3. Innovation, Need & Opportunity

Video note: I and many academics are cursed by slow speech. We don’t mind if you speed up our videos to stay awake. I speed up most videos to 1.25 or 1.5x (but maybe I’m just impatient).

As you explore our topics of innovation and entrepreneurship, you’ll find that we can’t separate the theoretical from the practical—they inform one another. On this page we’ll explore how innovation proceeds from a good idea, product, or service to one that has broad impact. This will give you background theory to provide a context and pathway from innovation to impact. But your ideas must work in a real-world context, and two practical considerations relate to the need for your product or service and the realistic opportunity to pursue that need. There’s actually something devious that can happen when the predictable diffusion of innovation collides with a changing real-world context. That’s called disruptive innovation, and it’s a key concept to understand and a key role played by entrepreneurs. But let’s start with how innovation leads to impact.

From Innovation to Impact

I’ll share two accepted theories on how innovations, new ideas, and new products spread from being unknown to successful to even dominant. The first is Rogers’ Diffusion of Innovation theory (1962) and the second focuses on how internet social media facilitate the spread of innovation and memes. Here are two videos to explain the Diffusion of Innovation. They are brief and cartoony, but they carry the essence of the academic theory taught in every innovation class. Within seven minutes you’ll learn the five groups who adopt innovations at different states: innovators, early adopters, early majority, late majority, and laggards. And you’ll learn the predictable growth path of successful innovations:

  1. Diffusion of Innovation-1: Adoption curve (3:30): https://www.youtube.com/watch?v=9QnfWhtujPA
  2. Diffusion of Innovation-2: the “S” curve (3:35 min): https://www.youtube.com/watch?v=NiNoNYLBabA

While the Diffusion of Innovation model is well accepted, a more recent model recognizes the network effect of a small group of respected sources in social networks, often termed “influencers.” In the network diffusion of memes (ideas that spread) image below, the red circles represent news sites and the blue represent blogs that people connect to through social media. It’s a visualization of how people get new ideas and develop opinions about causes, products, and services. You can think of influencers as the innovators and early adopters of Rogers’ model. The larger the dot, the more connections, therefore the more influence that site has on the spread of information about the meme, product, or service. The innovation spreads as more and more people connect to the ideas through their trusted sources on the social media network:

So there are strong, well-researched models of how you can expect and influence the spread of your innovative ideas, products, and services. But you actually have to make these ideas work. Next, let’s begin our study of how you would build a case for your idea to present to a funding agency or potentially supportive group or organization.

Disruptive Innovation

Begin learning about disruptive innovation from this 4-minute animation summarizing the ideas of Harvard professor Clay Christensen, author of super-successful business books explaining the concept. The video is fast paced and does not repeat or review, but it’s a great intro, The Innovator’s Dilemma (4:17 min): https://www.youtube.com/watch?v=yUAtIQDllo8 . Christensen’s book, “School’s Out,” applies his ideas to education in ways that taught me much about the power and strategies of entrepreneurship.

To understand more deeply, here’s a very informative low-key interview with Professor Christensen where he gives examples of disruptive innovation. He passed away about 7 years after the video was made, but at the time he was regarded as one of the world’s most influential management gurus: https://www.youtube.com/watch?v=qDrMAzCHFUU. One of the huge questions for educators is what part of complex school systems are ripe for disruption. NOT DESTRUCTION, but lower cost, simpler ways of meeting educational needs. BIG NOTE: data-driven models focus on the PAST, but you are trying to impact the future. Many disruptive innovations were guided by the gut instinct of the innovator rather than the data of the academic, the social scientist, or a manager. This has been a HARD concept for educators to deal with for many, many reasons, but one that an education entrepreneur must understand. It’s happening most often in higher education. Here’s a great current example:

Cutting cost of Master’s Degree from $44,000 to $7,000. Georgia Tech offered a respected M.S in Computer Science degree for $44,000. The classes were taught by competent professors on campus in classes of roughly 30 students. The students and professors got to know one another and formed informal networks that could help them through their careers. But it cost $44,000! Georgia Tech happened to be a pioneer in the development of fully-online, free, non-credit computer science courses called MOOCs (for Massively Open Online Course) with MOOC provider Udacity. These courses may enroll over 100,000 students in one class in one semester. All teaching is done by pre-recorded video, so there’s no increase in professor time. The courses were constructed quickly, and because they were free and non-credit, people took them without criticizing the rough edges. THEN …

