"A business that wants to be able to innovate, wants to have a chance to succeed and prosper in a time of rapid change, must build entrepreneurial management into its own system!"
--- Peter F. Drucker, Innovation and Entrepreneurship (1985)

Introduction

The book on Innovation and Entrepreneurship by Peter F. Drucker was written in 1985 and is still very relevant in 2023. At the heart of his argument lies two very simple beliefs:

• Management is the new technology (rather than any specific new science or invention) that is making the American economy into an entrepreneurial economy.
• Innovation and Entrepreneurship are capable of being presented as a discipline, capable of being learned, and capable of being practiced.

Drucker posits that innovation and entrepreneurship are “risky” mainly because so few of the so-called entrepreneurs know what they are doing. In order to reduce the risk of innovation and entrepreneurship and increase your likelihood of success, you need to establish purposeful innovation across the following 7 sources of innovative opportunity:

The unexpected – the unexpected success, the unexpected failure, the unexpected outside event.

The incongruity – between reality as it actually is and reality as it is assumed to be or as it “ought to be”

Innovation based on process need

Changes in industry structure or market structure – that catch everyone unawares

Demographics (population changes)

Changes in perception, mood, and meaning

New knowledge, both scientific and nonscientific

Therefore, innovation should be systematic and consist of a purposeful and organized search for changes. It should also consist of a systematic analysis of the opportunities such changes might offer for economic or social innovation.

The System: Establish Entrepreneurial Management

Peter F. Drucker is the father of modern business management and in this book, he puts forth a pathway for entrepreneurs to follow. Successful entrepreneurship and innovation are based on luck or genius. It’s based on the systematic and purposeful search for opportunities within the seven sources discussed in this book.

The System of Success is establishing Entrepreneurial Management!

Entrepreneurial management of most new ventures has 4 main requirements:

It requires, first, a focus on the market

It requires, second, financial foresight, and especially planning for cash flow and capital needs ahead

It requires, third, building a top management team long before the new venture actually needs one and long before it can actually afford one

Finally, it requires the founding entrepreneur a decision with respect to his or her own role, area of work, and relationships

If you can establish this framework in your organization or new venture, you will get purposeful innovation at low risk. Drucker makes sure to state unequivocally that innovation and entrepreneurship should not take unnecessary risks. Successful innovators and entrepreneurs are not “risk-takers.” They try to define the risks they have to take and minimize them as much as possible, and entrepreneurial management helps them do that.

What I Will Do Differently?

Invest more time employing “Creative Imitation” and “Entrepreneurial Judo.” As Chapter 17 discusses, the Japanese made the deliberate decision 100 years ago to concentrate their resources on social innovations, and to imitate, import, and adapt technical innovations with fantastic success. Using entrepreneurial judo, one first secures a beachhead in the market leader’s backyard. Once the beachhead is secured with adequate market and revenue streams, you then move in on the rest of the beach.

Pay more attention to the changes in Global Demographics. In Chapter 7, Drucker discusses how Demographics are doing some funky but predictable things right now. The developed countries are seeing a rise in the

aging population as birth rates fall and people live longer, while Third World Counties are seeing a tidal wave of young adults. Aging populations historically have caused labor shortages in places like Japan and put outsized pressure on government pension plans like in Italy. Consequently, there are huge innovation and entrepreneurial opportunities.

It’s cliche but Keep It Simple Stupid. In Chapter 11, Drucker discusses his principles for innovation. In order for an innovation to be effective, it must be simple and focused. It should do only one thing and that one thing well. Throughout the history of mankind, all effective innovations are breathtakingly simple!

Downloadable Content

The book on Innovation and Entrepreneurship was written by Peter F. Drucker in 1985. The year is 2023 and his principles are still relevant. As stated above, a business that wants to be able to innovate, wants to have a chance to succeed and prosper in a time of rapid change, must build entrepreneurial management into its own system. The following raw notes were created by me to help streamline a deeper understanding of Peter F. Drucker’s concepts in Innovation and Entrepreneurship. Hope you enjoy it!