Searching For New Business Opportunities

According to Peter Drucker, innovation and entrepreneurship will move North American businesses to all-time highs in profits, markets, and expansion in the next few years. Perhaps that is a bit too optimistic. Maybe we should say that innovation and entrepreneurship should have this effect and that it can occur, provided managers learns how to make it happen.

Drucker’s latest book, Innovation and Entrepreneurship, explains how businesses can become more entrepreneurial and presents a powerful case for why they must do so if they wish to survive. He approaches the topic from the viewpoint that innovation and entrepreneurship and practices, not disciplines. He doesn’t talk about the psychological makeup of entrepreneurs; instead, he speaks of what they do, how they do it, and how to manage them. At the same time, the volume is not a how-to book. While it provides many guidelines for those who want to make their firms more successful, it does not tell them much about how to make any of this happen.

Drucker points out that there has been a shift from a managerial to an entrepreneurial economy. That is, our current success in North America has come about because we are no longer just focusing our attention on managing what we have; we are creating new businesses and new jobs at an unprecedented rate, faster than any other place in the world. In the last 20 years, the American labor force grew by two-fifths, but the number of jobs grew by one-half. (We can assume a similar, situation for Canada.)

Where did all these jobs come from? “Aha,” you say, “from high-tech industries of course!” Sorry, you are wrong. Most new jobs have been created by small and medium-sized businesses. And while many of them have come from businesses that didn’t exist a few years ago, fewer than 25 per cent have been developed by high-tech industries.

In other words, we have been able to achieve this incredible expansion and growth because we have become more entrepreneurial in our approach to business. All over North America, we have quietly embarked on a program of innovation and a search for new opportunities. The result has been a dramatic increase in the number of new products, new services, new markets, and new jobs. Up to now, Drucker claims, this growth has been neither planned nor systematic. It has happened without much thought as to how it has occurred nor how to refine the process and continue its success. His book is an attempt to redress these shortcomings.

To enable others to pursue this pattern, Drucker suggests managers follow certain practices. First, they must view innovation as the most powerful tool they can use. Second, they must realize that not everyone can be entrepreneurial, but that there are company employees who could be innovative – and would be – if only they were so encouraged. (Note, we are talking about doing this completely within and not outside the firm.)

Entrepreneurs see change as healthy and normal. They don’t shy away from it; rather they search for change, respond to it, and turn it into new opportunities. The problem for managers is how to create an environment where systematic and purposeful innovation will take place. As you might expect, Drucker has some suggestions about how to create such an environment.

Tomorrow’s managers, he says, will have to learn a new management approach to encourage the practice of systematic innovation. Among other things, this involves using seven sources for innovative opportunity: the unexpected, in which an unforeseen success or failure can be turned to advantage; the incongruous, where one is aware of the difference between the way things turn out and the way they are “supposed to be”, and accepts it; innovation based on needs, which occurs when one responds to a demand; and changes in the industry or market itself that result in changes designed to capitalize on the new opportunities created by these changes. These four sources reside within the business already, but the last three sources of innovative opportunity involve the external environment: demographic changes or variations in the population; changes in perception, mood, and meaning resulting in a different way of thinking about things; and finally, new knowledge, probably the most common source of innovation.

Managers who want to encourage innovation must develop the skills and techniques to handle people in a different manner. That’s probably the easiest part; the hardest thing to do is to change the organization. Not only must the firm allow innovators to experiment, but it must also encourage them and give them greater freedom, while at the same time placating those who find this kind of different behavior uncomfortable and even unacceptable.

However, if what Drucker says is true, innovation is essential to staying in business in the years to come. If you are responsible in any way for the future development of your company’s people, products, or economic existence, you should read Drucker’s book. It might well make the difference between your company’s staying in business and going under.

Mangers who read, digest, and accept Drucker’s ideas will probably want to know how they can effect the changes he advocates. It is either a sign of the times or extremely good fortune, but there just happens to be another new book on the market by the same publishers – Intrapreneuring, by Gifford Pinchot III – which can tell you how to develop innovation in your firm. Pinchip has coined the term “intrapreneuring” to define “a revolutionary system for speeding up innovation within large firms by making better use of their entrepreneurial talent.” The two books ought to be sold as a set: Drucker’s book establishes the necessity for innovation, and Pinchot’s gives you the techniques and strategies for making it happen.

There is a powerful movement under way to make companies more adaptable, innovative, and creative. Firms that learn how to adapt to these demands will survive and flourish. Those that do not, will probably fail. It’s not really a question of whether you want to change or not. Rather, it’s a matter of whether you can afford not to change. If you want to make this kind of change, you had better drop by your bookstore or library soon and get some help in making it happen.

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