techno 5-creativity business idea

8/9/2019 Techno 5-Creativity Business Idea

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Creativity, the Business Idea, andOpportunity Analysis

McGraw-Hill/IrwinEntrepreneurship, 7/e Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 5


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Learning ObjectivesLearning Objectives

To identify variousTo identify various sources of ideassources of ideas for new ventures.for new ventures.

To discussTo discuss methods for generating new ideas.methods for generating new ideas.

To discussTo discuss creativitycreativity and theand the techniquestechniques forforproblemproblemsolving.solving.

To discuss theTo discuss the importance of innovationimportance of innovation..

To understand anTo understand an opportunity analysis planopportunity analysis plan..

To discuss the aspects of theTo discuss the aspects of the product planning andproduct planning anddevelopment process.development process.

To discuss aspects ofTo discuss aspects ofee--commercecommerce and starting anand starting an ee--commerce businesscommerce business..


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Sources of New Ideas (1 of 2)Sources of New Ideas (1 of 2)

ConsumersConsumers

Informal monitoring of potentialInformal monitoring of potentialideas and needs.ideas and needs.

Formally arrange for consumersFormally arrange for consumersto express their opinions.to express their opinions.

Existing products and servicesExisting products and services Analysis uncovers ways toAnalysis uncovers ways to

improve offerings that may resultimprove offerings that may resultin a new product or service.in a new product or service.

Distribution channelsDistribution channels Channel members can helpChannel members can help

market the newly developedmarket the newly developedproducts.products.

The idea represents alarge enough market tosupport a new venture.

Have more market appeal& better sales and profitpotential.

Familiar with the needs ofthe market & provideinformation with regard tocompetitors new productor technology


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Sources of New Ideas (2 of 2)Sources of New Ideas (2 of 2)

Federal governmentFederal government Files of the Patent Office containFiles of the Patent Office contain

numerous new productnumerous new productpossibilities.possibilities.

New product ideas can come inNew product ideas can come inresponse to governmentresponse to government

regulations.regulations.

Research and developmentResearch and development Largest source of new ideas isLargest source of new ideas is

the entrepreneurs own researchthe entrepreneurs own research

and development efforts. Mayand development efforts. Maybe:be: A formal endeavor connected withA formal endeavor connected with

ones current employment.ones current employment.

An informal lab in a basement orAn informal lab in a basement orgarage.garage.

Suggest more marketableproduct ideas. How to getthe information? E.g. TheOfficial Gazette,published weekly by the

U.S Patent Office.

Must wearing hard hat inconstruction areas orhaving fire extinguishersor First-aid kits inbusiness premises.

An idea that are not beingaccepted by firm, so beingintroduced by theentrepreneur.


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Methods of Generating New Ideas (1 of 2)Methods of Generating New Ideas (1 of 2)

Focus groupsFocus groups

Moderator focuses discussionModerator focuses discussionof the group in a directive orof the group in a directive ornondirective manner.nondirective manner.

An excellent method for initiallyAn excellent method for initially

screening ideas and concepts.screening ideas and concepts.

BrainstormingBrainstorming

Allows people to be stimulatedAllows people to be stimulatedto greater creativity.to greater creativity.

Though most ideas generatedThough most ideas generatedhave no basis for furtherhave no basis for furtherdevelopment, sometimes a gooddevelopment, sometimes a goodidea emerges.idea emerges.

Groups of individuals

providing information in astructured format. Being usesince 1950s.

The process go through anopen, in-depth discussion to

help participant to response.An excellent method forinitially screening ideas andconcepts.

A group method to obtain neideas and solutions.

Meeting & participate inorganized group experiences.Rules to follows: No criticismFree to talk, No limit on Ideas,combinations & improvement

of an ideas allowed.


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Methods of Generating New Ideas (2 of 2)Methods of Generating New Ideas (2 of 2)

Problem inventoryProblem inventory

analysisanalysis Analogous to focus groups.Analogous to focus groups.

Can be used to test a newCan be used to test a newproduct idea.product idea.

