Innovation, Business Models and Enterpreneurship

Dr. Rajat Agrawal

Department of Management Studies
Indian Institute of Technology, Roorkee

Lecture - 02
Innovation and Creativity: An introduction

Welcome back friends. So, we had our first session where we understand that what type
of environment is there and why innovation is necessary for meeting out the challenges
of those business environment. And we particularly focussed on Indian conditions that
why particularly seeing the global environment, it is necessary for Indian organizations
to innovate.

Now, in this second session of this course, we will discuss basics of innovation and
creativity; so, to start the discussion on innovation and creativity. I am taking you to the
one of the most popular author of management Peter F Drucker.

(Refer Slide Time: 01:28)

And Peter F Drucker says that Innovation is the specific tool of entrepreneurs, the means
by which the exploit change as an opportunity for a different business or a different
service. Now, if you see this definition given by Drucker it means two-three important
things.
And you see one is the exploit change. Innovation is a tool and tool of entrepreneurs. So,
one important thing we need to understand that it is a tool and with the help of this tool
we all understand I hope the meaning of tool. Tools are those things which enable us to
do something. So, if I am an entrepreneur, I need certain tools and innovation is probably
is one of the most important tool of the modern day. And what I do with the help of this
tool of innovation?

I exploit change as an opportunity, whenever something happens in my environment; I

consider it as an opportunity. For an example, let me take you to some of the changes
which are happening. Now, in India, the prime minister is focusing on clean India. We
know it as Swatch Bharath. Now, for large number of people those who are of that kind
of mindset, this becomes a good business opportunity.

But, what type of solutions I can generate around this clean India mission. There is
another problem in India that is corruption and we all know that those sitting in IT
companies, they thought that this corruption is a very good opportunity for developing
the business.

Because to eradicate corruption, we want to have more transparency and IT can provide
that type of transparency. If you see the period of railway reservation before
computerization a lot of corruption was there in railway reservation. Computerization
happened and everything became transparent and all of a sudden it is complete
removable of corruption from the railway reservation system.

So, the problems or the changes, the very recent example, we all know that how in our
country we moved from sales tax VAT to GST and the change this change of GST gave
opportunity to many entrepreneurs to develop softwares, which can handle the GST
calculations. Again, few months back, all most around 1 year back, we had another major
decision of government of India that is demonetization and in that demonetization
decision also, we had a sudden change and lot of companies which were involved in E-
payment they use this as a good opportunity to sell their products.

So, innovation is a specific tool of entrepreneurs the means by which they exploit
changes. So, whatever changes are happening you will find two types of people in the
society. They are people who will curse all types of changes; they do not want to change
anything.
And therefore, they will not be able to capitalize; they will not be able to leverage those
changes. On the other hand, entrepreneurs they look for these changes because they think
these changes can provide us opportunity for taking benefit of these changes.

So, that is what Drucker means with innovation that it is the specific tool of
entrepreneurs the means by which they exploit change as an opportunity for a different
business or a different service. So, they may start some new business, some new service
to exploit or to fulfil the requirement of change in the form of an opportunity. Further to
simplify this discussion of innovation that what do we mean by innovation; we have a
very interesting concept of 3-I. and in that 3-I, first I is this Idea.

(Refer Slide Time: 07:31)

Idea is our first I and in this Idea, we look forward that there should be a new Idea. Now,
you will see that during the course of this complete discussion, we will find many new
ideas; the only important thing is we need to keep our eyes, ears and brain open all the
time.

If we are open all the time, you will see that large number of new ideas will come to you.
But do not evaluate the idea initially; do not evaluate the idea initially, at the movement
we are in search of ideas and we want more and more ideas to come to us. And therefore,
idea is our first important I in the process of innovation; Now, we how the ideas will
come that we will come to discuss later.
The second important I is Implementation, you have idea and then it is not only idea; but
you need to implement that idea also. The idea might be executed and if you can execute
the idea, if you can execute the idea; then it is known as implementation. So, execution is
also very very important. Now, as far as innovation is concerned, it is possible at both
these stages. You may have a new idea; all together a new idea.

So, that may lead to innovation. It is possible the idea may not be new; the idea is old;
but you find a new way of implementing the idea that may also be innovation. For
example, the idea of non-violence and which Father of Nation, Mahatma Gandhi
popularized in our country.

This idea is very old. The idea of non violence is coming from Jain religion, from
Buddhism; all those religions are favouring the idea of nonviolence. [FL] But, the
implementation of that idea for the freedom movement of the country is the novelty of
Mahatma Gandhi and therefore, we all co that man as Father of Nation.

