Drucker on Innovation Opportunities

Since everyone else seems to be revisiting Christensen’s theory of disruptive innovation these days, the contrarian that I like to be.. I’d like to revisit Drucker – in a positive way.

Still the most renowned and cited management consultant in recent times, the Austrian Peter Drucker, offered a radical view of business endeavors.   He claimed the purpose of a business is to create a customer – and thus, the only business activities that add value are innovation and marketing, and the rest are costs (Peter’s profound insight was that the world was moving from the Marxist industrial worker to the modern, knowledge worker).

Peter Drucker defined innovation as the effort to create purposeful, focused change in an enterprise’s economic or social potential. He argued that to be effective, an innovation has to be simple and do only one thing, lest it confuse people.   He admitted that it’s hard to predict the success of any given innovation, but that from the very beginning, if it isn’t aiming for a leadership position, it isn’t innovative enough.

His definition of innovation included both new solutions or technologies and improvements to existing solutions or technologies (‘disruptive’ and ‘sustaining’ innovations in the Clayton Christensen lexis) – “(innovation) is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth” – P Drucker.

peter_drucker-resized-6003.jpgDrucker also taught us that bright ideas are the riskiest, least successful source of innovation – that innovation isn’t just simply about inspiration, but involves systematic hard work and focused knowledge that can be managed. He spoke of innovation as synonymous with entrepreneurship, even in large organizations “Innovation is the specific function of entrepreneurship, whether in an existing business, a public service institution,or a new venture started by a lone individual in the family kitchen“ – P Drucker.

Instead of waiting for the proverbial ‘eureka!’ moment to occur by sheer chance, Drucker noted that there are seven fundamental sources of innovation that can be systemically mined by the entrepreneurial minded (Read more at http://www.scribd.com/doc/5579/Creativity-The-Discipline-of-Innovation-By-Drucker-Peter):

  1. New technology and scientific findings
  2. Changes in public perception
  3. Demographic changes
  4. Industry market and structures
  5. Process needs
  6. Incongruities
  7. The unexpected

So what can you borrow from Peter Drucker to strenghten your new business endeavors? Perhaps ask yourself these five questions and be sure you can answer them positively (or you risk chasing a phantom opportunity)

  1. Can you clearly identify the customer you’re creating? (or it’s a solution looking for a problem)
  2. Would the customer be able to understand and appreciate (value) your innovation? (or they won’t pay for it)
  3. Are you trying to achieve a leadership position in your chosen market (or you may not be innovating enough)
  4. Is your innovation creating a new solution category or enhancing existing ones? (need to know in order to define the right execution strategy and place within the organization)
  5. What are the fundamental sources of your innovation opportunity? (if purely a ‘bright idea’ or better mouse trap, it’s likely that the opportunity to innovate isn’t really there or it’s way behind or way ahead of its time)
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