Innovation and Entrepreneurship: The Necessary Conditions of Value Creation

Abstract

The necessary conditions of value creation are considered from the vantage point of innovation and entrepreneurship. Both demand side and supply side considerations of value creation are examined. Specific demand concepts that are considered are: basic needs, customer perceived value, and customer satisfaction. Specific supply side concepts considered are: science, technology, and knowledge. The relationships between value creation and basic needs, customer perceived value, and knowledge are further examined. Although a number of factors are identified that impact value, only four are seen as primary factors of value: price, benefit, satisfaction, and experience. The innovator and entrepreneur can create value, and quantify the uniqueness of their value offerings, through these four primary factors. To create value, a proper understanding of the customer is required. The concept of missing value was also surfaced. Basic needs may underpin value, yet the relationship is complex. Basic needs are not the only factor that impacts value, and basic needs likely do not impact value directly, but only indirectly. Also, the concept of basic needs in itself is complex, and current treatments thereof may be too primitive. In addition, some of the other customer-related points that were surfaced, are i) customer-based factors that impact the adoption of new value offerings, ii) the factors of product uniquenss, and the method of determining product uniqueness, and iii) the incorporation of the customer's perception of value into the innovation process. Innovators may not necessarily face a knowledge barrier when wanting to innovate. Knowledge is not necessarily required to innovate, and the innovator may indeed be skilled to overcome such a barrier. Still, some basic knowledge regarding an industry, market, customers and existing products may be necessary to innovate. Factors that determine the avenues of opportunity that the innovator pursues, and the opportunities that the innovator recognizes and identifies, as well as how innovators further pursue opportunities, were also noted. The role of industry and educational institutions was also briefly considered. In conclusion, on the demand side, basic needs may be an indirect driver of value creation, and customer perceived value as concept may be useful in the context of value creation. At the same time, it is believed that the four factors – price, benefit, satisfaction, and experience – can significantly explain value creation. On the supply side, innovation as the driver of value creation, is not necessarily confined to science and technology – business knowledge and accumen is as an important avenue. In addition to existing knowledge and experience, factors like orientation (interests, passion, drive) and involvement also explain opportunity recognition.