Entrepreneurship Slides

8/8/2019 Entrepreneurship Slides

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Entrepreneurship


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Global Entrepreneurs

Richard Branson

Bill Gates

Fredrick Smith

Steve Case

Gordon Moore/

Andrew Grove

Edwin Land

Mitch Kapor

Amar Bose

Mark Zuckerman

Robert Swanson/

Herbert Boyer

Sergey Brin/Larry Page

Anita Rodick

Dietmar Hopp/ Hasso

Plattner


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Evolution of Entrepreneurship

Origin of the Word Entrepreneur

The word was originally used to describe people who

take on the risk between buyers and sellers or

undertake a task such as starting a new venture.The undertake interpretation of the word has been

central to its usage in English

Difference Between an Inventor and an Entrepreneur

An inventor creates something new

An entrepreneur puts together all the resources

needed the money, the people, the strategy and the

risk-bearing ability to transform the invention into a

viable business


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Entrepreneurship Defined

The essence of entrepreneurial behavior is

identifying opportunities and putting useful ideas into

practice

The set of tasks called for by this behavior can be

accomplished by either an individual or a group and

typically

requires creativity, drive and a willingness to take risks

Entrepreneurship is the process by which individualspursue opportunities

without regard to the resources they currently control


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Essence of Entrepreneurship

Nexus of:

Valuable opportunities and enterprising individuals

Opportunity

a situation in which a person can exploit a new business

idea that has the potential to generate profit Mindset: a way of looking at things that is

Opportunity focused

Creative

Passionate - doing what you love

Creating wealth and gaining independence Persistent and innovative


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Essence of Entrepreneurship(cont..)

Entrepreneurship is the knack for sensing opportunity

where others see

chaos, contradiction and confusion

An entrepreneur is someone who works for himself/

herself for 16 hours a day so he/she doesnt have to

work eight hours a day for someone else


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N E X U Sof

Enterprising Individuals

and

Valuable Opportunities


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The Price System

Prices contain all of the information

From all participants in the economy

Needed to allocate resources

People can therefore make decisions about allocationof resources through established decision rules

When equilibrium is reached, people then have noreason to change their approach to buying on selling


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Limits to the Price System

Prices do not always allocate resourceseffectively

Impose limits on the types of decisions that theprice system can be used to make

An inventor developing a new product must makedecisions about the use of resources

Information about new products does not exist till

it enters the market place Prices and revenues for new products cannot

determine the resource allocation decision


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Technology

Prices do not provide information

About a way of producing or organizing

That requires a technology that does not yetexist

By definition, such information is not available tomarket participants

Entrepreneurship creates technology and is enabled by i


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Prices & Entrepreneurship

Prices do not provide information about

The actions of competitors in response toentrepreneurial entry

This requires the entrepreneur to make aconjecture

Key element of entrepreneurial decision is notcontained in the prices, but in

Entrepreneur's conjecture as the cause forprice movement


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Role of Asymmetry Entrepreneurship requires differences between people:

specifically, entrepreneurship requires the preferentialaccess to information

ability to recognize opportunities

both of which vary across people

In the absence of variation across people

Everyone would recognize and act upon all opportunitiesmaking it impossible for any one person

to gain access to resources at a price at whichrecombination would yield profit


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Economic Impact of

Entrepreneurial Firms Innovation

Process of creating something new, which is central to

the entrepreneurshipSmall entrepreneurial firms are responsible for 60% of all

innovations

Job Creation

In the past two decades, economic activity has moved inthe direction of smaller entrepreneurial firms;

unique ability to innovate and focus on specialized tasks


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Entrepreneurial Firms Impact on

Society and Larger Firms Impact on Society

The innovations of entrepreneurial firms have a dramatic

impact on society through new products and services that

make our lives easier, enhance our productivity at work,

improve our health; and

entertain us in new ways

Impact on Larger Firms

Many entrepreneurial firms have built their entire business

models around

Products and services that help large firms become

More efficient and effective


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Global

Entrepreneurship

Monitor


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Entrepreneurship Around The Globe

