Ideation, Innovation, and Entrepreneurship

Ideation and Innovation

Ideation and innovation are two closely related, but distinct, concepts. Ideation springs from its route word, “idea”. It involves the mental process of brainstorming concepts and theories. Innovation involves the process of turning those newly generated ideas into a manner of doing something new or doing something that is familiar in a faster, better, cheaper, or more convenient manner.

Entrepreneurs and Opportunity

Understanding or identifying entrepreneurial opportunities is the focus of entrepreneurs, investors, and academics. By its very nature, entrepreneurship involves the commencement of something new. The recognition of an idea as having the potential create a desired value and the decision to exploit that value are important entrepreneurial topics. Below are the general stages of an opportunity in the entrepreneurial context:

Identification of a potential opportunity.
Recognition as an opportunity.
Creation to explore the opportunity.
Selection of the opportunity for exploitation.
Exploitation of the opportunity.

Exploitation of an opportunity is the subject of this and so many other entrepreneurial texts. For the aspiring entrepreneur, however, identifying and recognizing and opportunity can be the most challenging prospect.

So, how does one identify an idea as a potential opportunity and ultimately recognize an idea as an opportunity? While many academics propose answers based timing, available resources, the nature of the venture, and attributes of the individual entrepreneur, there is no clear answer to this question. There are, however, several recognized manners in which new ideas came about. I bring up this topic, not to explore the academic theory of opportunity recognition, but to provide a background for where entrepreneurs find or generate the idea or concept that ultimately becomes a functioning business venture. First, lets look at what type of idea constitutes a potential business opportunity.

Need or Want?

A business idea comes about through the identification of a need or want for a potential customer or client. Needs and wants are two dramatically different concepts for the entrepreneur. Most people have heard of Maslows Hierarchy of needs. Each individual has need prioritization of needs that corresponds to their physical, emotional, and financial state. At bottom or base of Maslows scale is the need for basic essential, such as food and shelter. These are needs that must be met at any cost. At the top or far end of the scale are self-actualization needs. These are the needs that make us happy or feel content with ourselves. These needs most closely related to a customers wants. That is, these needs arise not from physical necessity, but from an emotional reaction in the individual.

Where is the Problem or Hurt?

The need/want construct is often framed in terms of, there is a problem to solve. Defining a business idea as solving a problem is far too restrictive of a definition. A problem begets that the customer or client has some sort of issue that needs resolution. Such a scenario is not always the case for new products and services. Often customers and clients are unaware that they need or desire a product or service until they become aware of it and its value proposition. An unfulfilled need or want may include the failure of available products or services to adequately meet the needs or wants of the client or customer due to the attributes of the product or service or the amount of value (price) required in the exchange. In any case, focusing on the customers needs and wants allows one to think more broadly of how create any sort of value to any diverse type(s) of person.

Is it Better to Fill a Need or Meet a Want?

This discussion of need vs. want begs the question, which is better for an entrepreneurial idea, a need or a want? Most people respond that the need is better. A personal cannot go on without the need; therefore, you are assured of a customer base and sales. The only problem with this logic is that new needs do not arise as often as wants. That is, most of needs of humans (food, shelter, etc.) have been met for centuries. This has given rise to many businesses that fulfill those needs. Consistent with the law of supply and demand, the high level of demand and supply has pushed down the price on most needs. Competition to meet those needs going forward is often fierce and the margins are low. This gives a distinct advantage to established, larger businesses that can take advantage of name recognition and economies of scale in producing the product or service.

Wants, on the other hand, arise every day. People are constantly searching for new ways of doing things or ways to make their lives easier or more entertaining. This emotional drive has given rise to most of the industries that have shaped the world, such a books, radio, television, the Internet, etc. While the market to meet new needs can be competitive, there is far more room for new entrants to fulfill a customer want, or in some case, generate a new want the customer did not previously have. Each years fashion trend is a type of want that previously didnt exist, or existed to a much lesser extent. In any case, wants tend to have less competition and higher profit margins as a result of that lesser competition. Wants tend to be ideas with greater potential for growth and scale.

