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Unit 2

Creativity andEntrepreneurial Plan

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Creativity and InnovationCreativity is bringing something new into existence.

The Definition emphasizes the ability not theactivity of bringing something new into existence. Aperson may therefore conceive of something newand envision how it will be useful, but not

necessarily take the necessary action to make it areality.Innovation is the process of doing new things.

The distinction is important. Ideas have little value untilthey are converted into products, services or processes.Therefore innovation is the transformation of creativeideas into useful applications

Creativity Is A Prerequisite To Innovation

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Creative Process

Idea by itself has no meaning unless it istransferred to some meaningful purpose.

Creative Process is a process by which creativepeople germinate ideas, nurture them anddevelop them successfully.

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Creative Process

The seeding

stage of a newideaRecognition

IdeaGeneration

Conscious searchfor knowledgeRationalization

Preparation Subconscious

assimilation of information-Fantasizing

Incubation

Recognition of Idea as beingFeasible-Realization

Illumination Application or

test to showthat Idea hasvalue

Verification

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Creative ProcessThe main steps in creative process are:1. Idea Germination- It is the seeding process,

Most creative ideas can be traced to an individuals interestin or curiosity about a specific problem or area of study.

Alexander Graham Bells Fascination and Thomas EdisonsProblem is its example.

2. Preparation- Once a seed of curiosity is implantedinside the brain and has mutated in the form of focused idea, creative people embark on a

conscious search for answers. If it is a problem they are trying to solve- such as

Bells determination to help those with impairedhearing, then they begin an intellectual journey,

seeking information about problem.

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Any individual with an idea will consequently think about it,concentrating his or her energies on rational extensions of the idea and how it be brought into reality.

4. Incubation- Most ideas are evolved from the minds of creative people when they go on other activities. The idea,once seeded and given substance through preparation, isput on a back burner, the subconscious mind is allowed toassimilate information.

5. Illumination- This stage occurs when the idea resurfacesas a realistic creation. Illumination may be triggered by an

opportune incident that would lead to suddenunderstanding of the whole assimilated information.

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6. Verification- An idea once illuminated in the mindof an individual still has little meaning until verifiedas realistic and useful. The thinker may have tospend many years to develop an innovation basedon that creative idea.

It is the development stage of refining knowledge into

useful application.

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Innovation and Entrepreneurship The Innovation implies action not just conceiving of

new ideas.

Inventors are not limited to those who create newproducts. They also include those who identify New technological processes, New forms of product life,

New designs For an idea to have value, it must prove to bemarketable, and to achieve this status, the idea mustbe developed.

Innovation is a development process, a translation of idea into application. It requires persistence in analytically working out the

details of product design or service, to developmarketing, obtain finances and plant operations.

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Innovation process

To Identify- ProductDesign, MarketingStrategy andFinancial Need

AnalyticalPlanning

To Obtain-Materials,Technology, HR,Capital

OrganizingResources To Accomplish-

Organization,Product DesignManufacturingServices

Implementation

To Provide-Value toCustomers,Rewardsto employees,Revenues toInvestors &Satisfaction forfounders

CommercialApplication

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Technological Innovation

Inventor ororiginatorwho createssomethingfrompersonalvision andeffort

CreativeSource Champion

Entrepreneuror managerwho pursuesthe idea,providingleadership forapplication .

Sponsor

Person or Org.that backsinnovation withfinance, adviceand contacts

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7 Conditions important for Technological Innovation

1. An outstanding person in executive leadershipposition to support strategic decision thatencourage creativity and innovation development

2. An Operational Leader to carry out the essentialtasks of converting knowledge into commercialapplication.

3. A clear need for the application by sufficient

potential consumers to warrant the commitmentof resources to the innovation.

4. The Realization of the product, process or service

as a useful innovation providing value to society.

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5. Good Cooperation among the crucial players andamong diversified functions in an organization, allof whom together must bring idea to fruition.

6. Availability of resources and the supportingtechnology to succeed in the endeavor.

7. Cooperation and support from external sourceswho can influence the success of an innovation,including government, agencies, investors,vendors, suppliers and creditors.

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Project Management Project-

Definitions- Project is an organized unit dedicated to attainment of goals

with respect to time, cost and within program specifications. According to Little and Mirrlees-> ,A project is any scheme or

part of the scheme for investing resources which can bereasonably analyzed and evaluated as an independent unit

A Project Report is made to provide the necessaryinformation which is required for getting a loan.

