Module 1: The Entrepreneurial Mind

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Some people say that there is a specific psychological or motivational theory in

entrepreneurship, but that is not true. However, some entrepreneurs have different opinions in
achieving a success in new ventures or enterprises such as talent and skills. There are several
issues about in the world of entrepreneurship. There are several myths about it, some of them
will be tackled in Chapter 2.

The Psychological Theory of Dr. McClelland and Dr. Atkinson

This theory is accepted on entrepreneurial behavior. The theory states that people are
motivated by three principal needs:

1. Need for Power - is an urge to control others: to be able to influence them and make
them do things which perhaps they would not have done if left to themselves.

McClelland identified four stages within the power orientation:

1. Drawing inner strength from others

- being a loyal follower and serving the power of other people.

2. Strengthening oneself
- trying to dominate situations.

3. Self-assertiveness
- trying to manipulate situations so as to use other people to achieve one‘s own target.

4. Acting as an instrument of higher authority

- identifying with some organizations and employing the methods learnt in stages 2 and 3
but now being able to claim formal legitimacy.

2. Need for Affiliation - concerns the desire to be associated with specific people and
groups, to have a greater sense of belonging and place. It can play a role in variety of human
interactions and in the formation of bonds and friendships. A low need of affiliation can be part
of a more independent personality. People who do not feel a strong desire to affiliate with others
may have difficulty finding support.

3. Need for Achievement - is the urge to excel, to accomplish in relation to a set of

standards, to struggle to achieve success. The individuals with high achievement needs are
highly motivated by competing and challenging work. They look for promotional opportunities in
job. They have a strong urge for feedback on their achievement.

The Difference between Leadership and Management

Leaders have been characterized as inspiring or charismatic, but one rarely hears of
inspiring or charismatic managers. In the minds of many, management is associated with words
such as efficiency, planning, procedures, control, and consistency. Leadership is associated
with words such as vision, creativity, dynamism, change, nd risk-taking. But are there real
differences between managers and leaders? Between leadership and management?

According to A. D‘Souza, here are some distinctions:

1. Managers are concerned with the present. Leaders look to the future.

2. Managers make sure details are taken care of. Leaders set broad purposes and directions.

3. Managers exercise control to make sure that things work well. Leaders create commitment
that things may work better.

4. Managers solve today‘s problems by addressing difficulties caused by changing events.

Leaders create a better future by seizing opportunities stimulated by changing events.

5. Managers focus on the process. Leaders focus on the product.

6. Managers focus on problem behavior and try to improve it through counseling, coaching,
nurturing. Leaders focus on what is right and praise it.

7. Managers make sure people put in an honest day‘s work for their pay. Leaders inspire people
to do their best.

8. Managers organize and plan to meet this year‘s objective. Leaders create a vision of the
years down the road.

9. Managers create efficient policies and standard operating procedures. Leaders go beyond
the need for standard procedures and create a more efficient system.

10. Managers focus on efficiency. Leaders focus on effectiveness.

In his Seven Habits of Highly Effective People, Stephen Covey stated:

“Management is bottom-line focus: How can I best accomplish certain things? Leadership deals
with the top line: what are the things I want to accomplish? Management is efficiency in climbing
the ladder of success; Leadership determines whether the ladder is leaning against the right
wall.“

Most current thinking seems to suggest that all managers should become more
leadership-oriented. Managers should not be required to become more like leaders, nor should
leaders should come to value and emphasize the unique strengths of each other in order to tap
the natural tension between them to produce a “one plus one equals three“ outcome. This
requires blending strong management and strong leadership into one integrated whole where
the strengths of leaders combine with, rather than clash with, the strengths of managers,
thereby minimizing the weaknesses of both.

Leadership and Management Skills - A Comparison

Both leadership and management skills are needed to build a successful organization. It is
also important to realize that the way situations are viewed depends on whether it‘s from the
leadership or the management perspective. The best advice is to look at situations from both
perspectives so that all aspects are understood.

The comparison that follows is presented by Anthony D‘ Souza, to assist with the
understanding of these two seperate functions. In this way the best possible attributes from both
perspective can be used, and a multiple viewpoint will become the rule rather than the
exception:

1. Leaders gain power through their actions and personal relations.

Managers have positional power on which to rely.

2. Leaders are found throughout an organization.

Managers are found in the organization‘s higher echelons.

