct assumption in an entrepreneurial society is that individuals will have to learn new things well after they have become adults- and maybe more than once. The correct assumption is that what individuals have learned by age twenty-one will begin to become obsolete five to ten years later and will have to be replaced- or at least refurbished- by new learning, new skills, new knowledge... The assumption from now on has to be that individuals on their own will have to find, determine, and develop a number of 'careers' during their working lives."

    (pg. 264)

  • Goktug Yilmaz

    3 Keys:

    - The test of an innovation, lies not on its novelty, its scientific content, or its cleverness. It lies in its success in the marketplace.

    - Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A product is not “quality” because it is hard to make and costs a lot of money. That is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality.

  • Jurgen Appelo

    Amazing read for entrepreneurs with countless examples of innovative ideas and strategies.

  • Ali

    Glad that this book was an easy to read but i believe the book can be less than half of the volume to explain everything

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