AT&T wanted Georgia Tech to provide advanced training for their own computer engineers, but in an affordable, convenient manner for full-time employees spread across the nation. Georgia Tech converted the Masters in Computer Science courses to fully-online courses taught by the same professors who taught on campus. YOU or anyone who can be admitted to Georgia Tech can get the same degree with the same courses and instructors for only $7,000. From $44,000 to $7,000 offers greater convenience but you have fewer opportunities to develop your professional network! That’s disruptive, and it’s caused many sleepless nights in universities across the world. Here’s an article describing the research showing the new low-cost model is as effective as the former expensive one: https://www.insidehighered.com/digital-learning/article/2018/03/20/analysis-shows-georgia-techs-online-masters-computer-science

Georgia Tech now has the largest M.S. program in Computer Science in the U.S. and possibly the world! But that’s not the only example. Arizona State now offers a full freshman year for $600 per online course, fully refundable if you don’t pass the course. If you pass your freshman year courses, you are automatically accepted as an on-campus sophomore student! How might similar disruption take place at the community college or high school level? Shouldn’t every college, university, and high school be experimenting with these ideas?

That’s one of the burning questions and greatest opportunities for education entrepreneurs. Just as there was no criticism of Georgia Tech’s masters degree or ASU’s freshman program, there’s no implied criticism of community college or high school. Rather, can it be done a lot more simply, more conveniently, to reach customers/students not well served by the current system.

Two Kinds of Need and Opportunity

Only 3% or fewer of entrepreneurs are funded by Venture Capital or similar external funding sources. Most begin their ventures with limited funds from their savings, help from family and friends, or small bank loans. Other ventures request serious funding from government or foundation grants, angel investors, or venture capital firms. Those ventures need data-supported NEED statements that empirically document the rationale for the request. There are similar differences in how these two kinds of entrepreneurs address their business OPPORTUNITY. These two kinds of NEED and OPPORTUNITY are totally different. Let’s look first at the most common entrepreneur who is not requesting external funding.

Most Entrepreneurs Should Begin with Customer Discovery!

The most common cause of new business failure is Too Few Customers, NOT a failed product or service. The customer needs a reason to depart from their routine and “buy” your product or service. You must provide suitable VALUE to the customer or you will be ignored you will fail. This value is called your Value Proposition, and it refers to how you propose to address your customers’ needs and problems.

Business Model Canvas (Steve Blank Ver.)

Customer Discovery and Value Proposition are developed jointly in a new startup, typically requiring between one and two years to get it sort-of-right. There’s a really long slide deck (no narration) that shares how to use a common entrepreneurial tool, the Business Model Canvas, as a focus for your voyage of discovery. It and other tools are under the “Startup Process” heading in “Links”under MentalEdge.us/innovate. Here’s the slideshare link: https://www.slideshare.net/iain.verigin/2a-customer-discovery-canvas-and-story-2013q2

Business Model Canvas and Ice House Opportunity Discovery Canvas tools

Ice House Canvas

The Business Model Canvas is more suited to an entrepreneur who wants to create a business or non-profit that can scale up with employees, contractors, and partners. It emphasizes the search to identify Customer Segments and Customer Relationships. The Ice House Canvas is suitable for someone who wants to create a small business or non-profit, but needs to discover the opportunity, or Value Proposition, that may be worth pursuing. Both tools help you think, guess, pivot, and try out different strategies and structures.

Understanding the Value Proposition

The Value Proposition is the Value your customer receives from your startup. It is related to the product or service you provide, but it focuses on meeting a customer need that is strong enough the customer will pay for the value. Here’s an 8-min video that helps explain the nuance of the Value Proposition and its dependence on the customer more than the product or service (from Clay Christensen’s book Competing Against Luck: https://www.youtube.com/watch?v=auedNplxnu8

REQUESTING Funding or Support for Your Initiative: Need & Opportunity

Innovative entrepreneurs have to explain their business plan or funding proposal many times to key individuals or organizations. You may present a business plan to a venture capitalist or business loan officer. You may write a grant proposal to get initial corporate or government funding for your initiative. Your proposal may be presented to the CEO or board of an existing institution to begin an new internal program. Each of these scenarios require presentation of key information in a usually-predictable sequence. We’ll start with how you document the NEED for your product or service, how your plan will solve a real problem. If you can’t convince backers that there’s a present or future need, they will stop reading right there. BUT, following Alan Kay’s statement, “The best way to predict the future is to invent it,” you can propose ways you will create a need.