3. Leaders have followers who desire to be on the team.

Managers have subordinates who have been assigned to them

4. Leaders depend on people for success.

Managers depend on the system for success.

5. Leaders provide vision in terms of “the real benefit to you“.

Managers use the “this is your job.“ approach.
6. Leaders have self-conceived goals to better the organization.
Managers attempt to meet tbe goals provided by the organization.

7. Leaders strive to change the organization to best meet needs as they perceive them.
Managers work to maintain the organization‘s status quo.

8. Leaders often view rules and procedures as bureaucratic red tape.

Managers view rules and procedures as necessary controls to provide order.

9. Leaders work for results.

Managers follow directives.

10. Leaders work through their people.

Managers work with charts and computer print-out

Effective leaders build a climate of trust where people can freely express their ideas and
concerns. Such an atmosphere requires sensitive leaders who are secure in their own
knowledge, skills, and relationships rather than feel threatened by differences or resistance. If
used creatively without resentment or suppression, resistance and differences of viewpoint can
become a source of new ideas by forcing re-examination of objectives, plans, and
implementation.

Effective leaders are not only skilled in the dynamics of planned change and
goal-achievement; they also empower others. Without shared vision there would be no common
direction. Without empowerment of others, there would be no excellence in performance.
Leadership is the simultaneous provision of direction and empowerment.

Themes of Desirable and Acquirable Attitudes and Behaviors

Commitment and Determination

Entrepreneurial behavior is primarily self-determined behavior, that is, individuals decide

for themselves what courses of action they will follow. Self-determination of its own accord is
insufficient to support a claim that an individual is behaving entrepreneurial. An individual could
act in a self-determined way for any number of behavioral roles and reasons which can be
easily identified through the individual‘s dedication to ask and conviction to principle
Determination identified by four essential qualities:

1. The individual acts autonomosly

- central to the construct of self-determination is the notion of autonomy which is defined

by Stainton as; ‘the capacity to formulate and pursue plans and purposes which are
self-determined.‘ Thus, the person‘s recognized position or status within any given
context or role determines whether they are able to decide unilaterally on a course of
action.

2. Their behavior
- the individual needs the requisite knowledge, skills, and experiences to implement their
decision. Entrepreneurial behavior relies quite heavily on the individual‘s perception of
themselves as being autonomous as well as having the confidence and competence to
behave entrepreneurially.

3. Self-regulated
- is include self-management strategies, goal setting and attainment behaviors,
problem-solving behaviors, and observational learning strategies, all of which the
individual needs to be entrepreneurial. Self-regulation furthermore enables the protection
of the entrepreneurial opportunity by controlling the flow of confidential information to
others and timing opportunity exploitation for maximum affect.

4. The individual acts in a self-realizing manner

- they use a comprehensive and reasonably accurate, knowledge of themselves and their
strengths and limitations to act in such manner as to capitalize on their liabilities. It is also
influenced by evaluations from significant others, reinforcement, and their beliefs in themselves
regarding their own behavior.

Entrepreneurs base their self-determination not only on their values but also on natural
inclinations, interests, and curiosities. Entrepreneurs are thus said to be intrinsically motivated,
that is, they behave as they do because the individual finds these behaviors inherently
interesting, enjoyable or satisfying. Intrinsic motivation is the key ingredient for self-determined
behavior.

Leadership

Leadership and communication are constantly growing together, being intertwined into one
another to help develop an organization. To be an effective leader, communication has to be
defined in the organization for it to be successful.

Leadership in Entrepreneurship can be defined as “process of social influence in which

one person can enlist the aid and support of others in the accomplishment of a common task.“
in “one who undertakes innovations, finance and business acumen in an effort to transform
innovations into economic goods.“ This refers to not only the act of entrepreneurship as
managing or starting a business but how one manages to do so by these social processes, or
leadership skills. Entrepreneurship, in itself, can be defined as “the process by which
individuals, teams, or organizations identify and pursue entrepreneurial opportunities without
being immediately constrained by the resources they currently control“. This leads us to see that
an entrepreneur must have leadership skills or qualities in order to see potential opportunities
and act upon them. An entrepreneur, at the core, is a decision maker. Such decisions often
have an impact on an organization as a whole, which is representative of their leadership
amongst the organization.

According to Fisher, there are four phases of decision making:

1. Orientation Stage - is where the members involved are becoming aquatinted both with
themselves as well as the problem at hand.

