EXPLORING INNOVATION, CREATIVITY, AND ENTREPRENEURSHIP: THEORIES AND PERSPECTIVES
1. Introduction
Entrepreneurship is a combined factor of creativity and innovation, as it helps in solving various challenges. Entrepreneurs create new businesses by finding creative solutions to existing challenges, which requires creativity. Then creative ideas are implemented through innovation, which facilitates new business. In this essay, the concepts of innovation, creativity and entrepreneurship are discussed along with various theories. Later, it analyses the impact of creativity and innovation on SMEs and evaluates the barriers as well.
2. Definitions of innovation, creativity, and entrepreneurship
Entrepreneurship is considered much more extensive than creating a business idea and is regarded as a mind set, which creates ways to solve issues and create value. Entrepreneurship is highlighted as the “pursuit of opportunity”, where pursuit informs constant focus and opportunity depicts scope, which is new in four ways (Bessent & Tidd, 2011). The four categories of opportunity highlight integrating a new business model, creating an improved or affordable version of existing products, creating an “innovative good”, and targeting a different segment of consumers with the same product. Creativity indicates loosely toward the creation of new ideas and innovation is the effective implementation of novel concepts (Lowe, 2006). However, a distinct difference between creativity and innovation can be recognised. Creativity utilises the potential of the mind to think of novel concepts and innovations to take the concepts further to introduce changes. Innovation emphasises work and effort to make the idea viable.
The process of entrepreneurship is integrally connected with creativity and innovation. Entrepreneurship depends on the creativity of the involved people to generate new ideas about products and services along with the successful implementation of these ideas, which relates to innovation (Burns, 2014). Innovation can only be determined after the result of the implementation as it relies on the success of the new product in the targeted market or consumer segment. Therefore, innovation can be informed as the suitable conversion of ideas and knowledge into processes, products, and services, which obtain value from the consumers. On the other hand, creativity is the ability of individuals to generate unusual concepts to create something new. Creativity can be divided into two groups; innovation and invention (Blundel & Lockett, 2017). Invention can be described as the process of generating new concepts and converting the concepts into products and services for commercial success is informed as innovation.
Creativity is an imaginative process, which is not quantifiable and does not require financial consumption along with no risks. On the other hand, innovation is a productive process, which requires significant financial investment. Innovation has significant risks and it can be quantified based on the success of the new product (Burns, 2014). Entrepreneurs utilise creativity to seek out opportunities and innovation is used as a tool to create opportunities in business.
3. Theories of innovation and creativity
7 Sources of Innovative Opportunity
According to Callegari & Nybakk (2022), the “7 Sources of Innovative Opportunity” highlight various sources of “innovative opportunity”. “The unexpected” highlights success, unusual events and failure as a powerful source of innovation in business enterprises. On the other hand, “The Incongruous” depicts situations, when there is a significant discrepancy between reality and expectation facilitating the urge to seek new insights. The business organisation generally focuses on innovation in order to achieve certain objectives, which adds value to its products and services (Callegari & Nybakk, 2022). The “process need” and “Industry and market structures” highlight the requirements of the organisation based on their weaknesses in workflow and changing industry and market requirements. It inspires business firms to take unique measures to reduce the drawbacks of their established process and to align their operations with the current market and industry structure to gain benefits, which induces innovation.
The “Demographics” and “Changes in Perception” inform the changes in employment, population characteristics, and changing perspectives influence innovation as well (Estrin et al. 2022). “New knowledge” highlights the influence of innovation from advanced technologies and “scientific breakthroughs”, which can facilitate the requirement of assessing consumer needs, emerging trends, and the utilisation of new technologies to improve processes.
Innovation theory of entrepreneurship
According to Audretsch et al. (2020), the “Innovation theory of entrepreneurship” highlights five categories of innovation such as “new product”, “new market”, “new process”, “new source of supply”, and “Changes in industrial organisation”. A new product inserts certain changes in the existing market as it offers different features than the existing goods. Selling products to a new market can also facilitate innovation such as expanding business to a new country or targeting a different demographic group of consumers. It helps entrepreneurs in expanding their businesses successfully to acquire higher profitability and viability for their business (Blok, 2021). The “new source of supply” informs the use of new materials for existing goods such as using biodegradable materials instead of using plastic.
The “Changes in industrial organisation” highlights various changes such as parts of the supply chain, which can integrate changes in the business model. For example. Amazon has revolutionised the retail industry through its e-commerce business through which consumers can shop online and get their products delivered to their homes.
Schumpeter’s cycle of “creative destruction”
Creative destruction refers to the process of eradicating established practices to facilitate innovation. Creative destruction theory has four integrated principles, which highlight the purpose of dismantling old processes. Innovation is the first principle, which highlights the requirement of incorporating novel concepts and technologies (Hutahayan & Yufra, 2019). Creative destruction focuses on gang competitive advantage and supports entrepreneurship through which disrupting technologies and products emerge (Malerba & McKelvey, 2020). Having adequate capital is an essential part of the creative destruction theory, as innovative changes require substantial financial investments. For example, Apple has been able to replace CDs and MP3s to revolutionise the business model of the music industry through their creation of iTunes software.
Four Dimensions of Innovation (4Ps)
The 4Ps refer to the product, process, position and paradigm innovation, which highlights changes in organisational offerings. Product and process highlight changes in services, goods, manufacturing, and operational processes. Position depicts changes in context while paradigm highlights the changes in the underlying “mental model”.
