By Ron Davison
Innovation and entrepreneurship are two closely related words used in the business world. Some may think they mean the same, but using them interchangeably would be making a big mistake. While they revolve around the same idea, it is crucial to understand the difference.
Innovation is applying your creativity to come up with a unique idea or solution. It is technological invention, which lets parts do what they could not previously do. You have an engine, wheels and axles and you put them together to invent a car. Progress depends on innovation and great innovators can get rich.
Entrepreneurship, by contrast, is applying the innovation to bring the ideas to life. It is social invention, which lets people do what they could not previously do. Entrepreneurs grasp the opportunity to cash in on the innovation. They build businesses and propel the innovation forward. Progress depends on entrepreneurship and great entrepreneurs get even richer than great innovators.
Ray Kroc didn’t invent the hamburger, but when he died he was worth half a billion dollars. He was an entrepreneur. Sam Walton didn’t invent the retail store, but his heirs are worth more than $100 billion. He was an entrepreneur. Henry Ford didn’t invent the car, but he when he died in 1947, he was worth nearly $200 billion (inflation adjusted). He, too, was an entrepreneur.
Given the way we use the term, all of these entrepreneurs were innovative. And indeed, it is hard to imagine an entrepreneur who wasn’t innovative having much success. You have to distinguish your product or service from competitors and that usually calls for innovation. But thinking that your job as an entrepreneur is the same as the job of an innovator can create unnecessary confusion and failure.