Innovation and entrepreneurship are closely related but you
can make a big mistake by thinking that they are the same thing. They are not.
Innovation results in a new technology or product. It is
technological invention, which lets parts do what they could not previously do.
You have an engine and wheels and axles and you put them together to invent a
car. Progress depends on innovation and great innovators can get rich.
Entrepreneurship, by contrast, results in a new company or
organization. It is social invention, which lets people do what they could not
previously do. You have people with more money than they need now and people
who need money and put them together to make and get loans and you have a bank.
Progress depends on entrepreneurship and great entrepreneurs get even richer
than great innovators.
 |
| Henry Ford |
Ray Kroc didn’t invent the hamburger but when he died he was
worth half a billion dollars. He was an entrepreneur. Sam Walton didn’t invent
the retail store but his heirs are worth more than $100 billion. He was an
entrepreneur. Henry Ford didn’t invent the car but he when he died in 1947, he
was worth nearly $200 billion (inflation adjusted). He, too, was an entrepreneur.
 |
| Sam Walton |
Given the way we use the term, all of these entrepreneurs
were innovative. And indeed, it is hard to imagine an entrepreneur who wasn’t
innovative having much success. You have to distinguish your product or service
from competitors and that usually calls for innovation.
But thinking that your job as an entrepreneur is the same as
the job of an innovator can create unnecessary confusion and failure.
Imagine two people with equal skills for creating companies
and software. One – Seo-joon - thinks of himself as an innovator and focuses on
creating a great app. The other – Emma - thinks of herself as an entrepreneur
and focuses on creating a great company.
Seo-joon uses his scarce attention to analyze the market,
software tools, and to code. He does a great job and creates a valuable app.
Emma uses her scarce attention to analyze markets, business
plans and processes, and to create a company where people who want to focus on
creating and selling great products will want to work. She does a great job and
creates a valuable company.
When Seo-joon completes his great app, his work has just
begun. He will need a way to distribute the app, to market and sell it. He will
need to find a way to support it as customers begin to use it and either
encounter bugs or simply have questions. He will need to do research on how the
product is being used to decide how to improve the product and to find new
markets for it. He will need to set up payroll, finance, HR, and a host of
other business processes to support his app.
What is likely to happen? Probably, after realizing how much
more work he has to do – work he has not even focused on understanding or
learning – he will sell his product to Emma who will either buy it outright or
offer him royalty payments. Emma has engaged in entrepreneurship and has built
a company. Seo-joon’s app is just one of her products. She has a portfolio of
products. Emma is actually in a position to create more value with this
portfolio of products – even though she may not have designed or created a
single one – than Seo-joon is with his great app.
The world needs both innovators and entrepreneurs. R&D
labs, though, are full of innovators who work for entrepreneurs or someone who
manages a company founded by an entrepreneur.
Decide if you are building a company or a product. Decide,
that is, whether you are an innovator or entrepreneur. If you try innovation
without a way to sell and support your product, you’ll likely flounder. If you
try entrepreneurship without some innovative approach or with partnerships with
innovators, you’ll likely flounder. Be clear about what you are doing and then
try to excel at that. Great innovators and entrepreneurs tend prosper; people
who divide their attention between both of these important tasks tend to be
either unlucky or superhuman.
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