The Role of Innovation for Entrepreneurial Start-up and Firm Growth - Essay Example

THE ROLE OF INNOVATION FOR ENTREPRENEURIAL START-UP AND/OR FIRM GROWTH al Affiliation Table of Contents THE ROLE OF INNOVATION FOR ENTREPRENEURIAL START-UP AND/OR FIRM GROWTH 1 Name 1 Table of Contents 1 THE ROLE OF INNOVATION FOR ENTREPRENEURIAL START-UP AND/OR FIRM GROWTH 3 Introduction 3 Selection the Journals to be Used 4 Competitive Advantage 4 Responding to Customer Needs 6 Increases the Efficiency of the Business 7 Increasing Productivity 8 Allows for Expanding to New Markets 9 Conclusion 10 Reference List 11 THE ROLE OF INNOVATION FOR ENTREPRENEURIAL START-UP AND/OR FIRM GROWTH Introduction Innovation in broader sense refers to the process or act of developing and applying new ideas to improve the way the business does its things so that it can be able to increase its returns from the market where it is operating in. Innovation itself can be a continuous process or can be a process that takes a short time to develop and apply. Irrespective of the duration that it takes, it results in changes in many areas of the business that may in turn determine whether the venture succeeds or not. Aislabie (2012) says that innovation is normally focused on creating positive outcome for new products and services as well as in the operational processes of that particular business or start up that engages in it. The managerial processes, the market segment and the organizational structure of the business may also experience the positive impact of innovation when it is clearly and properly implemented and integrated into the business. Different businesses and startup companies engage in innovation for different reasons. The ultimate goal of innovation is to improve the businesses (Lee et al., 2000). The changes that are associated with innovation are intended to improve the efficiency, profitability and the viability of that particular business. There are several aspects of a business that are known to benefit from innovation both in an existing businesses or a new entrepreneurial start up. Some of these aspects and areas include finance, research and development, sales, human resources and marketing. Acs and Szerb (2009) state that innovation does not need to be new or revolutionary for it to be of benefit to the business or entrepreneurial start up. The aim of this paper is to explore the role that is played by innovation in entrepreneurial startups and in the growth of businesses. This is done through a reviewed of existing literature in peer reviewed journals. Selection the Journals to be Used In order to unravel and explore the role of innovation in entrepreneurial startups and in the growth of businesses, this paper relies on secondary data that exist in journals. To explore and understand how innovation impacts on entrepreneurial startups and the role that it plays in the growth of existing businesses, the paper will use peer reviewed journals. The journals that will be used in this paper are those that deal with innovation, entrepreneurship and growth of businesses. In selecting the journals to be used in the paper, an analysis of various journals that deal with the topic was done. After this, the journals that contain data and information that are related to the topic selection was done. Five peer reviewed journals that contain information that related to the topic of study were selected and analyzed. The information from these journals was then reviewed and the common characteristics and trends in the five journals used to answer the question about the role of innovation on entrepreneurial start up and in the growth of businesses. There are five major roles that were found to be played by innovation in entrepreneurial startups and in the growth of businesses. Competitive Advantage According to Acs and Szerb (2009), the current market place is a very dynamic one. Each and every business or entrepreneurial start up is struggling to win a market share in order for the business to become viable and to make profit form the business activities that it engages in. One of the ways that businesses have used to respond to the competition that exist in the market is by being innovative. Gries and. Naudé (2010) state that competitiveness and the survival and viability of a business are directly linked to the ability of that particular business to be innovative. Over the lasts years, there has been an increased focus on innovation by several businesses and startup companies. This increased focus on innovation has been influenced and fueled by several factors. However, competition remains the major reason many companies have decided to focus on being innovative (Martin, 2009). Unlike in the pasts where a new product could remain in the market for a long time without experiencing stiff and direct competition from other products, the current market has witnessed situations where new products continue to emerge in the market (Gries and Naudé, 2010). Businesses that are innovative come up with new products and services and go ahead to patent them so that they can have an advantage over other businesses by being the sole seller of the new patented products. However, it does not take a while before another business comes up with alternative products that are centered on the patent that the original producer or the person who discovered the good or product has. Due to this reduced life cycle of new ideas and products, there is always the need for the company to instill a culture of constant and continuous innovation in order to remain relevant in the market and to have an advantage over the other players in the market (Bessant and Tidd, 2011). It is normally very difficult for a new venture or business to compete in the market when it is dealing with products, services and processes that are obsolete or out of date (Gries and Naudé, 2010). Being the first entity to come up with a particular product or service may give the business an edge over the other businesses. If a business, for example, wants to compete on the basis of price, it should be able to come up with innovative products that makes it stand out from the rest of the ventures that are also operating in that particular market. Chen, Cao and Ma (2008) indicate that it is through innovation in terms of products and processes that companies such as Toyota and Apple have been able to get a higher portion of the market share by being ahead of their rivals. Innovation enables companies and entrepreneurial startups to come up with products, services and processes which are new in the market. At times, what is needed is just alteration and modification of the existing products and processes to be able to stay ahead of the competitors. Companies, businesses and entrepreneurial startups that are not innovative may tend to have a rough time in the current competitive market especially owing to the fact that the current world and market has been globalized. Globalization has brought together companies and businesses from various markets and in return increased competition (Chen, Cao and Ma, 2008). Therefore, for entrepreneurial start an up to thrive and even expand there is the need to focus on innovation and instill the innovative culture within its ranks. Responding to Customer Needs One of the major drivers in the current market is the customer’s expectation on the kind of good and services that are in the market. This has also driven the amount of innovation in the market both directly and indirectly. Customers of a particular product or service normally want products and services that improve their lives and add some kind of value to their everyday lives. The modern customers and consumers are more informed compared to the situation that existed sometimes back (Gries and Naudé, 2010). The current customers also have more options when it comes to what they want to buy and who they want to buy it from. The current customers do not accept any kind of mediocrity