2. Conflict Stage - is where the problem is analyzed with several possibilities presented to
resolve problem.

3. Emergence Stage - decision is made about which solution is to be used.

4. Reinforcement Stage - is the supportive of the decision.

With the growing global market and increasing technologies throughout all industries, the
core of entrepreneurship, the decision making, has become an ongoing process rather than
isolated incidents. This becomes knowledge management which is “identifying and harnessing
intellectual assets“ for organizations to “build on past experiences and create new mechanisms
for exchanging and creating knowledge“. This belief draws upon a leaders past experiences that
may prove useful. It is a common mantra for one to learn from their mistakes, so leaders should
take advantage of their benefit.

In cultural differences, the success and failures of entrepreneurs can be traced to how
leaders adapt to local conditions. With the increasingly global environment, a successful leader
must be able to make these adaptations and have insight into other cultures. Corporate visions,
in response to the environment are becoming transnational in nature due to the changes an
organization must make in order to operate or provide services or goods for other cultures.

Opportunity Obsession

One interpretation of entrepreneurial behavior suggests that is characterized by a

‘proactive search for opportunities within a market and the propensity to take risks in order to
achieve a certain goal‘. One of a goals of entrepreneurial behavior is the recognition of an
opportunity, then there is a need for a closer examination of what constitutes opportunity
identification. In order for there to be entrepreneurship there needs to be an opportunity which is
either discovered or created.

Entrepreneurial opportunities are therefore perceived to be discovered, created or both. It

is what motivates the individual to actively seek out opportunities or to create them that is under
investigation. Entrepreneurial opportunity recognition by one individual differs from opportunity
recognition through collaboration with others for two reasons. First, some individuals have better
access to information about the possibilities of an entrepreneurial opportunity. Access to key
information comes about as a result of a number of factors such as; job, experience, searching
capability, social networks and the individual‘s absorptive capacity. Second, some individuals
are simply better than others at processing the same information because they have a better
equipped cognitive capability. The ability to process and categorize that information efficiently
and effectively relies primarily on an individual‘s capacity and motivation to think
entrepreneurially as well as their self-efficacy.

Entrepreneurs are obsessed with opportunity. Having an entrepreneurial mindset would

help established businesses to successfully identify and exploit opportunities. Entrepreneurs
look for changes in the political, economical, social, and technological environment that disrupt
the equilibrium in the market place and consequently create new business opportunities.
Similarly, customers‘ dissatisfaction with the ability of existing products and services to meet
their needs indicates an opportunity that begs for exploitation. A company should look for an
opportunity that meshes well with its core competency. For an entrepreneur, personal expertise
is an excellent source for a new opportunity. While an entrepreneur may have no shortage of
“ideas“ and may think passionately about those ideas, it pays to assess an opportunity before
spending the time and effort to start a business only to see the idea fall flat with target
customers.

Tolerance of risk, Ambiguity, and Uncertainty

Entrepreneurship means risk. The risk of walking away from security and career path to
create something new. The risk of taking yourself and your family into an unfamiliar storm of
stress and uncertainty. The risk that you‘ve miscalculated an opportunity, or your own internal
resources as you plunge into a new venture.

To seriously consider taking the entrepreneurial leap already sets a person apart from the
vast majority of men and women, who will never come close to actually leaving the world of
wages. But even for the brave-of-heart, the reality of risk that comes with that leap when the last
paycheck is left behind and life is reduced to a single do-or-die mission. It is the most naked
moment in a working life. It can be a powerful energizer. It can also be overwhelming if you are
not, at some level, prepared.

Here‘s the tips for facing the storm of risk that accompanies launching a new venture:
1. Assess your tolerance for risk before you dive in - serious entrepreneurship is not blind
adventuring. But even when you‘ve done everything you can to minimize risk, it will stil show up,
alarminly, at some point in your effort. Imagine how you are likely to respond. You may
misjudge, but a tough exercise in self-awareness is good preparation.

2. Brace your home life - the pressures of an new venture are nearly impossible to
compartmentalize. Despite your best efforts, they are almost certain to roll into your home, your
family, your love life. Loved ones deserve a big heads-up, and your acknowledgement that to no
small degree they are being drafted into your dream. Their support will be critical. Their
alienation could cost you more than a new business.

3. Dont take the entrepreneurial leap simply for money - entrepreneurs want to be successful
but follow a real passion in your venture, whatever it may be. That passion will carry you
through the days when risks and obstacles seem insurmountable.