Results must be carefullyResults must be carefullyevaluated as they may notevaluated as they may notactually reflect a newactually reflect a new

business opportunity.business opportunity.

Example: Food Industry developed a list of problemssuch as taste, appearance,healthy, weight etc. individualcan associate products withthe problems listed.

For best result, probleminventory analysis should beused primarily to identifyproduct ideas for furtherevaluation.


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Creative Problem SolvingCreative Problem Solving

Creativity:Creativity: an importantan important

attribute of a successfulattribute of a successfulentrepreneur.entrepreneur.

Creativity tends to declineCreativity tends to decline

withwith:: Age, education, lack of use,Age, education, lack of use,

and bureaucracy.and bureaucracy.

Latent creative potential ofLatent creative potential ofan individual can be stifledan individual can be stifledby perceptual, cultural,by perceptual, cultural,emotional, andemotional, andorganizational factors.organizational factors.

Creativity generally declines instages through teens andcontinues to progressivelylessen through ages 30, 40, &50


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Creative ProblemCreative Problem--Solving TechniquesSolving Techniques


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Creative ProblemCreative Problem--Solving Techniques (1 of 3)Solving Techniques (1 of 3)

BrainstormingBrainstorming Used in creative problem solving andUsed in creative problem solving and

idea generation.idea generation.

Creative problem solving:Creative problem solving: aa method formethod forobtaining new ideas focusing on theobtaining new ideas focusing on theparameters or barriers or limitations.parameters or barriers or limitations.

Reverse brainstormingReverse brainstorming

A group method for obtaining newA group method for obtaining newideas focusing on theideas focusing on thenegative/problems.negative/problems.

BrainwritingBrainwriting Form of written brainstorming.Form of written brainstorming.

It is a silent, written generation of ideasIt is a silent, written generation of ideasby a group of people.by a group of people.

How to run the session setspecific problem statement,select 6-12 participants and alare treated as equal, all ideasmust be recorded, criticizingevaluation to ideas are notallowed during the session.

The process involves theidentification of everythingwrong with an idea, followedby a discussion of ways toovercome these problems.

The process allows theparticipants to write theirsideas on a specialforms/cards that circulatewithin the group, consist ofpersons, each membergenerates 3 ideas. Circulatio


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Creative ProblemCreative Problem--Solving Techniques (2 of 3)Solving Techniques (2 of 3)

Gordon methodGordon method

Method for developing new ideasMethod for developing new ideaswhen the individuals are unaware ofwhen the individuals are unaware ofthe problem.the problem.

Checklist methodChecklist method

Developing a new idea through a list ofDeveloping a new idea through a list of

related issues.related issues.

Free associationFree association Developing a new idea through a chainDeveloping a new idea through a chain

of word associations.of word associations.

Forced relationshipsForced relationships Developing a new idea by looking atDeveloping a new idea by looking at

product combinationsproduct combinations

The process starts by

mentioning a general conceprelated with the problem thenthe group responds byexpressing a number of ideaThe process going on for 2-3times then, actual problem i

then reveals, enabling thegroup to make suggestions fimplementation or refinemen

Use list of questions orstatement i.e. put to otheruses? Modify? Rearrange?

First, a new word or phraserelated to problem is writtendown, then another, andanother, each new wordattempting to add something

new, ending with a newroduct idea.


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Illustration of Forced Relationship TechniquesIllustration of Forced Relationship Techniques


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Creative ProblemCreative Problem--Solving Techniques (3 of 3)Solving Techniques (3 of 3) Collective Notebook MethodCollective Notebook Method

Developing a new idea by groupDeveloping a new idea by group

members regularly recording ideas.members regularly recording ideas.

Attribute ListingAttribute Listing

Developing a new idea by looking atDeveloping a new idea by looking atthe positives and negatives.the positives and negatives.

BigBig--Dream ApproachDream Approach Developing a new idea by thinkingDeveloping a new idea by thinking

without constraints.without constraints.

