ENTREPRENEURSHIP

CHAPTER 1: NATURE & IMPORTANCE OF ENTREPRENEURSHIP

Opening Profile: OPRAH WINFREY:
 Oprah & Jeff Jacobs’ contradicting personality traits complimented each other as coworkers
 Difference b/w good & great entrepreneur: “ability to spot an idea with the right emotional & strategic fit & to identify resources
necessary to take advantage of the opportunity”

ENTREPRENEUR (definition) is an individual who takes risks and starts something new.
 Earliest Period: A go-between person; taking active role in trading & bearing all the physical & emotional risks.
 Middle Ages: an actor and a person who managed large production projects.
 17th Century: person who entered into a contractual arrangement with the govt. to perform a service to or to supply stipulated
products.
 18th Century: one who needed capital.
 19th & 20th Century: an individual developing something unique (innovator).
 Today: behavior that includes
1. Initiative taking
2. The organizing & reorganizing of social & economic mechanisms to turn resources & situation to practical account
3. The acceptance of risk or failure

ENTREPRENEURSHIP (definition) is the process of creating something new with value by devoting the necessary time and effort,
assuming the accompanying financial, psychic, and social risks and receiving the resulting rewards of monetary and personal
satisfaction.

INVENTORS & ENTREPRENEURS (difference)

 Inventor creates something new and falls in love with the invention.
 Entrepreneur falls in love with the organization & ensures its survival & growth by making the invention “commercially feasible”.

ENTREPRENEURIAL PROCESS is the process of pursuing a new venture (new products into existing markets, existing products in the
new markets, or the creation of a new organization).
1. Identify & Evaluate the Opportunity
o Most difficult task; opportunities do not appear suddenly
o Requires entrepreneur’s alertness and establishment of mechanisms (consumers/business associations, members of
distribution systems, technical people) to identify potential opportunity
o Talking to consumers, discussion with retailers, wholesalers to figure out a need that can be addressed
o Window of Opportunity (the time period available for creating new venture) & Market Size are the bases for determining risks
and rewards.
o Opportunity must fit personal skills and goals of entrepreneur.
o Opportunity Assessment Plan:
 Description of the product/service
 Assessment of the Opportunity
 Assessment of the entrepreneur and the team
 Specification of all the activities & resources needed to translate the opportunity into a viable business plan
 Sources of capital to finance its initial venture as well as its growth
2. Develop a Business Plan
o Describes the future direction of the business
3. Determine the Resources Required
o Appraisal of the entrepreneur’s present resources
 Differentiate critical resources from helpful ones
 Not to underestimate the amount and variety of resources needed
 Assess the downside risks associated with insufficient or inappropriate resources
o Acquiring the needed resources in timely manner while giving up as little control as possible
 Large share needed initially: when more capital will be required to expand, more share will have to be yielded
4. Manage the Enterprise
o Implement the business plan
o Examining operational problems of the growing enterprise (implementing management style & structure)
o Establishing control system (in order to quickly identify and resolve problems)

TYPES OF START-UPS:
 Lifestyle Firms small ventures that supports the owners and usually does not grow.
 Foundation Company formed from research and development that usually does not go public
 High Potential Venture (Gazelles) has high growth potential and therefore receives great investor interest

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

 Increasing per capita output and income
 Initiating and constituting change in the structure of business & society
  Division of wealth among various participants
 Stimulating investment interests
 Creating jobs and opportunities for more individuals

 Product Evolution Process is the process for developing and commercializing an innovation
 Iterative Synthesis is the intersection of knowledge and social need that starts the product development process
 Ordinary Innovation New products with little technological change
 Technological Innovation New products with significant technological advancements
 Breakthrough Innovations New products with some technological change

BRIDGING THE GAP BETWEEN SCIENCE AND MARKETPLACE:

1. Government as an innovator
o A govt. active in commercializing technology
o Technology Transfer is commercializing the technology in the labs into new products
o Govt. has the resources needed to commercialize lab technology to the marketplace
o Problems: Lacks marketing and distribution skills and networks, bureaucratic structure, red-tapeism
2. Corporate Entrepreneurship
o Entrepreneurship within existing business
o Existing businesses have financial resources, business skills, marketing & distribution systems to commercialize innovation
successfully
o Problems: Bureaucratic structure, focus on short-term profits, highly structured organizations.
3. Independent Entrepreneurship
o Many entrepreneurs lack managerial skills, marketing capability, or financial resources.
o Their inventions are often unrealistic, requiring significant modifications to be remarkable.
o They don’t know how to interface with banks, suppliers, customers, venture capitalists, distributors, ad-agencies...
o Yet they are the most effective medium for bridging the gap b/w science and marketplace
 They significantly affect the economic activity of an area by building economic base and providing jobs
 Entrepreneurship accounts for the majority of new products and net new employment

ETHICAL & SOCIAL RESPONSIBILITY OF ENTREPRENEURS

 Redeploying the resources in the market that were exploited by the large companies from stakeholders.

