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Eps Unit 3
Eps Unit 3
3.1 CREATIVITY:
Creativity is simply the ability of imagination. ... Using imagination, an entrepreneur can put
aside the practical norms and think of something creative and innovative. However, a creative
mind has to have entrepreneurial skills to bring those creative ideas to life in a business setting.
Creativity does give an entrepreneur a competitive advantage, but how does one assess whether
they are creative enough or not?
3.2 Innovation: Innovation is the process of creating and implementing a new idea. It is the
process of taking useful ideas and converting them into useful products; services or processes or
methods of operation. These useful ideas are the result of creativity, which is the prerequisite for
innovation. Creativity in the ability to combine ideas in a unique way or to make useful
association among ideas. Creativity provides new ideas for quality improvement in organizations
and innovation puts these ideas into action.
Incremental innovation
Most innovations are incremental, gradual and continuous improvements in the existing
concepts, products or services in the existing market.
Incremental innovations are just a little better than the previous version of the product or service
and has only slight variations on an existing product formulation or service delivery method.
example: TV
Disruptive innovation
example : iphone
Radical innovation
Radical innovation is rare as it has similar characteristics to disruptive innovation but is different
in a way that it simultaneously uses revolutionary technology and a new business model.
Example: AI&Robotics
Innovation process:
1. Preparation
This involves paying real, detailed attention to what’s going on in the area of your business
where you want to innovate – what’s its purpose/who gets something from it/what,
fundamentally, are the outcomes it’s supposed to yield?
2. Generation
Once you’ve explored and understood the context in which you are wanting to innovate,
you can start to come up with ideas that deal with the things you’ve discovered are really
significant in that context.
3. Incubation
Once you’ve developed some options, sleep on them, or at least go away, do something
else and then come back to them. This will allow your brain to process them and make
better sense of them.
4. Evaluation
Once you’ve slept on the options you’ve created, you can evaluate them from a more
objective perspective. A good approach is to use the themes you identified during
preparation. Do these options fulfil the purpose, give everyone what they need and yield
the fundamental outcomes?
5. Implementation
Some might say that this is the most challenging stage of the process – turning, with the
cooperation of colleagues, clients, suppliers and so on, a good idea into something that
works to everyone’s satisfaction!
Challenges of innovation:
Technological failure of the innovation – The biggest risk any company takes in the innovation
process is whether or not the new product or idea will work once it is launched .
Financial strain – Often, the innovation process is faced with the challenge of draining out the
company resources as returns are usually long-term as opposed to immediate.
Market failure – For innovations which involve the introduction of new products or technology
to the market, it is imperative that the product meets the needs, tastes and preferences of the
consumers.
Redundancy – With trends in the market constantly changing and many innovations emerging,
it is possible that a profitable innovation today may be redundant in the near future.
Lack of capacity for implementation – This is especially a challenge for start-ups where they
lack the structural and financial capacity to roll out the innovation.
Organizational risks – This refers to the risks that are faced in the structure and running of the
business once the innovation is introduced..
Unprecedented risks – These are risks that would not have been foreseen and may be
influenced by factors outside the company’s control.
Entrepreneur has to search business opportunities. It’s an idea in the mind of an individual based
on valuable thought. Essentially, entrepreneurs need ideas to start and grow their entrepreneurial
ventures. Generating ideas is an innovative and creative process. Sometimes, the most difficult
aspect of starting a business is coming up with a business idea. Even if you have a general
business idea in mind, it usually needs to go through fine-tuning processes. Fruitful ideas often
occur at points where your skill set, your hobbies and interests, and your social networks
intersect. In other words, the best ideas for a new business are likely to come from activities and
people that you already know well.
As Kaplan, (2003) argued that you may be surprised to hear that not all entrepreneurs come up
with unique ideas. According to Timmons and Spinelli, (2007), finding a good idea is the first
step in the process of converting an entrepreneur’s creativity into an opportunity.
Any good business ideas could be an invention, a new product or service, or an original idea or
solution to an everyday problem. A good business idea does not necessarily have to be a unique
products or services. Majority of the entrepreneurs credited their accomplishment to the
exceptional execution of ordinary ideas. The chances of success therefore will be far greater if
you can market a product that is similar to existing offerings, while providing greater value to
customers.
