Innovation is the practical application of ideas that result in different new
types of new offerings, like products, services, processes, and business
models, intending to improve or disrupt existing applications or creating
new solutions.
It doesn’t matter if you are getting the ideas from outside the
organization, through brainstorming, combining of existing ideas, or
radical new thinking within your field. But it should be at the heart of your
business and it should constantly be done to ensure business survival.
8 Fields of Innovation
Innovation can be in different forms and outcomes. When we talk about
innovation, most people think of new products while there is a wide array
of different innovation outcomes possible. Here we list the most common
1. Product & Product Performance Innovation
Either a new product is developed or the performance of an existing
product is improved. This kind of innovation is very common in the
business world.
2. Technology Innovation
New technologies can be also the basis for many other innovations. The
best example was the Internet, which was itself an innovation but also
lead to other innovations in various fields.
3. Business Model Innovation
Many of the most successful companies in the world managed to innovate
their business model. Using different channels, technologies and new
markets can lead to new possible business models which can create,
deliver and capture customer value. Digital ecosystems are a well-known
example of innovation using several technologies and creating a whole
new type of business.
4. Organizational Innovation
Managing and sharing resources in a new way can also be an innovation.
This way it’s possible to use resources and assets in a completely new
way.
5. Process Innovation
Innovation in the processes can improve the efficiency or effectiveness of
existing methods. Possible process innovations involve production,
delivery, or customer interaction.
6. Marketing / Sales – New Channel Innovation
New methods to capture and hold attention from customers. Either
through the use of innovative marketing/sales concepts or the use of new
channels for customer acquisition/sales.
7. Network Innovation
By connecting different groups and stakeholders it might be possible to
create extra value. This type of innovation is very common due to the use
of ICT services.
8. Customer Engagement / Retention
Innovative concepts that try to increase the engagement of customers
and keep the retention up. The goal is to have innovative models to keep
the customers “locked-in” or engaged.
The 4 Types of Innovation
1. Incremental Innovation
Existing Technology, Existing Market
One of the most common forms of innovation that we can observe. It uses
existing technologies within an existing market. The goal is to improve an
existing offering by adding new features, changes in the design, etc.
Example
The best Example for incremental innovation can be seen in the
Smartphone market where the most innovation is only updating the
hardware, improving the design, or adding some additional
features/cameras/sensors, etc.
2. Disruptive Innovation
New Technology, Existing Market
Disruptive innovation is mostly associated with applying new
technologies, processes, or disruptive business models to existing
industries. Sometimes new technologies and business models seem,
especially in the beginning, inferior to the existing solutions but after
some iterations, they surpass the existing models and take over the
market due to efficiency and/or efficacy advantages.
Examples
Amazon used Internet-Technologies to disrupt the existing industry for
book-shops. They had the existing market for books but changed the way
it was sold, delivered and experienced due to the use of disruptive
technologies. Another example was the iPhone, where existing
technologies in the market (Phones with buttons, keypads, etc.) were
replaced with touch-interface-centered devices combined with intuitive
user interfaces.
3. Architectural Innovation
Existing Technology, New Market
Architectural innovation is something we see with tech giants like
Amazon, Google, and many more at the moment. They take their domain
expertise, technology, and skills and apply them to a different market.
This way they can open up new markets and expand their customer base.
Examples
Especially digital ecosystem orchestrators like Amazon and Alibaba use
this innovation strategy to enter new markets. They use existing expertise
in building apps, platforms, and their existing customer base to offer new
services and products for different markets. A recent example for
this: Amazon recently entered the medical care field.
4. Radical Innovation
New Technology, New Market
Even it is the stereotypical way most people see innovation; it is the rarest
form of them all. Radical innovation involves the creation of technologies,
services, and business models that open up entirely new markets.
Example
The best example of radical innovation was the invention of the airplane.
This radical new technology opened up a new form of travel, invented an
industry, and a whole new market.
Entrepreneurship and Value Creation
Entrepreneurship is a process of developing, organizing and running a
new business to generate a profit. In other words, it is the act of a
business while taking all possible risks in the hope of to gain a profit. In
addition, Entrepreneurship is all about transforming the world by solving
big problems such as bringing change to society and at the same time,
creating an innovative product in how we can survive in our daily lives.
Entrepreneurship is what people do to take their career into their hands
and lead it to the direction they want. In simple word, entrepreneurship is
a process of acting or doing.
