Unit 1 · 1.4
1.4 Innovation and Entrepreneurship☆
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# The Company That Invented Its Own Killer
- In 1975, a Kodak engineer built the world's first digital camera.
- Kodak hid it, afraid it would hurt its film sales.
- Others sold digital cameras instead; Kodak went bankrupt in 2012.
- Having an idea isn't enough. Turning it into something people use is innovation.
Innovation is the successful conversion of a new idea into a product, service, process or business model that creates value in the market.
- Schumpeter: the entrepreneur is basically an innovator, someone who carries out "new combinations" and drives economic development.
- Management view: innovation is the specific tool of entrepreneurs; they treat change as an opportunity to create something new.
- Without innovation, a venture is just a copy, competing only on price.
# Invention vs Innovation
| Basis |
Invention |
Innovation |
| Meaning |
creating a new idea or device for the first time |
turning an idea into a marketable product or process |
| Focus |
technical novelty |
commercial value |
| Done by |
scientists, inventors |
entrepreneurs, firms |
| Market test |
not needed |
must be accepted by customers |
| Example |
first digital camera (1975) |
mass-market digital and phone cameras |
- New product: a new good, or a new quality of an existing one (smartphone).
- New process: a new method of production (assembly line, cloud-based software delivery).
- New market: opening a market not entered before (selling insurance in villages through mobile apps).
- New source of supply: new raw materials or inputs (solar energy, recycled plastic).
- New organisation: new structure of an industry (aggregator models like Uber, Zomato).
Creative destruction is the process by which new innovations destroy old products, firms and industries while creating new ones.
- Example: digital photography wiped out film; streaming replaced DVDs; UPI cut cash and card use.
# Seven Sources of Innovative Opportunity
| Source |
Meaning |
Example |
| Unexpected events |
a surprise success or failure |
COVID-19 boosting online classes and telemedicine |
| Incongruity |
gap between what is and what ought to be |
long hospital queues → online appointment apps |
| Process need |
a weak link in an existing process |
slow bank transfers → UPI |
| Industry / market change |
shifts in market structure |
rise of e-commerce |
| Demographic change |
changes in population, age, income, education |
ageing population → elder-care services |
| Change in perception |
people see the same thing differently |
health awareness → fitness and organic foods |
| New knowledge |
scientific or technical breakthroughs |
AI tools, electric vehicles |
- The first four arise inside an industry; the last three come from outside it.
# How Innovation Creates New Ventures
flowchart TD
A["<b>Change or problem</b><br>spotted"]:::blue --> B["<b>New idea</b><br>to solve it"]:::amber
B --> C["<b>Innovation</b><br>product, process, model"]:::amber
C --> D["<b>New venture</b><br>jobs, value, growth"]:::green
classDef blue fill:#5b84d424,stroke:#5b84d480
classDef amber fill:#d6a24424,stroke:#d6a24480
classDef red fill:#d0707024,stroke:#d0707080
classDef green fill:#52a86e24,stroke:#52a86e80
- Fintech: UPI enabled PhonePe and Paytm to build payment businesses used by crores of people.
- Ride-hailing: Ola used smartphones and GPS to connect drivers and riders without owning cars.
- Food delivery: Zomato and Swiggy turned restaurant listings into a delivery network.
- Meaning, types and challenges of innovation in detail → 2.1 · creativity and the innovation process → 2.2.
# Innovative Entrepreneurs
| Entrepreneur |
Venture |
Innovation |
| Steve Jobs |
Apple |
user-friendly personal computers, iPhone |
| Elon Musk |
Tesla, SpaceX |
mass electric cars, reusable rockets |
| Dhirubhai Ambani |
Reliance |
backward integration; equity culture for small investors |
| N. R. Narayana Murthy |
Infosys |
global delivery model for IT services |
| Kiran Mazumdar-Shaw |
Biocon |
affordable biotech medicines (insulin) |
| Ritesh Agarwal |
OYO |
standardised budget hotel rooms under one brand |
⚡ Quick recall
- Innovation? → new idea turned into market value
- Entrepreneur as? → innovator: "new combinations" (Schumpeter)
- Invention vs innovation? → first creation, technical vs commercialised, customer-accepted
- Five forms? → product · process · market · source of supply · organisation
- Creative destruction? → new innovations replace old ones (film → digital)
- Seven sources? → unexpected · incongruity · process need · industry change (inside) · demographics · perception · new knowledge (outside)
- Innovators? → Jobs (iPhone) · Musk (EVs) · Murthy (global delivery) · Agarwal (OYO)