Every possibility should be recordedEvery possibility should be recorded& investigated without regard to any& investigated without regard to any

constraintsconstraints

Parameter AnalysisParameter Analysis

Developing a new idea by focusingDeveloping a new idea by focusingon parameter (problems)on parameter (problems)

identification and creative synthesisidentification and creative synthesisfind solutions .find solutions .

Use a small notebook consist astatement of the problem, blankpages, and any pertinentbackground data. Participantconsider the problem and itspossible solutions, recording thideas at least once a day. Endinin developing a list of best ideaand suggestions.

The process start by list downthe attributes of an item orproblem and then look at eachfrom a variety of viewpointsending to form a new uses that

better satisfy a need.

Identify the parameter (issues/problems) and then findpossible solutions.


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Illustration of Parameter AnalysisIllustration of Parameter Analysis


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Types of Innovation (1 of 2)Types of Innovation (1 of 2)

BreakthroughBreakthrough Fewest innovations.Fewest innovations.

Establishes the platform on which future innovations inEstablishes the platform on which future innovations inan area are developed.an area are developed.

E.g.E.g. penicillin, steam engine, computer.penicillin, steam engine, computer.

TechnologicalTechnological Not at the same level of scientific discovery andNot at the same level of scientific discovery and

advancement as breakthrough inventions.advancement as breakthrough inventions.

Offer advancements in the product/market area.Offer advancements in the product/market area.

E.g.E.g. personal computer, voice and text messaging.personal computer, voice and text messaging.

OrdinaryOrdinary Occurs most frequently.Occurs most frequently.

Usually come from market analysis and pull notUsually come from market analysis and pull not


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Defining a New Innovation (Product orService)Defining a New Innovation (Product orService)

Newness can be:Newness can be:

In the consumer concept.In the consumer concept. Change in the package orChange in the package or

container.container.

Change in colors of packages.Change in colors of packages.

In the industrial market:In the industrial market:

Products are called newProducts are called newwhen only slight changes orwhen only slight changes ormodifications have been mademodifications have been made

in its appearance.in its appearance.

Companies also add products toCompanies also add products totheir product line that are alreadytheir product line that are already

marketed by other companies.marketed by other companies.

i.e. coffee companies introduc

newdecaffeinated coffee,newkeropok lekor with curry flavor,

New container i.e. plasticgradually replace bottle, hairspray, flip-top can etc.

i.e. a new version of MicrosoftWord usually includes onlyminor improvements.

The product was new to themanufacturer but not new to thconsumer. i.e. manufacturermanufacture a new existingproduct to cater new market

opportunity.


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Classification of New Products: ConsumersClassification of New Products: ConsumersViewpointViewpoint

Continuum proposed byContinuum proposed byThomas Robertson is basedThomas Robertson is basedon the disrupting influenceon the disrupting influencethat use of the product has onthat use of the product has onestablished consumptionestablished consumption

patterns.patterns.

ContinuousContinuousinnovationsinnovations

DynamicallyDynamicallycontinuouscontinuous

DiscontinuousDiscontinuousinnovationsinnovations

i.e. fashion styles changes, packagechanges, product size or colorchanges.

i.e. Compact disks, iPod, Walkman,cell-phone

i.e. Internet


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Continuum for Classifying New ProductsContinuum for Classifying New Products

ContinuousInnovations

Dynamically

ContinuousInnovations

DiscontinuousInnovations

(Least disrupting influence

on established

consumption patterns)

(Some disrupting influenceon established

consumptionpatterns)

(Involves the

establishment of new

consumption patterns and

the creation of previously

unknown products)

Figure 5.3


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Classification of New Products:Classification of New Products:

From a Firms ViewpointFrom a Firms Viewpoint Firm may need to classifyFirm may need to classify

its new products on someits new products on somesimilar dimensions.similar dimensions.

Distinction can be madeDistinction can be madebetween new products andbetween new products andnew markets.new markets.

Situation of new technologySituation of new technology

and new market:and new market: Most complicated andMost complicated and

difficult.difficult.

Has the highest degree ofHas the highest degree ofrisk.risk.

