CAPE ENTREPRENEURSHIP HANDOUT

MODULE 2 ENTREPRENEURIAL PROCESS

1. Generating Ideas

2. Opportunity Identification

3. Business Concepts
Business Concept is the creative process involved in generating, developing and communicating a novel concept
that has the potential of exploiting a new or untapped business opportunity in the market. Business Concept is
essential in a world where the only constant is change, and where you need to be innovative and find new
opportunities for growth to take your business to the next level.

Sources of business concept:

New products, new services, new processes, new markets, new organisational structures/forms,
new sales or distribution channels, new development paradigms.

Changing business concept into idea

For entrepreneurs, it is often easier to come up with a variety of ideas for new businesses and
more difficult to actually implement those concepts. A business concept is a bridge between an
idea and a business plan. It focuses ones thinking so that the entrepreneur can identify the
specifics of his/her proposed venture. Converting an idea into a business concept requires
thinking about how the product or service will be sold and who will buy it, the benefits of the
product or service, how it is differentiated from similar ones, and methods of delivery.

Preparing a written concept statement helps unearth critical components of a venture and begins
research into key factors that may be more thoroughly addressed in a business plan. As the
business idea takes form as a concept statement, the entrepreneur can evaluate the business more
effectively for potential challenges and pitfalls.

4. Resources (Financial, Physical and Human)

The required resources:

skilled employees, general management expertise, marketing and sales expertise, technical
expertise, financing, distribution channels, sources of supply, production facilities, licences,
patents and legal protection.

Acquiring the required resources:

internal sources (equity, family and friends) and external (debt, leveraging, outsourcing, leasing,
contract labour, angel funding, venture capitalist, temporary staff, supplier financing, joint
ventures, partnerships, barter and gifts.

Business and entrepreneurial development organisations:

Caribbean Group of Youth Business Trusts (Jamaica, Barbados, Guyana, Trinidad and Tobago,
St. Lucia, St. Vincent and the Grenadines, Dominica, Belize, and Antigua and Barbuda), Jamaica
Business Development Corporation, HEART Trust/NTA (Jamaica), Institute of Private
Enterprise Development (IPED); National Entrepreneurship Development Company Limited
(NEDCO), Micro, Small and Medium Sized Enterprises (MSME) Alliance (Jamaica); Caribbean
Association of Small and Medium Enterprises (CASME); DFLSA Incorporated (Guyana and
Suriname).

5. Implementing and managing the venture.

6. Harvesting the venture (Exit Strategies)

Management buy-out (MBO)

A management buyout (MBO) is a form of acquisition where a company's existing managers
acquire a large part or all of the company from either the parent company or from the private
owners. Management buyouts are conducted by management teams as they want to get the
financial reward for the future development of the company more directly than they would do as
employees only. A management buyout can also be attractive for the seller as they can be
assured that the future stand-alone company will have a dedicated management team thus
providing a substantial downside risk against failure and hence negative press. Additionally, in
the case the management buyout is supported by a private equity fund (see below), the private
equity will, given that there is a dedicated management team in place, likely pay an attractive
price for the asset.

Mergers and Acquisitions

Mergers and acquisitions (M&A) are transactions in which the ownership of companies, other
business organizations or their operating units are transferred or combined. As an aspect of
strategic management, M&A can allow enterprises to grow, shrink, and change the nature of
their business or competitive position. From a legal point of view, a merger is a legal
consolidation of two entities into one entity, whereas an acquisition occurs when one entity takes
ownership of another entity's stock, equity interests or assets.
 MODULE 3 INNOVATION AND CREATIVITY

WHAT IS CREATIVITY
Creativity is designed as the tendency to generate or recognize ideas, alternatives or possibilities
that may be useful in solving problems, communicating with others and entertaining ourselves
and others.

Tests of creativity measure not only the number of alternatives that people can generate but the
uniqueness of those alternatives. The ability to generate alternatives or to see things uniquely
does not occur by change; it is linked to other more fundamental qualities of thinking, such as
flexibility and tolerance of ambiguity or unpredictability.

PROCESS OF CREATIVITY
1. Opportunity or Problem Recognition
A person discovers that a new opportunity exits or a new problem needs resolution.

