BPEM CHAPTER 3

Dr Rakhi Bhattacharya
 INNOVATION

•It is the means by which the entrepreneur

either creates new wealth producing
resources or endorse existing resources
with enhanced potential of creating wealth
 INNOVATION

Process of creating something new.

Innovation takes place in 4 forms
•Introducing new product in the market
•Development of new production technology
•Entry to new market
•Development of new source of raw material
 DEGREES OF INNOVATION

•INCREMENTAL INNOVATION
•EVOLUTIONARY INNOVATION
•REVOLUTIONARY INNOVATION
 TYPES OF INNOVATION

• Market Innovation
• Product Innovation 1. Forward vertical innovation
2. Backward vertical
• Process Innovation innovation
3. Convergent lateral
• Supply source Innovation combination
4. Divergent lateral
• Cultural Innovation combination
5.1. Help face
Financial competition
combination
2. Develop corporate
• Brand Positioning Innovation image
3. Create Status
 INVENTION

•The process of creating something that has never

been created before.
•The invention become innovation when it meets
the criteria of technical feasibility,
Business viability and consumer desirability.
•A patented invention protects the intellectual
property rights of the innovator.
 DIFFERENCE BETWEEN
INVENTION INNOVATION
1. Creating product or introducing 1. Commercial use of invention.
process for the first time 2. It consist of practical
2. It consist of fresh, original idea. implementation of idea.
3. Invention requires scientific 3. Innovation requires marketing,
skills technical and strategic skill.
4. Invention are mostly limited to 4. Innovation can happen at any
research and development part of the organisation.
department.
5. Success of innovation is judged
5. Success of invention is judged by by its commercial success
technical criteria
 CREATIVITY
• Creativity is the ability to produce something origin and unusual or to make
something new and imaginative.
CREATIVE PROCESS INCLUDE:
• Idea Germination
• Preparation
• Incubation
• Illumination
• Verification
• Implementation and review
 QUALITIES OF CREATIVE PEOPLE

• Sensitivity to problems , need, attitude and feelings of others.

• Fluency: Ability to take advantage of an opportunities.
• Flexibility: Ability to adjust to the environment quickly.
• Originality: it refers to uncommonness of individual’s response to
problematic situation.
• Ability to synthesise or combine several component
• Organisation ability
 FOSTERING CREATIVITY AND INNOVATION IN
ENTERPRISES
• Challenging task
• Support from top mgmt.
• Team spirit
• Risk taking
• Open channel of communication
• Role models
• Decentralised organisation structure
• Recognition and rewards
 OPPORTUNITIES THROUGH CHANGE

• Change in demographic environment.

• Changes in economic environment
• Changes in technological environment
• Changes in political environment
• Changes in cultural environment
• Changes in financial environment
• Changes in legal environment
• Changes in international environment.
 IDEA GENERATION

•Ideation is the process of generating, developing

and communicating new ideas. Ideation is all
stages of a thought cycle from innovation , to
development to actualisation.
 SOURCES OF IDEA GENERATION
• Consumers
• Existing companies
• Distribution Channels
• Research and Development
• Personal experience
• Observation
• Hobbies and Interest
 METHODS OF GENERATING NEW IDEAS FOR
ENTREPRENEURS
• FOCUS GROUPS
• BRAINSTORMING
• REVERSE BRAIN STORMING
• GORDON MODEL
• ATTRIBUTE LISTING
• FREE ASSOCIATION
• FORCED RELATIONSHIP
 ENVIRONMENTAL SCANNING AND SWOT
ANALYSIS
● THE ECONOMY

● THE GOVERNMENT

● LEGAL

● TECHNOLOGY

● ECOLOGY

● SOCIAL- CULTURAL

● POTENTIAL SUPPLIERS

● STAKEHOLDERS

● RESPONSES
 Strength Analysis
• Availability of adequate infrastructure
• Adequate production capacity.
• Availability of skilled manpower
• Low cost of mfg
• Proper R&D
• Liquidity position of the organisation
• Consistency in earning profit
• Efficient management
• Good corporate image
 WEAKNESS ANALYSIS

• Scarcity of capital
• Inadequate infrastructure
• Poor project planning
• Outdated technology
• Problems of underutilised capacity
• Rising cost of operations
• Growing union pressure
• Low staff motivation
• Weak creditworthiness
• Inefficient management; inadequate training; lack of leadership
 OPPORTUNITIES

• Favourable government policies.

• Growing population
• Good monsoon
• Availability of appropriate technology
• Presence of favourable cultural environment
• Increase in disposable income
• Availability of market information
 THREATS

• Technological obsolescence
• Political instability
• Tough competition
• Rejection by market
• Recession
• Shortage of power, fuel
• Absence of basic infrastructure
• Resource crunch
• Prolonged economic depression
• Difficulty in retaining technical expert
 ENTREPRENEURSHIP
DEVELOPMENT CYCLE
 CHALLENGE FOCUS MONEY SOURCES
SEED STAGE Need for market Focus on business At this stage
acceptance opportunities that matches up entrepreneur must rely
with your skill on their own fund
START UP STAGE Cash flow crisis; no Establish a customer base and Own fund; friends;
profit; market presence family; customer;
To stay in business and dealers, advances and
survive grants
GROWTH STAGE Constant range of issues Maintain and enhance Banks; profits; investors
demanding time and customer relation. and leasing option
money. Need for Focus on promotional activities
delegation
ESTABLISHED Competitive market Improvement and productivity. Ploughing back of profit,
STAGE place with entry barriers Better business practices. investment and banks
Outsourcing to improve
productivity
DECLINE STAGE Dropping sales, profit Focus on new opportunities Suppliers, customers,
and negative cash flow. and business venture owners and retained
Sustaining negative cash earnings
flow
EXIT STAGE In case of business Making proper valuation of the
 BUSINESS PLAN

