Friday, November 25, 2011

Reading :: Innovation and Entrepreneurship

Innovation and Entrepreneurship
By Peter F. Drucker

This book is one of Drucker's classics. Unfortunately, I had a hard time maintaining interest - perhaps because I'm not an entrepreneur, but also perhaps because it's not sparkling prose. Nevertheless, it's a classic for a reason - Drucker packs a lot of information in here.

For instance, here's Drucker's pithy explanation of what an entrepreneur does: "the entrepreneur always searches for change, responds to it, and exploits it as an opportunity" (p.28). Indeed, "entrepreneurs, by definition, shift resources from areas of low productivity and yield to areas of higher productivity and yield" (p.28). Entrepreneurs must innovate systematically, and that means "monitoring seven sources for innovative opportunity" (p.35). The first four are symptoms of change within the enterprise:

  • the unexpected
  • the incongruity
  • innovation based on process need
  • changes in industry structure or market structure (p.35)
The last three "involve changes outside the enterprise or industry":
  • demographics
  • changes in perception, mood, and meaning
  • new knowledge (p.35)
In the rest of the book, Drucker examines each of these points in turn, in great detail. He cautions us to always expect and look for change so that we can get ahead of it. Specifically, he says that every three years, we should put everything on trial - "every single product, process, technology, market, distributive channel, not to mention every single internal staff activity" (p.151). Essentially, he says, don't become comfortable in routine. Don't ossify. 

And this is an important point. Although Drucker is talking to the enterprise, he says that 
'Planning' as the term is commonly understood is actually incompatible with an entrepreneurial society and economy. Innovation does indeed need to be purposeful and entrepreneurship has to be managed. But innovation, almost by definition, has to be decentralized, ad hoc, autonomous, specific, and micro-economic. It had better start small, tentative, flexible. (p.255)
 Sage words. If you're interested in innovation and entrepreneurship, read this book.

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