Creativity and innovation as the driving power of entrepreneurship

Electronic International Interdisciplinary Conference September, 3. - 7. Creativity and innovation as the driving power of entrepreneurship Jasmina Lukić, Assistant Professor, Faculty of Tourism and Hospitality Management, University of Kragujevac Vrnjačka Banja, Serbia jasmina.lukic@kg.ac.rs Abstract - The aim of this paper is to introduction to the entrepreneurial process and its components, analyze the contribution of creativity and innovation in this process as well as determining the techniques and methods to stimulate creativity and innovation. Based on the Schumpeter definitions of entrepreneur as an innovator who is a creative destructor and Drucker definition of entrepreneur as "someone who maximizes business opportunities", it can be said that business opportunities are at the heart of entrepreneurship. The entrepreneur must be creative and innovative in order to identify the true entrepreneurial opportunities and adequately use them. In this sense, entrepreneurial creativity and innovation are seen as two sides of the same coin. For the realization of the entrepreneurial idea into a successful business venture it is necessary to balance creativity and innovation with entrepreneur s abilities. Keywords: entrepreneurial process, creativity, innovation, entrepreneurship, entrepreneur, techniques and methods to stimulate creativity. Entrepreneurship is the process of creating something new and valuable, by investing time and effort, accepting risk and gaining a reward for the risk and effort invested. An entrepreneur, as an individual, perceives new business opportunities and develops ideas on how to implement them. Perceived business opportunity can give the desired results only if entrepreneur strongly believes in it. In order to turn perceived business idea into a successful business venture, entrepreneur has to be creative and innovative and ready to make sacrifices and accept the risks and uncertainty that the job entails. Creativity can be defined as the ability to notice problems and develop methods (products, services, processes) for their solution. Innovation is defined as bringing new product/service/process in general use. Therefore, innovation and creativity play an important role in the process of identifying problems, methods of solving them and use of opportunities that companies face every day. The entrepreneur who continuously creates new ideas and innovates will be able to meet the changes and needs of contemporary society. I. ENTERPRENEURIAL PROCESS AND PERSONALITY OF ENTERPRENEUR Small companies and entrepreneurs are very important factors for social and economic development of every country. Their importance lies in the fact that they create new jobs and are key actors in creating and maintaining the welfare of the economy. In support of the importance of small companies and entrepreneurs is the fact that this sector accounts for about 99% of the total number of companies in the European Union and employs about 67% of the total number of employees. Encouraging entrepreneurship is seen as a means of releasing currently unused chances that are inherent in individuals, rejected technologies and combinations of resources [1]. Entrepreneurship involves the creation of value, the process of starting or developing new, profitable business, the process of providing new product or service and intellectual creation of value through organization of an individual or a small group of partners [2]. The entrepreneurial process, as the process of working on a new venture, includes all functions and activities associated with the perception of business opportunity and creating organization to exploit these opportunities to create value [3]. The person who starts the entrepreneurial process and accepts the risk in order to gain profit is called entrepreneur. Therefore, entrepreneur who invests his/her cash funds in the perceived market opportunity to make profit has a central role in the entrepreneurial process. An individual becomes an entrepreneur when he/she perceives the chance, creates an idea and believes in its success. Ability to perceive the market opportunity is the key point in entrepreneurship. The task of entrepreneur is to investigate people's needs, whether there are areas in which these needs have not been met or have been met in a manner that is not acceptable to consumers. Entrepreneur should recognize his/her opportunity in this. An individual or an entrepreneurial team can participate in implementation of perceived business opportunity. Numerous researches show that an entrepreneurial team contributes to the growth and development of business and an individual entrepreneur contributes only to the creation of means of livelihood. Therefore, entrepreneurs who plan to develop a large and profitable business must form a team of managers who will help them do that [4]. Entrepreneurship is described by the following terms: new, innovative, creative, flexible, dynamic and prone to take risks [2]. Entrepreneur, in addition to the resources, possibilities and organization, is a component of the entrepreneurial process. Figure 1 shows the importance of entrepreneur in the entrepreneurial process [5]. - 83 -