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Project classificationThe project classifications are explained below:1. Quantifiable and non quantifiable projects :

quantifiable projects are those in which a plausiblequantitative assessment of benefits can be made.E.g., project concerned with industrialdevelopment , power generation, mineraldevelopment.Non quantifiable projects are those where such an

assessment is not possible.E.g., of non quantifiable category (health,education and defence).

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2. Sectoral projects : According to the IndianPlanning Commission, a project may fall in thefollowing sectors:

a. Agriculture and allied sector

b. Irrigation and power sector

c. Industry and mining sector

d. Transport and communication sector

e. Social services sector

f. Miscellaneous sector The sector classification of projects

is quite useful for resource allocation at macro

levels.

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3. Techno economic projects : This includes

a. Factor intensity oriented classification: classification of project such as capital-intensive or labor intensivewhich depends upon the large scale investments inplant and machinery or human resources.

b. Causation oriented classification: the causation

oriented project are determined based, on its causesnamely demand based or raw material based projects.

c. Magnitude oriented classification: the size of

investment forms the basis for magnitude orientedprojects. Projects may thus be classified based on itsinvestment such as large scale, medium scale andsmall scale projects

U it d N ti d it i li d g i th I t ti l

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United Nations and its specialised agencies use the Internationalstandard Industrial classification of all economic activites in collectionand compilation of economic data. Economic activities are under thisclassification grouped into ten divisions, which are sub divided into

ninety sub divisions. The divisions are: Division 0-agriculture, forestry, hunting and fishing Division 1-mining and quarrying

Division 2&3-manufacturing Division 4-construction Division 5-electricity, gas, water and sanitary services

Division 6-commerce Division 7-transport,storage and communications Division 8- services Division 9-activities not adequately described

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4. Financial institutions classificationsAll india and state financial institutions classify the projectsaccording to their age and experience and the purpose for

which the project is being taken up.They are as follows:

1. New projects2. Expansion projects3. Modernization projects4. Diversification projects

the projects listed above are generally profit orientedand the services oriented projects are classified as under:

1. Welfare projects2. Service projects3. R&D Projects

4. Educational projects

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Project identificationProject identification is concerned with the collection,compilation and analysis of economic data for the eventual

purpose of locating possible opportunities for investment andwith the development of the characteristics of suchopportunities.

Opportunities , according to Drucker (1955), are of three

kinds: additive, complementary and breakthrough.project identification cannot be complete without identifyingthe characteristics of project.every projects has three basicdimensions-inputs, outputs and social costs and benefits.

in addition to inputs and outputs every project has an impacton the society. It is necessary to evaluate carefully thesacrifice which the society will be required to make and thebenefits that will accrue to the society from a given project.

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INTERNAL CONSTRAINTSIn India ,the internal constraints for the entrepreneurswhile venturing the projects comprise inputs, resourcesand outputs. These are narrated as under:

i. Entrepreneurs , while implementing the projects, relymore on outside consultants for preparation of

feasibility reports in the formulation of their projects.ii. For early implementation of projects within the

budgeted cost and time schedule, all theentrepreneurs cannot develop independent projectmanagement systems. In such situation, theentrepreneurs inherent internal constraints aredeveloping well equipped project management

strategies and tools while implementing them.

iii P j l d bj i l d h i

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iii. Project goals and objectives lay down the mainpurpose for which an organization exists. This willbe another internal constraint for the project team

to achieve the unrealistic objective which isdecided by the top management personnel of thebusiness.

iv. The availability of the necessary internal projectelements and resources are physical and nonphysical resources. The physical resources includefinance , personnel, inventories and facilities. The

non physical resources are patents, secretprocesses , unique experience and skills. Bothphysical and non physical resources are importantconstraints for the entrepreneurs.

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EXTERNAL CONSTRAINTSthe important external constraints are the projectenvironments comprising things, people, andsituations outside a project and also the size, nature, location and extent of the project constitute theenvironment. The other tangible environmentfactors are namely social taboos, governmentpolicies and the state of capital market.

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Project Feasibility Analysis Project feasibility analysis is done with the objective

to formulate a report, called Project feasibilityreport with respect to any investment proposalbased on certain information and factual data, forthe purpose of getting project appraised orevaluated. Used by

Financing companies to check if project requiresfinancial assistance.

Other companies to provide assistance such as work-sheds, raw materials, seed/margin money, etc.

The report is based upon the soundness of the project.