There is tremendousinterest in

entrepreneurship

around the world

According to the GEM

2005 study, about 330

million people, or 14%

of the adults in the 35

countries surveyed, are

involved in forming

new businesses


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GEM Conceptual Model

General National Framework Conditions

Openness (External Trade)

Government (Extent/Role)

Financial markets (Efficiency)

Technology, R&D (Level, intensity)

Infrastructure (Physical)

Management (Skills)

Labor markets (Flexible)Institutions (Unbiased, Rule of Law)

Entrepreneurial Framework Conditions

Financial

Government Policies

Government ProgramsEducation & Training

R&D Transfer

Commercial, Legal Infrastructure

Internal market Openness

Access to Physical Infrastructure

Cultural, Social Norms

Social,

Cultural

Political

Context

Major EstablishedFirms

(Primary Economy)

Micro Small &

Medium Firms

(SecondaryEconomy)

Entrepreneurial

Opportunities

Entrepreneurial

Capacity

-Skills

-Motivation

NationalEconomic

Growth

(Jobs &

Technical

Innovation)

NewEstablish-

ments

New

Firms


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TEA Index

Total Entrepreneurial Activity (TEA) Index is the

sum of nascent entrepreneurs and new

businesses

Nascent entrepreneurs:

individuals between 18 and 64 years who

have taken some action to create new

businesses

Owner managers:

firms which have paid wages for more than

three months and less than 42


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Entrepreneurship in India

More respect for entrepreneurship now than these was a few

years ago

More and more people are experimenting with it

Age and experience are not the critical factors

Idea and vision are the key

Corporate executives are increasing

Starting new ventures

Or Joining start-ups


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Start-up

Easy access to customer and market

Ability to develop primary demand

Effective and timely access to innovations

Inventiveness/ creativity

Strong investment in innovations

Effective knowledge dissemination

Investment in business infrastructure Access to risk financing

Availability

Mechanisms


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Growth

Value retention and reinvestment

Efficient and timely access to people

Environment conducive to effective employee motivation

Effective and available supporting business services


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Exit

Reasonable capital gains rates

Share in the value

Effective exit markets

Trade sales

IPO

Efficient bankruptcy treatment


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Entrepreneurship is a Process

that causes change

through innovation

brought about by Individuals

who generate or respond to economic

opportunities

that Create Value for

both themselves and society


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Context

Positive attitude towards business

Positive view of business

Positive view of initiative over conformity

Role models Constructive social Dynamic

Focus on sharing a growing pie and not on seizing and dividing

the pie

Positive attitude toward success and failure Permit and promote success

Dont punish well-intended failure

Good demographics


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Entrepreneurial Process

Context Start-up Growth Exit

Value Creation


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Entrepreneurial Process

A typical manager asks

What resources do I control?

What structure determines our companys relationship to

its market?

How can I minimize the impact of others on my ability to

perform?

What opportunity is appropriate?


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Entrepreneurial Process cont

The entrepreneur tends to ask:

Where is the opportunity?

How do I capitalize on it?

What resources do I need?

How do I gain control over them?

What structure is best


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Beyond Business As Usual

Entrepreneurial judgment required since

No decision rule that can be applied

using freely available information

No way to model complex decisions

involving uncertainty and discovery

Major impact on account of risk and

innovation


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Sailing in Uncharted Waters

Exploitation of opportunity is, by definition, uncertain

Information necessary to determine whether a particular effort

to exploit an opportunity will be profitable

cannot be known with certainty at the time that the

opportunity is identified because

that information does not come into existence

until the entrepreneur pursues the opportunity.

The pursuit of opportunity, itself, determines

whether the demand exists,

whether the entrepreneur can compete with others, and

whether a new value chain can be created?


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Shumpeter Model

Changesin

Political forcesRegulation

Macroeconomic factorsSocial trendsC R E A T E

New Informationthat

Entrepreneurs use

toFigure out

how toRecombine resources

intoN E W A N D V A L U A B L E F O R M S

From Innovation to Entrepreneurship


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Environment for Entrepreneurship

Entrepreneurship flourishes in communities where

resources are mobile

Entrepreneurship is greater when successful members ofa community reinvest excess capital in the projects of

other community members

Entrepreneurship flourishes in communities in which

success of other community members is celebrated rather

than derided

Entrepreneurship is greater in communities that see

change as positive rather than negative.