Value Creation It is the process of turning labor and resources into
something that meets the needs of others. It is the process of doing that
helps to meets the needs of the consumers or customers.
What is Value Creation for a Customers, Employees and Investors?
Value Creation for Customers.
Value creation occurs when their wants and needs are completely achieve
by the innovation or creation of the products that are applicable to their
satisfaction.
Value Creation for Employees.
Value creation occurs:
when employees are valued by their employers.
if they are loved, valued, appreciated, respected and they are carried
along in every decision-making process, the employees become more
motivated, determined and productive at work through giving their
best in achieving the overall business goals.
Companies cannot deliver unique products or services without
professional and dedicated employees.
Value Creation for Investors. —
Value creation is occur when their investment is consistently delivering a
high returns on their Capital.
Traits and Characteristics of an Entrepreneur
1. Vision and Passion
An entrepreneur must have a very clear vision of his business. So he must
have the ability to plan out his long term and short term goals and
objectives. He has to be able to map out his future plans in an articulate
and efficient manner. 2.
2. Innovative
One of the main characteristics of entrepreneurship is innovation. The
entrepreneur looks for the opportunity in the market and capitalizes on it.
He is the one who introduces new products and services in the market
trying to fulfil customer needs. The innovation can also be in a production
process, new marketing strategy, innovative advertising etc.
3. Risk Taker
A risk is an integral part of any new business. But it is an especially
important factor in entrepreneurship because here the entrepreneur bears
the entire risk of the business. So it is necessary that the entrepreneur
has an adventurous and risk-taking personality.
4. Leader
One of the other important qualities of a successful entrepreneur is
leadership. All good entrepreneur are good leaders. They have the ability
to motivate and lead their employees to success. They also have the
tenacity, knowledge, and skill to pull their businesses from a tight corner
like good leaders.
5. Persistent
A good entrepreneur is always persistent by nature. A business is never
an overnight success. It takes immense hard work and also a little bit of
luck. But a persistent entrepreneur makes his own luck. He can create
opportunities if they are not presented to him. So a persistent
entrepreneur that works tirelessly always has a greater chance of success.
6. Ethical
Ethics and integrity are the cornerstones of any successful business in the
long term. A sustainable business cannot be run by someone with
compromised morals. So any credible business must have at its head an
ethical entrepreneur who upholds the letter of the law and the integrity of
the business.
7. Competitive Spirit
The business world is a very cut-throat space. Thousands of new
businesses born and die every day. So the competition is always going to
be fierce and intense. Such an environment is better suited to someone
who is already competitive by nature and thrives in such situations of
pressure.
8. Resilient
And finally one of the most important traits in a successful entrepreneur is
resilience. There is no smooth straightforward path to success. There will
always be some failures and roadblocks in the way. So the entrepreneur
has to be resilient and steadfast in his pursuit of success.
10 Habits of Successful Entrepreneur
A successful entrepreneur is a person who creates something from
nothing. He is a person who knows how to make that something available
for people who will buy it to improve their lives.
Creating is not an easy task. Creating requires many activities, good
habits, and a desire to create from the person who will create.
As a successful entrepreneur, you are the creator. You create a
customer’s happiness and satisfaction. You create an employee’s
satisfaction and happiness. Also, you create your partner’s satisfaction
and happiness. As a creator, you will need many good practices and
habits to implement and use in your everyday work.
Let’s look at the ten habits of a successful entrepreneur as a person who
creates something from nothing.
1. Successful entrepreneurs have a clearly defined vision.
You need to know where you want to be, what you want to achieve, and
how you want to look at your own future and the future of your
environment. The vision is something that should be deeply rooted in you.
But your entrepreneurial vision will need followers.
If you don’t have a clear vision, you will not know where you need to
move your business, and you can’t have followers who can help you
realize your vision. So, you need to have a clear vision and ensure that
you have followers that will help you realize that vision.
2. Successful entrepreneurs set up and adjust their goals.
But, vision is not enough to ensure entrepreneurial success. It only shows
you where you want to be in the future, while goals will show you how to
get there. A good habit is to set goals following your vision. If your goals
are not aligned with your vision, you can not expect to achieve your
vision, even if you achieve your goals. So, you must start developing your
goals with the vision in your mind.
