Drucker always seemed to be years, if not decades, ahead of anyone in his field, and Innovation and Entrepreneurship was the first book to treat the subject in a systematic, non-sensational way. Drucker is clear that his book is not about the psychology or character of entrepreneurs. It is not the mysterious "invention", or `flash of genius' so often ascribed to the wealth creator that interests him, but actions and behaviour - how innovation and entrepreneurship can be boiled down to a system that can be applied by anyone. By 1914, the time World War I broke out, "invention" had become "research," a systematic, purposeful activity, which is planned and organized with high predictability both of the results aimed at and likely to be achieved. Something similar now has to be done with respect to innovation. Entrepreneurs will have to learn to practice systematic innovation.

Successful entrepreneurs do not wait until having a "bright idea"; they go to work. Altogether, they do not look for the "biggie," the innovation that will "revolutionize the industry," create a "billion-dollar business," or "make one rich overnight." Those entrepreneurs who start out with the idea that they'll make it big--and in a hurry--can be guaranteed failure. They are almost bound to do the wrong things. Drucker states that a management team should be already built before the business will grow mid-side; otherwise it would be too late. He gives the examples when the founders of Ford Motor and Honda Motor to not start the venture until they have found a reliable partner who will run administration, finance, distribution, marketing, sales, and personnel.

Drucker somewhat envisioned the I.T. bubble of 2001. Many new ventures, especially high-tech, fail because they ignore the basic principles that were known for centuries. He states that high-tech is not intrinsically risky. It is not riskier than any other business, if properly applied. Entrepreneurship is only risky, he observes, when so-called entrepreneurs `violate elementary and well-known rules.' It is not risky when it is systematic, managed, and purposeful.

Accroding to Drucker, Innovation does not have to be technical, does not indeed have to be a "thing" altogether. Wherever introduced, it changes the economy from supply-driven to demand-driven, regardless almost of the productive level of the economy. "Innovation," then, is an economic or social rather than a technical term. It can be defined as changing the yield of resources.

The book consists of three sections.

In the first section, Drucker describes seven sources of innovative opportunity: The Unexpected, Incongruities, Process Need, Industry and Market Structures, Demographics, Changes in Perception, and New Knowledge. He debunks the believe that innovation is "a bright idea" and maintains that dependable innovative ideas come from systematic exploration of the seven sources of innovative opportunity.

The second section covers entrepreneurship and especially the development of an entrepreneurial culture within an organization. Along with suggestions for things to do, there are a couple of suggestions of things that will probably fail such as buying an entrepreneurial company in order to help a non-entrepreneurial company change.

The third section covers four major entrepreneurial strategies ("fustest with the mostest", "hit them where they ain't", ecological niches, and changing values and characteristics) with a discussion of some derivatives of each strategy and a look at the advantages and pitfalls of each.

I highly recommend the book "The Effective Executive" by Peter Drucker, in addition to this book.

This is still one of the best books about innovation to read and it's classic Drucker. A newer one about innovation and ideas also is great by Mitch Ditkoff - "Awake at the Wheel". Awake at the Wheel: Getting Your Great Ideas Rolling (in an Uphill World)

Drucker's recurring theme is that good entrepreneurship is usually market-focused and market-driven.

Drucker gives us guidelines for identifying innovative opportunity. For example, unexpected successes or unexpected failures within an industry often point to opportunity. Drucker also suggests that innovative opportunity exists where there is "an internal incongruity within the rhythm or the logic of a process" or a process need.

As a great example, Drucker tells us the story of William Conner, a salesman to the medical industry who decided he wanted to start his own company. Conner went out and spoke with surgeons about the problems and difficulties the surgeons faced.

While talking with surgeons, Conner learned that the process for cataract surgery was generally routine and easy, except there was one incongruity making the surgery difficult and unpleasant for physicians. During the surgery, surgeons had to cut one ligament which involved some risk.

With research Conner learned that there was an enzyme that dissolved this ligament. Conner also learned that new methods of storage could preserve this enzyme allowing it to be used in surgery. After patenting his compound, Conner quickly captured a niche market providing his compound to surgeons performing cataract surgery. No longer did they need to cut the ligament. They could dissolve it. With process need, the market already exists for the innovation. Drucker notes this is a relatively low-risk type of entrepreneurship.

While process need is a great area of entrepreneurial innovation, Drucker also suggests demographics may provide opportunities. I'm more dubious of this. Even though we may know how the population will change in ten years, capitalizing on this change isn't easy. Further, most entrepreneurs already tend to be focused on a particular industry or market and large-scale demographic changes wouldn't induce them to change their company's focus. Plus, there are entrepreneurial opportunities even in declining industries.

Sometimes, there is a dissonance between reality and the perception of reality in an industry. This may offer innovative opportunities, according to Drucker.

For example, Drucker mentions the evolution of the ship container industry. While established shipping companies focused on cutting transit time and cost by making ocean-going ships faster and more cost effective, this really wasn't the key. Ships were already very efficient in transit.

Rather, the real problem with the shipping industry was the loading and unloading of cargo, which kept ships in port and tied up valuable harbor space. When the shipping container was developed, it could be pre-loaded on land before the ship arrived. The pre-loaded container could then quickly be loaded onto the ship when the ship arrived in port. This made ocean transit much more cost effective and efficient. Drucker notes that the big cost of ocean transit was having ships held up in port, effectively tying up a capital asset without being able to utilize its full earnings capability.

Drucker discusses entrepreneurial management, claiming three keys to building a successful new organization are:
--having a market focus
--financial foresight, i.e., cash flow budgeting and planning for capital needs
--assembling a top management team

Other topics covered in "Innovation and Entrepreneurship" include creative imitation, entrepreneurial judo, and filling a specialized, ecological niche. "Innovation and Entrepreneurship" provides great insight into seeking entrepreneurial opportunities.

Every entrepreneur should have a copy of this classic book.

Peter Hupalo, author of
Thinking Like An Entrepreneur: How To Make Intelligent Business Decisions That Will Lead To Success In Building And Growing Your Own Company

This book was written in the early 80's, yet it still has today's business strategies attached to it. This book was a supplementary reading for my business class, but this should of been used for discussion for the whole semester. If you read on...he pretty much predicts the internet boom.

This book was written in the early 80's, yet it still has today's business strategies attached to it. This book was a supplementary reading for my business class, but this should of been used for discussion for the whole semester. If you read on...he pretty much predicts the internet boom.