2. Immersion
The individual concentrates on the problem and becomes immersed in it. He/she will recall and
collect information that seems relevant, dreaming up alternatives without refining or evaluating
them.

3. Incubation
The person keeps the assembled information in mind for awhile. He or she does not appear to be
working on the problem actively; however, the subconscious mind is still engaged. While the
information is simmering it is being arranged into meaning new patterns.

4. Insight
The problem-conquering solution flashed into the persons mind at an unexpected time, such as
on the verge of sleeps, during a shower or while running.

5. Verification and Application

The individual sets out to prove that the creative solution has merit. Verification methods include
gathering supportive evidence and experimenting with new ideas.

Role and Importance of Creativity

1. It Fosters Innovation
When you create something and youre attaching your name to it, you want to make sure that it
not just satisfies customer expectations, but also exceeds them. You need to be careful and
ensure that your product/service will be useful. Although it may be difficult to see this from the
beginning, especially when your offering is still just an idea, things will get much clearer as the
consecutive steps unfold and the idea starts turning into a reality. This is when you will realize
the difference between invention and innovation. An idea which is unique is an invention, but an
idea which is unique as well as useful is an innovation. In order to innovate, you need to be
creative and look at the same thing differently. This will help you merge usefulness into a unique
idea.
 2. Leads to Higher Overall Success
Were always told that our intelligence will see us through everything in life. However, it is not
until we mature that we realize that although intelligent thinking is a necessary quality to have,
creative thinking has an important role to play as well. The sad fact, however, remains that most
educational institutes and businesses still stress more on intelligence than creativity. This could
perhaps be because the former is easier to measure and manage, whereas the latter can be
difficult to spot. However, times are changing and the world has begun to realize that
organizations need creative people on board as they could bring great benefits if their skills are
adequately shaped and harnessed.

3. It Encourages People to Think

We live in a world where creative problem solving is slowly but steadily turning out to be one of
the best ways to mitigate organizational issues. It works best when coupled with sharp, highly
focused and disciplined way of thinking. People often talk about two modes of thinking
convergent and divergent. It is said that people can think in either of the two or both the modes.
Convergent thinking is extremely analytical and strives to arrive at one accurate solution to the
problem. Computer systems, accounting software and various other data sources are considered
to come to the solution. Most organizations are adept at this. Divergent thinking, on the other
hand, encourages creative ideas by exploring many plausible solutions for the same problem. In
order to ensure that the organization gets the best resolution, it is important to combine both the
modes of thinking by giving due attention to divergent pathways.

4. It Helps Transcend Boundaries

Most path-breaking discoveries are made when two or more disciplines collide. Thats why it is
essential that the boundaries set by disciplines blur and collisions take place. This is important in
order to get new perspectives towards problems. Creative problem solving is great because it is
actually able to connect two distinct areas or expertise and enable you to extrapolate probable
solutions from one field to an unrelated area.

5. It Helps Increase Productivity

Being creative entails disconnecting from the familiar and moving into uncharted, unfamiliar
territories, with an aim of discerning something unique and useful. It is, therefore, important that
not only the leader be creative, but his employees develop such skills as well. To enable this, an
entrepreneur needs to provide them with the time and the resources necessary to discover
innovative ideas and solutions to issues. This makes for an extremely cost-effective way of
increasing productivity. Creativity and innovation within an organization have always been
known to bring it on the path to success.
6. It Can Help Exploit Employee Potential
By not encouraging their employees to be creative, organizations are essentially utilizing only
half of their potential. The good news is that employees are realizing that there is an ocean of
information and creative ideas that are dormant and untapped at all levels. Tapping all this talent
can involve anything from improving processes, making them more effective and profitable,
solving performance-related issues, developing new financial strategies, or innovating to stay
ahead of the herd.
 7. It Can Be Developed
While most people used to believe that creativity is an intrinsic trait, it is now believed that
creativity is a renewable resource that can be tapped into anytime and be learned. Were all born
with creative potential and thought process which can be developed and reinforced. Inculcating
new hobbies and skills is a great way to put your inherent creative skills to the test as well as
hone them. It is also an effective way to train your mind to think in a manner that leads to
creative thinking.

WHAT IS INNOVATION
Innovation is the implementation of new ideas at an individual, a group or organizational level.