FUTURE OF ENTREPRENEURSHIP
 Growing interest in the field of entrepreneurship
 More universities offering courses and more students opting for the subject
 Promotion by government
 Entrepreneurs are revered in the society as well
 ENTREPRENEURSHIP
CHAPTER 2: THE ENTREPRENEURIAL MIND-SET
Opening Profile: EWING MARION KAUFFMAN:
 Childhood experience of reading and selling farm eggs and being a boy scout helped him a lot.
 While working in the pharmaceutical company, his commissions accounted for more than president’s salary.
 Always treated his employees as “associates” and made them the owners of the company which increased the efficiency of the
company by a great deal.
 Believed in the spirit of giving back. Made many more entrepreneurs through his efforts of making “associate entrepreneurs”.

HOW ENTREPRENEURS THINK

1. Effectuation is a process that starts with what one has (who they are, what they know, and whom they know) and selects among
possible outcomes.
o The Patchwork Quilt principle emphasizes on creating something new with existing means rather than discovering new
ways to achieve given goals.
o The Affordable Loss Principle prescribes committing in advance to what one is willing to lose rather than investing in
calculations about expected returns to the project.
o Bird-in-Hand Principle involves negotiating with any and all stakeholders who are willing to make actual commitments to
the project; determines the goals of the enterprise.
o Lemonade Principle prescribes leveraging surprises for benefits rather than trying to avoid them, overcome them, or adapt
to them.
o Pilot-in-the-Plane Principle urges relying on and working with people as the prime driver of opportunity and not limiting
entrepreneurial efforts to exploiting factors external to the individual.
 Entrepreneurial Mindset involves the ability to rapidly sense, act, and mobilize, even under uncertain conditions.

2. Cognitive Adaptability describes the extent to which entrepreneurs are dynamic, flexible, self-regulating, and engaged in the
process of generating multiple decision frameworks focused on sensing and processing changes in their environments and then
acting on them.
o Comprehension Questions designed to increase entrepreneurs’ understanding of the nature of the business environment.
o Connection Tasks designed to stimulate entrepreneurs to think about the current situation in terms of similarities and
differences with situations previously faced and solved.
o Strategic Tasks designed to stimulate entrepreneurs to think about which strategies are appropriate for solving the problem
(and why) or pursuing the opportunity (and how).
o Reflection Tasks designed to stimulate entrepreneurs to think about their understanding and feelings as they progress
through the entrepreneurial process.
 Entrepreneurs with increased cognitive adaptability have an improved ability to
o Adapt to new situations
o Be creative
o Communicate one’s reasoning behind a particular response

3. Learning from Business Failure

 Most common cause of business failure is insufficient experience.
 Grief is a negative emotional response a person feels from the loss of something important.
 Grief can interfere with entrepreneurs’ ability to learn from the failure and quite possibly with their motivation to try again.
 Grief Recovery Process: Dual Process for Grief
o Loss-Orientation an approach to grief recovery that involves working through, and processing, some aspect of the loss
experience and, as a result of this process, breaking emotional bonds to the object lost.
o Restoration-Orientation an approach to grief recovery based on both avoidance and proactiveness toward secondary
sources of stress arising from a major loss.

MANAGERIAL VERSUS ENTREPRENEURIAL DECISION MAKING

ENTREPRENEURIAL FOCUS CONCEPTUAL DIMENSION ADMINISTRATIVE FOCUS

Strategic Orientation
Driven by perception of opportunity Driven by controlled resources
Commitment of Resources
Revolutionary with short duration A single stage with complete commitment out of decision
Control of Resources
Episodic use/rent of req. resources Ownership or employment of required resources
Management Structure
Flat with multiple informal networks Hierarchy
Reward Philosophy
Based on value creation Based on responsibility and seniority
Entrepreneurial Culture
Promoting broad search for opportunity search restricted by controlled resources; failure punished
Growth Orientation
Rapid growth is top priority; risk accepted to achieve growth Safe, slow and steadily