Introduction to the entrepreneurial process academy...3 What is entrepreneurship?...

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Introduction to the entrepreneurial process Pedro Neves

Transcript of Introduction to the entrepreneurial process academy...3 What is entrepreneurship?...

Introduction to the

entrepreneurial process

Pedro Neves

PART I

The entrepreneurial process

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What is entrepreneurship?

• Entrepreneurship has been credited with the development of the assembly line, the airplane, the computer, the contact lens, and DNA fingerprinting (Baumol, 2004)

• Around the world, 9 in every 100 working age individuals are involved in entrepreneurship with approximately 300 million in the venture creation phase (Reynolds et al., 2004)

• There has been a rise in entrepreneurial activity since the 1990s

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Entrepreneurial activity

The entrepreneurship process and GEM (Global Entrepreneurship Monitor) operational definitions

Nascent – first 3 months of running a new business New – first 3,5 years

Entrepreneurial perceptions, intentions and societal attitudes in 69 countries (2012)

Entrepreneurial activity

Entrepreneurial perceptions, intentions and societal attitudes in 69 countries (2012)

Entrepreneurial activity

Entrepreneurial activity in 69 countries (2012)

Entrepreneurial activity

Entrepreneurial activity in 69 countries (2012)

Entrepreneurial activity

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Total Early-Stage Entrepreneurial Activity (TEA) in 69 countries

Entrepreneurial activity

The entrepreneurial ecosystem (GEM)

An example: Cultural and social norms

Characteristics of culture

- National similarity;

- Historic influence;

- Colective creation;

- Dinamic character;

- Learned;

- Shared;

- Visible and invisible.

Adapted from Schein (2004)

An example: DNA Cascais

Reasons for business discontinuation in 69 economies

Entrepreneurial activity

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• It usually involves four distinct phases:

• Identification and evaluation of the opportunity

• Development of the business plan

• Determination of the required resources

• Manage the new enterprise

The entrepreneurship process

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• Managing entrepreneurial firms is NOT the same as traditional management (Stevenson & Gunpert, 1985; Brown et al., 2001)

The entrepreneurship process

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Causation vs. Effectuation

• Causation vs. effectuation (Sarasvathy, 2001)

• Causation – focuses on selecting the means to create a given effect (traditional process)

• Effectuation – takes a set of means as given as focuses on selecting between possible effects

• Both are part of human reasoning and can occur simultaneously, overlapping and intertwining

The entrepreneurship process

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• 5 core principles of successful entrepreneurs (Read et al., 2011)

• Start with your means and take action (vs. wait for the perfect

opportunity)

• Set affordable loss (vs. focus on the attractiveness of the upside)

• Leverage contingencies and embrace surprises (vs. over commitment

to existing goals)

• Form partnerships with people really committed (vs. me against the

world or team up with partly committed people)

• Create opportunities with what is under your control (vs. focus on predicting the future or finding the optimal opportunity)

The entrepreneurship process

PART II

Characteristics and myths

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• You control you own destiny!

• Although there is risk involved it is much more rewarding

• You get to “change the world”

• Nothing will use/value your talents and abilities more than

starting your own company

Why would you want to become an entrepreneur?

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• You have to believe in (and get others excited about it) something that does not yet exist

• You have to start somewhere: a technology, a pain, a team, a market, …

• You have to ask a LOT of questions: • Who is my customer? • What is my value proposition? • Who do I need on our team? • What exactly is the product/service? • Will it work? Can I scale it? How?

• Do I have a sustainable advantage? • Can I avoid making mistakes that will kill

the company before it becomes viable? • What are those mistakes? • What is my exit strategy?

Do you have what it takes to become an entrepreneur?

Baum, J.R., & Locke, E.A. (2004). The relationship of entrepreneurial traits, skill, and motivation to subsequent venture growth. Journal of Applied Psychology, 89, 587-598.

Passion is a key driver

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• Entrepreneurs are visionaries

• Opportunities are both found (causal) and made (effectual)

• In many cases, these are people that basically make their own opportunities using mundane means

• Entrepreneurs are risk takers

• It has to do with uncertainty (they perceive less risk AND

they do not try to predict the future/environment), not necessarily risk taking (picking higher stakes)

Some myths about entrepreneurs (Read et al., 2011)

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• Entrepreneurs are extraordinary forecasters

• They don’t predict, they control (with the available tools)

• It is difficult to predict in uncertain and dynamic markets

• “Prediction is very difficult, especially when it’s about the future.” (Niels Bohr, physicist)

• Entrepreneurs are not like the rest of us

• “Most of what you hear about entrepreneurship is all wrong. It’s not magic; it’s not mysterious; and it has nothing to do with genes. It’s a discipline and, like any discipline, it can be learned.” (Peter Drucker)

Some myths about entrepreneurs (Read et al., 2011)

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• Healthy fear vs. Paralyzing fear of what can go wrong (Isenberg, 2011)

• Accept that failure is a natural part of doing business (failures come early; successes take time)

• Turn failure into fodder (fail small, fast and cheaply and learn from it)

One key element: dealing with failure