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Page 1: Introduction to the entrepreneurial process academy_Introduction.pdf · Introduction to the entrepreneurial process ... The entrepreneurial process . 3 What is entrepreneurship? •Entrepreneurship

Introduction to the

entrepreneurial process

Pedro Neves

Page 2: Introduction to the entrepreneurial process academy_Introduction.pdf · Introduction to the entrepreneurial process ... The entrepreneurial process . 3 What is entrepreneurship? •Entrepreneurship

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

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

Entrepreneurial activity

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

Entrepreneurial activity

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Entrepreneurial activity in 69 countries (2012)

Entrepreneurial activity

Page 8: Introduction to the entrepreneurial process academy_Introduction.pdf · Introduction to the entrepreneurial process ... The entrepreneurial process . 3 What is entrepreneurship? •Entrepreneurship

Entrepreneurial activity in 69 countries (2012)

Entrepreneurial activity

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

Entrepreneurial activity

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The entrepreneurial ecosystem (GEM)

Page 11: Introduction to the entrepreneurial process academy_Introduction.pdf · Introduction to the entrepreneurial process ... The entrepreneurial process . 3 What is entrepreneurship? •Entrepreneurship

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)

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An example: DNA Cascais

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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

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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?

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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