Let's now take a step back and see where we stand.

Everything we've looked at until now, the unexpected,

incongruities, process needs, and industry change,

all require a fairly deep knowledge of the area in which we're looking.

What that means is that you should focus your search on an industry you're in,

hobbies you're passionate about, or subjects you know about.

While it's not impossible to find opportunities for

innovations in areas you know little about,

it's more likely that you'll expend significant time and

money on an opportunity that doesn't really exist.

But even if you don't have deep knowledge inside a particular industry or

subject matter, you can still find opportunities to innovate outside your

immediate experience.

The last three sources of innovation we'll be talking about all have this property.

The first most predictable way to find innovation outside your

experience is by looking at changing demographics.

Things like population size, employment, and education,

really anything that will have fairly predictable consequences.

Think about the baby boomers.

The babies that were born in the US immediately after World War II.

This was an unusually large cohort and as these babies got older, they caused

a population spike and whatever age demographic they found themselves.

The baby boomer cohort is now at retirement age, and

it shouldn't be surprising that we're seeing a spike in healthcare expenditures.

Entrepreneurs who recognize this trend and

innovated early to prepare for the retiring baby boomers are in

the best position to make the most of the opportunity.

The same principle applies to other demographic cohorts as they get older.

It's probably worth noting a few risks you'll face when using demographic changes

to look for innovative opportunities.

The first is that you won't be the only one looking.

Demographic changes are large and highly visible, so don't be surprised if

you're not the first entrepreneur to come up with your big idea.

That doesn't mean that you shouldn't innovate in this sphere.

Just be prepared for more potential competition.

The other risk is that this source of innovation is lower than the other

sources.

Large, macro-level changes, though highly predictable,

generally don't happen very quickly.

So, the timeline for successful innovation could be years, if not decades.

That doesn't mean you shouldn't look here for innovative opportunities,

as anyone providing healthcare to the Baby Boomers can attest.

But, you should recognize that it might take longer than some

of our other sources.

The next source of innovation you can find outside your direct experience is a change

in perception.

What people like and don't like, changes.

Sometimes dramatically.

Think about the video game industry.

When at home video game consoles first came out,

they were generally considered designed for children.

As the industry evolved, this perception dramatically changed.

How many of you play some form of video game,

whether it's Madden's Football or Words with Friends.

The industry is now considered a juggernaut,

mostly catering towards adult gamers.

The perception that video games are an acceptable form of adult

entertainment fundamentally changed what was possible in this sphere and

led to enormous entrepreneurial opportunities.

Entrepreneurs constantly gauge perceptions, watching for

a persistent shift in attitudes.

A big risk when identifying opportunities, based on changing perceptions,

is that you might identify a fad instead of a persistent trend.

Too often, the next big thing turns out to be extremely short lived.

To give you an idea how difficult it can be to differentiate between the two.

In his book, Drucker called the video game industry a fad.

This was correct when the book was written, but

changing perceptions turned the fad into a huge opportunity.

Hopefully at this point,

it's clear that innovation is very different than invention.

Coming up with your big idea, in all likelihood will not involve a momentary

flash of brilliance, it's just a matter of looking in the right places and

having an entrepreneurial mindset.

As Helen Hanson, the best selling mystery writer once said,

inspiration is the windfall from hard work and focus.

Muses are too unreliable to keep on the payroll.

With that in mind, we still acknowledge that some innovative breakthroughs

do come through that flash of brilliance which we call new knowledge.

What's different from the other sources of innovation, and

the reason I've waited so long to mention this source of innovation,

is that this is easily the riskiest source of all.

The time frame for new knowledge to become incorporated into

the market is generally measured in decades.

Hoping to innovate with new knowledge will take much longer than you think.

It's going to take much more money than you think,

and you're going to be facing much stronger competition.

Generally, new knowledge is created during a period where everyone is

excited about the prospect of a solution.

Think about the push to develop new energy sources today.

The problem is a lot of people are working on their problem, but

there are only a few winners.

You not only need to come up with the new knowledge,

you need to come up with it first.

On top of that, every other source of innovation we've talked about

exploits a change that has already occurred.

With new knowledge, the innovation is the change.

Unfortunately, that means you won't be able to tell in advance,

whether people will even want what you're in the process of creating.

You could invent what you're convinced is the next big thing,

but no one will want it.

We don't want to dissuade most of you from looking for

opportunity through new knowledge, if you're successful the pay off is huge.

However, at the end of the day, the other sources of innovation

we discussed are much more likely to lead you to success.

We've covered the major sources of innovation that will help you develop your

big idea.

The unexpected incongruities, process needs, changes in industry structure,

demographics, changes in perceptions, and new knowledge.

It's worth reiterating that we presented these sources of innovation in

order of reliability.

The absolutely least reliable method is to hope for that aha moment.

You might as well go to Las Vegas and bet on black.

Instead, you're much more likely to find your big idea from your life in your

regular, normal experience.

It's probably staring you right in the face.

You just need to look for it and embrace your entrepreneurial mindset.

With the principles from this lecture in mind,

I urge you to get started with your big idea.

That said, there are a few principles of innovation you should keep in mind when

looking for your big idea.

>> First, you need to analyze all the opportunities.

Look through all seven sources of innovation and

try to find ideas that span the sources.

For instance, the video game industry relied not just on a change in perception,

but also on a demographic shift as young video gamers became older video gamers.

Second, get out and listen to your customers and suppliers.

We'll talk extensively about listening in our next module, but for now,

recognize if your idea involves a market in which you have no connections, and

you can't recruit someone for your team that has those connections,

it'll be very difficult to pursue your venture.

Third, your idea needs to be simple and focused.

You don't want to change too much at once,

as customers tend to resist large disruptions.

In addition,

it can be difficult to communicate a complex idea to potential financiers.

Fourth, make sure your innovations start small.

We'll talk much more about the iterative process in our last module.

But your venture will likely start small and receive a small amount of funding.

If your idea is too large, you likely won't have enough time or

money to make the adjustments you'll need to be successful.

Fifth, innovate for today.

While you'll ultimately want a long-term strategy if there isn't an application for

your idea today, it won't be successful.

We hear of many student ideas involving social media that start with,

if millions of people join, they'll get a lot of value from the network.

The problem is that many of these ideas don't give much value to customers today,

which means the long-term strategy will never come to fruition.

Finally, make sure your idea can be strategically implemented.

We'll talk much more about a strategy in a future module.

But for now, make sure you can visualize a market segment in which your

idea could lead the pack.

With these principles in mind,

I urge you to start looking through all seven sources of innovation for

that rustling of the breeze, and keep trying to find your big idea.

We truly believe every one of you has one, you just need to find it.

Demographics, Changes in Perception, and New Knowledge

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