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Looking at Situations in the New Light

Turbulence

Volatility New unknown

competitors

Unpredictability

Competitive

conditionsunclear

Risk factors known

Predicable patterns Known players

Stability and

predictability

Critical success

factors clear

Industry

Unknown business

conditions/ new

technologies

Known business

conditions/ established

technologies

Entrepreneurial

Situation


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Looking at Situations in the New Light (cont..)

Divergent thinking

Scenario design

Focus on adjustment

and flexibility

Convergent thinking

Analytical methods

Focus on competitive

advantages

Strategy Process

Unknown business

conditions/ new

technologies

Known business


technologies

Entrepreneurial

Situation

Option based

Iterative processes

Ad hoc assessments

Known cash flows

Known dilemmas

Clear objectives

Resource Allocation


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Looking at Situations in the New Light (cont..)

Unknown business

conditions/ new

technologies

Known business


technologies

Entrepreneurial

Situation

Experiments Structured analysis in

known surroundings

Market Assessment

Fluid, dynamic

network Conflicts encouraged

Open-ended

Well defined

boundaries Conflicts avoided or

moderated

Calculating culture

Organization

ExperimentalWell defined,

incremental

Development Process


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A Different Process

StrategicOrientation

Driven by ResourcesCurrently Controlled

Driven by Perceptionof opportunity

Commitment to

Opportunity

Evolutionary with

Long Duration

Quick Commitment

CommitmentProcess

Single stage withComplete Commitment

Upon Decision

Multistage with minimalExposure at each stage

Control of

Resources

Ownership of Employmen

Of Required Resources

Episodic Use of Rent

Of Required Resources

Management

Structure

Formalized HierarcyFlat with MultipleInformal Networks

Reward

System

Resource-Based

Individual & promotional

Oriented

Value Based and Team

Based


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Entrepreneurship :A Personal Journey


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Key Phases inEntrepreneurship process

- Individual Level Variables (skills, motives, characteristics of entrepreneurs

-Group Level variables (ideas, input from others, effectiveness in

interactions with venture capitalists, customers, potential employees)

- Societal level variables (government policies, economic conditions, technology)

All phases are influenced by these

three level variables

Idea forNew

Product / Service

and/orOpportunity

Recognition

Initial

Decision

to Proceed

Assembling the

Required Resources

(information,

financial, people)

Actual

Launch of

New Venture

Building a

Successful

Business

Harvesting the

Rewards (exit

by founders)


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Entrepreneurs Approach Challenge the incumbent firms

Introduce new inventions

Make current technologies and productsobsolete

Create high knowledge asymmetry

Establish knowledge as the source of

comparative advantage


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Entrepreneurial Process in Social andCommercial Context

Team

Strategy

Structure

Culture

Products

Entrepreneur

Leader

Manager

Commitment

Vision

Networks

Teams

Parents

Family

Role Models

Risk Taking

Job Dissatisfaction

Job Loss

Education

Age

Commitment

Achievement

Locus of Control

Ambiguity Tol.

Risk Taking

Personal Values

EducationExperience

OROGANI-

ZATIONAL

PERSONALSOCIOLOG-

ICAL

PERSONALPERSONAL

GROWTHIMPEMENTATIONTRIGGERING

EVENT

INNOVATION

Competitors, Customers, Suppliers,

Investors, Bankers, Lawyers,

Resources, Govt. Policy

Competition, Resources

Incubator, Government Policy

Opportunities, Role Models,

Creativity

ENVIRONMENTENVIRONMENTENVIRONMENT


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Perspectives in the Entrepreneurial

ProcessFull understanding of the entrepreneurialprocess comes though

The Micro-perspective Focuses on behaviour and thought of

individuals, and

The Macro-perspective

Focuses on primarily environmental

factors

Both are Necessary


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External Pressures Trigger

Opportunity Recognition Rapid changes in

Technology

Consumer economics

Social values

Political action

Regulatory standards


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Effect of Individual Attributes on the

Decision to ExploitNon-psychological factors Education Career experienceAge Social position Opportunity cost

Psychological factors Motivation Core evaluation Cognition

OpportunityExploitation


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Becoming an Entrepreneur

Can you handle uncertainty?