M k ti g A l i

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Marketing Analysis

Brief description of the market Analysis of Past and Present demand (quality and value of consumption) Analysis of Past and Present Supply with Source

Technical Analysis Evaluation of the project in terms of technical feasibility Offers a basis for the estimation of costs It provides an alternatives on employment, ecology, infrastructure, demands,

balance of payment, capital services Financial Analysis

Preparation of Financial Statements, evaluation in terms of commercialprofitability and determination of magnitude of financing required

Sensitivity and Risk Analysis Assembly of the market and technical cost into Performa

Economic Analysis Examining existing demand and supply position. Adequacy of provisions made with regard to the fixed and working capital Dependability of estimates made about the sources of Finance Evaluates the proof of profitability and repayment capability.

P j F l i P

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Project Formulation: Process

Time scheduling of the activities of the project

Amount of Investment

Type and size of organization

Type and level of activities to be undertaken

Areas of Operation

Infrastructure Facilities

Availability of various resourcesLocation and Size of Project

Decision of the Objectives of Project

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Project Evaluation/ Appraisal Project evaluation is an assessment of the project in all its

aspects and its analysis to determine its feasibility andviability. Evaluation or appraisal is performed by banks or financial

institutions before making decision to sanction term loanor working capital assistance to the project promoter.

While the evaluation criterion can vary from institution toinstitution it normally covers 3 areas.

Technical Evaluation Marketing Evaluation

Financial Evaluation

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Technical Evaluation- Technological engineering andother production aspects are considered to determinethe possibility of producing the product at a reasonablecost.

Plant and machinery selected, Technology proposed to be used Raw material sources Availability and arrangements of supply Manpower Availability Promoters competence to harness requisite resources

M k ti E l ti M k ti ibiliti

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Marketing Evaluation- Marketing possibilities aresimultaneously explored, marketing proposed by thepromoter may be of 2 types.

Existing ones Ones to be created

Marketing evaluation consists of the following- Examination of location and adequacy of markets Nature of competitive environment, relative share of

competitors and what market share promoter hopes tocapture and strategy for the same.

The distribution channels currently in use by theindustry; if promoter gets access to them; if not, thealternatives proposed to be involved and what cost is

thereoff

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Fi i l E l i

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Financial Evaluation- Financial aspect seeks to establish financial soundness of

project idea. Financial aspect includes cost analysis of the project,

evaluation of the prices fixed, examination of the fundsto be raised and used and income/expenditure profile.

Following queries are sought by the evaluator/ appraiser

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Following queries are sought by the evaluator/ appraiser Cost study

What will be capital cost of the project What will be the operational cost Will the average total unit cost show downward trend and at

what capacity output. Income/ Expenditure

I/E estimates are reconsidered and anticipated profits arereviewed. Income flow forecast is examined in the light of loanrepayment schedule.

The ROI is evaluated to establish project profitability; cashgenerating capacity is related to repayment schedule andsavings possibility. Payback period is examined and compared.

Price study

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Price study What price is been fixed and how? What is expected sales revenue and basis of forecasting sales?

What is BEP in terms of sales units and sale rupees. What is tax element in price How much of the tax element is transferable What are the prices of competitive products

Funds to be raised (Need Vs Availability) Amount required under various heads for successful project

installation

Sources proposed to be tapped their availability, timelinesand cost involved The promoters contribution and its adequacy

C i P bl S l i T h i

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Creative Problem Solving Techniques Heuristic or heuristics: refers to experience-based

techniques for problem solving, learning, anddiscovery. Heuristic methods are used to speed upthe process of finding a good enough solution,where an exhaustive search is impractical. Examples

of this method include using a rule of thumb", aneducated guess, an intuitive judgment, or commonsense.

In more precise terms, heuristics are strategiesusing readily accessible, though loosely applicable,information to control problem solving inhumanbeings and machines.

The most fundamental heuristic is trial and error which can

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The most fundamental heuristic is trial and error which canbe used in everything from matching bolts to bicycles tofinding the values of variables in algebra problems.

Here are a few other commonly used heuristics, fromPolya's 1945 book, how to solve it

If you are having difficulty understanding a problem, trydrawing a picture.

If you can't find a solution, try assuming that you have asolution and seeing what you can derive from that("working backward").

If the problem is abstract, try examining a concrete

example. Try solving a more general problem first (the invetors

paradox" : the more ambitious plan may have morechances of success).

Brainstorming: Brainstorming is a group creativity

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Brainstorming: Brainstorming is a group creativitytechnique designed to generate a large number of ideas for the solution of a problem.