Electronic International Interdisciplinary Conference September, 3. - 7. Possibilities is invention. Thus, the invention is the design of a new idea, the creation of a new possibility for new or improved product or process [8]. Creativity is a precondition for innovation, i.e. innovation is the transformation of creative ideas in a particular product/service/ process. Figure 2 shows a relationship between invention, innovation and entrepreneurship. Provision and management Resources Figure 1. Components of entrepreneurial process It can been seen in the figure that entrepreneur is in the heart of entrepreneurial process and that his/her task lies in connecting the other three components of this process, and the value is created as a result of their connection. Therefore, entrepreneur connects possibilities (through their identification in the market and the methods by which they can be used) with the resources (through their provision and the most efficient use) and organization (by directing activities towards the goal of the organization). How much is entrepreneur going to be successful in managing the entrepreneurial process depends on the ability of entrepreneur to meet the specific requirements of such entrepreneurial process. His/her abilities are reflected through characteristics, which are more or less identified with each entrepreneur. These are the following [6]: Entrepreneur Self-accomplishment, Self-confidence, Independence, Acceptance ofrisk, Creativity, Innovation, Vision. Leadership and guidance Organization Among the above characteristics, a special place related to showing the character of entrepreneur belongs to creativity and innovation. The entrepreneurial process begins by identifying and assessing entrepreneurial chance (opportunity), as well as by development of ideas in order to exploit the perceived business opportunity. Perceiving new business opportunities is often the result of knowledge and expertise of entrepreneur, emerging by the combination of education and experience, and the experience results from various business events [7]. Creating and generating new ideas makes a creative process and the result of this process Through application of creativity and innovation, it is possible to solve problems and use chances which companies face. Therefore, creativity and innovation have a key role in the entrepreneurial process. Competitive advantage can be achieved through the process of innovating and creating new products/services/processes or improving existing ones. The ability of entrepreneur is reflected in the fact that he/she uses changes, i.e. uses his/her creativity to turn obstacles and constraints into advantages [8]. The matrix shows the relationship of entrepreneur and his/her creativity and innovation, on one hand, and his/her expertise and knowledge of business, on the other hand [9]. By looking at the matrix, it can be concluded that an individual who wants to become an entrepreneur must have a high level of expertise and knowledge of business, as well as high creativity and innovation. II. CREATIVITY AS A CHARACTERISTIC OF ENTREPRENEUR Creativity, i.e. ability to create something new and valuable by the art of imagination also dominates among the above characteristics of entrepreneur. In the definition of entrepreneurship, the emphasis is on creativity, which includes the following [10]: Creation of new business ventures and organizations; Creation of new combinations of goods and services, production methods, markets; Creative identification of new and existing opportunities; Creativity in using new and existing opportunities. Creativity is usually defined as a continuous search for new and represents a precursor to innovation [8]. This characteristic of entrepreneur is related to the perception of problems and finding appropriate solutions. An individual is creative when looking at things in a new, so far unknown - 84 -

Electronic International Interdisciplinary Conference September, 3. - 7. Figure 2 Relationship between invention, innovation and entrepreneurship way. Creativity can also be defined as the ability to connect previously unconnected concepts or ideas in a whole [6]. Therefore, only a creative entrepreneur can identify new business opportunities and chances, and he/she has skill to use them properly. Modern business is characterized by a high degree of uncertainty and risk. According to Schumpeter, one of the characteristics of entrepreneur is also acceptance of risk that a certain job involves. A successful entrepreneur is an individual who knows how to use the uncertainty that can represent an important source of business ideas. Recently, it is increasingly emphasized that creativity depends on knowledge, intellectual abilities, personal characteristics and motivations. These four causes are also the characteristics of a successful, creative entrepreneur. According to Gilford, creative people think divergently, i.e. aspire to create more ideas and look for more ways to solve a problem. A successful entrepreneur must constantly look for changes, play a little, know how to accept the risks and constantly ask 'What if? In this way, entrepreneurs develop skills, acquire knowledge, and stimulate motivation, what is the key to entrepreneurial success. Creativity can be viewed as a continual process, which consists of four phases: preparation, incubation, illumination and verification [8], as illustrated in Fig. 3. Preparation Incubation