File C5-10

February 2010
www.extension.iastate.edu/agdm
Peter Drucker and Innovation*

I
nnovation involves finding a new and better way 5. Demographics - Changes in the population’s size,
of doing something. Much of our modern society age structure, composition, employment, level of
is based on innovations that have occurred in the education and income can create innovative op-
past that provide us with the standard of living we portunities.
enjoy today.
6. Changes in perception, mood and meaning-
Innovative opportunities can develop when a
Entrepreneurship and innovation are companion
society’s general assumptions, attitudes and beliefs
terms. Entrepreneurship involves looking for a new
change.
innovation and taking advantage of it.
7. New knowledge - Advances in scientific and non-
Peter Drucker is a leading authority on entrepreneur- scientific knowledge can create new products and
ship and innovation. Below Drucker outlines seven new markets.
sources or places to look for innovative opportunities.
Then he outlines five steps to follow to take advan- Drucker’s Five Principles of Innovation
tage of an innovative opportunity. Below are five principles that can help you take
advantage of a new innovation you may have discov-
Drucker’s Seven Sources for Innovative ered.
Opportunities 1. Begin with an analysis of the opportunity.
Drucker outlines seven sources for innovative oppor-
tunities that should be monitored by those interested 2. Analyze the opportunity to see if people will be
in starting an entrepreneurial venture. The first four interested in using the innovation.
are sources of innovation that lie within the industry. 3. To be effective, the innovation must be simple and
The last three arise in the societal environment. clearly focused on a specific need.
1. The unexpected - An unexpected success, an 4. Effective innovations start small. By appealing to a
unexpected failure or an unexpected outside event small, limited market, a product or service requires
can be a symptom of a unique opportunity. little money and few people to produce and sell it.
2. The incongruity - A discrepancy between reality As the market grows, the company has time to fine-
and what everyone assumes it to be, or between tune its processes and stay ahead of the emerging
what is and what ought to be, can create an innova- competition.
tive opportunity. 5. Aim at market leadership. If an innovation does not
3. Innovation based on process need - When a aim at leadership in the beginning, it is unlikely to
weak link is evident in a particular process, but be innovative enough to successfully establish it-
people work around it instead of doing something self. Leadership here can mean dominating a small
about it, an opportunity is available to the person market niche.
or company willing to supply the missing link. *Reference: Drucker, Peter F. Innovative and Entrepre-
4. Changes in industry or market structure - The neurshipPractice and Principles. Harper & Row, Publish-
opportunity for an innovative product, service or ers, Inc. 1985.
business approach occurs when the underlying
foundation of the industry or market shifts.
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Don Hofstrand
co director Ag Marketing Resource Center
extension value-added specialist
641-423-0844, dhof@iastate.edu