Drucker states that innovation should be managed like any other business activity, and he highlights the need for functional inspiration to ensure success in a management environment.
Drucker’s 7 kinds of opportunities:
1) Unexpected Occurrences: “These are productive sources of innovation opportunities because most businesses dismiss them, disregard them, and even resent them. Genuinely entrepreneurial businesses have two ‘ﬁrst pages’ – a problem page and an opportunity page –and managers spend equal time on both.”
2) Incongruities: Look for inconsistency and disharmony to see where an innovation could smooth a process or join it up.
3) Process Needs: What can you develop that supports another process or product?
4) Industry and Market Changes: “Managers may believe that industry structures are ordained by the good Lord,but these structures can–and often do –change overnight. Such change creates tremendous opportunity for innovation.”
5) Demographic Changes: “Managers have known for a long time that demographics matter, but they have always believed that population statistics change slowly. In this century, however, they don’t. Indeed, the innovation opportunities made possible by changes in the numbers of people – and in their age distribution, education, occupations, and geographic location – are among the most rewarding and least risky of entrepreneurial pursuits.”
6) Changes in Perception: “Changing a manager’s perception of a glass from half full to half empty opens up big innovation opportunities.”
7) New Knowledge: “They are the superstars of entrepreneurship; they get the publicity and the money. Knowledge-based innovations differ from all others in the time they take, in their casualty rates, and in their predictability, as well as in the challenges they pose to entrepreneurs. Like most superstars, they can be temperamental, capricious, and hard to direct.”
Drucker also drew up 5 principles of innovation:
1) “Purposeful, systematic innovation begins with the analysis of the opportunities. It begins with thinking through…the sources of innovative opportunities.”
Drucker was a logical thinker with his feet firmly on the ground and this first principle is a perfect example of this. Opportunity is key, but only a logical and clear-headed analysis will highlight the right opportunity for the individual.
2) “Innovation is both conceptual and perceptual… Successful innovators…look at figures, and they look at people. They work out analytically what the innovation has to be to satisfy an opportunity. And then they go out and look at the customers, the users, to see what their expectations, their values, their needs are.”
This is a fine example of Drucker’s belief that innovation needs to be managed like any other business activity. There has to be a need that can be fulfilled and every aspect of that need, from the product or service through to customer expectations, has to be analysed. An innovation that is not handled in this way is merely a pipe dream and not an innovation.
3) “An innovation, to be effective, has to be simple and it has to be focused. It should do only one thing, otherwise, it confuses. All effective innovations are breathtakingly simple. Indeed, the greatest praise an innovation can receive is for people to say: ‘This is obvious. Why didn’t I think of it?’”
Simplicity is not a requirement that you might expect from a groundbreaking innovation, but as Drucker explains, it is necessary to ensure that a clear business model can be put in place. Know what you are doing and where your defining lines are and you will then know how to beat any competition.
4) “Effective innovations start small… They try to do one specific thing.”
To fill a common need all you have to do is find a solution. If you try to do anymore than that then you aren’t solving a problem, you are complicating it. Only once you have successfully filled that need can you expand.
5) “A successful innovation aims at leadership [within a given market or industry]… If an innovation does not aim at leadership from the beginning, it is unlikely to be innovative enough, and therefore unlikely to be capable of establishing itself.”
An innovation must be innovative; otherwise it is simply mimicking the work of others and stealing their thunder. This begs the question, if you cannot reach the top of your game, is it your game at all? To be the best at what you do is without doubt inspirational talk, but putting it into action is a true work of innovation and management and only once you have achieved leadership in the industry can you count it a success.
Famous Drucker quotes:
- “The best way to predict the future is to create it.”
- “In business, innovation rarely springs from a flash of inspiration. It arises from a cold-eyed analysis of seven kinds of opportunities.”