New Product are defined in termof the amount of improvedtechnology.

New Markets is based on thedegree of new segmentation.

The firm will need a new and

carefully planned marketingstrategy.


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New Product Classification SystemNew Product Classification System


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Model of the Opportunity Recognition ProcesModel of the Opportunity Recognition Proces


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Opportunity Analysis PlanOpportunity Analysis Plan An opportunity analysis plan is notAn opportunity analysis plan is not

a business plan.a business plan. It focuses on the idea and the marketIt focuses on the idea and the market

(the opportunity) for the idea.(the opportunity) for the idea.

A typical opportunity analysis planA typical opportunity analysis planhas four sectionshas four sections::

1.1. Description of the idea and itsDescription of the idea and itscompetition.competition.

2.2. Assessment of the domestic andAssessment of the domestic andinternational market potential forinternational market potential forthe idea.the idea.

3.3. Assessment of the entrepreneurAssessment of the entrepreneurand the team.and the team.

4.4. Discussion of the steps neededDiscussion of the steps neededto make the idea the basis for ato make the idea the basis for aviable business venture.viable business venture.

Not the venture. The

opportunity analysis planserve as the basis inmaking decision either toact on the opportunity orwait for another newopportunity.


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The Idea and Its CompetitionThe Idea and Its Competition

Create a prototype or schematic of theCreate a prototype or schematic of the

product.product. Identify and list all competitive companies inIdentify and list all competitive companies in

the product (service) market space.the product (service) market space.

Compared with at least three competitiveCompared with at least three competitiveproducts/services most similar in filling theproducts/services most similar in filling theidentified market need.identified market need.

This indicates its unique selling propositionsThis indicates its unique selling propositions

(USP)(USP) differentiationdifferentiation

Entrepreneur needs to reevaluate if the ideaEntrepreneur needs to reevaluate if the ideadoes not have at least 3does not have at least 35 unique selling5 unique selling

propositions.propositions.


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The Market and the OpportunityThe Market and the Opportunity Addresses the size and theAddresses the size and the

characteristics of thecharacteristics of themarket.market. Market data should beMarket data should be

collected for at least threecollected for at least threeyears.years.

Can be done through gatheringCan be done through gatheringas much secondaryas much secondary(published) data as possible.(published) data as possible.

Entrepreneur can determineEntrepreneur can determine

if the market isif the market is large enoughlarge enoughand suitable to warrant timeand suitable to warrant timeand effort required to furtherand effort required to furtherdevelop a business plan anddevelop a business plan andactually enter the market.actually enter the market.

To see the overall trend of the

industry, market, marketsegment, and the target market.

Other characteristics Made-up of few large or manysmall companies,

Does the respond quickly/slowly to any new entrants? How many new product (if any)are introduced each year?How geographically disperse isthe market?

Do the product have thepotential to enter internationalmarket?.


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Entrepreneur and Team AssessmentEntrepreneur and Team Assessment

Entrepreneur and theEntrepreneur and the

entrepreneurial team needentrepreneurial team needto be assessed.to be assessed.

At least one person on theAt least one person on theteam needs to haveteam needs to have

experience in the industryexperience in the industryarea of the new idea.area of the new idea.

Allows the entrepreneur toAllows the entrepreneur to

determine if he is reallydetermine if he is reallysuited to successfully movesuited to successfully movehis idea into the market.his idea into the market.

This would help to increase thesuccessful rates of the venture.

There are several questionsneed to answered? What make

you decided to pursuit this ideaand opportunity. Do you havethe experience to venture intothis idea? Did the idea fit yourteam members experience &skills?


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The Next StepsThe Next Steps

Steps need to beSteps need to be

identified and put inidentified and put insequential order.sequential order.

Time and money neededTime and money needed

for each step needs tofor each step needs tobe determined.be determined.

If the idea cannot beIf the idea cannot be

selfself--financed, thenfinanced, thensources of capital needsources of capital needto be identified.to be identified.

Note:

Do not underestimate the costsand the time needed to launch thidea.

