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Entrepreneurship

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LECTURE OBJECTIVES

1. What is an entrepreneur?

2. Characteristics of an entrepreneur

3. Planning to be an entrepreneur

4. Growth pressures, managing a family business, and corporate intrapreneurship

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Entrepreneur :Entrepreneur : Is it all a Myth? Is it all a Myth?

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Entrepreneurship in the PastEntrepreneurship in the Past

• If you are a small businessman, you may If you are a small businessman, you may be as extinct as the village blacksmithbe as extinct as the village blacksmith

• Small business is as dead as the dodoSmall business is as dead as the dodo

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Entrepreneurship TodayEntrepreneurship Today

• 70% of economic activity70% of economic activity

• Between 60% and 80% of new jobsBetween 60% and 80% of new jobs

• Driven by passion and purposeDriven by passion and purpose

• U.S. standard of living (4 times better than U.S. standard of living (4 times better than former USSR) ascribed to entrepreneurshipformer USSR) ascribed to entrepreneurship

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Let’s see your schedules!

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Why are you here?

What do you want to do?

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What Is An Entrepreneur?

ENTREPRENEUR

A vision-driven individual who assumes significant personal and financial risk to start or expand a

business.

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What Is An Entrepreneur?

ENTREPRENEURSHIP

The pursuit of opportunity throughinnovation, creativity and hard work

without regard for the resources currently controlled.

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Entrepreneurship• Entrepreneurship: a way of thinking,

reasoning, and acting that is:– opportunity obsessed– holistic in approach– and leadership balanced

(This definition of entrepreneurship has evolved over the past two decades from research at Babson College and the Harvard Business School and has recently been enhanced by Stephen Spinelli, Jr., and John H. Muller, Jr., Term Chair at Babson College.)

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Entrepreneurs V. Intrapreneurs• Entrepreneurs are people that notice opportunities

and take the initiative to mobilize resources to make new goods and services.

• Intrapreneurs also notice opportunities and take initiative to mobilize resources, however they work in large companies and contribute to the innovation of the firm.

• Intrapreneurs often become entrepreneurs.

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Entrepreneurs: Born or Made?

• Is there inborn talent required?

• Assume that the answer is YES: – then we can identify the main characteristics– if we have them, fine - no others need to apply! – we could start spotting talent in kindergarten– we could "stream" these people– we could discourage people without these talents

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Entrepreneurs: Born or Made?• Assume the answer is NO:

– then schools could teach anyone– would be a "profession" like law or medicine– companies could establish "nurseries" for them– government "incubators" would be successes

• The real answer lies somewhere in-between– Talent and education is the way

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Steve Jobs Stanford Commencement Speech 2005

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Situational more than personality

Who is an Entrepreneur?

AgeDistribution

forStarting Company

Ability

Age

20 3025 35 4540

Flexibility

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Who is an Entrepreneur?Manager’s Opportunities

PerceivedCapability

Future Goals

Change Status Quo

Possible

Blocked

SatisfiedmanagerEntrepreneur

Frustratedmanager

Classicbureaucrat

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Burch's Entrep. Personality Traits1.A desire to achieve

Conquer problems, create successful venture

2.Hard work Their workload is very hard to match

3.Nurturing quality

4.Acceptance of responsibility Morally, legally and mentally accountable

5.Reward orientation Want be rewarded for their efforts

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Burch's Entrep. Personality Traits6.Optimism

Anything is possible

7.Orientation to excellence Pride in something first class

8.Organization They are wholly "take charge" people

9.Profit orientation Profit primarily a gauge of performance

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Which one are you?

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Failure? So what!• Failure seen differently in America & Europe.

– In Europe it is a major set-back– U.S. expected (required even!)– Canada - in between but tending to U.S.

• “Our” System:– Many entrepreneurs had been "blue collar"– Many come from families of entrepreneurs– Many are immigrants or their children– But, there are no "rules" that ensure success

• Universally, entrepreneurs shake off failure!

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Failure as “Learning Process”• Ignore it, then start again

– Some find it easy to blame someone else

• In public, always optimistic– Especially with funders– Agonise over what went wrong in private

• Willingness to disregard the rules – Start from first principles.

