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Markets and science advance society in fundamentally the same way. They enable the failure of theories and the hypotheses that drive those theories, thus advancing human knowledge.
It is not hard to find people who see how products could be better. We all do that. The entrepreneur is the one who acts on such ideas.
Innovation is about designing the future, which is inherently unpredictable. It is unpredictable, in part, because as the innovator is designing new ways of doing things, so are other people.
Short run thinking about cost treats fixed costs as already paid and unrecoverable (that is "sunk"). Long run thinking about cost assumes that no fixed costs have been decided or paid.
Disruptive innovators expose outdated methods of production. They create something new and in the process destroy the old.
Entrepreneurs aim to access and integrate resources that will enable them to offer customers a new and valuable service.
Entrepreneurs tend not to be reckless. The risks they take are calculated. They want to make sure that they will be able to handle the downside, and they want to make sure that the likely upside is worth the risk. There is a method to how they behave.
Just as we argued that all value is co-created, we also argue that all markets are co-created. When the effectuation process works, the result is the creation of new firms and new markets.
Competitive advantage among firms arises from both the relative resource or production cost and the relative appeal of value propositions. The dynamics of competitive advantage arise from firms attempting to gain advantage by acquiring and integrating resources at a lower cost.
As entrepreneurs strive to innovate, they tend to make three major errors.
Successful entrepreneurs are not over-confident, and they are not self-absorbed. They understand that being successful in life involves building a place for themselves in a community of other political animals.