Identify the critical steps that

need to be taken to make theidea a reality in the marketplace.


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Product Planning and Development ProcessProduct Planning and Development Process

Divided into five major stages:Divided into five major stages:

IdeaIdea stage.stage.

ConceptConcept stage.stage.

ProductProduct developmentdevelopment stage.stage.

Test marketingTest marketing stage.stage.

Commercialization.Commercialization.


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Establishing Evaluation CriteriaEstablishing Evaluation Criteria

Criteria for evaluation need to beCriteria for evaluation need to be

established aestablished at each stage of thet each stage of the productproductplanning and development process.planning and development process.

Criteria should be:Criteria should be:

All inclusive and quantitative to screen theAll inclusive and quantitative to screen theproduct carefully.product carefully.

Established to evaluate the new idea in termsEstablished to evaluate the new idea in termsof:of:

Market opportunityMarket opportunity

CompetitionCompetition

Marketing systemMarketing system

Financial factorsFinancial factors

Production factors.Production factors.


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The Product Planning andThe Product Planning andDevelopment Process (1 of 3)Development Process (1 of 3)


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Idea stageIdea stage Promising new product/servicePromising new product/service

ideas should be identified.ideas should be identified.

Impractical ones eliminated.Impractical ones eliminated.

Evaluation methodEvaluation method

systematic market evaluationsystematic market evaluationchecklist.checklist.

Concept stageConcept stage Refined idea is tested toRefined idea is tested to

determine consumerdetermine consumeracceptance.acceptance.

Consumer acceptance can beConsumer acceptance can bemeasured through themeasured through theconversational interviewconversational interview

method.method.

How to evaluate? In term ofvalues, merits, and benefits

Questions with regards toproduct features, price, and

quality and reliability ascompare to competitorsproduct.


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Product development stageProduct development stage Determines consumer reaction toDetermines consumer reaction to

the physical product/service.the physical product/service.

A tool frequently usedA tool frequently used consumerconsumerpanel.panel.

Consumer preference is determinedConsumer preference is determinedthrough:through: multiple brand comparisons, riskmultiple brand comparisons, risk

analysis, level of repeat purchases,analysis, level of repeat purchases,or intensity of preference analysis.or intensity of preference analysis.

Test marketing stageTest marketing stage

Increases certainty of successfulIncreases certainty of successfulcommercialization.commercialization.

Provides actual sales results, whichProvides actual sales results, whichindicate the acceptance level ofindicate the acceptance level ofconsumers.consumers.

Consumers are given a samplethe product and one or morecompetitive productssimultaneously to determineconsumer preference.

To conduct market test to becertain of successfulcommercialization stage.


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Commercialization StageCommercialization Stage

Introduction:Introduction:Negative profits but moving upward as well as salesNegative profits but moving upward as well as sales

gradually moving upward.gradually moving upward.

Growth:Growth:Profits gradually increase and sales moving upwardProfits gradually increase and sales moving upward

drastically.drastically.

Maturity:Maturity:Profits and sales reach maximum level and movingProfits and sales reach maximum level and moving

downward at the same time.downward at the same time.

Decline:Decline:Profits and sales shown downward trendProfits and sales shown downward trend


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EE--commerce and Business Startcommerce and Business Start--upup EE--commerce offerscommerce offers

entrepreneurs anentrepreneurs an

opportunity to be creativeopportunity to be creativeand innovative.and innovative.

Factors that facilitate aFactors that facilitate ahighhigh--growth in electronicgrowth in electronic

commerce:commerce: Widespread use ofWidespread use ofpersonalpersonal

computerscomputers.. Adoption ofAdoption ofintranetsintranets inin

companies.companies.

Acceptance of the InternetAcceptance of the Internetasas a businessa businesscommunications platform.communications platform.

Faster and more secureFaster and more securesystems.systems.

Increasing amount of both B2Band B2C e-commerce sales and

continues to increase on anannual basis.

Total Internet spending reached$143.2 billion in 2005 as compareto 117.2 billion in 2004.

