Innovation is an essential ingredient to entrepreneurship. The entire entrepreneurship process begins with innovation. The entrepreneur must be an innovator, he must be able to come up with new breakthrough ideas which no one else has come across.
An entrepreneur constantly scans the environment for novel and innovative ideas. He looks at a situation in its totality. He comprehensively understands the situation and is able to break it down into parts and analyze each part in its totality. He then looks at the problems and difficulties faced in each part as well as the situation as a whole, after which he tries to come out with an innovative way to overcome the problems faced. The solution may be in a tangible form i.e. a product or may be in an intangible form i.e. a service rendered.
The solution the entrepreneur proposes is never an abstract idea which cannot be implemented in reality i.e. the entrepreneur solution is a concrete idea which can be developed and marketed in the most cost efficient, within the required quality permissible limits and at the same time the time to provide such a solution to the customer must be minimum i.e. there should a minimum time gap between the time to produce and the time to market to customer. The entrepreneur never forgets the fact that the idea develop must be capable to being functional i.e. it must have functionality and the customer must be able to use the solution without much problem or hassles.
Entrepreneurs are the most critical part of any nation’s innovative process. This is because these entrepreneurs run small firms which are more dynamic as compared to large enterprises which put several constraints on the amount of risk to be undertaken, finance and capital risks and other risks associated with technology. These small firms become the breeding ground for innovations which at times get sold over to larger commercial organizations to commercialize and market such innovations. One must remember that the entrepreneur’s innovation output may not only be limited to products and services, innovation can also be done with respect to a process i.e. the entrepreneur can innovate with respect to an existing process and find a new, better, faster and cheaper manner to produce or manufacture a product or render a service.