Over
the last three weeks I have given you advice from four billionaires.
And, all four of them made their money through entrepreneurship.
So,
what is entrepreneurship? As I have written about before, the only purpose of a business is to create a customer. Therefore, the two
entrepreneurial functions are: innovation and sales.
To
put it more simply, entrepreneurship is about the exchange of value.
The exchange is the selling, and the value is the innovation.
Next
week I will do a post about selling. This week let us talk a little
about innovation.
Innovation
is all about the creation of value.
Peter
Drucker said the following about innovation, “It
is the act that endows resources with a new capacity to create
wealth...Until
then, every plant is a weed and every mineral is just another rock.”
“Not
much more than a century ago, neither mineral oil seeping out of the
ground nor bauxite, the ore of aluminum, were resources. They were
nuisances; both render the soil infertile. The penicillin mold was a
pest, not a resource. Bacteriologists went to great lengths to
protect their bacterial cultures against contamination by it. Then in
the 1920s, a London doctor, Alexander Fleming, realized that this
'pest' was exactly the bacterial killer bacteriologists were looking
for–and the penicillin mold became a valuable resource.”
Think
about Xerox, for example. As you can probably appreciate,
photocopying is a very technologically advanced process. But,
actually, what made Xerox successful was not really the complex
technology.
The
main contributor to Xerox's success was a pricing innovation. This
may seem weird but, the way you price things can be an innovation.
Remember innovation is about creating valuable things.
As
it applies to Xerox, lots of people would like to photocopy
documents. However, very few people make enough copies to get value
from an entire machine. If you had to buy an entire photocopying
machine, would you? Of course not. So, allowing people to pay per
copy represents real value. People do it all the time.
At LegalShield, one of our main innovations is a pricing innovation as
well. Instead of forcing people to pay $200-300 per hour, to speak
with an attorney, LegalShield provides people with attorneys for less
than a dollar a day. It is real value and people love it!
As
you can see, innovation is not about what you want to produce.
Innovation is about what people want to buy. Innovation is not
creativity. Innovation is the commercialization of creativity. If
sufficient numbers of people do not want to buy your products, or
services, you will not succeed as an innovator. Which means you will
not succeed as an entrepreneur.
Having
said that, hopefully you can see how your sales and marketing efforts
can influence the success of your innovations. Two examples would be
IBM and Microsoft. Neither IBM nor Microsoft produce technologically
superior products. The two succeed because they are excellent selling
organizations.
But,
I am getting ahead of myself. For now, simply remember
that innovation is all about the creation of things valuable.