(a) Develop ideas as an extension of an existing product (i.e. adding camera and song features to
a mobile phone).
(d) Add value to an existing product or service (i.e. reputable brand name or delivery service).
(g) Personal interests or hobbies many people find ways to turn their hobbies into successful
businesses.
(h) Work experiences, skills, abilities a business, related to the work you do.
A survey of entrepreneurs found that most new start-up companies are involved in industries
where they had significant work experience. The personal contacts and domain expertise
developed on the job have proven to be valuable to many individuals who contemplated
launching a business of their own. Anybody who intends to start a business in a new industry are
therefore encouraged to firstly become an "apprentice" for a suitable period of time. By doing
that, you could avoid costly mistakes and at the same time be able to assess whether you enjoy
the work before making a serious financial commitment.
In general, entrepreneurs identify more ideas than opportunities because many ideas are typically
generated to find the best way to capitalize on an opportunity. Several techniques can be used to
stimulate and facilitate the generation of new ideas for products, services and businesses. The
following are various methods of generating ideas:
a) Brainstorming
This is a process in which a small group of people interact with very little structure, with the goal
of producing a large quantity of novel and imaginative ideas. The goal is to create an open,
uninhibited atmosphere that allows members of the group to “freewheel” ideas. Normally, the
leader of the group asks the participants to share their ideas. As group members interact, each
idea sparks the thinking of others, and the spawning of ideas becomes contagious.
(b) Focus Groups
These are group of individuals who provide information using a structured format. Normally, a
moderator will lead a group of people through an open, in depth discussion. The group members
will form comments in open-end in-depth discussion for a new product area that can result in
market penetration. This technique is an excellent source for screening ideas and concept.
(c) Observation
A method that can be used to describe a person or group of people’s behavior by probing:
(i) What do people/organisations buy?
(ii) What do they want and cannot buy?
(iii) What do they buy and don't like?
(iv) Where do they buy, when and how?
(v) Why do they buy?
(vi) What are they buying more of?
(vii) What else might they need but cannot get?
(d) Surveys
This method is proposed by Zikmund (1994). This process involves the gathering of data based
on communication with a representative sample of individuals. This research technique requires
asking people who are called respondents for information either verbally or by using written
questions. Questionnaires or interviews are utilized to collect data on the telephone or face-to-
face interview.
(e) Emerging Trends
The example is based on the population within your area may be getting older and creating
demand for new products and services.
(f) Research and Development
Research is a planned activity aimed at discovering new knowledge, with the hope of developing
new or improved products and services. Researching new methods, skills and techniques enable
entrepreneurs to enhance their performance and ability to deliver better products and services.
(g) Tradeshows and association meetings
This can be an excellent way to examine the products of many potential competitors, uncover
product trends and identify potential products.
Taking an idea from concept to viable cooperative takes many steps. None more valuable or
important than the feasibility study. In the section you will learn the key concepts to allow you to
formulate the idea and subject it to rigorous analysis to identify opportunities and challenges that
will make the cooperative successful.
A feasibility study should provide a comprehensive analysis and evaluation of the market,
operational, technical, managerial and financial aspects of your business concept or opportunity.
A comprehensive study can then evolve into the market-driven strategic plan that is the road map
for all subsequent decisions.
A feasibility study is the preliminary evaluation of a business idea, conducted for the purpose of
determining whether the idea is viable or worth pursuing. Feasibility study takes the guesswork
out of the business launch and provides an entrepreneur with a more secure notion that a business
idea is feasible or viable. Normally a feasibility study will be conducted to determine the
viability of an idea before proceeding with the development of the business.