Illumination Figure 3. Phases of creative process Verification The essence of the preparation phase is to precisely define the problem, because well-defined problem is often half the solution. Creative problem solving requires a complete understanding of the problem but, for better orientation, entrepreneur needs to know what he/she aspires, which is the ultimate goal. Experience, knowledge and information that entrepreneur has are very important for an adequate understanding of the problem, for only thus he/she can identify the right opportunity and create idea(s). Incubation (discovery) phase refers to that part of the creative process when entrepreneur consciously moves away from the problem. It is believed that creative solutions often occur below the threshold of consciousness, because ideas and information are then connected in a more liberal way. Therefore, at this phase, the entrepreneur is focused on other activities unrelated to the problem. It should be mentioned that this is a complex phase because the creative solutions cannot occur so easily. Illumination phase is practically part of the incubation phase, where possible solution to the problem suddenly appears at a certain moment. Illumination phase is the moment when an innovative idea occurs. Defined solution to the problem is analyzed and studied within the verification phase. This phase is extremely important, because it is very important to test the feasibility of the solution itself. If we come to the conclusion that the solution is not feasible, we return to the beginning of the process, i.e. the preparation phase. III. INNOVATION AS A CHARACTERISTIC OF ENTREPRENEUR A very important task of entrepreneur is to create value in the market. Value is created through the production of new products/services/processes or improving existing ones, which is achieved through the process of innovation and learning. Therefore, it can be said that innovation is a very important factor of vitality and competitiveness of companies and thus a very important characteristic of entrepreneur [8]. Therefore, innovation is a different way of performing some production, service, entrepreneurial activity that has not previously been seen in the market, whether a completely new product/service/process is being produced or an existing one is being improved. Otherwise, Peter Drucker defines innovation as 'a specific tool of entrepreneurs, the means by which they use changes as favorable opportunities for some other business or service activity, so entrepreneurs must create something new, something different, they must change or transform value' [11]. Since creativity and innovation are important characteristics of entrepreneur and are very often considered to be synonyms, it is necessary to make a distinction between the creative process and the process of innovation. We are talking in fact about two related processes, where - 85 -

the process of innovation is built and based on the creative process. Namely, the idea is created within the creative processes. New idea that has not yet been realized, i.e. turned into a new product/service/process is an invention. In the process of innovation, a new idea is turned into a market product/service/process. Figure 4 shows the process of creation and development of a product. Creativity Electronic International Interdisciplinary Conference September, 3. - 7. believed that by mastering these skills, entrepreneurship can be learned like any other profession. Therefore, entrepreneurs are not born, but created. Some entrepreneurs are less, some more talented to carry out entrepreneurial activities, and therefore the techniques for stimulating creativity and innovation have been formulated. According to [12], there are six methods of stimulating creativity and innovation: (1) Brainstorming - means the emergence of new idea, suddenly, all at once. Group members suggest as many ideas as possible, on the basis of which the potential solution to the problem is defined. Idea generation Idea development Product development (2) Brainwriting - means presenting the problem to the group, where individuals write down ideas for solving the problem and then change their sheets and discuss ideas. Discovery Invention Innovation Figure 4: Innovation process According to Drucker, changes are the basis of all innovation. Therefore, the point is to find new products/ services/processes, i.e. create an innovation that will be 'a powerful weapon' of entrepreneur in dealing with changes. Through innovations, entrepreneur is trying to use changes and turn them into advantages that can be a source of high profits. However, high profits are generated only in the beginning. In time, income decreases due to the appearance of imitators of innovation. For these reasons, an entrepreneur must permanently, constantly, continuously search for new ideas which he/she will successfully turn into innovations, and which will bring him/her high profits. IV. TECHNIQUES FOR DEVELOPMENT OF CREATIVITY AND INNOVATION Value of entrepreneur is recognized by the concepts such as creativity and innovation. Schumpeter believes that entrepreneur can only be a person who is different from others. Therefore, entrepreneur is an individual who is extremely talented, capable to introduce novelty, prepare creative ideas, initiate and use changes. It was believed