Innovation

Prof Bharat Nadkarni

What is Business?

What is Productivity?
 What is Productivity?

Productivity = Output
Input
 How to increase Productivity?

1.Increase Output but keep the Input constant.

2.Keep the Output constant but decrease Input

3. Output > Input

Delta Delta
What is Innovation ?
Innovation is not a technical term. It is an economic and social
term.It’s criterion is not science or technology but a change in the
economic or social environment, a change in the behaviour of
people as consumers, producers or as citizens.
Innovation is investing of resources to create new wealth or
investing of wealth to create new resources. It is measured by
assessing its impact on environment, and therefore, innovation
should always be Market Focused. It is the responsibility of every
individual, and it begins with a conscious search for opportunities.
Finding those opportunities and exploiting them with focused,
practical solutions requires a rare genius.
Innovation and Entrepreneurship - The link
Innovation is the specific function of entrepreneurship. It is the
means by which the entrepreneur either creates new wealth
producing resources or endows existing resources with enhanced
potential for creating wealth.
Innovation is an activity, the effort to create purposeful focused
change in an enterprises’ economic or social potential.
What is Innovative Strategy ?
The first objective of a strategy for an ongoing business is to
optimize what already exists. However, the ruling assumption of an
innovative strategy is whatever exists is aging. The assumption is on
the premise that existing product lines and services, existing markets
and distribution channels etc will sooner or later go down rather than
up.
 …….Innovative Strategy contd.
The motto of a strategy for the on going business is “ Better and
More “, however, the motto of a strategy for innovation is “ New
and Different “.
Innovative strategy is planned out by systematically getting rid of
the old, the dying and obsolete, because abandoning yesterday alone
will free resources for tomorrow.
Why does one need to Innovate ?
• to face competition
• to stand out in a clutter
• to survive recession
• to solve certain problems
Innovations and Profits
The main function of an entrepreneur is to introduce innovations in
the economy and profits are reward for his performing this function.
Any new measure or policy adopted by an entrepreneur to reduce
the cost of production or to increase the demand for his product is an
innovation.
Innovation can be divided into two categories
• Those which reduce the cost of production ie which change the
production functions. This first type of innovation includes the
introduction of new machinery, new and cheaper technique or
process of production, exploitation of a new source of raw material,
a new and better method of organizing the firm etc.
• Those which increase the demand for the product ie which change
the demand or utility function. This category includes the…… contd
introduction of a new product, a new variety or design of the
product, a new and superior method of advertisement, discovery of
new markets etc.
Role of an Innovator
Role of an innovator is a part of entrepreneurship. The entrepreneur
is not a man of ordinary managerial ability, but one who introduces
something entirely new. The entrepreneur is motivated by the desire
to be the founder of a private commercial kingdom, the will to
conquer and prove his superiority and the joy of creating, of getting
things done or simply of exercising one’s energy and integrity.
Role of Profit
An entrepreneur innovates to earn profits. Profits arise due to
dynamic changes resulting from innovation. They continue to exist
until innovation becomes general.
Breaking of the Circular Flow

Schumpeter’s Model

Profits caused by a particular innovation tends to be competed away

as other imitate and adapt that. But if the entrepreneur comes out
with another innovation at that time when the favourable effects of
the former innovation are dying out, he will make profits again.
Therefore, as long as innovation exist, profits continue to arise out
of them. According to Schumpeter, Innovation is the sole
cause of Profit.
Instilling Attitude for Innovation
• Encourage creative conflict

• Big ideas come from small teams

• Learning happens away from the desk

• Understand the Product’s user – empathise

• Live in the future

• Failure sometimes produces innovation

• Brainstorming for Innovation

Sources of Innovation
As mentioned by Peter Drucker

Within an Enterprise
• Unexpected occurances
• Incongruities
• Process needs
• Industry and Market changes
Outside the Enterprise
• Demographic changes
• Changes in perception
• New knowledge
Thank You