The Discipline of Innovation by Peter F. Drucker
Despite much discussion these days of the "entrepreneurial personality, " few of the entrepreneurs with whom I have worked during the last 30 years had such personalities. But I have known many people - salespeople, surgeons, journalists, scholars, even musicians - who did have them without being the least bit "entrepreneurial." what all the successful entrepreneurs I have met have in common is not a certain kind of personality but a commitment to the systematic practice of innovation.
Innovation is the specific function of entrepreneurship, whether in an existing business, a public service institution, or a new venture started by a lone individual in the family kitchen. It is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth.
Today, much confusion exists about the proper definition of entrepreneurship. Some observers use the term to refer to all small businesses; others, to all new businesses. In practice, however, a great many well-established businesses engage in highly successful entrepreneurship. The term then, refers not to an enterprise's size or age but to a certain kind of activity. At the heart of that activity is innovation: the effort to create purposeful, focused change in an enterprise's economic or social potential.
Sources of Innovation
There are, of course, innovations that spring from a flash of genius. Most innovations, however, especially the successful ones, result from a conscious, purposeful search for innovation opportunities, which are found in only a few situations. Four such areas of opportunity exist within a company or industry: · unexpected occurrences · incongruities · process needs · industry and market changes
Three additional sources of opportunity exist outside a company in its social and intellectual environment: · demographic changes · changes in perception · new knowledge
True, these sources overlap, different as they may be in the nature of their risk, difficulty, and complexity, and the potential for innovation may lie in more than one area at a time. But together, they account for the great majority of all innovation opportunities.
Unexpected Occurrences.
Consider, first, the easiest and simplest source of innovation opportunity: the unexpected. In the early 1930s, IBM developed the first modern accounting machine, which was designed for banks. But banks in '933 did not buy new equipment. What saved the company - according to a story that Thomas Watson, Sr., the company's founder and long-term CEO, often told-was its exploitation of an unexpected success: the New York Public Library wanted to buy a machine. Unlike the banks, libraries in those early New D~ days had money, and Watson sold more than a hundred of his otherwise unsalable machines to libraries.
Fifteen years later, when everyone believed that computers were designed for advanced scientific work, business unexpectedly showed an interest in a machine that could do payroll. Univac, which had the most advanced machine, spurned business applications. But IBM immediately realized it faced a possible unexpected success, redesigned what was basically Univac's machine for such mundane applications as payroll, and within five years became the leader in the computer industry, a position it has maintained even to this day.
The unexpected failure may be an equally important innovation-opportunity source. Everyone knows about the Ford Edsel as the biggest new-car failure in automotive history. what very few people seem to know, however, is that the Edsel's failure was the foundation for much of the company's later success. Ford planned the Edsel, the most carefully designed car to that point in American automotive history; to give the company a full product line with which to compete with General Motors. When it bombed, despite all the planning,