The next important thing is to have goals close to your possibilities, which
you can quickly achieve. So, your goals will need to be
constantly adjusted according to reality.
3. They are focused on achieving their goals.
Focus is the third habit of a successful entrepreneur that contributes to
the development of success. Without enough focus, too many goals,
activities, or tasks are a sure path to your failure.
If you manage your business without enough focus on the right and
important things, you can not build an effective and efficient company.
Then you will be in big trouble.
4. A successful entrepreneur use deadlines.
You can not realize and achieve your goals on time if you are not using
deadlines. It is true that for everything you want to accomplish, there is
enough time. But one thing is quite clear when it comes to the business
world. That thing is that speed is one of the critical features of your
success.
If you don’t take your first step to achieve your goals, you can not achieve
your vision. So, start working on activities that will enable you to achieve
your goals.
5. They plan ahead their own activities.
Yes, successful entrepreneurs plan ahead of their activities. They know
what next they should do to achieve their goals.
So, you should divide your goals into tasks and activities on a daily,
weekly, and monthly basis. Try to make the total number of your daily
tasks on the level you will easily manage to do them on time.
6. A successful entrepreneur prioritizes their own tasks.
When you use the plan and a to-do list, you can never be sure that
everything will be as you have already planned. There will be many new
urgent tasks. However, don’t let the urgency to “hack” your time. Use
clear priorities instead of that.
You can use the time management matrix that will help you to succeed in
the proper prioritization process.
7. Persistence is an important part of your entrepreneurial
success.
Success requires overcoming many obstacles, solving many problems,
and avoiding many pitfalls. Success is not the result of chance. Prosperity
results from work, experimentation, mistakes, failures, etc. So, you have
to be persistent to get to your so wanted destination or closer to your
vision.
You will fail so many times until you reach the level of success you want to
reach. So, don’t stop, keep moving forward, and you will become a
successful entrepreneur.
8. Successful entrepreneurs use continuous learning process.
Knowledge is an essential characteristic of an entrepreneur and a
business. But that knowledge is not static. Like everything else, the
knowledge is changing, which means that what today is true or, enough,
tomorrow, can be obsolete. Because of that, learning is an essential habit
of successful entrepreneurs, and you need to ensure a continuous
increase of knowledge in your business.
9. They are not afraid to take action.
If there is no action, there is no reaction. You can’t be closer to your
vision. You will not have measures that would tell you whether you are
right or wrong. Also, you can’t know do you need something to change
and what will need to be changed.
If you don’t take that first step for each of your goals, everything else will
be inappropriate.
10. Successful entrepreneurs are not afraid to take a risk.
Risk is an integral part of every aspect of our lives. So, the same is true for
businesses.
You will always have different levels of risk in everything you do as an
entrepreneur. Each of your actions will have a dose of potential risk. But it
should not be a reason for you to maintain status-quo situations in your
business.
What is the real purpose of a business?
The real purpose of a business is NOT to create profits. Because a
business cannot exist outside of society and must satisfy a specific need
in order to stay in business, it has to create or add additional value to the
community or individuals. That’s why the real purpose of a business is to
create customers.
What is the purpose of business?
Is it to create profits? Be your own boss? Supporting an advocacy? Provide
a community a livelihood?
All these are great vision and mission statements.
However, when you look at organizations in the context of society, the
real and only purpose of organizations should be to create customers.
Businesses Exist Because of Its Customers
Business enterprises … are organs of society. They do not exist for their
own sake, but to fulfill a specific social purpose and to satisfy a specific
need of a society, a community, or individuals.”-Peter Drucker
Peter Drucker, perhaps one of the best management thinkers of all time,
said that businesses exist to fulfill a specific social purpose and to satisfy
a specific need of a society.
However, a lot of business owners think of organizations only from a
capitalist mindset. Now, that isn’t bad nor wrong by itself. It’s just another
way to look at it. But if that’s the only thing that enters your mind — to
make money — you are looking at businesses in the wrong way.
Any organization won’t exist without customers.
Now, you may hear about start-ups using funding at the beginning, but
they all die after some time because they can’t create customers who are
willing to pay for their products/services. While they may have great ideas
or cool offerings, if no one is willing to pay for them, they will eventually
close.
And this is also true even for non-profits. They have their own customers
that they serve. Without them, they will also cease to exist.