earlier that entrepreneurs were born, so an individual who had a good intuition could conduct such work. However, the situation is slightly different today. Namely, today's entrepreneurs grow into professionals who rely more on their knowledge, gained by education, and intellectual abilities they have. There are three types of skills that potential entrepreneurs must master before they enter the business project: technical, human and conceptual [8]. It is (3) Method of Creative Orientation - is a method which includes: bionics as a skill that is based on the application of knowledge on living systems for solving social problems; searching for solutions according to heuristic principles, starting from the existing product where possible changes in such product are examined; searching of examination area starting from observation of the current situation from another angle. (4) Method of Creative Confrontation - is a method which includes: classic synectics, synectics conference, visual synectics, analysis by stimulating words, BBB method, Force-Fit game, Tilmag method, method of integration of adjacent fields, semantic intuition, forced connection, catalog technique. (5) Method of Systematic Structuring - is a method which includes: morphological box, specifying the list of attributes, showing problem fields, sequential morphology, decision tree, process analysis. These methods try to encourage intellectual and rational thinking of people. (6) Method of Systematic Specification of Problem - is a method which includes: progressive abstraction, epistemological analysis, K-J method, N-M method, hypothesis matrix, relevance tree. According to [7], techniques for stimulating creative ideas and innovations are the following: (1) Brainstorming - develops ideas about the problem within a limited period of time, along with spontaneous contributions of participants; (2) Reverse Brainstorming - is based on finding shortcomings of an idea; - 86 -

ARY IPLIN CONF SC INTER DI Electronic International Interdisciplinary Conference September, 3. - 7. ENCE ER [2] M.K. Coulter, Entrepreneurship in Action, Prentice Hall, London, 2001, pp. 3-4. (3) Brainwriting - is a written form of brainstorming; [3] (4) Gordon Method - is based on the unknown of problem by the participants; B. Paunović, Preduzetništvo i upravljanje malim preduzećem, Centar za izdavačku delatnost Beograd,, pp. 56. [4] (5) Method of Checklist - develops ideas through perception of related problems; J.A. Timmons, Opportunity Recognition: The Search for Higherpotential Ventures, at: Bygrave, W.D. (ed.) The Portable MBA in Entrepreneurship, John Wiley, 1994, pp. 33. [5] (6) Free Association - is a method where participants can use free association for generating new ideas; P. A. Wickham, Strategic Entrepreneurship: A Decision Making Approach to New Venture Creation and Management, Prentice Hall, 2001, pp.37. [6] D. Pokrajčić, Karakteristike uspešnih preduzetnika, Ekonomski anali br. 162. Beograd, 2004. str. 30. [7] R. Hisrich, M. Peters, D. Shepherd, Poduzetništvo, MATE d.o.o. Zagreb, str. 143-151. [8] D. Đuričin, S. Janošević, Đ. Kaličanin, Menadţment i strategija, Centar za izdavačku delatnost Beograd,, str.26-613 [9] Ţ. Ţivković, M. Jelić, N. Popović, Osnove menadţmenta DŠIPBakar, Bor, 2005. (7) Forced Relationships - develops new ideas through observation of a combination of products; (8) Method of Joint Notes - develops new ideas in a way that group members write down the ideas; (9) Writing of Characteristics - develops new ideas through the perception of positive and negative aspects; [10] P. A. Wickham, Strategic Entrepreneurship, Prentice Hall, New Jersey, 2004. (10) Big Dream Approach - develops ideas through thinking without limitations; [12] M. Milisavljević, R. Senić, S. Janošević, Inovacije i tehnološka strategija preduzeća, Ekonomski fakultet Beograd, 1993. str. 88 [11] P.F. Drucker, Innovation and Entrepreneurship: Practice and Principles, 1st ed., NewYork: Harper & Row, 1985. (11) Analysis of Parameters - develops a new idea through analysis of parameters. CONCLUSION An individual who leads and manages the entrepreneurial process is called an entrepreneur. It is a person oriented towards the future that has a vision and develops ideas, tries to predict events and changes and use them in an adequate manner, is able to recognize the opportunity that others have not noticed or have not gave importance to. Entrepreneurs more or less differ among themselves, but successful entrepreneurs are characterized by hard work, perseverance in their work, determination and flexibility. In order to survive, entrepreneur must continually innovate. Entrepreneur sees the sources of innovation in changes and, therefore, it is said that changes are something the entrepreneur is 'living with'. Therefore, in order to take advantage of changes, entrepreneur must be creative and innovative. Creativity is defined as creation of a new idea by the art of imagination. Innovation is bringing idea (invention) in general use. Individuals who do not have expressed these two characteristics of entrepreneur can improve them by techniques for development of creativity and innovation. REFERENCES [1] V. A. Gilsing, A. Elco van Burg, G. L. Romme, Policy principles for the creation success of corporate and academic spin-offs, Technovation, 1st ed., vol.30, 2010, pp.12. - 87 -