Creating needs is one of the primary roles of marketing. A grant agency may not like that approach, but a venture capitalist may listen closely. Steve Jobs was a genius at creating demand for products that had never existed. His “reality distortion field” convinced people they needed a tablet computer, a small screen black&white computer (original Macintosh), or a SmartPhone. Auto manufacturers and the fashion industry are also professionals at creating need. Next will come the OPPORTUNITY section. Now that you’ve presented a convincing need, you must show that this need presents a business, social, or educational opportunity to meet this need through your innovative entrepreneurial proposal.

Documenting NEED for Product or Service (for external funding)

Backers are normally convinced of a current or projected need through authoritative data supplied with referenced official sources. A NEEDS statement is generally required for grant applications, project proposals, and many contracts. If you can’t convince funders and supporters of the need, you won’t be funded. Here are a few examples of Statements of Need:

  • examples of statement of need in a grant or project proposal. The article presents a bad example, a better one, and a best example, discussing the weaknesses and how to strengthen them. Grant proposals usually require a short statement of need.Other funding sources may expect a full page to describe and document the need. (from Instrumentl, a grant-writing site): https://www.instrumentl.com/blog/how-to-write-needs-statements-for-grants#toc-3

Explaining Your OPPORTUNITY to Address the Need (for external funding)

Formal funding applications seldom have an OPPORTUNITY section, but strong information of this kind impresses funding reviewers. After convincing a body that you have identified a real need, you need to convince them that it is possible for your organization or proposal to meet this need. Some funding applications ask about the ability of your agency to carry out the proposal. This Opportunity Section includes your capacity to successfully carry out the proposal objectives. Here is the kind of information appropriate for the OPPORTUNITY section (a real opportunity section would omit parts that are not relevant):

  • Timing: your organization can carry out your proposal in the stated/allotted time. The “time or conditions are right” for your proposal to succeed. If your state’s Department of Education is scheduled to approve new curriculum materials in two years, your timeline must allow you to complete the development and testing of the materials you want the Department to approve or adopt.
  • Support: your proposal has the support of those needed to foster the proposal’s success. You may need governmental approval to support a foreign school, city approval to erect 5G internet antennas, board approval to change a curriculum or to support required staff, business office approval to change budget allocations, state approval to waive a regulation.
  • Management Team: your organization has the capacity and experience to design, initiate, and supervise the proposed activities. Names, positions, qualifying prior experience, and proposed responsibilities of managers would be appropriate. Since these managers may have other demanding responsibilities, specify a fraction or percentage of their work commitment they will spend on your project. For small entrepreneurial teams, it may be 100%.
  • Staff: your organization has or can hire or employ staff with the skills and time to carry out the proposed activities. Name existing staff with their title, expertise, and responsibilities. Describe how new staff will be hired as employees, services, or consultants.
  • Unique qualifications: explain why your organization or plan expects to succeed in this endeavor. If other plans have failed, or if other organizations are able to meet this need why should a funding agency expect that YOUR organization or proposal would succeed or would be better than the competition. Here you may explain why other attempts have failed or why the competition is less able to address the need.
  • Track record: describe previous experience, successes, and failures in similar initiatives, plans, or proposals. Provide references if possible to verify your track record.

The above elements of the OPPORTUNITY section may have their own headings and sections in different backers’ funding applications, but this is the kind of information they want to know. Why should they expect YOU and your organization to succeed, knowing that most entrepreneurial initiatives fail?

Begin Your Own Entrepreneurial Discovery Journey (part 1 of 3)

Whether you are searching for the right opportunity and customer segment or you are applying external funding, you need to develop a disciplined way to propose, structure, and communicate those ideas (if only to yourself for now). Practice the discipline of clarity and brevity to avoid hiding fuzzy ideas in a forest of text. Creating a two-page narrative that clearly states the Customer Segments (Need) and the Value Proposition (Opportunity) for your initiative will start you on your search. This will create one third of a rich-but-simple draft entrepreneurial venture.