Entrepreneurs & Inventors

As discussed in the previous chapter, the entrepreneur assembles resources around a source of value. More common than not, the entrepreneur is not the person who came up with the idea or invention. This separation is the most common genesis of entrepreneurial teams. For example, an engineer develops a state of the art baby stroller. It has functionality that is far superior to all of the strollers on the market. The inventor may not have the knowledge, time, or ability to work on the product and build a business around it. In steps the entrepreneur who undertakes the process of assembling value around the product. While the engineer undertakes the role of continued product development, the entrepreneur plans for bringing the stroller to market in a way that will provide a sustainable transfer for value that benefits the business.

Do you love your product or service?

Now is a good time to raise another point. As an entrepreneur, do you love your product or service? In the case of most successful serial entrepreneurs, the answer is generally no. You should be passionate about the process of building a business, but not necessarily about the idea itself. The role of the entrepreneur is to remain objective in evaluating the business opportunity. He or she knows that many good ideas exist. If the present idea, no matter how cool or innovative, does not product the desired value, then it is not worth pursing. Inventors, on the other hand, tend to become consumed by their product. Their dedication to their work product makes it difficult to look objectively at the product when determining the feasibility of creating the desired value around the venture. The entrepreneur looks at the product through the lens of the intended customer segment, rather than through the lens of the devoted inventor.

Now that you understand the concept of what type of ideas constitute potential business opportunities, lets turn to how individuals identify or form these ideas. The next chapter will focus on evaluating these ideas to determine whether they are indeed feasible entrepreneurial opportunities.

Innovation is the Introduction of Something New

The something that is introduced can be a idea, method, or device. Too often people associate innovation with technological inventions. On the contrary, innovation is most common in the form of innovative new services, whether technical or no.There are several common methods used to innovate in business or specifically entrepreneurship. Solving A Problem: Identifying a problem that exists either in general with the public at large or with a particular individual. This type of innovation is often referred to as finding the pain or hurt. Improving on an Existing Product or Service: Any product or service addresses or attempts to address an already recognized pain or hurt. This type of innovation deals with improving on the existing product or service to remedy the pain or hurt in a faster, more efficient, more complete, or more cost efficient manner. Combining Ideas: Often one product will come about and solve several pains or hurts. This means coming up with a product or service that removes or lessens the need for more than one other product or service. For example, the idea of the smartphone came about from the combination of several relevant devices. Brand New Innovation: This is an idea that comes up with some for of unique or previously undeveloped thought. Take Facebook, for example. This innovative product addresses a need or want that most never realized existed prior to Facebooks advent. Random Discovery: This is the idea that comes about by happenstance without active or directed search for an idea. This is not a type of innovation that can be planned. However, keeping ones mind open for potential ideas is an absolute necessity for this type of idea generation. Directed Innovation: This is most commonly associated with a particular line of research or exploration. Developing pharmaceuticals is an example of this type of innovation. Often the effects and benefits of drugs are unexpected results of long-term scientific study. Philosophical Innovation: This type of innovation is best exemplified within the academic arena. A PhD is a doctorate degree in philosophy. The role of the PhD is add some kind of innovative thought to a particular area or field. The innovation may be theoretical or procedural. While this type of innovation is not closely related to a product or service that is ready for commerce, it often leads to manners of though or paradigms that are useful to the entrepreneurial or business community. Conclusion: Understanding a theory of innovation provides the entrepreneur with a framework from which to ideate.

Prior Experience in Entrepreneurship

Prior experience or knowledge of the entrepreneur is a heavily studied characteristic in entrepreneurial behavior. Startups frequently emerge from entrepreneurs with lots of acquired knowledge or experience within the subject field. Prior experience helps one to understand the opportunities that exist. The entrepreneur is more familiar with the needs and wants that exist and more apt to identify and recognize an opportunity to that meets those needs or wants.

Brainstorming

Brainstorming is a common and well-known problem solving technique. It involves the concept of lateral thinking, which relies on individuals to ideate without inhibition or judgment to produce a high quantity of ideas. The freedom allowed in brainstorming allows for original and creative views, ideas, and solutions to problems.

