In This Article
Introduction
Peter Drucker, in his book "Innovation and Entrepreneurship" (1985), argued that innovation is not mysterious or the result of genius. Instead, it is a discipline that can be learned and practiced systematically. Successful innovators look for opportunities in specific areas.
Drucker identified seven sources of innovation opportunity, ranked in order of reliability and predictability. The first four sources lie within the organization or industry, while the last three involve changes outside the organization.
Seven Sources of Innovation Opportunity
Sources Within the Enterprise/Industry
1. The Unexpected
Unexpected successes, failures, or outside events.
- Unexpected success: When something works better than expected
- Unexpected failure: When careful plans don't work
- Unexpected outside event: External surprises that create opportunity
Example
IBM's unexpected success with accounting applications led to dominance in business computing, even though they originally focused on scientific computing.
2. Incongruities
Gaps between what is and what ought to be, or between perception and reality.
- Incongruity between economic realities
- Between assumptions and actual values
- In the rhythm of a process
3. Process Need
A task-focused source that looks at what is needed to complete a process.
- A weak link in a process
- A missing link that needs to be supplied
- Redesigning an old process around new knowledge
4. Industry and Market Changes
Changes in industry structure that create opportunities.
- Rapid industry growth
- Convergence of technologies
- Changes in market structure
Sources Outside the Enterprise
5. Demographics
Changes in population, age distribution, education, income, and occupation.
- Population growth/decline
- Age structure changes
- Education level changes
- Workforce composition
6. Changes in Perception
Shifts in how people perceive and interpret facts.
- "The glass is half full vs. half empty"
- Changes in mood and meaning
- Timing is crucial—when perception changes
7. New Knowledge
Scientific, technical, and social innovations based on new knowledge.
- Longest lead time and highest risk
- Often requires convergence of several knowledge areas
- Most glamorous but least predictable
| # | Source | Location | Reliability |
|---|---|---|---|
| 1 | The Unexpected | Internal | Highest |
| 2 | Incongruities | Internal | High |
| 3 | Process Need | Internal | High |
| 4 | Industry Changes | Internal | Medium |
| 5 | Demographics | External | Medium |
| 6 | Perception Changes | External | Lower |
| 7 | New Knowledge | External | Lowest |
Principles of Purposeful Innovation
The Do's
- Begin with analysis of opportunities: Systematically analyze the seven sources
- Go out and look, ask, and listen: Innovation is perceptual and conceptual
- Keep it simple and focused: Complex innovations don't work
- Start small: Try to do one specific thing
- Aim at leadership: If not aimed at leadership, unlikely to be innovative enough
What to Avoid
The Don'ts
- Don't try to be clever: Innovations need ordinary people to operate
- Don't diversify, splinter, or do too many things: Stay focused
- Don't innovate for the future: Innovate for the present
Conclusion
Key Takeaways
- Innovation is a discipline that can be practiced systematically
- Drucker identified seven sources of innovation opportunity
- Internal sources (unexpected, incongruities, process need, industry changes) are more reliable
- External sources (demographics, perception, new knowledge) are less predictable
- Successful innovation requires analysis, simplicity, and focus
- Start small and specific, aim at leadership
- "The unexpected success" is the richest source of innovation
Special Thanks to Mr. Kavit Kaul, JBIMS batch of 2009 for sharing his marketing notes.