especially when they know that they have several options available and they can get a similar product or alternative products from somewhere else (Drucker, 2012). This is the reason startups and businesses that need to grow are supposed to be more and more innovative. Innovation allows entrepreneurial startups and businesses to identify and respond to the needs and requirements of the customers. (Aislabie, 2012) says that it is important for the startups to identify both the current needs and the future needs of the customers. When the business is able to anticipate the future needs of the customers in a particular market, it will be able to quickly respond to and satisfy these needs when the right time comes. This way the business is not only able to keep the existing customers but also attract new customers who want to satisfy their needs through the new product, services, processes that has been brought forth by the entrepreneurial start up or even an existing business. Increases the Efficiency of the Business One of the indicators of whether a startup will succeed and become viable in a particular market is the efficiency of that particular business in terms of product and processes. A business that is operating in a market efficiently and effectively will automatically be able to easily and fully satisfy the needs of the customers or consumers. One proven way through which the efficiency of an e entrepreneurial start up can be improved in order to make it viable is through innovation. Baron and Shane (2008) say that innovation does not have to be always about coming up with a new product or service. It is very important for businesses to focus on the various processes in the various aspects of the business such as finance, sales and marketing and human resources in order to enhance efficiency. Innovative businesses entities come up with processes that are meant to enhance operation efficiency in the market. This may involve complete alteration and reengineering of the existing processes or just a slight alteration or modification of these processes. Irrespective of the approach or route take, it has been agreed that innovation plays and important role when it comes to process efficiency, which in turn determines whether a venture will be viable or not (Baron and Shane, 2008). Existing business have been able to grow by coming up with innovative process and operation structures that have allowed them to venture into new markets. It is through these innovative processes that the companies have reduced their operational costs, which then allow them to increase their returns from the market and be able to raise capital that is used for expansion and growth. Companies like Comcast have relied on innovative processes within its ranks to be able to gain and increase its presence in different markets. Many businesses have gone ahead to grow by copying and adapting the innovations of other businesses that are known to result in efficiency. This has allowed them to advance in the market and increase their market shares. The use of innovative technology in the various processes and aspects of the business such as marketing, sales and human resources allows the entities to remain viable and be able to grow. Aislabie (2012) states that ventures that are operating efficiently in the market are normally able to effectively meet their objectives and attain advantage over their other rivals in the market. Entrepreneurial startups that have incorporated innovative practices in their ranks are able to reduce the costs of doing business. In addition to this, such businesses and entrepreneurial startups are able to reduce and minimize waste in their operations (Audretsch and Falck, 2000). This way, such businesses have been able to ensure higher chances of success in the market. On the other hand, the ventures that are not innovative will tend to have higher operating costs. As such, they will not be able to operate efficiently. The result of this is that the ventures will not be able to compete with the others ventures that are effective in their operations by being innovative. Increasing Productivity The productivity of the business or an entrepreneurial start up is a key measure that differentiates a successful entrepreneurial start up from one that has failed. Productivity directly relates to the returns that the business is able to get from a particular market (Aislabie, 2012). Productivity of a business and entrepreneurial start up is normally improved and increased through innovation. This is especially the case when it comes to the business processes and the services that are offered by that particular business. Through innovation and innovative practices, companies have been able to ensure product diversification within their ranks and this has gone a long way in increasing productivity and giving the business and an avenue that can be used to expand and grow in newer markets. Aislabie (2012) states that business entities like Samsung have grown and increased their market share through innovation. Despite the existence of other alternative mobile phone options, Samsung has used innovation to increase productivity and be able to stay ahead of its rivals. The company has gone ahead to come up with innovative processes and practices which have enabled it to come up with different products that are not only appealing to the clients but also able to satisfy the needs of the consumers. Innovation not only promotes product diversification but also allows the company or entrepreneurial start up to differentiate its products from the rest of the other products and services that are in the market (Aislabie, 2012). By increasing productivity, diversifying the products and differentiating them from the rest of the other available products in the market, businesses are able to increase their market shares and grow. This occurs because of the increased returns that they get from the sale of the innovative products and services. Allows for Expanding to New Markets Innovation is the best way through which entrepreneurial start up and businesses can to get into new markets. The reason this is the case is because of the fact that customers and consumers view innovative products as something that helps improve their lives and adds value to them (Gries and Naudé, 2010). As a result, the consumers will go try out the products that they view to be innovative. For a business to be able to expand to newer markets, innovation needs to be taken into consideration. Innovation plays the roles of facilitating entry into a new market by providing an avenue through which the businesses can create a new entry point for selling. The business market is usually saturated and in order to be able to expend into a new market or thrive in the current saturated market, businesses are required to be innovative. When the business is able to identify and come up with an innovative product, process or service, it will be able to create a unique entry and selling point in the market (Aislabie, 2012). This will allow it to gain mileage in the market and increase its revenues and returns from that particular market. It is through innovation and innovative practices that Apple, Toyota and Samsung have been able to create unique entry points and selling points in different markets. This has allowed them to cut a niche in the already saturated market and be able to expand. Conclusion Innovation is a very important aspect of doing business. As such, existing business ventures as well as new entrepreneurial startups are required to be innovative to be able to come up with products and process that are unique and that will allow them to be able to thrive in the saturated markets. The businesses that are not innovative are not able to match their competitors in the market. In addition, such businesses will not be able to fully and efficiently satisfy the needs of the customers. 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