Entrepreneurship in the United States is lagging. The United States Bureau of Labor Statistics reports that between 1994 and 2015, the number of new jobs created by start-ups has decreased by more than one million (Bureau of Labor Statistics Staff, 2016). Insufficient financial resources, risk aversion, and perhaps the “lack of a good idea” are all possible reasons for the lack of entrepreneurial activity. Some research suggests those without experience in a start-up environment appear to be less motivated by the spirit of enterprise and, within a generation, the inclination to start a business may further decline (Guilles, 2016). Entrepreneurs may well need to gain experience and relevant knowledge by working within a start-up environment. And such an environment is likely to provide a hands-on way to learn financial responsibility and risk management. But, perhaps, more importantly, a start-up environment enables a foundational way of thinking that is rooted in innovation rather than in invention that is necessary for long-term success.
One does not necessarily need to have a “good idea” to launch a business; a fact that may confuse many prospective entrepreneurs. The entrepreneurial focus is more on planning and execution than on ideas and inventions (Stibel, 2009). Good ideas are easy to come by, it’s the execution of those ideas that proves difficult. Indeed, many entrepreneurs have taken good ideas and inventions and created viable businesses. However, there are far more entrepreneurs who have, through innovation, took a “second-mover advantage” approach, thereby redefining business models, categories, and even industries for success (Anderson, 2013). Entrepreneurs who, through planning and execution, can improve upon that original “good idea” in a way that increases the value to the customer can reap significant benefits through their innovation.
So what is innovation? For some “innovation” means to create something new, for others, it means an improved approach or way of doing something. The most modern definition of the word “innovation” itself supports both meanings. Merriam-Webster defines it as: “The introduction of something new; a new idea method, or device” (Merriam-Webster Staff, n.d.). One might argue these definitions are better suited to the word “invention,” or maybe “creativity.” And while invention, creativity, and innovation are closely related, they are not the same.
Creativity, for example, enables an entrepreneur to look at life differently. A creative view may lead to a novel solution or a new invention that helps to overcome some life problem. An improvement to that invention would be considered an innovation. So, creativity fuels invention, which in turn supports innovation. The initial idea and the first application of that idea provide only the foundation on which an entrepreneur can build a business. Growth depends on planning, execution, and continual innovation.
Technological advances that disrupt existing industry sectors, and not new inventions, have driven much of the entrepreneurial growth opportunities in the past twenty-five years. More recently, consider firms like Uber and Airbnb both of whom have facilitated job creation through innovation (Guilles, 2016). Both companies looked at established sectors—personal transportation services and lodging—and through innovation transformed each industry’s standard offering to create greater value for the customer. Neither company invented anything; both applied new thinking to present challenges. Innovation, not invention, may provide the fastest and most likely route to entrepreneurial success.
If we look at the Uber and Airbnb examples again, we may see that creativity is present in the approach to overcoming a challenge, but the challenge itself is not new. In the case of Uber: A faster and easier way to get a ride (Uber Staff, n.d.). For Airbnb: A way to create more lodging space in a market where hotel rooms are a limited and at a premium (Brown, n.d.). In both cases, the founders of these companies used creativity to solve a personal or life problem through innovation, not with an invention.
In the 1990’s everyone seemed to be starting a business. Many of those businesses were born from advances in technology that encouraged new thinking about how to do things better, faster, and cheaper. From my experience during the dot-com era, I witnessed numerous technology entrepreneurs developing applications to improve processes and procedures that reduced operational costs while improving delivery to the customer. Few of these companies invented anything new; they found a way to improve upon the way things were being done. Innovation, not invention, drove entrepreneurial activity then, just as it has since the Industrial Revolution.
The lack of entrepreneurial activity is potentially a serious economic problem for the United States. Consider that 99% of the 28 million U. S. employers are private small businesses, providing nearly half of all non-government jobs, and generating approximately 63% of new non-government employment (Babson College and Goldman Sachs, 2016). Without an active and vibrant entrepreneurial start-up environment, job creation, wages, and government programs supported through tax revenue wane. Some prospective entrepreneurs are waiting for inspiration—that new idea or invention that will make them wealthy. It is true that creativity and invention are often the seeds of entrepreneurship, but it is innovation—improvements on existing ideas and inventions, or to business models and industries that provide the greatest entrepreneurial opportunity.
What do you see that needs to be improved? And when will you start?
Anderson, T. (2013, November 4). The Second-Mover Advantage. Retrieved January 21, 2017, from northwestern.edu: https://insight.kellogg.northwestern.edu/article/the_second_mover_advantage
Babson College and Goldman Sachs. (2016). The State of Small Business in America: 2016. Wellesley: Babson College. Retrieved January 15, 2017, from http://www.babson.edu/executive-education/custom-programs/entrepreneurship/10k-small-business/Documents/goldman-10ksb-report-2016.pdf
Brown, M. (n.d.). Growth Studies - Airbnb: The Growth Story You Didn't Know. Retrieved January 21, 2017, from growthhackers.com: https://growthhackers.com/growth-studies/airbnb
Bureau of Labor Statistics Staff. (2016, April 28). Business Employment Dynamics: Entrepreneurship and the U. S. Economy. Retrieved January 18, 2017, from bls.gov: https://www.bls.gov/bdm/entrepreneurship/entrepreneurship.htm
Guilles, W. (2016, February 17). Kauffman Foundation 2016 State of Entrepreneurship Address. Washington: Ewing Marion Kauffman Foundation. Retrieved January 19, 2017, from http://www.kauffman.org/~/media/kauffman_org/resources/2016/soe/2016_state_of_entrepreneurship_speech.pdf
Merriam-Webster Staff. (n.d.). Definition of Innovation. Retrieved January 19, 2017, from merriam-webster.com: https://www.merriam-webster.com/dictionary/innovation
Stibel, J. (2009, June 30). Are You an Inventor or an Entrepreneur? (Harvard Business School Publishing) Retrieved January 21, 2017, from hbr.org: https://hbr.org/2009/06/are-you-an-inventor-or-an-entrepreneur
Uber Staff. (n.d.). Finding the way: Our trip history. Retrieved January 20, 2017, from uber.com: https://www.uber.com/our-story/