So, idea may be new; obviously, it will be innovation. Idea may not be new; but the
implementation the execution of that idea may be done in a novel fashion that is also
innovation. The third important I is Impact. You have idea, you have executed that idea;
but it must result in some kind of impact. If impact is not there, then it is not innovation.
So, 3 I’s; one I is of Idea, another I is of Implementation and another I is of Impact.
These are the 3 I’s and depending upon the nature of organization, you may have
different types of impacts.

If it is a business organization, then the impact may be in terms of increased market

share; it may be in terms of lower cost; it may be in terms of increased profits etcetera.

And if it is a non business organization, so here, the criteria of impact may be as per the
nature of the organization. For example, if you are a school, your impact may be
measured in terms of number of children going for higher education from your school. If
you are a religious organization; so, may be your impact can be measured a number of
people who left alcohol, who left drugs because of your influence. So, depending upon
the type of organization, you may have different types of criteria to measure the impact.

But these 3 I’s Idea, Implementation and Impact are very simple formula to evaluate
whether a particular phenomena can be classified as innovation or cannot be classified as
innovation; because many a times we are confused with innovation and invention. And
therefore, I have a specifically develop this idea that if you have one idea, you
implemented that idea.

(Refer Slide Time: 14:02)

So, these two I’s make Invention and when you add Impact in this Invention, it is
Innovation. So, Invention is let me put in a simple language; invention means something
is up to the lab, something is at the experimental stage. So, you come with a new
concept, you executed that concept in a controlled environment; you implemented that
idea in a controlled environment and that is invention and when you take that invention
to the commercialization stage, when you make some kind of impact out of your
invention that becomes innovation.

So, it is quite possible that in our higher educational institutions, where we do MTech;
where we do PhD; where we do MBA projects; there may be large number of project
reports available, where invention element may be there; where invention element may
be there. But because that remained within the files; that remained within the
dissertation, it is not the part of market. Therefore, it is not innovation.

In some of you can search those reports in your colleges and take those reports make
products make services, make some kind of processes out of those concepts which are
mentioned in those reports and some kind of impact is done; then it becomes innovation.
So, it is very very important that we are clear about the terminologies; what is the
boundary of invention and what is to be added in that boundary so that it becomes
innovation. And I hope that now you can understand various examples where these are
inventions, but not innovations and when those things are becoming popular in the
market, those things become the part of your routine life, these things become
innovation.

So, that is about the way we want to define innovation; one way is with the help of
opportunities arising from change that is the concept of Peter F Drucker, where you
capitalize the opportunities which are resulting from the changes which are happening in
the environment. And in our session one, we already discuss that how different types of
changes are coming in the society and those changes will help us in getting more and
more opportunities.

And the second thing is the concept of 3 I’s which also help us in differentiating between
invention and innovation. So, after understanding that what is innovation, what is
invention and the different ways of innovation, we move to another very important
discussion which is very useful at this movement in the beginning of this course that is
about myths of innovation.

(Refer Slide Time: 18:14)

We have certain innovations; we have certain myth about innovation and one of the myth
about innovation is that since I am not a creative person, I cannot innovate. People feel
like that I am not creative; I cannot innovate and that is my myth number one. People say
that innovation begins with creativity; but it is not the case. The reality is innovation
begins with curiosity. Innovation begins with creativity; it is Myth and innovation begins
with curiosity; it is the Reality. So, we need to understand that what is curiosity?
Curiosity is if you keep asking questions like why?

Keep asking questions like how, what, why this thing is happening in this particular
fashion? Can it be done in a better way? Can I minimize the waste; can I minimize the
time; can I minimize the efforts? If I keep asking these question, it means I am curious.
and when I am curious; it means I am a fit case for innovation. So, first important we
need to remove this myth from our minds that innovation begins from creativity. It
begins with curiosity. If I am asking questions; if I am asking questions you see a small
child in your family, 3 years old, 4 years old the child keeps asking so many questions
and that is a good example of curiosity.

Child ask question about everything which he sees around him and we also need to ask
large number of questions may be to somebody else or may be with our self only, but
asking questions is very very important in the process of innovation. If you want to
innovate you should develop this approach of curiosity.

Why is it like this way; why is it like this way; how can I improve the working of my
office; how can I reduce my monthly electricity bill; how can reduce the wastage of
water; how can I reduce the collection of garbage around my house? If we start asking
these questions, you will see that large numbers of problems around us will automatically
disappear. And therefore, innovation begins with curiosity is our first important answer
to myth of innovation begins with creativity. The second myth is that innovation is a
smooth linear process.
(Refer Slide Time: 22:02)

We feel that first idea will come; we feel that there is idea. We will implement this idea
and this will create some kind of impact. So, it looks like that is a simple linear process
first you need to have a novel idea, you need to go to a lab, you need to go to a
manufacturing set up to develop the prototype around that idea and then, go to market
and start earning profit and that is a simple smooth linear process of innovation.