Are you energetic?

Do you believe in yourself and your abilities?

Can you handle reversals and failures well?

Are you passionate about your goals or vision?

Are you good with other people?

Are you adaptable?

Are you willing to take risks or leaps or faith?


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Serial Entrepreneurs Temperamentally suited to start-ups

Do not hesitate to give up control or sell

once the company enters the growthphase

Track record helps in obtaining backing

at an early stage

Those who did it


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Type E Personality

Aggressively pursues goals

Pushes both self and others

Seeks autonomy, independence andfreedom from boundaries

Sends consistent messages Very focused and doesnt deviate from

purpose

Acts quickly, often without deliberating

Keeps distance and maintains objectivity

Expects others to be self sufficient andtangy-minded


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Type E Personality (cont)

Pursues simple, practical solutions

Able to cut through complexity

Find the essential and important issues

Willing to take risks

Comfortable with uncertainty Exhibits clear opinions and values

Makes quick judgments

Often finds faults

Has high expectations Impatient regarding results and with others

Has just do it mentality

Positive, unbeat, optimistic

Communicates confidence


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Clarifying Goals

Where do I want to go?

What kind of enterprise do I need to build?

What risks and sacrifices does such an

enterprise demand?

Can I accept those risks and sacrifices?


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Cognitive Factors

Studies have shown that opportunity recognition may

be an innate skill or cognitive process

Some people believe that entrepreneurs have a sixth

sense that allows them to see opportunities that othermiss

This sixth sense is called entrepreneurial alertness,

which is formally defined as the ability to notice things

without engaging in deliberate search


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Cognitive Style

Intuitive Holistic Thinking

Rational Analytical Thinking


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Role of Individual in Discovery of

Opportunities

INDIVIDUAL DIFFERENCES AND THE DISOCVERY OF

ENTREPRENEURIAL OPPORTUNITIES

Access to information

Life experiencesSocial networks

Search processes

Opportunity recognition

Absorptive capacityIntelligence

Cognitive properties


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The Three Key Capacities

Diagnostic

Capacity

CommunicativeCapacity

Creative

Capacity


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5 Characteristics of Entrepreneurs

Audacity

Courage

PatienceAdaptive

Closer


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Prior Experience Social Networks

Personal Characteristics of theEntrepreneur

Characteristics that tend to make some people better at

recognizing opportunities than others

Cognitive Factors Creativity


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Prior Industry Experience

Several studies have shown that prior experience in an

industry helps an entrepreneur recognize business

opportunities. There are several explanations for this

By working in an industry, an individual may spot a

market niche that is underserved

It is also possible that by working in an industry, an

individual builds a network of social contacts who

provide insights that lead to recognizing new

opportunities


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Social Networks

The extent and depth of an individuals

social network affects opportunity

recognition

People who build a substantial network ofsocial and professional contacts will be

exposed to more opportunities and ideas

than people with sparse networks

In one survey of 65 start-ups, half the

founders reported that they got their

business idea through social contacts


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Social Networks (cont)

Nature of Strong-Tie Vs. Weak Tie

Relationships

Strong-tie relationship are

characterized by frequent interaction

and form between co-workers, friendsand spouses

Weak-tie relationships are characterized

by infrequent interaction and form

between casual acquaintances

Result

It is more likely that an entrepreneur will

get new business ideas through weak-

tie rather than strong-tie relationships


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Social Networks (cont)

Strong Tie Relationships

These relationships, which

typically form between

likeminded individuals,

tend to reinforce insights

and ideas that peoplealready have

Weak Tie Relationships

The relationships, which

form between casual

acquaintances, are not as

apt to be between like-

minded individuals, soone person may say

something to another that

sparks a completely new

idea

Why weak-tie relationships lead to more new business ideasthan strong-tie relationships


