Author: Peter Drucker
Publisher: HarperBusiness; 1st edition (May 1, 1993)
ISBN: 0887306187 (available at amazon.com)
 

Main thesis: Innovation is organized, systematic, rational work.
The book is about developing the principles, the practice and the discipline for entrepeneurship and innovations. Drucker argues that innovation is perceptual (perception of change, of opportunity, of the new realities) as well as conceptual (rigorous logical analysis). Intuition alone is not good enough. Entrepreneurial strategy is by no means hunch or gamble. But it is also not precisely science. Rather it is judgement.

Term: Innovation
This is an economic or social, rather than technical term. It can be defined in demand terms as changing the value and satisfaction obtained from resources by the consumer.

Principles of Innovation (pg. 134)         
• Analysis of opportunities. All sources of innovative opportunity should be systematically studied. It its not enough to be alerted to them.
• Innovation is both conceptual and perceptual. Perception is the very important second imperative of innovation - look at the customers, the users, to see what their expectations, their values, their needs are.
• An innovation has to be simple and it has to be focused. If an innovation does more than one thing it confuses. It should be focused on a specific need that it satisfies, on a specific end result that it produces.
• Effective innovations start small. The necessary changes can be made only if the scale is small and the requirements for people and money fairly modest.
• A successful innovation aims at leadership. Entrepreneurial strategies must aim at achieving leadership in a given environment, otherwise they are simply creating an opportunity for the competition.

3 Conditions of Innovation

• Innovation is work. Innovation becomes hard, focused, purposeful work making very great demand on diligence, on persistence, and on commitment. If these are lacking, no amount of talent, ingenuity, or knowledge will avail.
• Innovators must build on their strengths to succeed. Innovators need to be temperamentally attuned to the innovative opportunity. The work they are doing must be important to them and make sense to them.
• Innovation is an effect in the economy and society. It is a change in behavior or a change in process, therefore always has to be close to the market, focused on the market, indeed market-driven.

Personality: Conservative Innovator
Innovative personality is not one of risk takers, but of individuals who define the risks they have to take and to minimize them as much as possible. They systematically analyze the source of innovative opportunity, then pinpoint the opportunity and exploit it.

Term: Entrepreneur
The entrepreneur upsets and disorganizes. Entrepeneurship rests on the theory of economy and society. The theory sees change as normal and indeed as healthy. It is risky mainly because so few of the so-called entrepeneurs know what they are doing. Entrepeneurship needs to be systematic, it needs to be managed and above all it needs to be based on purposeful innovation. Successful entrepeneurs, whatever their individual motivation, try to create value and make a contribution.

Entrepreneurial Strategy
The test of an innovation is always what it does for the user. Entrepreneurial strategy has more chance of success the more it starts out with the users- their utilities, their values, their realities.

1. Attempt to create industry leadership or market dominance by a.) being first to market, b.) creative imitation (do something better than original innovator), or c.) entrepreneurial judo (make yourself distinct by offering an alternative strategy in an existing industry- rather than provide every service available, optimize by offering only most important services they need)
2. Ecological Niches: create practical monopoly in a small area in which total market is so limited as to make it unattractive for any would be competitor. (see pg. 236 on specialty skill)

Entrepreneurial Management
Existing businesses (knows how to manage) faces different problems from the non-business public service institution and the new venture (needs to learn how to manage). Each faces different problems, limitations and constraints and each has different learning needs and is prone to making different mistakes.

Existing business requires policies and practices in four major areas

1. Must be receptive to innovation and perceive change a opportunity rather that a threat.
2. Systematic measurement of company as entrepreneur and innovator is mandatory
3. Special practices pertaining to organizational structure, to staffing and managing, and to compensation, incentives and rewards.
4. Don’t mix managerial units and entrepreneurial units; don’t diversify - become entrepreneurial in field company understands; do not acquire small entrepreneurial ventures and try to fit them in.

Public Service has four rules for policies and practices

1. Clear definition of mission. Need to focus on objectives not programs and projects.
2. Needs to state a specific goal, so that at some point it can say “our job is finished.”
3. Failure to achieve objective is reason to question validity of the objective - the exact opposite of what most public service institutions believe.
4. Need to perceive change a opportunity rather that a threat.

New Venture has four requirements (pg. 188)

1. A focus on the market
2. Financial foresight, especially planning cash flow and capital needs ahead.
3. Building a top management team long before new venture actually needs one and long before it can actually afford one.
4. It requires that the founding entrepreneur make a decision with respect to his or her own role, area of work, and relationships.