Strategies for Entrepreneurshi

p and Innovation

Introduction

Entrepreneurship involves the creation of new business. Involves opportunity recognition or creation, assembling resources to pursue the opportunity, and managing activities that bring a venture into existence.Innovation is the process of translating an idea or invention into a good or service that creates value or for which customers will pay. Innovation is synonymous with risk-taking and organizations that create revolutionary products or technologies take on the greatest risk because they create new markets.

This chapter focuses on entrepreneurship, innovation and growth.

1. Considered opportunist, in such a way that they recognize and take advantage of opportunities

2. They are also resourceful, creative visionary, hardworking, and optimistic. They are independent thinkers who are willing to take risks and innovate.

3. Although entrepreneurship causes a lot of stress, disappointments, and uncertainties, successful entrepreneurs can also acquire great wealth and personal satisfaction.

The Entrepreneur

• Common traits• Original thinkers• Risk takers• Take responsibility for own actions• Feel competent and capable• Set high goals and enjoy working toward them

The Entrepreneur

Some of the Most Powerful

Entrepreneurs• Larry Page and Sergey Brin

• Founders of Google. Larry and Sergey named the search engine they built “Google,” a play on the word “googol,” the mathematical term for a 1 followed by 100 zeros. Google Inc. was born in 1998, when Sun co-founder Andy Bechtolsheim wrote a check for $100,000 to that entity—which until then didn’t exist. Today, Google is one of the most powerful and influential companies in the United States and the world. Google, as of May 2014, has a market capitalization of $382.47 billion.

Some of the Most Powerful

Entrepreneurs• Mark Zuckerberg

• an American computer programmer and Internet entrepreneur. He is best known as one of five co-founders of the social networking website Facebook. Together with his college roommates and fellow Harvard University students Eduardo Saverin, Andrew McCollum, Dustin Moskovitz, and Chris Hughes, Zuckerberg launched Facebook from Harvard's dormitory rooms. Zuckeberg dropped-out of Harvard to write the codes for Facebook. As of 2014, Zuckerburg’s Net Worth is $9.4 billion.

Some of the Most Powerful

Entrepreneurs• Elon Musk

• an engineer, entrepreneur, and inventor. He is the CEO and CTO of SpaceX, CEO and chief product architect of Tesla Motors, and chairman of SolarCity. He is the founder of SpaceX and a cofounder of PayPal, Tesla Motors, and Zip2. He has also envisioned a conceptual high-speed transportation system known as the Hyperloop. He has a net worth of $7.5 billion as of 2014

Primary tasks associated with a new venture

A. Opportunity Recognition or CreationEntrepreneurship is often envisioned as a discovery

process. Entrepreneurial discovery entails channelling resources toward the fulfilment of a market need. The success of this involves creating a new market. Entrepreneurial discovery may be viewed as the intersection of a need and a solution.

ExamplesNeed for cure for sickness, need for communication, need

for information

New Venture

B. Creation of a Business PlanEverything associated with a new venture revolves around

a business plan. Creation of a plan forces and entrepreneur to think through the details of the venture and determine whether it really seems reasonable.

New Venture

Business Plan is a written document that describes in detail how a new business is going to achieve its goals. A business plan will lay out a written plan from a marketing, financial and operational viewpoint.

Composition of the business plan

1. Executive summary- should catch the interest of the reader. It describes the

proposed business venture.

2. Business Description- Includes elements such as where the venture will be

launched, who will be involved, the customers it will serve, and when everything is likely to happen.

New Venture - The Business Plan

3. Environmental Analysis - Study on the external environment in which the new

venture will compete. It involves competitor, supplier, customer, technology and others.

4. Resource Analysis- focuses on the special resources the venture already

possesses and the resources it will need to make the venture a success.

5. Functional Plans- Plans on how the venture will work out such as

marketing, management, operations, research and development.

New Venture - The Business Plan

6. Financial Projections - it helps the investors understand timing issues, such as

when money will be needed, how much will be needed and when their investment earn respectable returns.7. Implementation Schedule

- it provides time frame for the accomplishment of various activities.8. End-game strategy

- exit strategy if the venture is not successful or when the venture has concluded. This exceptionally useful for the potential investors.9. Risk Analysis

- all ventures entail risk. Potential investors appreciate a good analysis of risks. This section helps the entrepreneur to decide whether to pursue the venture.