TYPES OF INNOVATION
1. PRODUCT INNOVATION
Perhaps the by and large understood type of innovation is that which introduces or improves the
value of a product or service. The Split AC is an example of a product innovation, which has also
benefited from a range of incremental innovations since its original invention. There may also be
innovative products which help to achieve organizational goals. For example, the Life Straw is a
portable water filter developed by Vestergaard-Frandsen which enables individuals to drink
clean water from almost any source. Product innovation leads to product development
approaches.

2. PROCESS INNOVATION
Innovations also focus on processes through which products are produced or delivered to
customers. By improving the process into innovative process organizations mostly enhance their
efficiency and effectiveness. Examples of process innovations that have had a positive effect on
organizational performance are automated packing, Adoption of CNC etc.

3. POSITION INNOVATION
The third focus of innovation is re-positioning the perception of an existing product/services or
process in a specific context. Position-based innovations refer to changes in how a specific
product or process is perceived representatively and how they are used to achieve the
organizational goals. For example, Levi-Strauss jeans are a well know global product line,
formerly developed as manual workers clothing materials, but then re-branded as a fashion item.

4. PARADIGM INNOVATION
The final P of 4P innovation model relates to innovation that defines or redefines the dominant
paradigms of an organization or entire sector. Paradigm-based innovations relate to the mental
models which shape what an organization or business is about. Henry Ford provides a pithy
quote, when talking about the development of the Model T motor car: If I asked people what
they wanted, they would have asked for a five-legged horse.

CORE INNOVATION CONCEPTS

1. Incremental Innovation
This consists of small, yet meaningful improvements in your products, services, and other ways
in which you do business. These tend to be the "new and improved" innovations we are all
bombarded with every day: new flavors, shifts to better or all-natural ingredients, packaging
improvements, faster/slower functioning, just-in-time supply chain enhancements, bigger/smaller
sizing, cost reductions, heavier/lighter weight. We see them every day and they help extend
product, service, and business life cycles and improve profitability. They can be easily
visualized and quickly communicated and give you something new with which to grab consumer
attention in an increasingly noisy marketplace.

2. Modular Innovation
Modular innovation uses the architecture and configuration associated with the existing system
of an established product, but employs new components with different design concepts.

3. Discontinuous Innovation
Discontinuous innovations cause a paradigm shift in science or technology and/or the market
structure of an industry. As they are entirely new-to-the world products, made to perform a
function for which no product has previously existed, discontinuous innovation requires a good
deal of learning for the incumbent organisation and its value network, including the user.
Discontinuous innovations disrupt established routine and may even require a very different set
of capabilities and new behaviour patterns. The notion of novelty is relative so a discontinuous
innovation for one organisation might be an incremental one for another. Radical innovation and
discontinuous innovation are synonyms. Disruptive innovation used to be a synonym until 1997.
Since then the term has been strongly associated with Christensens model. Incremental
innovation is the opposite of radical innovation

4. Architectural Innovation
Innovations that change the way in which the components of a product are linked together, while
leaving the core design concepts (and thus the basic knowledge underlying the components)
untouched. Architectural innovation destroys the usefulness of a firm's architectural knowledge
but preserves the usefulness of its knowledge about the product's components

Sources of Innovation
1. new markets;
2. new technologies;
3. new political rules;
4. running out of roads (limited options);
5. change in sentiments or behaviours;
6. deregulations;
7. Changes in the business models.

Disruptive, Incremental and Open innovations

1. Concept of disruptive and incremental innovations.
Incremental innovation focuses on cost or feature improvements in existing products or services.
Disruptive innovation creates a dramatic change that transforms existing markets or industries, or
even creates new ones, by introducing groundbreaking new products.
Walking on the Safe Side Incremental Innovation

Incremental innovation focuses on continually making existing products or services more

competitive by focusing on reducing costs and improving or adding features. Thanks to its low
level of uncertainty and risk it is by far the most popular form of innovation. Its hard to go
wrong with incremental innovation.

A good example of incremental innovation is Googles Gmail, the worlds most popular email
service. When first launched, Gmail had few features, but did one thing very well. It delivered
emails quickly, without lots of confusing ads. As time passed, Google introduced many
additional features and improved its service, making it faster and better. Since then, the company
has successfully emulated this method numerous times with their other products, from Google
Maps to the Chrome internet browser. Google rushes to get a simple product to market in order
to quickly stake out market share in emerging industries, then gradually improves their offering,
making it the best in the field.

