UNDERSTANDING ENTREPRENEURSHIP CH 1 01 30 2013 What is entrepreneurship Entrepreneurship is about opportunities Opportunities are An entrepreneur s perception that the market will support new product offerings Discovered created or some combination thereof Entrepreneurship is a mindset and set of behaviors that involve s Producing novelty Accessing and using resources Deciding what processes to perform and executing those processes Influencing the behavior of other people Why is entrepreneurship important Implications for the economy and society Reallocates resources i e creative destruction Creates jobs and growth i e through new ventures Increases the tax base Creates product offerings for people entrepreneurs initiate and respond to technology change Implications for the entrepreneur Provides independence and autonomy Generates wealth Makes the entrepreneur a more valuable economic asset Enables the entrepreneur to pursue goals s he values Venture Creation Process New ventures Many new ventures fail i e they do not survive or they produce returns that are too low Influence and are influenced by many stakeholders e g customers suppliers financiers etc Involve uncertainty yet have important consequences Are developed iteratively and nonlinearly often involving milestone achievement Factors shaping new venture performance and survival occur at three levels The entrepreneur e g decision making The internal environment e g culture The external environment e g regulations The Importance of the Entrepreneur The entrepreneur decides to pursue the opportunity and how to pursue it Push factors relate to an entrepreneur s lack of alternative career prospects Pull factors relate to the attractiveness of the opportunities Ventures often embody entrepreneurs personality and values Entrepreneurs judgments and decisions drive venture behavior especially in their early stages People can learn to become better entrepreneurs Creativity drive timing and adaptability are important Increasingly ventures are founded by teams Internal Environmental Factors Venture strategy Plans routines and commitments that direct resource acquisition and allocation Both formulation and implementation are important Invention versus innovation versus imitation Invention developing new product offerings Innovation commercializing new product offerings Imitation replicating others product offerings or processes Radical versus incremental innovation Radical large changes from the status quo potentially generating new or reconfiguring existing industries Incremental small changes over the status quo often building upon not supplanting what existed previously Many Facets of the External Environment Industries Firms producing similar products and services Evolve through life cycles perhaps as a result of entrepreneurs actions The environment may be difficult to understand Customer demand products and processes may be new poorly defined and rapidly changing New ventures e g international firms often confront multiple environments The potential outcomes of some decisions much less the probabilities of the outcomes are difficult to discern The liabilities of smallness and newness reflect the effects of the environment on small and new firms Trends in the External Environment Global Economy Interdependence among countries has positive and negative consequences Emerging economy firms are increasingly important A source of business opportunities e g social media Facilitates knowledge sharing enabling the emergence of new opportunities by facilitating innovation Internet Women are The majority of both college students and workers Increasingly apt to pursue entrepreneurship An influential customer group Green solutions could spur the next economic boom PREPARING FOR THE ENTREPRENEURIAL JOURNEY 2 Myths and Realities Entrepreneurs start businesses only for the money Many factors are more important than financial gain is Starting a business requires a lot of money Autonomy passions social objectives and the need for achievement are all important The business should be unique but small departures from the status quo may be sufficient Capital increases survival chances Many businesses start without much capital It takes a great idea Execution is important The bigger the risk the bigger the reward Risk is a subjective concept There are several ways financial risk can reduce returns Myths and Reality continued A business plan is required for success Preparation is important even without a business plan Entrepreneurship is for the young and reckless Many ventures are founded by older individuals Entrepreneurship cannot be taught Entrepreneurs can apply learned skills to their ventures Business plans provide discipline and organization but they do not add value directly Experience particularly within the given industry is often important entrepreneurs need diverse skills Personality and situation factors are difficult to change Teaching about specific opportunities eliminates advantages of pursuing them Paths to Entrepreneurship The home based entrepreneur Most small businesses In the U S there is an infrastructure to support such businesses The serial entrepreneur Founds and exits businesses repeatedly Develops unique entrepreneurial skills through experience The portfolio entrepreneur Maintains large financial positions in multiple businesses simultaneously Might manage actively none or a few of these businesses Paths to Entrepreneurship continued The nonprofit entrepreneur Associated with social entrepreneurship The novelty of the approach not the profit is a defining feature of entrepreneurship The business must be sustainable The corporate entrepreneur Associated with corporate venturing intrapreneurship or strategic entrepreneurship The firm s behaviors not its size determine whether it is entrepreneurial Corporate entrepreneurship is increasingly critical to the success of business in many industries Challenges of Entrepreneurship Good opportunities may be difficult to find Entrepreneurs often work long hours for little pay especially in ventures early stages Managing stakeholders e g employees and financiers can be complex and wearing Entrepreneurs may experience social isolation High uncertainty risk and change can cause stress and hinder long term personal planning Failures and setbacks might be inevitable Limited confidence access to capital knowledge and time e g due to family increase difficulty Mentors and Personal Networks