New Venture - The Business Plan

Business plan

-Emphasis on financing-New venture- Different target audiences (potential investors)

Strategic Plan

-Plans assume ongoing business-focuses on operating detail as needed by the managers

New Venture - Business Plan vs. Strategic Plan

C. Securing Start-up capitalObtaining start-up capital is probably the most difficult

problem facing a potential entrepreneur. Not obtaining sufficient capital is one of the biggest causes of failures.

New Venture

Potential Sources of Capital for Entrepreneurs

New Venture

D. Managing the VentureThe early stages of an entrepreneurial start-up are the most difficult.

First Year Agenda for Entrepreneurial Start-ups

New Venture

Activity DescriptionFinancial Management Puts emphasis on establishing systems to track revenues and expenses and

control costs. Marketing Early marketing efforts may include providing a service to a few customers at a

nominal price to establish a track record and gain references. Targeted advertising is also appropriate

Services Development This includes establishment of a system for collecting feedback from early customers so that services can be improved. (continual improvement is essential)

Resource Acquisition Gathering of resources at start-up. It includes site selection, human resource selection, accessibility to customers and suppliers, and the acquisition of Property, Plant and Equipment.

Process Development The focus is on production and operation management to ensure efficiency and quality.

Management and Staffing

One of the most essential activities is recruitment of motivated, well-trained employees and selection of managers, as needed. This area also includes assignment of responsibilities, establishment of personnel policies, overcoming administrative problems, training and establishing a compensation system, which may include benefits. The entrepreneur is establishing an organizational culture in the first year. It should support the objectives of the venture.

Legal Requirements The venture should have a legal form (sole proprietorship, partnership, corporation). The venture needs to be a “good corporate citizen”

Franchising

1) Franchising is when two independent companies form a contractual agreement giving one (the franchisee) the right to operate a business in a given location for a specified period of time under the brand of the other firm (franchisor).

2) Franchisees agree to give the franchisor a combination of fees and royalties, usually in the form of percentage of unit sales.

3) It is important to understand that franchising is not without risks, one study showing that fewer than 25 percent of companies that offered franchises in the US in 1983 still franchising ten years later.

Causes of Failures

1. According to both entrepreneurs and venture capitalist, the most common reasons new venture fail are internal.

2. Most Common sources of entrepreneurial failures

Corporate Entrepreneurship and

Innovation• Corporate entrepreneurship, sometimes called

Intrapreneurship, involves the creation of new products, processes, and services within existing corporation that enable them to grow.

• Corporate entrepreneurship can be viewed as an organizational learning process directed at developing the skills and knowledge necessary to compete in new domains.

Corporate Entrepreneurship and

Innovation• Factors Encouraging or Discouraging Innovation in Established Firms

Factors Encouraging Innovation Factors Discouraging Innovation

Vision and Culture that support innovation, personal growth and risk taking

Rigid bureaucracy and conservatism in decision making

Top management support and organizational champions

Absence of management support or champions

Teamwork and collaboration; a flat management hierarchy

Authoritarian leadership and traditional hierarchy

Decentralized approval process Difficult approval process

Valuing the ideas of every employee Attention given to the ideas of only certain people (researchers or managers)

Excellent Communication Closed-door offices

Innovation grants and time off to pursue projects

Inadequate resources devoted to entrepreneurial activities

Large rewards for successful entrepreneurs Harsh penalties for failure

Focus on learning Exclusive emphasis on measurable outcomes

Corporate Entrepreneurship and

Innovation• Two Types of Organizational Champions

• A champion is someone who is very committed to a project and is willing to expend energy to make sure it succeeds

• Managerial Champion• A person with enough authority in the company to

gather the resources and push the project through the administrative bureaucracy.

• Technical Champion• An expert with the knowledge needed to guide the

technical aspects of the projects of the project from beginning to end.

The Internet and e-commerce• According to Peter Drucker, the explosive emergence

of the internet as a major, perhaps eventually the major, worldwide distribution channel for goods, services, and surprisingly, for managerial and professional jobs is profoundly changing economies, markets, and industry structures; products and services and their flow; consumer segmentation, consumer values, and consumer behaviour; jobs and labor markets

Some examples of e-commerce websites

• Amazon• E-bay• OLX• Lazada• Ayos Dito