Brainstorming Process

As you will see below, brainstorming has many variations and alternate techniques. However, the three core aspects of brainstorming are as follows:

Framing Framing provides an objective for your ideation and limits the scope of your brainstorming. It also makes certain that everyone involved in the brainstorming session has a common understanding of the goal. You may choose to brainstorm around a particular industry, product, problem, or customer need or want. In an case framing will provide context for your ideation.

Facilitation To facilitate means to make an action or process easier or simpler. In this case, someone involved in the brainstorming session should facilitate the event. The role of the facilitator is to make certain that the group feels comfortable with the objective and that the best practices rules are closely followed. The facilitator will need to encourage participation, help moderate the conversations, add and record others ideas, push the participants to dig deeper or look more thoroughly at an idea or sequence of ideas, and seek participant feedback. When choosing a mediator, it should be someone who has the ability to motivate the participation of others and has no personal stage in the outcome (such as a predisposition toward a given idea).

Evaluation Criteria In order to reduce the large quantity of ideas to a manageable lot, there must be some metric or evaluation criterion to judge the idea. Most facilitators will lead the group through collaborative voting, ranking, or otherwise allowing the members to show their preference for any ideas. This may be done openly or anonymously, verbally or in writing, and may allow for treatment of multiple ideas at once or each idea individually. The technique used to evaluate the ideas should meet the personality of the group so that it promotes participation and input from all members.

Rules of Effective Brainstorming

Generate Lots of Ideas Quantity leads to quality in brainstorming. The greater the number of ideas, the higher the probability of coming up with an idea or combination of ideas that are valuable.

Avoid Evaluating, Judging, or Criticizing Ideas This creates an open environment where participants are not subject to the inhibitions listed below.

Seek Diversity Promote any sort of idea and encourage unique or unusual ideas. Diverse participation often leads to diverse ideas due to their unique perspectives on similar situations.

Combine Ideas Good ideas promote other good ideas. Sometimes ideas can be combined to create even stronger ideas.

Effect of Brainstorming

The effect of brainstorming is the production of more and, ultimately, higher quality ideas. Further, assuming the brainstorming individuals are or will be involved in the resulting ideas, brainstorming has the following effect on the brainstormers:

Participants are more willing to participate fully in the session.

Collective thought stimulates ideas in each individual.

Individual thought is augment and each member is able to make greater and often more valuable contributions.

Diversity of members gives greater breadth to the ideas.

Ideas are explored more thoroughly as a result of a variety of perspectives.

Team members feel greater camaraderie offer greater support to a team generated idea (rather than an individuals idea).

Basic Types of Brainstorming

Individual Brainstorming Brainstorming can be carried out in groups or alone. Research is divided on which produces the highest quality of ideas. Individual brainstorming, like group brainstorming, requires that the individual follow the same rules with minor exceptions. The techniques to enhance the effect of brainstorming can be used in individual brainstorming as well. Brainstorming individual is generally most effective in simple problem solving.

Group Brainstorming Group brainstorming have obvious advantages over individual brainstorming. The sheer number of ideas tends to be greater in groups. Individuals can be inspired by the ideas of other members. Groups can examine a single idea in greater and expand on that idea. The diversity of experience of the members sparks a wider variety of ideas. Further, there is social value in group brainstorming. Members feel greater camaraderie and are more likely to settle on a best idea because they feel as if they have contributed to the process. The downside to group brainstorming is that members are often more susceptible to the variety of inhibitions listed below. Particularly, individuals become reluctant to participate fully or lose concentration due to social inhibitions. Group brainstorming is often most effective in complex problem solving situations.

Brainstorming Variations and Other Techniques

Brainstorming has been the subject of great study and practice since its introduction in 1953 by Alex Osborn. Over the years various modifications and variations of the traditional brainstorming model have developed. There are far to many varieties to list and explain in this chapter; however, Ive listed some well-known techniques below for your further research. (A good source of information for these techniques can be found at www.mindtools.com)

Nominal Group Technique Participants brainstorm and provide their ideas anonymously. The facilitator collects the ideas and the group votes or ranks their preferences for ideas. The top ranked ideas are re-evaluated by the group for further development. The group may be broken up into sub-groups that will work on individual aspects of the idea. The subgroups will submit their new ideas anonymously. The collective group will vote or rank their ideas again. Ideas may change dramatically through this process. Some ideas that were excluded by the group may reappear through the natural development of the favored ideas.