Value Exchange
Customers are created when they find value in the product and/or service
of the organization. What this means is they find something of value to
them that they are willing to spend money in exchange for it.
At this point, when a customer pays for a product or service, a sale or
revenue is created. Two things happen here that is worth noting:
1. The customer receives value he/she is looking when he/she gets the
product or experience the service
2. The organization receives value in the form of the payment of the
customer
If you notice, there is simply an exchange of value from both parties.
Without this cycle (exchange of value from the organization to the
customer and the customer to the organization), you and your
organization will cease to exist. The market will cease to exist if value is
not created for both parties. And when the value you provide is less than
the cost, the business earns a profit.
What Is a Business Model?
The term business model refers to a company's plan for making a profit. It
identifies the products or services the business plans to sell, its
identified target market, and any anticipated expenses. Business models
are important for both new and established businesses. They help new,
developing companies attract investment, recruit talent, and motivate
management and staff.
Established businesses should regularly update their business model or
they'll fail to anticipate trends and challenges ahead. Business models
also help investors evaluate companies that interest them and employees
understand the future of a company they may aspire to join.
Business Model
Understanding Business Models
A business model is a high-level plan for profitably operating a business in
a specific marketplace. A primary component of the business model is
the value proposition. This is a description of the goods or services that a
company offers and why they are desirable to customers or clients, ideally
stated in a way that differentiates the product or service from its
competitors.
A new enterprise's business model should also cover projected startup
costs and financing sources, the target customer base for the
business, marketing strategy, a review of the competition, and projections
of revenues and expenses. The plan may also define opportunities in
which the business can partner with other established companies. For
example, the business model for an advertising business may identify
benefits from an arrangement for referrals to and from a printing
company.
Successful businesses have business models that allow them to fulfill
client needs at a competitive price and a sustainable cost. Over time,
many businesses revise their business models from time to time to reflect
changing business environments and market demands.
When evaluating a company as a possible investment, the investor should
find out exactly how it makes its money. This means looking through the
company's business model. Admittedly, the business model may not tell
you everything about a company's prospects. But the investor who
understands the business model can make better sense of the financial
data.
When evaluating a company as a possible investment, find out exactly
how it makes its money (not just what it sells but how it sells it). That's
the company's business model.
Types of Business Models
There are as many types of business models as there are types of
business. For instance, direct sales, franchising, advertising-based,
and brick-and-mortar stores are all examples of traditional business
models. There are hybrid models as well, such as businesses that combine
internet retail with brick-and-mortar stores or with sporting organizations
like the NBA.
Below are some common types of business models; note that the
examples given may fall into multiple categories.
Retailer
One of the more common business models most people interact with
regularly is the retailer model. A retailer is the last entity along a supply
chain. They often buy finished goods from manufacturers or distributors
and interface directly with customers.
Example:
Manufacturer
A manufacturer is responsible for sourcing raw materials and producing
finished products by leveraging internal labor, machinery, and equipment.
A manufacturer may make custom goods or highly replicated, mass
produced products. A manufacturer can also sell goods to distributors,
retailers, or directly to customers.
Example: Ford Motor Company
Fee-for-Service
Instead of selling products, fee-for-service business models are centered
around labor and providing services. A fee-for-service business model may
charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-
service companies are often specialized, offering insight that may not be
common knowledge or may require specific training.
Example:
Subscription
Subscription-based business models strive to attract clients in the hopes
of luring them into long-time, loyal patrons. This is done by offering a
product that requires ongoing payment, usually in return for a fixed
duration of benefit. Though largely offered by digital companies for access
to software, subscription business models are also popular for physical
goods such as monthly reoccurring agriculture/produce subscription box
deliveries.
Example: Spotify
Freemium
Freemium business models attract customers by introducing them to
basic, limited-scope products. Then, with the client using their service, the
company attempts to convert them to a more premium, advance product
that requires payment. Although a customer may theoretically stay on
freemium forever, a company tries to show the benefit of what becoming
an upgraded member can hold.
Example: LinkedIn/LinkedIn Premium
Some companies can reside within multiple business model types at the
same time for the same product. For example, Spotify (a subscription-
based model) also offers free version and a premium version.
Bundling
If a company is concerned about the cost of attracting a single customer,
it may attempt to bundle products to sell multiple goods to a single client.
Bundling capitalizes on existing customers by attempting to sell them
different products. This can be incentivized by offering pricing discounts
for buying multiple products.