In 1953 the method was popularized by AlexFaickney Osborn in a book called AppliedImagination . Osborn proposed that groups could

double their creative output with brainstorming.

Professor Olivier Toubia of Columbia University has conducted

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Professor Olivier Toubia of Columbia University has conductedextensive research in the field of idea generation and hasconcluded that incentives are extremely valuable within thebrainstorming context.

There are four basic rules in brainstorming. Focus on quantity: T he greater the number of ideas

generated, the greater the chance of producing a radical andeffective solution.

Withhold criticism : In brainstorming, criticism of ideasgenerated should be put 'on hold'.

Welcome unusual ideas : To get a good and long list of ideas,unusual ideas are welcomed.

Combine and improve ideas : It is believed to stimulate thebuilding of ideas by a process of association .

Synectics Synectics is a problem solving methodology

http://en.wikipedia.org/wiki/Criticismhttp://en.wikipedia.org/wiki/Association_(psychology)http://en.wikipedia.org/wiki/Association_(psychology)http://en.wikipedia.org/wiki/Criticism

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Synectics- Synectics is a problem solving methodologythat stimulates thought processes of which the subjectmay be unaware.

Developed by George M. Prince (April 5, 1918 - June 9,2009)[1] and William J.J. Gordon, originating in theArthur D. Little Invention Design Unit in the 1950s.

They set up Synectics Inc. (now Synectics world) in andthe methodology has evolved substantially in theensuing 50 years.

The process was derived from tape-recording (initiallyaudio, later video) of thousands of meetings, analysis of the results and experiments with alternative ways of dealing with the obstacles to success in the meeting.

Prince emphasized the importance of Creative

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Prince emphasized the importance of CreativeBehavior in reducing inhibitions and releasing theinherent creativity of everyone.

He and his colleagues developed specific practicesand meeting structures

The use of the Creative Behavior tools extends theapplication of Synectics to many situations beyondinvention sessions

Gordon emphasized the importance of "'metaphorical process' to make the familiar strangeand the strange familiar". He expressed his centralprinciple as: "Trust things that are alien, andalienate things that are trusted.

It is done through the creation of analogies .

As an invention tool Synectics invented a technique

http://en.wikipedia.org/wiki/Analogyhttp://en.wikipedia.org/wiki/Analogy

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As an invention tool, Synectics invented a techniquecalled " springboarding" for getting creativebeginning ideas.

For the development of beginning ideas, themethod incorporates brainstorming and deepensand widens it with metaphor .

Synectics is more demanding of the subject thanbrainstorming , as the steps involved mean that theprocess is more complicated and requires more

time and effort. It is also much more rewarding .

Value Analysis (VA)- A team problem-solving system,

http://en.wikipedia.org/wiki/Metaphorhttp://en.wikipedia.org/wiki/Brainstorminghttp://en.wikipedia.org/wiki/Brainstorminghttp://en.wikipedia.org/wiki/Metaphor

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Value Analysis (VA) A team problem solving system,developed at the General Electric Company in the late 1940s.

Its special power is a technique called Function Analysis whichdramatically shifts the viewpoint of the problem-solvers.Functional Analysis

The product or process under study is first converted into anumber of word-pairs called Functions. The remainder of thestudy then concentrates on those word-pairs rather that onthe concrete product or process.

The specific form used for these word-pairs is now called aFunctive. Each pair comprises one verb and one noun. Eachnoun is ideally a parameter or measurable quantity. Each verbis ideally demonstrable on a non-verbal level. Those whorecall their sentence diagramming from English 101 willrealize that one verb and one noun make up one elementalsentence.

The total number of these sentences could run from

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The total number of these sentences could run fromforty or eighty for even a simple product or process.

In sum, these two-word statements are a totaldescription of the functions of the product orprocess. Value Analysts call this group of statementsa Function Analysis.

They greatly minimize what Miles called "functionalfixedness."

Miles defined this creative focus of FunctionAnalysis in terms of the technique he called"Create-by-Function."

Value Analysis-Key Elements>>

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y y FUNCTION ANALYSIS FUNCTION-COST FUNCTION-WORTH CREATE BY FUNCTION IMPLEMENTATION THE JOB PLAN THE TEAM OWNERSHIP

Users have modified the process to fit theirrequirements. A version of the process is in heavy usein the US Government, where it is called "ValueEngineering."

The Construction industry has followed their lead. Theirversion is also called "Value Engineering."

Some refer to the process as "Value Management."