Purpose:
A feasibility study will provide various sources of information to the entrepreneur such as
follows:
1. Market feasibility
The market feasibility study is an assessment of the overall appeal of the market for the product
or service being proposed. Aspects of market feasibility study that should be carried out include:
A. Product/Service
b. Customers
c. Market Demand
d. Competitors
e. Market Share
2. Technical feasibility
•A technical feasibility study is concerned with determining whether the business has the
necessary technology and equipment to produce the intended product/service.
c. Manpower
d. Location
3. Organisational feasibility
An organizational feasibility study is concerned with determining whether the business has the
necessary and sufficient human resource to bring a particular product/service idea to market
successfully. Aspects of organizational feasibility study that should be carried out include:
a. Organization Structure
b. Management Team
c. Compensation
d. Supporting Services
4. Financial feasibility
The financial feasibility study is an assessment of the financial aspect of the business.
a. Startup Capital
5. Social Feasibility
A project may cross all the above barriers mentioned above and found very suitable but it will
lose its entire creditability, if it has no social acceptance. Though the social customs, conventions
such as caste community, regional influence etc. are creating hindrance for development of a
project should avoid all such social conflicts which will stand on the successful implementation
of the project. (e.g) Considering the interests of the general public; projects which offer large
employment potential, which channelize the income from less developed areas will stimulate
small industries.
Conducting Feasibility Study:
The steps in conducting feasibility study are:
First, outline the planned idea or action. This means looking at what you are looking to achieve
and why.
Second, examine the market space and the commercial viability of the action. You want to get
an overall feel of what type of customers are you potentially attracting.
Third, examine the unique characteristics of the idea and whether they are strength or a
weakness. The idea or action might have certain unique characteristics (i.e. location, price,
usability) and these might help your organization.
The scope must be detailed and outline the objectives of the feasibility study clearly.
You’ll also need to research the current competitive landscape in order to understand whether the
proposed idea or action is viable.
Outlining the product awareness required for the use of your product or service.
The
Finally, you need to review your feasibility study carefully and examine the findings with time.
A Project Report is a document which provides details on the overall picture of the proposed
business. The project report gives an account of the project proposal to ascertain the prospects of
the proposed plan/activity.
Project Report is a written document relating to any investment. It contains data on the basis of
which the project has been appraised and found feasible. It consists of information on economic,
technical, financial, managerial and production aspects. It enables the entrepreneur to know the
inputs and helps him to obtain loans from banks or financial Institutions.
The project report contains detailed information about Land and buildings required,
Manufacturing Capacity per annum, Manufacturing Process, Machinery & equipment along with
their prices and specifications, Requirements of raw materials, Requirements of Power & Water,
Manpower needs, Marketing Cost of the project, production, financial analyses and economic
viability of the project.
Purpose of DPR:
Its helps an Entrepreneur judge the viability & profitability of a given enterprise proposal.
If it reveals a proposal to be unviable, the Entrepreneur will avoid a grave error of
investing in an Unsound Venture.
It is the basis for a Development Bank to sanction Long Term Financial Assistance & a
Commercial Bank to provide Working Capital Assistance.
It aids the process of firming up Technical Arrangement , Choosing a Location, Selecting
Plant & Machinery, Determining Man Power , & Utility needs etc etc.. reqd for Project
Implementation.
It generates a Knowledge Base for the Entrepreneur concerning such diverse facets as
Structure of Enterprise – Industry, Market, Raw Material supply & Technology etc.
It educates the Entrepreneur regarding the Degree of Risk underlying the Enterprise
Proposal.
It brings into sharp focus the Key Performance Determinants in the chosen line of
Business & thus makes the Entrepreneur realize the need to pay special attention to such
determinants.
Contents of DPR:
1. General Information
A project report must provide information about the details of the industry to which the project
belongs to. It must give information about the past experience, present status, problems and
future prospects of the industry. It must give information about the product to be manufactured
and the reasons for selecting the product if the proposed business is a manufacturing unit. It must
spell out the demand for the product in the local, national and the global market. It should clearly
identify the alternatives of business and should clarify the reasons for starting the business.
2. Executive Summary
A project report must state the objectives of the business and the methods through which the
business can attain success. The overall picture of the business with regard to capital, operations,
methods of functioning and execution of the business must be stated in the project report. It must
mention the assumptions and the risks generally involved in the business.