Group Passing Technique Individual participants write down an idea and pass it to another member in the group. Each person will pass their idea and receive someone elses idea. New, each participant will add some thought or detail to the idea and pass it again. This will happen until each participant has commented on everyone elses idea. The elaborated ideas are then presented to the group for evaluation.

Electronic Brainstorming (or Brain-netting) Electronic brainstorming means collaborating and ideating through the use of an electronic medium, such as videoconference or email. Individuals brainstorm individually and list their ideas on a collaborative network. The contributions of each individual are generally anonymous to prevent a reluctance to participate. Participants will draw from posted ideas to inspire further ideas. At some point, the participants will evaluate and prioritize the ideas. The benefits of using a electronic medium is the ease of maintaining anonymity, the ability to collaborate over an extended period of time, and individuals do not have to be in the same location or contribute at the same time.

Question Brainstorming Participants attempt to produce questions rather than just ideas. The questions are used to inspire thought in others. Individuals will naturally attempt to think of answers or solutions in the process of creating new questions. At the end, the participants will prioritize the questions most in need of address. This technique can be very useful in narrowing down the particular customer want or need that the entrepreneur wishes to fulfill.

Mind Mapping Mind mapping employs a diagram to visually capture information surrounding an idea or situation. The process begins by placing a word (generally representing the objective or parameters of your ideation) in the center of a page or board. Participants in the mind map provide words that relate expand upon the central term. These words serve as branches off of the central word and may serve as categories. Sometimes the words give rise to broader words that replace that word as a higher-level category. The branches from the higher-level categories can be other ideas, tasks, related concepts, etc. The ideas are placed strategically around the central terms and categories so that it creates a web of ideas that can be interconnected. The process facilitates the organization and structuring information. The main benefit, however, is having the ideas together so that the participants make mental connections between the concepts. The mindmap can be used for address many issues, aside from ideation, and can be used in a number of formats.

Concept Maps Concept maps function similarly to mind maps, except it uses a while idea or concept, rather than single words and ideas. The concept maps generally require additional labels along the web to sub-categorize information. Concept maps allow for the creation of more diverse patterns of categorization.

Team Idea Mapping The process begins with defined topic that provides the scope of the exercise. All participants brainstorm individually and the ideas are merged together in the form of a map. Like ideas are positioned according to their association with other ideas. As the ideas are consolidated onto the map, each participant explains the meaning or inspiration behind the idea. This process helps others view the idea from the originators perspective. The alternative perspectives serve to inspire new ideas and different approaches to each participants own idea. All of the ideas are then organized and prioritized by the group. During this consolidation phase, participants may discover a common understanding of the issues as they share the meanings behind their ideas. During this sharing, new ideas may arise by the association, and they are added to the map as well. Once all the ideas are captured, the group can prioritize and/or take action.

Brainwriting (Known as 6-3-5 Brainwriting, 6-3-5 Method, or Method 635) Brainwriting is very similar to brainstorming in that it promotes novel, unique, or non-traditional thought and ideas. Also, the exercise seeks to produce a high quantity of ideas. Generally there are six participants and a moderator in the brainwriting group. Each member thinks up 3 ideas in 5 minutes and records the ideas on a worksheet. The worksheet is passed to every other member of the group who repeats the exercise and uses the ideas already present on the worksheet as inspiration. The objective is to produce 108 ideas within a 30-minute period.

Affinity Diagrams Affinity diagrams are tools that allow for categorization of information into quadrants based on their inherent qualities. Affinity diagrams have a number of uses, but can be particularly useful in providing context for ideation or brainstorming sessions. Once ideas are recorded, the ideas are recorded into categories and sub-categories. This categorization process leads one to expand on the categories and sub-categories when expanding upon the ideas.

Others Techniques to Research: Step-ladder technique; Role-storming, Reverse Brainstorming, Starbursting, Round-Robin Brainstorming, etc.