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Pursuit

Persuasion

Critical Abilities

and


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Successful IntelligencePractical Intelligence

Ability to solve problems ofeveryday life

Analytic Intelligence

Ability to think critically and

analytically

Creative Intelligence

Ability to formulate new ideas and

new ways of solving problems

Social intelligence skills required

to get along effectively with others

& obtain necessary backing

SuccessfulIntelligence

Success as an

Entrepreneur


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The Making of anEntrepreneur


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Why Become an Entrepreneur ?

There are three primary reasons that people becomeEntrepreneurs and start their own firms

Desire to be their own boss

Desire to pursue their own ideas

Financial rewards


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Characteristics of SuccessfulEntrepreneur

Four Primary Characteristics of Successful Entrepreneurs

Passion for

the Business

Product/

customer focus

Tenacity despite

failureExecution

Intelligence

Successful

Entrepreneur


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Characteristics of Successful

Entrepreneurs Passion for the Business

The number one characteristic shared by successful

entrepreneurs is a passion for the business

This passion typically stems from the entrepreneur's beliefthat the business will positively influence peoples lives

Product/ Customer Focus

A second defining characteristic of successful

entrepreneurs is a product/ customer focus

An entrepreneurs keen focus on products and customers

typically stems from the fact that most entrepreneurs are at

heart, craftspeople


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Characteristics of Successful

Entrepreneurs (Cont) Tenacity Despite Failure

Because entrepreneurs are typically trying something new, the failure

rate is naturally high

A defining characteristic for successful entrepreneurs is their ability to

persevere through setbacks and failures

Execution Intelligence

The ability to fashion a solid business idea into a viable business is a

key characteristic of successful entrepreneurs

The ability to translate thought, creativity and imagination into

action and measurable results is the essence of executionintelligence


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True or False ?

Entrepreneurs are motivated by money

The idea is what matters

Entrepreneurs are born not made

Startups are one man bands

Entrepreneurs are inventive geniuses

Entrepreneurs are academic rejects with

no qualifications

Most new business fail

Entrepreneurs are loners

Entrepreneurs have chaotic personal lives

Entrepreneurs are gamblers


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Characteristics of Entrepreneurs

Age

Education

Gender

Work Status


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Characteristics ofEntrepreneur: Age

Different income groups have different levels of

entrepreneurial activity across all ages

People between 24-36 years of age are the most active

group regardless of the income of their country After the age of 36, all populations show a decline in

entrepreneurial activity

The relationship between age and entrepreneurship is

changingOlder entrepreneurs are responsible for 50% more business

start-ups than 10 years ago


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Characteristics of theEntrepreneur: Education

The relationship between education and entrepreneurial

activity is complex and very much country-specific

About 30% of those who start a business have a

secondary level education across all 3 income groups In high-income countries 57% of entrepreneurs have a

post-secondary education while 13% have not completed

a secondary education

In low-income countries 23% of entrepreneurs have a

post-secondary education while about 50% have notcompleted a secondary education


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Characteristics of theEntrepreneur: Gender

There are almost twice as many men who are active

entrepreneurs than women

In middle-income countries men are 75% more likely than

women to be active entrepreneurs In high-income countries men are 33% more likely than

women to be active entrepreneurs

In low-income countries, men are 41% more likely than

women to be active entrepreneurs

The gender gap is narrower for necessity entrepreneurship

than for opportunity entrepreneurship


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Characteristics of theEntrepreneur: Work Status

The overwhelming majority of people starting business

in all national income group are currently working

In middle-income countries 91% have jobs

In high-income countries 81% have jobs

In low-income countries 77% have jobs

The percentage of people starting a business without

being also employed as

6% in middle-income countries

17% on low income countries

5% in high-income countries


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Entrepreneurial Expectation

Regardless of income, the majority of start-ups intend

to create little if any employment

Start-ups that are export focused are more prevalent in

the high-income countries

As income increases the business services sector is the

most important

About 3% of start-ups qualify as businesses with high

potential; expect to create significant employment and

exports


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Story of an IndianEntrepreneur


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C.K. Ranganathan

His inspiration: Chinni Krishnan, his father

CKR in School : Poor in academics

Father suggestion : Agriculture or start a business

Siblings : Good in studies became doctors and lawyers.