(Refer Slide Time: 22:52)

But, I am sorry that this is not correct. In fact, you will see that innovation is iterative and
the outcome of series of experiments. What do I mean by that? This is correct and this is
myth. Innovation is highly iterative; therefore, you need to have lot of patience; without
that innovation is not possible. Now, what do I mean that innovation is iterative and the
outcome if series of experiments when idea is here, you have this stage of
implementation. In this case you have this type of loop also. You will implement; you
will start executing your idea; you will not get favourable results, then you will modify
your initial idea.

And it becomes a very iterative process. Then once you are able to execute correctly and
you are now commercializing, you are taking this idea this product to market and when
you are looking for some kind of impact, you will see that impact is not as per you
expectations. The market is not responding what you expected and therefore, you may
again come back to the implementation stage or even you may come to the idea stage
also.

It is a very iterative process it is not a smooth linear process. You need to come back, do
another experiments slightly change your idea and then again experiment, again go to
market all these things are you need to do regularly. Therefore, it is not a smooth linear
process.

(Refer Slide Time: 24:58)

Then another myth is Innovation is about risk-taking.

(Refer Slide Time: 25:08)

Yes, it is. Innovation is about risk taking, but it is not purely risk taking; it is not like you
are drinking alcohol and driving your motor bike on a hilly terrine at a speed of 100
kilometres per hour; it is not that type of risk taking. It is risk taking assessment and
mitigation also. So, if you are driving your bike on a hilly terrine, you know that what
type of mitigating measures I need to have; I need to wear helmet; my vehicle should
have proper breaks; I should not drive over a particular speed limit; I should not consume
any kind of toxic elements.

So, all these mitigating measures I take. So, obviously, it is a risk, but you also have
some kind of counter elements, you also have some kind of mechanism to handle your
risk which is involved in the innovation process. So, we see that innovation begins with
curiosity; this is the reality. Innovation is iterative and the outcome of series of
experiments; this is the reality. And effective innovation involves [vocalized- noise] risk
taking, assessment of risk and mitigation of risk. So, these are our myth and these three
are the reality of innovation.

So, it is very very important that right from the beginning you are clear that what is this
process of innovation; how are we going to move in this and we need have patience, we
need to know that we always should be surrounded by some kind of counter risk
strategies so that we can minimize our risk.
So, this is very very important part in the process of innovation; otherwise if you take
innovation as such there are lot of challenges are there. But, if we are clear, we know
about the path of innovation and we understand that these different steps which are
coming in the journey of innovation are bound to come these steps are not surprise
element to us; then probably you are better prepared to handle those unexpected
outcomes.

But if you feel that today I am starting a new venture and tomorrow I will start getting
profit and if then profit is not coming; you feel depressed, you feel leaving your
organization, leaving your enterprise probably it is because you are still living in those
myths. So, in the beginning itself it is very much required that we should have a clear cut
picture in our mind that what type of innovation activities and how you will travel the
path of innovation and the most important thing which I will certainly like to highlight
that is the innovation begins with curiosity.

If you keep asking question; So, here I am writing that we need to develop this approach
of asking questions; keep asking questions and more you ask more innovative you will
be. Because one more important thing is innovation is a team activity; it is a team
activity, it is not individual activity. So, if I am asking question, it is not necessary that I
know the answer also; but some of my friend who could not visualize that question, he or
she may be having the answer of my question.

So, if I am asking the question, somebody else will give the answer of that question that
becomes the idea; somebody else will give us proper tools proper facility so that we can
experiment with that idea and somebody else will help us to create impact out of that
idea. So, it is a team activity, but the starting point of this whole process is the person
who asks question. So, keep starting, keep asking question and more you ask more
questions, more ideas will come and who knows tomorrow you will also become a great
innovator.

The second point of reality that innovation is iterative, this point focuses on the journey
of innovation. This is that the path is not simple; this path is full of may iterations, may
forward backward movements and therefore, many a times innovation takes huge
amount of time. And third is when we are moving in the path of innovation, we also need
to have some kind of mitigating strategies with us which will minimize; which will
minimize our loss because each iteration will increase our cost of innovation each
iteration will delay our product of to deliver into the market.

So, you need to have some kind of safe guard measure so that you do not lose, you do
not incur heavy expenditure, heavy losses because of iterative nature of innovation
process. So, these are important thing that we understood that what are the myths and
how can you handle those myth with reality.

So, thank you very much for this session and we will discuss different types of
innovation in our coming sessions.

Thank you very much.