Example:
Marketplace
Marketplaces are somewhat straight-forward: in exchange for hosting a
platform for business to be conducted, the marketplace receives
compensation. Although transactions could occur without a marketplace,
this business models attempts to make transacting easier, safer, and
faster.
Example: eBay
Affiliate
Affiliate business models are based on marketing and the broad reach of a
specific entity or person's platform. Companies pay an entity to promote a
good, and that entity often receives compensation in exchange for their
promotion. That compensation may be a fixed payment, a percentage of
sales derived from their promotion, or both.
Example: social media influencers such as Lele Pons, Zach King, or
Chiara Ferragni.
Razor Blade
Aptly named after the product that invented the model, this business
model aims to sell a durable product below cost to then generate high-
margin sales of a disposable component of that product. Also referred to
as the "razor and blade model", razor blade companies may give away
expensive blade handles with the premise that consumers need to
continually buy razor blades in the long run.
Example: HP (printers and ink)
"Tying" is an illegal razor blade model strategy that requires the purchase
of an unrelated good prior to being able to buy a different (and often
required) good. For example, imagine Gillette released a line of lotion and
required all customers to buy three bottles before they were allowed to
purchase disposable razor blades.
Reverse Razor Blade
Instead of relying on high-margin companion products, a reverse razor
blade business model tries to sell a high-margin product upfront. Then, to
use the product, low or free companion products are provided. This model
aims to promote that upfront sale, as further use of the product is not
highly profitable.
Example: Apple (iPhones + applications)
Franchise
The franchise business model leverages existing business plans to expand
and reproduce a company at a different location. Often food, hardware, or
fitness companies, franchisers work with incoming franchisees to finance
the business, promote the new location, and oversee operations. In return,
the franchisor receives a percentage of earnings from the franchisee.
Example: Domino's Pizza
Pay-As-You-Go
Instead of charging a fixed fee, some companies may implement a pay-as-
you-go business model where the amount charged depends on how much
of the product or service was used. The company may charge a fixed fee
for offering the service in addition to an amount that changes each month
based on what was consumed.
Example: Utility companies
Brokerage
A brokerage business model connects buyers and sellers without directly
selling a good themselves. Brokerage companies often receive a
percentage of the amount paid when a deal is finalized. Most common in
real estate, brokers are also prominent in construction/development or
freight.
Example:
How to Create a Business Model
There is no "one size fits all" when making a business model. Different
professionals may suggest taking different steps when creating a business
and planning your business model. Here are some broad steps one can
take to create their plan:
. Identify your audience. Most business model plans will start with
either defining the problem or identifying your audience and target
market. A strong business model will understand who you are trying
to target so you can craft your product, messaging, and approach to
connecting with that audience.
. Define the problem. In addition to understanding your audience,
you must know what problem you are trying to solve. A hardware
company sells products for home repairs. A restaurant feeds the
community. Without a problem or a need, your business may
struggle to find its footing if there isn't a demand for your services
or products.
. Understand your offerings. With your audience and problem in
mind, consider what you are able to offer. What products are you
interested in selling, and how does your expertise match that
product? In this stage of the business model, the product is tweaked
to adapt to what the market needs and what you're able to provide.
. Document your needs. With your product selected, consider the
hurdles your company will face. This includes product-specific
challenges as well as operational difficulties. Make sure to document
each of these needs to assess whether you are ready to launch in
the future.
. Find key partners. Most businesses will leverage other partners in
driving company success. For example, a wedding planner may
forge relationships with venues, caterers, florists, and tailors to
enhance their offering. For manufacturers, consider who will provide
your materials and how critical your relationship with that provider
will be.
. Set monetization solutions. Until now, we haven't talked about
how your company will make money. A business model isn't
complete until it identifies how it will make money. This includes
selecting the strategy or strategies above in determining your
business model type. This might have been a type you had in mind
but after reviewing your clients needs, a different type might now
make more sense.
. Test your model. When your full plan is in place, perform test
surveys or soft launches. Ask how people would feel paying your
prices for your services. Offer discounts to new customers in
exchange for reviews and feedback. You can always adjust your
business model, but you should always consider leveraging direct
feedback from the market when doing so.
Instead of reinventing the wheel, consider what competing companies are
doing and how you can position yourself in the market. You may be able
to easily spot gaps in the business model of others.