One important aspect of entrepreneurial behavior is the willingness to take risks. Many
theoritical models have therefore assumed that entrepreneurs are less risk averse than
non-entrepreneurs. However, empirical evidence regarding risk propensity has produced
inconclusive results. One reason for these different results might be that most studies consider
risk propensity as an individual trait that should be stable over time.

How about ambiguity and uncertainty? Entrepreneurs need vision. If you want to become
a successful entrepreneur, you need to be able to say: “See that hill? That‘s an important hill.
We need to take that hill!“ And you need to say it with enough conviction that people will join
with you. But if you have the instincts of an entrepreneur, what you‘ll do next is surprising. As
soon as your merry band sets off toward the hill, you‘ll say to yourself: “That‘s probably not the
right hill. I bet I‘m wrong. I need to be looking for clues that we need to change course.“

The ability to hold this illustration, to commit to charging ahead while looking for evidence
to prove you are wrong, shows a high “tolerance for ambiguity.“ It‘s an entrepreneur‘s
willingness to paint a compelling vision and charge ahead that creates order out chaos obe step
at a time. It‘s a willingness to be open to new information and make mid-course corrections that
mitigates risk. The ability to do both of these at once, in the face of great uncertainty, is a
tolerance for ambiguity that sets an entrepreneur apart from the rest of the world.

The best way to develop a tolerance for ambiguity is to make mistakes early, cheaply, and
often. To learn that failure is a blessing, if it helps you grow. To learn that failure in pursuit of a
worthy goal is noble and that questions are more important than answers.

In essence, learning to know is important but only if it helps you learn to do and learn to
be. Life is a matter of becoming who you were meant to be by using your gifts to do somethibg
that matters to you and others. That‘s the real hero‘s journey of a principled entrepreneur.
 Resolve now to seek out small challenges towards a greater vision and to steel yourself to
welcome the small failures that make you stronger. Begin to increase your personal tolerance
for ambiguity, and you‘ll be well on your way to strengthening that rarest of all entrepreneurial
traits.

Creativity, Self-reliance, and Ability to Adapt

The seed of entrepreneurship is the ability to see things differently. Whether it‘s with new
products or new processes, entrepreneurs are driven by the uncanny knack to see holes in the
marketplace and devise innovations to fill them. Though it‘s not the only essential quality to
success, creativity may be the foundational mental skill. Entrepreneurs ask the “what ifs“ that
drive inquisitiveness, and they‘re able to let go of what they already know to source fresh
information and new ways of thinking about a problem.

Some business owners however have a hard time adjusting to change and are reluctant to
adapting to new technology or even new internal changes needed for increased sales and
growth. The world of business is full of surprises and unforeseen events. Using the habit of
adaptability allows business owners to respond to circumstances with the ability to change
course and act without complete information.

Motivation to Excel

What is your motivation? Regain your motivation by understanding the big “why“ behind
what you do. To be fully engaged in your life, you must have bigger and bolder goals. Why do
you do what you do? Do you really know? Do the people around you know?

Comparison between individuals whose motivation is authentically self-generated and

those who are externally motivated typically reveal that the former, relative, to the latter, have
more interest, excitement, and confidence. Intrinsic motivation flourishes when circumstances
permit. Thus, an individual who identifies an entrepreneurial opportunity will act on it when they
perceive conditions are favorable to its exploitation

Entrepreneurial behavior is not, however, exclusively intrinsically motivated. There will be

occasions when entrepreneurial behavior will be the result of a combination of both intrinsic and
extrinsic motivation. In other words an individual will engage in entrepreneurial behavior
because they are intrinsically motivated to do so as well as for the potential extrinsic rewards
they stand to gain from doing so.

Values are consequently antecedent to intrinsic motivation and provide the individual with
a sense of control over how they think and act. Individuals subjected to a more controlling
approach not only lose initiative but operate less effectively, especially when the work they are
doing requires conceptual and creative processing capability. The individual‘s focus to their best
and to be more excelled.
 So can everyone have an entrepreneurial mind? Probably not. But with time and practice,
you can begin to think more like entrepreneurs. You can start to make subtle shifts in old,
reflexive thinking that keeps us from exploring a new idea or taking the leap and launching your
own business. Entrepreneurial thinking may be less of destination and more of a journey as you
push your own boundaries and explore exactly what you‘re capable of.