4. Impacts of innovation/creativity on the development/success of SMEs
SMEs refer to businesses in the UK that fall within particular employee and turnover thresholds. In this context, SMEs are categorised based on their workforce size and annual turnover. Specifically, micro-businesses consist of 1 to 9 employees and should not surpass a turnover of €2 million. Small businesses, which employ 10 to 49 individuals, should keep their turnover below €10 million. Medium-sized businesses, with a workforce of 50 to 249 employees, should maintain a turnover that does not exceed €50 million. These distinctions are important for various purposes, including regulatory considerations, financial assessment, and policy formulation. Innovation and creativity play pivotal roles in shaping the growth and success of SMEs.
Innovation and creativity stand as cornerstones in shaping the trajectory of SMEs, exerting profound impacts on their development and ultimate success. These dynamic forces serve as catalysts, propelling SMEs beyond traditional norms and equipping them with the tools to navigate the complexities of modern business landscapes (Blok, 2021). A prime example of innovation’s transformative power can be found in the initiatives of Starling Bank. Starling Bank redefined the banking experience through a “customer-centric approach”, eliminating hidden fees and offering “24/7 customer service”. This innovative mindset not only attracted customers seeking transparency and convenience but also set Starling Bank apart in a saturated banking industry. Creativity, as demonstrated by Starling Bank, acts as the driving force behind effective problem-solving and customer engagement. The bank’s responsiveness to customer needs is exemplified by its introduction of a second debit card for trusted individuals during the pandemic.
This creative solution empowered those self-isolating to access essential supplies through their designated proxies, displaying how innovation can directly address real-world challenges. Moreover, innovation fuelled technological advancements within Starling Bank. The bank’s in-house engineering teams and core banking software in the public cloud infrastructure illustrate the power of technological innovation (Priyana & Syam, 2023). This approach not only enabled agility in response to the crisis but also enhanced operational efficiency, enabling Starling Bank to provide seamless services to a growing customer base. In addition, EasyJet, an SME that ingeniously transformed the airline industry with its innovative approach to affordable travel, serves as a splendid illustration of the profound effects of innovation. Through a daring reevaluation of conventional aviation practices and a keen responsiveness to evolving customer preferences, EasyJet successfully reshaped the landscape of air travel, demonstrating the remarkable potential of creative thinking within small and medium-sized enterprises.
Creativity played a crucial role in EasyJet’s success, which highlighted the idea of creating an online booking process to enhance customer engagement and loyalty. The airline innovated an easy-to-use online booking system and digital interfaces, which allowed passengers to manage their travel plans directly, making things more convenient and removing intermediaries (Malerba & McKelvey, 2020). This innovative approach not only empowered customers but also helped EasyJet establish a unique brand identity that set it apart from competitors. Additionally, EasyJet’s dedication to using technology in smart ways improved its efficiency and the overall travel experience. The airline adopted cutting-edge technologies for tasks like online check-in, digital boarding passes, and automated processes. These upgrades made travelling smoother, saving time for passengers and increasing their satisfaction.
EasyJet’s forward-thinking approach to environmental sustainability is another example of its creativity. Through investing in fuel-efficient planes and eco-friendly practices, the airline showed how it is addressing global environmental concerns. This aligns its business strategy with what society values and expects (Estrin et al. 2022). The connection between innovation, creativity, and SME development is noticeable as Starling Bank’s journey shows how innovation, through a strong customer-focused approach, can change traditional industries. Removing hidden fees and offering “24/7 customer service” resonates with customers who want transparency and convenience (Hutahayan & Yufra, 2019). Similarly, the ingenious approach of EasyJet towards affordable travel serves as a testament to the transformative potential of creative thinking. Through a comprehensive reevaluation of conventional aviation practices and a nimble response to evolving customer preferences, EasyJet successfully orchestrated a revolution in the realm of air travel.
5. Limitations of SMEs to become more creative/innovative
SMEs encounter certain limitations that hinder their ability to fully embrace their creativity, innovation and realisation of their transformative capabilities. One significant drawback lies at the management level, where the agility that often defines SMEs can falter when faced with rapid growth and increased complexity. The organisational structure of SMEs can barely be equipped to handle the challenges that come with scaling up operations, potentially leading to inefficiencies and operational bottlenecks (Gay & Szostak, 2019). At the personnel level, SMEs often struggle with a shortage of technical expertise due to limited resources for hiring or retaining specialised professionals crucial for “research and development”. Limited finances also hold back SMEs from innovating through a shortage of money, and they might not have access to the same funding sources as bigger companies.
Additionally, limited resources can stop them from trying new things or making new products, which stops SMEs’ growth and creativity. SMEs might have a tough time teaming up with big companies, research centres, or industry pros, which keeps them from getting important info and fresh ideas. Money creates great challenges in marketing by making it tricky to run extensive marketing campaigns or establish broad distribution, making it difficult to reach more customers and highlight new and innovative offerings (Gay & Szostak, 2019). There are also various barriers such as the pressure of obeying traditional rules, which limits the possibilities of innovation that limit creativity and innovation. The availability of resources and the pressure of hierarchy also prevent employees from involving and spending time on creativity.
6. Conclusion
This essay discusses many theories as well as the ideas of innovation, creativity, and entrepreneurship. Utilising the capacity of the mind to generate original ideas and innovations, creativity pushes ideas further and ushers in change. The importance of work and effort is highlighted in innovative thinking. Innovation and creativity act as catalysts, pushing SMEs past conventional boundaries and giving them the tools they need to successfully negotiate the complexities of contemporary business environments. However, SMEs struggle with management, technical expertise shortages, financial constraints, limited collaborations, marketing challenges, and hierarchical pressures, hindering full creativity and innovation.
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