Apparel & accessoriesconstituted one of the fastest-growing categories. Others i.e.PC games, home & garden, toysand hobbies, jewelry & watches.

Benefits of e-commerce: accessto a broader customer base,lower information disseminationcosts, lower transaction costs,the interactive nature of the

Internet


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Using EUsing E--Commerce CreativelyCommerce Creatively Entrepreneurs starting anEntrepreneurs starting an

Internet commerce ventureInternet commerce venture

need to address the sameneed to address the samestrategic and tactical questionsstrategic and tactical questionsas any other entrepreneur.as any other entrepreneur.

Entrepreneurs have to decideEntrepreneurs have to decideon:on:

Run Internet operationsRun Internet operationswithin the company,within the company,oror

Outsource these operationsOutsource these operations

to Internet specialists.to Internet specialists.

Another option is to use theAnother option is to use thepackages for epackages for e--commerce.commerce.

Importance to entrepreneur toenable them to minimizemarketing costs while reachingbroader markets.

And also being used to extendtheir marketing & saleschannels as well as being the

basis for new ventures.

To regularly update the informatio

on the Web pages.

The best decision depend on thesize of the Internet-relatedbusiness and the costs of eachalternative.

Need computer servers, routers,and other hardware & software another support service costs!?


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Components of Internet CommerceComponents of Internet Commerce

Two major components ofTwo major components ofInternet commerce are:Internet commerce are:

FrontFront--end operations.end operations.

BackBack--end operations.end operations.

Integration of frontIntegration of front--end andend andbackback--end operationsend operations

represents the greatestrepresents the greatestchallenge for doingchallenge for doingInternet business.Internet business.

provides the opportunityprovides the opportunityfor developing afor developing asustained competitivesustained competitiveadvantage.advantage.

Web sites functionality i.e. searchcapabilities, shopping cart, andsecure payment etc.

Integration of customer order withdistribution channels andmanufacturing capabilities that are

flexible enough to handle anyspecific customers needs or desire.

The ability to well manage the front-end and back-end operationsrepresents the greatest challenge

and can become the source ofcompetitive advantage toentrepreneur.


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Web SitesWeb Sites

Keys to a good Web site:Keys to a good Web site:

Ease of useEase of use Structure and organization ofStructure and organization of

informationinformation

VisibilityVisibility

Search capabilitySearch capability EE--mail response systemmail response system

Speed.Speed.

Technical aspectsTechnical aspects

Should work properly inShould work properly indifferent browsers anddifferent browsers andplatforms.platforms.

Should appear in allShould appear in all

marketing materials.marketing materials.

Amazon was rank number one,followed by American Eagle,Banana Republic, Tolbots, Cosco,and Comp USA.

Web is a communication vehicleand should addressed thefollowing questions: Who is theaudience? What are theobjectives for the sites? What dowant the customers to do uponvisiting the site? Is the Web anintegral part of the venture totalcommunication program?

There are three successfulcharacteristics Speed, speed,and speed.


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Tracking Customer InformationTracking Customer Information

Database not only:Database not only:

Tracks activity of the:Tracks activity of the:Industry.Industry.

Segment.Segment.

Company.Company.

But also supportsBut also supports personal marketingpersonal marketing targetedtargetedat individual clients.at individual clients.

Should be able toShould be able to capture customer attentioncapture customer attention withwithcustomizedcustomized oneone--toto--one marketing.one marketing.


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ing Eing E--Commerce as an Entrepreneurial CompaCommerce as an Entrepreneurial Compa

To do business through the Internet:To do business through the Internet: Products should be deliveredProducts should be delivered economicallyeconomically andand

conveniently.conveniently.

Products need to interest/attract aProducts need to interest/attract a wide marketwide marketCompany must be readyCompany must be ready to shipto ship the productthe product

outside its own geographical location.outside its own geographical location.

Online operations have to bringOnline operations have to bring significant costsignificant costreductions.reductions.

Company must possess the ability toCompany must possess the ability toeconomicallyeconomically draw customers to its Web site.draw customers to its Web site.

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