3. Organization Summary
The project report should indicate the organization structure and pattern proposed for the unit. It
must state whether the ownership is based on sole proprietorship, partnership or joint stock
company. It must provide information about the bio data of the promoters including financial
soundness. The name, address, age qualification and experience of the proprietors or promoters
of the proposed business must be stated in the project report.
4. Project Description
A brief description of the project must be stated and must give details about the following:
Target of production,
Power requirements,
Fuel requirements,
Water requirements,
Production process,
If the business is service oriented, then it must state the type of services rendered to customers. It
should state the method of providing service to customers in detail.
5. Marketing Plan
The project report must clearly state the total expected demand for the product. It must state the
price at which the product can be sold in the market. It must also mention the strategies to be
employed to capture the market. If any, after sale service is provided that must also be stated in
the project. It must describe the mode of distribution of the product from the production unit to
the market. Project report must state the following:
Type of customers,
Target markets,
Nature of market,
Market segmentation,
Sales objectives,
Demand for the product in the local, national and the global market,
It must indicate potential users of products and distribution channels to be used for distributing
the product.
The project report must describe the total capital requirements of the project. It must state the
source of finance, it must also indicate the extent of owners funds and borrowed funds. Working
capital requirements must be stated and the source of supply should also be indicated in the
project. Estimate of total project cost, must be broken down into land, construction of buildings
and civil works, plant and machinery, miscellaneous fixed assets, preliminary and preoperative
expenses and working capital.
Proposed financial structure of venture must indicate the expected sources and terms of equity
and debt financing. This section must also spell out the operating cost
7. Management Plan
The project report should state the following.
8. Financial Aspects
In order to judge the profitability of the business a projected profit and loss account and balance
sheet must be presented in the project report. It must show the estimated sales revenue, cost of
production, gross profit and net profit likely to be earned by the proposed unit. In addition to the
above, a projected balance sheet, cash flow statement and funds flow statement must be prepared
every year and at least for a period of 3 to 5 years.
The income statement and cash flow projections should include a three-year summary, detail by
month for the first year, and detail by quarter for the second and third years. Break even point
and rate of return on investment must be stated in the project report. The accounting system and
the inventory control system will be used is generally addressed in this section of the project
report. The project report must state whether the business is financially and economically viable.
9. Technical Aspects
Project report provides information about the technology and technical aspects of a project. It
covers information on Technology selected for the project, Production process, capacity of
machinery, pollution control plants etc.
The proposed units draws inputs from the society. Hence its contribution to the society in the
form of employment, income, exports and infrastructure. The output of the business must be
indicated in the project report
It has been experienced that in preparing DPR , the Entrepreneur is forced to consider
several Financial & Implementation Problems well in advance, giving him enough time to solve
or prepare for them.
This is meant for the Entrepreneur himself. This is an essential document to procure
assistance from Financial Institutions & to fulfill other formalities for the successful
implementation of the Project.
Many a time, the Entrepreneurs feel that he could relieve himself of the botheration of
preparing a Project Report by engaging a Consultant.
A business plan, as defined by Entrepreneur, is a “written document describing the nature of the
business, the sales and marketing strategy, and the financial background, and containing a
projected profit and loss statement.” However, business plan can serve several different
purposes.
Contents of B Plan:
Find names, addresses and phone numbers of the type of investors you wish to target. Ask people
you know for referrals. Network as much as possible.
Learn as much as possible about how much money people have to invest, industries they’re
interested in and other requirements. Search venture capital directories, Who’s Who, news
articles, websites and similar sources.
First, mail an introductory letter to your target letting them know you have a plan you'd like to
send. Sending unsolicited, unanticipated business plans with a mere cover letter won't typically
get your plan read. Not only are most people too busy to read whatever comes across their desk
or lands in their inboxes, they also don't want to be sued someday for “stealing your ideas,” even
if they never read your plan.
5. Defuse objections.
Prepare a list of possible objections—potential competitors, hard- assumptions and the like—that
your investor may raise. Then prepare cogent answers.
6. Get a commitment.
You won’t get an investment unless you ask for it. When all objections have been answered, be
ready to offer one last concession—“If I give your representative a board seat, can we do this
today?”—and go for the close.
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