The above categories of ideation techniques and tools are not meant to be comprehensive. Take the time to further research any of these procedures when you are actively developing ideas or expanding upon your ideas.

See Wikipedia’s explanation of Brainstorming for further reference. Also, ReferenceForBusiness.com provides an excellent resource for the Process and Theory Behind Brainstorming.

Ideation Best Practices

While many approaches to ideation exist, there a several commonalities that exist for effectively developing or creating new ideas. Below is a list of some of these best practices.

Use Unique Thought Patterns – Albert Einstein said that, “Common sense is a collection of prejudices established before the age of 18 years.” Do not rely on your basic assumptions about an idea or about individuals. Attempt to address any problem by breaking away from your previously-engrained, logic patterns.

Challenge All Existing Assumptions Any situation or idea comes with certain assumptions. Challenging the basic assumptions associated with an idea helps to expand upon the idea or concept in a novel fashion.

Think of ways to Reword the Idea or Concept This allows you to look at things from different vantages

Make Interconnections This allows one to conceptualize relationships between generally unrelated ideas

Employ Unique Perspectives We tend to look at things from a perspective built on our personal experience and internal paradigms. Try to approach problems from the perspective of someone much different from myself.

Use Facilitating Devices You can facilitate your ideation by identifying enablers. Enablers can include creative tools or an environment that allows for free thought.

How to Translate Ideation into the Business Plan

The primary purpose of ideation is to come up with some novel idea that creates a desired value. However, ideation can also help you in constructing the concept for your ideas value proposition. Within the business plan you will want to describe the concept of your business. If you are providing a product or service, you will need to describe in detail how that product or service provides value to the intended customer or client. Simply stated, you need to tell how the product or service fulfills a customers need or want. With new or innovative ideas, the customer want may not be obvious. For example, many people were skeptical about whether customers would want an IPad. Ideation will allow you to tease out the core elements of the product or service that fit with the need or want framework.

Analysis of the Business Idea or Concept

The concept analysis continues the task begun during the ideation process. This portion makes certain that you fully understand your business concept and how you hope to transfer value to customers or clients. You cannot accurately assess your market, operational capability, and financial needs without first have a firm understanding of exactly what value you plan to provide.

What is the current market need/want? Answering this question is the first step in making a preliminary determination of whether your idea is or could be a valid business opportunity.

What to Do?

Write out, in detail, how the product or service addresses the want or need of a customer or client.
At the end of the above paragraph, create a single sentence that states your products value proposition (i.e., how it provides value to the customer).

Note: Please do not take this process lightly. The concept statement provides a bearing point for the entire business idea. While, the ideation process asks you to think broadly and not confine yourself to traditional thought processes, you must be specific about your ideas attributes when you examining it for feasibility in the current market.

At first glance the above instructions seem simple and straightforward. After attempting to do so, you likely find that stating and describing the value proposition concisely is quite difficult. Often, a product or service has multiple different ways in which it can potentially create value. Failing to be specific in your business objective (building the core product or service) will inevitably lead to uncertainty in planning and a lack of confidence from those interested in your business idea.

Questions to Ask about the Idea or Concept

Below are some additional questions that may help you develop the concept paragraph:

What is the nature of the opportunity? (i.e, What type of business will this be?)
Why is there a possibility for this business (need or want)?
Is there anything overly compelling about the business?
Is someone already fulfilling this need/want in the market and, if no, why not?
What are the potential risks involved in getting started?
Are there any clearly identifiable hurdles or gaps in the plan and, if so, how can they be addressed in the planning process?

This list of question is by no means exclusive, but they may help you to tease out and more fully develop your concept. Remember, having a strong understanding of the concept will help you and other (investors, partners, lenders, etc.) determine whether the idea is worth pursuing (a valid business opportunity) in its present form.

Closing Points

Remember, ideas are a dime-a-dozen.
Do your love the idea? Get over it. Your idea will naturally change and evolve into something better. You have to be passionate about the entrepreneurial undertaking.
Entrepreneurship is going through the process of assembling resources around an idea/product/service to create value.