Viewpoint September 15, 2009, 10:45AM EST

Is Miss Nebraska an Entrepreneur?

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They said that all who take the risk are entrepreneurs, but there are two types of entrepreneurs: "Replicative entrepreneurs," who constitute the vast majority of small businesses (such as restaurants and dry cleaners), and "innovative entrepreneurs," the rare few who bring new products/services to market or who pioneer new production methods—such as Wal-Mart (WMT), eBay (EBAY), and Dell(DELL).

Pioneering New Methods

Under the Kauffman definition, Sue would qualify as an "innovative entrepreneur", because she is developing new services and pioneering new methods. In contrast, Bashyam would be a "replicative entrepreneur" because he is delivering a standardized service in a field that charges primarily by the hour for its time. Bashyam, who is working incredibly hard, could well end up running a huge law firm and be worth many millions—but that doesn't make him particularly innovative in his business model.

Should more "replicative entrepreneurs" seek to become "innovative entrepreneurs? I certainly believe that is the key to boosting economic growth and creating jobs. And just how does a "replicative" entrepreneur become "innovative"? I turned to Steve King of the blog Small Business Labs. Here's his advice:

• Stay close to your customers, and constantly look for new ways to add value. Focus on the problems your customers have, not the problems your products solve.

• Network with and learn from others in your industry, but also network with people from other industries. Well known practices in one industry are often innovative in a new industry.

• Experiment often. Try new methods, approaches, business models, and technologies. But keep the experiments small and iterative. Fail quickly and move on when a new idea doesn't work.

• Most important, be open to new ideas. Embrace and encourage innovation.

The bottom line is that anyone can be an entrepreneur. But not anyone can be an "innovative entrepreneur." To become an "innovative entrepreneur" you need to stop trying to be the best at a replicative model and to make your own model. I can't promise that any amount of work will turn Bashyam into a beauty queen, but he may be able to discover some new business opportunities which turns his firm into the Amazon.com (AMZN) of the legal business.

Wadhwa is senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University. He is an entrepreneur who founded two technology companies. His research can be found at www.globalizationresearch.com. Follow him on Twitter "@vwadhwa".