• Ability to "bend, not break" rules of life

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Classic Entrepreneurship: The Startup

• Raw startup company—an innovative idea that develops into a high growth company

• Qualities of a startup company– Strong leadership from the main entrepreneur

– Complementary talents and outstanding teamwork of team members

– Skill and ingenuity to find and control resources

– Financial backing to chase opportunity

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Desirable and Acquirable Attitudes and Behaviors

• Commitment and determination

• Leadership

• Opportunity obsession

• Tolerance of – Risk– Ambiguity– Uncertainty

• Creativity, self-reliance, and adaptability

• Motivation to excel

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The Entrepreneurial Process• It is opportunity/marketopportunity/market driven

• It is driven by a lead entrepreneurlead entrepreneur and an entrepreneurial teamentrepreneurial team

• It is resource parsimoniousparsimonious and creativecreative

• It depends on the fitfit and balancebalance among these

• It is integratedintegrated and holisticholistic

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The Timmons Model of the Entrepreneurial Process

Opportunity(2)

Resources(4)

Team(3)

Ambiguity Exogenous forces

Capital marketsUncertainty

Founder(1)

Creativity Leadership

Communication

Business PlanFits and gaps

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Enlightened Serendipity

• Being in the right place

• At the right time,• Recognizing it, and• Acting upon it,• APPROPRIATELY and• PASSIONATELY!!!

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Business IncubatorsBusiness Incubators

• Business incubators are designed to “hatch” new Business incubators are designed to “hatch” new businessesbusinesses

• Incubators provide some a number of resources to a Incubators provide some a number of resources to a new venturenew venture

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Small Business Owners• Small business owners are people who own

a major equity stake in a company with fewer than 500 employees.

• In 1997 there were 22.56 million small business in the United States.

• 47% of people are employed by a small business.

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Advantages of a Small Business• Greater

Opportunity to get rich through stock options

• Feel more important

• Feel more secure

• Comfort Level

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Disadvantages of a Small Business

• Lower guaranteed pay

• Fewer benefits

• Expected to have many skills

• Too much cohesion

• Hard to move to a big company

• Large fluctuations in income possible

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Technical Proficiency• Many entrepreneurs demonstrate strong technical skills,

typically bringing some related experience to their business ventures

• For example, successful car dealers usually have lots of technical knowledge about selling and servicing automobiles before opening their dealerships

• Especially important in the computer industry

• NOT ALWAYS NECESSARY

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Planning• Business Plan – A step-by-step outline of

how an entrepreneur or the owner of an enterprise expects to turn ideas into reality.

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Questions To Keep In Mind• What are my motivations for owning a business?

• Should I start or buy a business?

• What and where is the market for what I want to sell?

• How much will all this cost me?

• Should my company be domestic or global?

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Motivations• Deciding what your motivations are will

direct you toward what type of business fits you best.

• Types:

1. Lifestyle Venture

2. Smaller Profit Venture

3. High Growth Venture

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1. Lifestyle Venture• Small company that provides its owner

independence, autonomy, and control.• Is often run out of household• Provides flexibility (hours, meeting places,

attire)• Aligns your personal interests and hobbies

with your desire to make a profit.

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2. Smaller Profit Venture• Small company not concentrated on

pushing the envelope and growing inordinately large.

• Making millions of dollars not important.

• Content with making a decent living.

• Ex. Mom and Pop Stores

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3. High Growth Ventures• Goal is maximum profit and growth.

• Concentrated on pushing envelope and growing as large as possible.

• Focus on innovation

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Start or Buy?• Start – cheapest, but very difficult

-requires most planning/research• Buy – expensive – may be out or reach

-requires less planning and research• Franchise (middle ground) – a business run

by an individual (the franchisee) to whom a franchiser grants the right to market a certain good or service.

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The Market???• Planning & Research essential

• Extensive market surveys (family, friends, neighbors…)

• Magazines and Polls offer some information on the market -Businessweek, Harris Poll

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What about the cost?• Plan realistically, not optimistically

• Don’t overestimate your profits

• Don’t underestimate your costs

• Sources of Funds• Banks

• Venture Capitalists – filthy rich, high risk investors looking for a many-times-over yield

• Angels – seem to have altruistic motives and less stringent demands than venture capitalists

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Domestic or Global?• Drawbacks to Global – more research and

less accessible connections in startup phase, more travel time required, more considerations.

• Advantages to Global – more human resources, more demand, more financing, easier to start global than go from domestic to global.

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One More Time• What is an entrepreneur?

• Characteristics of an entrepreneur

• Planning to be an entrepreneur

• Growth pressures, managing a family business, and corporate intrapreneurship