Were put in English Medium School. CKR into Tamil MediumSchool

Studies did not interest CKR

But pets did

500 pigeons

Lots of fish

Variety of birds

Used to earn pocket money out of pet business


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Entry into Entrepreneurship

Father died when CKR entered college Father believed in little packets as a means to reach a

large number of small customers

Talcum powder (100gm/ 50 gm/ 20 gm)

Epsom salt (5 gm) However, father was unable to market the concept

well

CKR joined family business in 1982

Velvet shampoo Left within a year due to clash of business ideas

without any stake in property or business


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Starting Small

Started new business with a saving of Rs 15,000/- Initial investment

House cum office @ Rs 250 p.m. (Advance Rs 1,000)

Factory @ Rs 300 p.m. (Advance Rs 1,200)

Shampoo packing machine @ Rs 3,000/- Launched Chik Shampoo

Slow sales 20,000 sachets per month

Moved to Chennai in 1989

Manufacturing continued in Cuddalore

Took three years to get a bank loan

First loan Rs 25,000/-


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Making Chik Click

Big companies sold shampoo in big bottles and fromfancy stores

CKR saw opportunity in serving

Rural markets through

Petty shops Targeted rural areas in South India where people

hardly used shampoo

Ran live demonstrations

Sponsored shows of Rajnikanths films Introduced new fragrances jasmine and rose

Growth: Rs 35000/ month to Rs 12 lac/ month to Rs 30

lac/ month to Rs 1 crore/ month in three years


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India in GEM Survey

India below average on

Government policies

Physical infrastructure

Education system

R&D transfer

Respect for entrepreneurship in

society

Average score on

Opportunity perception by individual

Ease of market entry for a new player


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India in GEM Survey (cont)

India above average on

Market dynamism

Entrepreneurial capacity

Commercial and professional

infrastructure

Financial support

Necessity based v/s opportunitybased entrepreneurship No.1 on necessity based

No.25 on opportunity based


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Who Are They?

About 2/3rd, 26-39 years

25%, bachelors degree

69%, masters/ doctorate

Employed for five to eight years

Over 90% are male


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Company Profile

Over 60% in business for 3 to 6

years

Median annual revenue: Rs 1.5

crore

85% less than Rs 1 crore

Median number of employees: 15

84% less than 100 employees

Parents and relatives own thebusiness in 28% of cases


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Support Systems

Rely on friends and family to start

business

Significant help from former co-workers

and university mates specially in

marketing

Finance mainly from family and friends

Limited use of consultants and

government institutions


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Success Criteria

Revenue, customers, profits

Personal factors like satisfaction

and goal achievement

Creating something new anddurable

Leaving a legacy

Proving themselves

Contribution to Indian business


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Total Entrepreneurial Activity

(TEA) Index

India 18%

USA 10.2% Japan 2%

Global average 7%


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India below average on

Government policies

Physical infrastructure

Education system

R&D transfer

Respect for entrepreneurship in society

Average score on

Opportunity perception by individual

Ease of market entry for a new player


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India above average on

Market dynamism

Entrepreneurial capacity

Commercial and professional infrastructure

Financial support

Necessity based v/s opportunity based entrepreneurship

No.1 on necessity based

No. 25 on opportunity based


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Successful Indian

Entrepreneurs

Subhash Goel

N.R. Narayana Murthy

Sunil Mittal

Rajendra Pawar/ Shiv Nadar

Dilip Shanghvi

Manmohan Shetty

Alok Kejriwal

Kiran Mazumdar

Ramoji Rao

Aroon Purie

Kishor Biyani

R. Sriram/ Hemu Ramaiah/

BS. Nagesh

Raman RoyRajesh Jain


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Thank You

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