But there are still dangers with incremental innovation especially if this is your only method.
Take Kodak, for example. Kodak led the photography industry for years with incremental, yet
steady improvements to traditional film. When the disruptive innovation of digital imaging was
introduced, it revolutionized the way people captured, stored and used images making Kodak
obsolete. Had the company been willing to invest time and effort in more disruptive innovations,
perhaps it would have remained an industry contender.

All or Nothing Disruptive Innovation

This brings us to disruptive innovation. It explores new technologies and as such is characterized
by a high level of risk and uncertainty. Ironically, disruptive innovation often depends on
incremental improvements, refinements modifications in complementary technologies. Due to
the high risk factor, smaller companies or start-ups usually play important roles in
disruptive innovation. On the positive side, you sometimes dont need to compete for market
share with disruptive innovation; rather you branch off and create your own market. And the
eventual pay-off can often be spectacular much greater than with incremental innovation. The
Uber example, provided above, is an excellent case of disruptive innovation that played off big.

Since its generally a complex, lengthy process, with big ups and downs, the criteria used to
evaluate a radical idea should not be the same as those applied to incremental innovations.
Whereas incremental innovation will often have a formal, phase-gate development model,
disruptive innovation usually requires an informal, flexible model, especially in the early stages,
due to the many uncertainties. Viewing ideas associated with high uncertainty from the
perspective of mainstream business and traditional trajectories either gives a false sense of
security or leads to prematurely rejecting good ideas. You can switch to a more formal model in
the later stages, after these uncertainties have been minimized.
Find Your Innovation Balance

Whether you choose disruptive or incremental innovation will depend on many factors for
example, the industry you are operating in. The rate of technological change differs greatly
between one industry and another. Some sectors are characterized by rapid change and
disruptive innovations, others by smaller, incremental ones. But generally speaking, there is no
need to put all your eggs in one basket. At the end of the day, its best to find a balance between
the two approaches. Combine the introduction of the occasional revolutionary product with many
small incremental improvements in existing products. By having a comprehensive view of your
initiatives over time, you can avoid either overwhelming or underwhelming the marketplace.

The concept of open innovation

Open Innovation, also known as external or networked innovation, is focused on uncovering new
ideas, reducing risk, increasing speed and leveraging scarce resources. With a better
understanding of what is out there, a company is able to lower risk by combining external
capabilities with internal innovation resources. The old question of Why reinvent the wheel?
clearly applies, as Open Innovation enables a company to connect with someone who has already
developed the technology in need or who is further along the development path.

Impact of open source innovation

So what do we see as the future of open source? When it comes to software development, it will
be increasingly difficult to integrate, develop, and extend closed source softwareand extremely
costly compared to open source alternatives. Companies have come to understand the importance
of open source and the key role it plays in developing innovative software today. Twitters
messaging app is a good example of how open source can be powerfully used, and of how well-
known companies are influencing the community. Because Twitter open sourced its messaging
platform, it gave a lot of other companies the ability to benefit from the direct messaging
capabilities it developed. Even top financial companies, such as Goldman Sachs, realize the
importance of open source.

Open source has long since proved its legitimacy, and the use of open source has changed the
way that companies compete. Its very difficult for companies to develop innovative software
without it, and companies now understand the rapid, progressive development it enables. As
industries and technologies continue to evolve at a faster pace, closed source companies will be
dead in the water if they arent leveraging the open source community and the projects theyre
working on.
 Nurturing and Managing Innovation
1. Conditions for effective innovation:
Micro/Organisational level
(i) Incentives for innovating;
(ii) Internal policy;
(iii) Organisational culture:
- Inspiration;
- Observation;
- listening to consumer;
- Organisational structure.

Macro/National level
Policy development:
(i) Social (for example, changing demographics);
(ii) Political (for example, internal governance, stability);
(iii) Economic (for example, entrepreneurship policies, incentives);
(iv) Environmental (regulations, environmental responsibility);
(v) Cultural (respect for indigenous customs and practices);
(vi) Ethical (adherence to sound principles and business practices).