• It is a written document prepared by the entrepreneur that describes all the

relevant external and internal elements in starting a new venture.
• SCOPE
What the venture is all about?
What is the marketing perspective
The investor’s perspective
The socio economic impact of proposed ventur
 IMPORTANCE OF A BUSINESS PLAN

• To an entrepreneur
1. Useful for obtaining loan and other assistance from bank.
2. It can be submitted to govt. authorities wherever required. Eg plan can be
submitted to pollution control board.
3. Helps entrepreneur to check project viability
4. It act as a guide to entrepreneurial project.
5. It supplies vital information like cost of raising fund
 CONTINUED….

• To financing agencies
1. Banks and financial agency can study and evaluate business plan before
sanctioning fund.
• To investors
• To Government agencies
• To the suppliers of equipment
 OBJECTIVE OF A BUSINESS PLAN

• To guide operations and strategy development

• To test feasibility of the venture.
• to establish credibility
• To attract financing
• To build commitment towards the venture
• To attract additional entrepreneurial team members
 OUTLINE OF A BUSINESS PLAN

1. Introduction page
• Name and address of business venture
• Name and address of entrepreneur
• Nature of business
• Statement of finance needed
• Statement of confidentiality report
 2 EXECUTIVE SUMMARY

• Brief description of business

• Opportunity and strategy to capitalise on it.
• Target market and projected demand
• Competitive advantage and sustainability
• Management team
• Investment vs expected return
• Compelling reson for investment
 3. INDUSTRY ANALYSIS

• Future outlook and trend.

• Analysis of competition
• Market segmentation
• Industry forecast
 [Link] OF VENTURE

• Product and services

• Size of the business
• Background of promoters

(1) PRODUCTION PLAN

• Plant and machinery
• Manufacturing process
• Outsourcing
• Name of the suppliers of RM
 6. OPERATION PLAN

• Description of company operation

• Flow of goods and services
• Use of technology in operation
1. MARKETING PLAN
• Pricing
• Promotion
• Distribution
• Sale forecast
• Marketing control
 ORGANISATIONAL PLAN

• Form of ownership
• Type of organisation structure
• Background of core management team
• Authority of top management
 FINANCIAL PLAN

• Proforma income statement

• Proforma balance sheet
• Cash flow statement
• Break even analysis
• Sources and application of fund
 ASSESSMENT OF RISK

• Evaluate weakness of business

• New technologies
• Contingency plan
APPENDIX
• Letters
• Market research
• Lease or contract
• Pricelist from supplier
 FEASIBILITY STUDY AND TYPES
It is a preliminary study undertaken to determine a project’s viability.
Types of Feasibility study:
• Technical feasibility study
• Safety Feasibility
• Political feasibility
• Environmental feasibility
• Market feasibility
• Economic feasibility
• Legal feasibility study
• Operational feasibility
• Financial feasibility
 REASON FOR CONDUCTING FEASIBILITY
STUDY
• To safeguard against wastage
• Cost of business plan will be reduced
• It provide evidence that project will be viable.
• Helps to select best business alternative.
• Helps to locate opportunities
• It enhances probability of success
• Helps in decision making
• Provides documentation that the business venture was thoroughly
investigated.
 CRITICAL RISK CONTINGENCIES OF THE
PROPOSAL
• Natural events
• Political events
• Government policy
• Technological changes
• Change in consumer taste
• Change in competitors strategy
• Change in economic environment
• International events
 COPING WITH RISK AND UNCERTAINITIES

• CONTINGENT PLAN
• WORKERS PARTICIPATION
• ADAPTIVE PLANNING
• MIS
• DEFENSIVE APPROACH
• CENTRALISATION OF AUTHORITY
 SCHEDULING

•It involves preparation of a timetable in respect

of a project plan. The main objective of
scheduling is to ensure completion of each
activity of project on time.
•Any difference in planned schedule and actual
schedule of the project is called SCHEDULE OF
VARIANCE.(PSV and NSV)
 IMPORTANT ELEMENTS OF SCHEDULING

• Work breakdown structure

• Resource allocation
• Milestones
• Budget
• Quality plan
• Communication paln
• Risk management
• Monitoring and control
 MILESTONES

• They are white stone fixed on highways to indicate distance travelled or the
distance needed to be travelled to reach a particular destination.
• They are logical points in the project schedule identified either as completion
of a set of task or how much the task is yet to be completed. They indicate
important intermittent achievement of the project.
 GUIDELINES FOR SETTING MILESTONE

• Specific and clear

• Measurability
• Achievable
• Realistic
• Time bound
• Priority
• Participation
• Periodic review