Why Entrepreneurship is Important to the Economy

By David S. Chang

Entrepreneurs are becoming increasingly important to the global economy. What separates America from the rest of the world is a strong entrepreneurial culture. Failure is not looked down upon as other countries. Many top college graduates in the U.S. aim to start their own business, whereas many other countries’ top graduates would rather be a civil servant or work for an established company.

In the 1980s many experts believed that Japan would overtake the U.S. economically. They were making better products, at a lower cost, and more efficiently. What these experts didn’t take into account was the entrepreneurial spirit of America. These entrepreneurs created a new tech sector, with companies like Yahoo, Google, and Amazon leading the way.

Entrepreneurship is critical to any economy for three primary reasons:


Innovation

Image Credit: Pexels, Free to use licence. 

Entrepreneurship also drives innovation. Entrepreneurs look to create new technologies or improve upon something in a better way. Economies need constant innovation, especially transformative or disruptive innovation, that significantly increases productivity.

Entrepreneurs through trial and error create new products and services, as well improve upon existing ones. These innovations not only transform consumers’ lives, but also become platforms for many other industries that, in combination, fundamentally change entire economies.

What is innovation?

Before we can begin looking at why innovation is important we must first understand what innovation is. Many people believe innovation to be the creation of new, new devices, new inventions etc. and there is some truth in that. But innovation actually stems from far earlier in the creative process. Innovation starts with new ideas, new imaginations and creative thoughts, and what makes them innovative is their ability to add value to what already exists.

Today innovation centers around what users need and many innovations focus on iterative improvements to products that already exist, but that doesn’t mean that there’s no longer room for completely new unrivaled innovations.

Why is innovation important for long term success? 

Sixty-six percent of those who responded in The Deloitte Innovation Survey 2015 believe that innovation is important for growth but innovation is also important for a number of other reasons including:

  1. Increasing your market share
    Innovation makes it easy for even smaller-scale companies to increase their market share. After all, it’s easy to claim a portion of the market if you’re one of only a few companies in it. However, not everyone will be able to innovate in an entirely new market and as mentioned previously most innovations are actually incremental improvements on preexisting products, but this doesn’t mean that it can’t help you gain more market share.
  2. Scaling your business
    Innovation can help you anticipate market changes more quickly and get ahead of opportunities, not only does this stop you from needing to react to changes but it can help you scale too. Companies who successfully innovate are able to make more profit and scale up their business more quickly than those who don’t.
  3. Maintaining a competitive advantage
    In crowded markets, innovation is what sets aside the market leaders from their followers. Working to continuously improve your product or service through innovation gives you a unique selling point and a reason for customers to choose your business over one of your competitors.
  4. Meeting customer needs
    The needs of customers are constantly changing and you will not be able to continually meet their needs unless you are willing to innovate. Anticipating the changes in customer needs and innovating accordingly will allow you to maintain a longstanding customer relationship and will prevent your business from stagnating.
  5. Attracting the top talent and improve employee retention

People with talent want to work for innovative companies and so if you want to attract the top talent you need to prove that your company has a history of innovation. Similarly, an innovative workplace is exciting and stimulating for employees and you’ll find it easier to retain people who are the top of their field if you provide them with an environment where they can thrive.

How can you achieve innovation within your organization?

Manufacturing innovation isn’t easy, If innovation was easy then everyone would be doing it. But thankfully there are a few things you can do to try and foster a culture of innovation within your workplace to increase your chances of thinking up the next best thing.

Listen to and observe your customers

With new innovation centering around the needs of users it makes sense that the new innovation process should start by speaking to your current customers. It’s important to both speak to and observe customer behavior as sometimes they may not be able to communicate what they want but will demonstrate it with their behavior.

  1. Use complaints
    Complaints about a current product or service are the perfect place to start when looking at how you can improve in the future, it’s these simple changes that can help move product innovation forward.
  2. Eliminate rather than add
    Sometimes innovation isn’t about adding but is about subtracting. What could you take away from your product to make it better? Apple took away the headphone jack and in the process created a new market for Bluetooth headphones.
  3. Ask your staff
    Your staff are often the people on the front line of your business and they may have some valuable ideas as to how you could improve things. Make sure you provide an environment where they can be heard.

Collaborate
It’s better to collaborate and innovate together than to not innovate at all. Combine your specialty with that of another company and see where the combination takes you. 


David S. Chang

Award-Winning Entrepreneur, Wealth Manager and CEO | Chief Editor, Author, Keynote Speaker, Consultant ArtofThinkingSmart.com | Political Consultant | Army Officer National Guard | Living To Fulfill Needs, Solve Problems, and Live Passionately!

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