The term ‘creativity’ and ‘innovation’ are often used to mean the same thing, but each does have an unique connotation. Creativity is ‘’the ability to bring something new into existence’’. This definition emphasises the ‘ability’ and not the ‘activity’ of bringing something new into existence. A person may therefore conceive of something new and envision how it will be useful, but may not necessarily take the required action to make it a reality. Innovation is the process of ‘doing’ new things. This distinction is important. Ideas have little value if they are not converted into new products, services or processes. Innovation, therefore, is the transformation of creative ideas into useful applications. Creativity is therefore a prerequisite for innovation. According to Peter Drucker, the seven sources for innovation (four internal and three external) are as under:

The four internal sources of innovation are :

1. The unexpected – Unexpected opportunities are seldom noticed. On the contrary, they are often rejected. But such opportunities if taken care of, may offer success with very little risks. For example, coaching classes started as tutorials for students who were weak in studies. Now coaching classes as a business have flourished.

2. The inconsistent – There are inconsistencies (ie discrepancies) between what is and what ought to be. The talent of an entrepreneur lies in identifying them. Beauty parlors are a good example of this. They are no longer limited to the higher classes of society. Small passenger cars are another excellent example. Cars have no longer remained the monopoly of the rich.

3. Innovation – Necessity is the mother of all inventions. Workers were reluctant to work in hazardous environment which involved toxic gases, heights, heat etc. The creation of robots is an example of innovation.

4. Change in industry structure – It catches everyone unaware. The steep rise in the fuel prices gave rise to small cars.

The three external sources of innovation are :

1. Demographics – It means the changes in population, age structure, size, employment, education and income. Because of the birth control measures taken by the government, the population may reduce after 5 years and baby products will obviously sell less. But parents will definitely pamper their ‘only child’. This may open up the horizons for many new products.

2. Change in reception – It is the mood and taste of people. The way people dress has changed. The requirement of photographs for all documentation has changed the photo industry from the ‘come after 4 days’ to a ‘photo in one hour’ or instant photos.

3. New knowledge – The main feature of knowledge based innovation is that it has the longest lead-time and as such it is the kingpin of successful entrepreneurship. It cannot be introduced tentatively and the innovator does not get a second chance.

In order to make an organisation receptive to innovation, the following policies and practices are needed for an entrepreneur :

a. Infusion of innovative thinking – There is only one way to make innovation attractive and that is a systematic policy of abandoning whatever is obsolete and unproductive. Nothing so powerfully occupies an entrepreneur’s mind as the knowledge that the present product or service will be abandoned within the foreseeable future. Innovation must be made a part and parcel of the thinking process and daily routine of every entrepreneur.

b. Knowledge of hard reality – It must be made clear to all those in the organisation that all existing products, processes and technologies have a limited life. The entrepreneur should take a lead in planning the life / obsolescence of their own products and services by introducing new products and processes rather than waiting for a competitor to do so. Thus a policy of systematic abandonment of existing products and processes must be adopted.

c. Business analysis – An analysis and diagnosis of the current business is required to define how much innovation the business requires, in what areas and within what time frame. Such a diagnosis enables every one to turn innovative intentions into innovative performance.

d. Opportunity – Entrepreneur’s vision should be focused on opportunity. All presentations and meetings should include not only the present operations but also the opportunities available.

e. Periodical meetings – Conduct periodical meetings of all the concerned employees and observe the viewpoints to find out who have done better and differently. This will help to generate an entrepreneurial spirit throughout the entire team.

f. Listen – It is good to listen to people from research, engineering, marketing etc to discover new ideas and opportunities. A greed and need for new things should be developed.