Innovation is the basic driving force behind entrepreneurship and the creation of small businesses. When an individual comes up with an idea that has not previously been explored, or a niche that larger businesses have not been able to exploit, he or she may be able to turn that idea into a successful business venture. "Ideas are the fuel that keep entrepreneurial fires blazing," I. Satya Sreenivas wrote in The Business Journal. "Savvy entrepreneurs realize the fact that ideas can originate from anywhere at anytime, and a random idea could be more worthwhile than a well-researched project."

Of course, not every new idea has the potential to become a successful business. And in many cases, individuals with good, marketable ideas fail to come up with the capital needed to turn their ideas into reality. But innovation is still a necessary first step for small business success in many instances. Moreover, entrepreneurs cannot afford to stop innovating once they have established a successful business. Innovation applies not only to new business and product ideas, but also to the internal workings of a company. Successful business owners continually innovate with regards to internal systems and processes in order to create and sustain a source of competitive advantage. "The global economy requires that companies generate an unending stream of new products, systems, technologies, and services," Claus Weyrich wrote in Electronic News. "And innovation has to be applied to things other than products."

According to Weyrich, sustaining innovation in a business organization requires an understanding of the company's core competencies, an innovative corporate culture, and a systematic approach. He described three phases in the innovation process: 1) the invention phase, in which ideas are generated; 2) the implementation phase, in which the best ideas are selected and developed further; and 3) the market penetration phase, in which ideas are exploited for commercial gain. This process is an ongoing one, with feedback used to close the loop.

Analysts agree that companies of all sizes need to place innovation in a broader context than just traditional research and development and manage the process of innovation in a structured way. "Companies need to establish a seamless innovation process—an enterprise-wide exchange of ideas that will ensure that the information and expertise required to create, market, and service breakthrough products is available and accessible to those who need it," Chemical Week contributor Ken Cottrill explained. "If all the people able to extract value from a new product or technology are in the information loop, there is a smaller chance that opportunities will be squandered." Making use of the information resources available within a company allows employees to benefit from "corporate memory." They are better able to focus on innovation because they know where others have been before them.

It is important to include the whole company in the innovation process, because the germ of idea can come from anywhere, and the best ideas often grow out of a combination of functional areas. Establishment of a network structure can provide a framework for this desired innovation. A network structure includes cross-functional groups within the company, cross-links between the various groups, and can even include linkages with external parties such as customers and suppliers. "Companies of all sizes can adopt this approach to innovation," said Cottrill. "There is no standard blueprint for these networks, because they are shaped by a company's business goals and organizational structure. However, the individuals who make up these groups are unified by a common mission and are in regular communication."

Small businesses face a number of obstacles to effective innovation, the most obvious being limited financial, knowledge, and manpower resources. But studies suggest that a lack of strategic alignment and well-defined processes, which can be addressed and overcome by talented, determined entrepreneurs, can be even greater obstacles to innovation. In fact, one of the most important factors in promoting company-wide innovation is the support of the small business owner. "A corporation's synapses may be buzzing with creative ideas and initiatives, but without support from the top echelons, this effort can lose momentum, and innovation becomes stifled," Cottrill stated.


Cottrill, Ken. "Networking for Innovation." Chemical Week. February 25,1998.

Henry, Jane, ed. Creative Management. Sage Publications, 1991.

Michalko, Michael. Thinkertoys: A Handbook of Business Creativity for the 1990s. Ten Speed Press, 1991.

Sreenivas, I. Satya. "First Idea May Not Be the Best." The Business Journal. November 3,1997.

Weyrich, Claus. "The Meaning of Innovation." Electronic News. February 16,1998.

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