final - intro to entrepreneurial mindset

entrepreneurs are doers, not thinkers

they do tend towards action, but they are still methodical people who plan their moves carefully

entrepreneurs are born, not made

think of entrepreneurship as a discipline

entrepreneurs are always inventors 

a full understanding of entrepreneurship covers more than invention, its requires a complete understanding of innovative behavior in all its forms 

entrepreneurs are academic and social misfits 

the entrepreneur is now viewed as a professional role model 

entrepreneurs must fit the profile

a standard entrepreneurial profile is hard to compile

all entrepreneurs need is money

money is a resource but never an end in itself 

all entrepreneurs need is luck 

what appears to be luck is actually preparation, determination, desire, knowledge, and innovativeness 

entrepreneurship is unstructured and chaotic

entrepreneurs are heavily involved in all facets of their ventures, and have tons of responsibilities. they are structured but can look strange to the casual observer

most entrepreneurial initiatives fail 

the statistics of entrepreneurial failure rates have been misleading over the years

corridor principle

with every venture launched, new and unintended opportunities often arise

entrepreneurs are extreme risk takers 

the entrepreneur is working on a moderate to calculated risk 

theory of entrepreneurship

A theory of entrepreneurship is a verifiable and logically coherent formulation of relationships, or underlying principles, that either explain entrepreneurship, predict entrepreneurial activity (e.g., by characterizing conditions that are likely to lead to new profit opportunities or to the formation of new enterprises), or provide normative guidance (i.e., prescribe the right action in particular circumstances).

the financial risk is measured against…

the level of profit motive coupled with the type of activity

profit motive

the desire for monetary gain or return from the venture

_____ entrepreneurs are driven solely by monetary gain

not all

financial risks

• the individual puts a significant portion of savings or other resources at stake 

• all money or resources will be lost if venture fails 

• many people are unwilling to risk their savings, house, property, and salary to start a new business 

carrer risks

• a major concern to managers who have a secure job with high salary and good benefits 

• if they leave the job they lose the benefits and secureness 

family and social risk

• the entrepreneur’s other commitments may suffer

• old friends may vanish eventually because of missed get-togethers

• spouses and children might be emotionally scared

psychic risks

• money can be replaced, but emotional problems can set them back

• if dealing with failure the wrong way, the psychological impact may be too severe for them to get back up again 

what does the word ethics come from?

the greek word ethos, meaning custom or mode of conduct

what does greek philosopher Chilon say about ethics

a merchant does better to take a loss than to make a dishonest profit

ethics

the basic rules or parameters for conducting any activity in an “acceptable” manner

the four rationalizations:

• the activity is not “really” illegal 

• it’s in the corporation’s best interest

• it will never be found out 

• because it helps the company, the company will condone it 

non-role

go against the firm with acts of stealing

role failure

go against the firm by not providing the managerial role they are suppose to 

role distortion

the behavior of individuals who think they are acting in the best interests of the firm

role assertion

the behavior of individuals who assert their roles beyond what they should be, thinking (falsely) that they are helping the firm

what is the first thing that ethics researcher LeRue T. Hosmer reached regarding the relationship between legal requirements and moral judgement?

the requirements of law may overlap at times but do not duplicate the moral standards of society. Some laws have no moral content whatsoever (e.g., driving on the right side of the road), some laws are morally unjust (e.g., racial segregation laws, which were in effect in the United States into the 1960s and 1970s), and some moral standards have no legal basis (e.g., telling a lie).

what is the second thing that ethics researcher LeRue T. Hosmer reached regarding the relationship between legal requirements and moral judgement?

legal requirements tend to be negative (forbidding acts), whereas morality tends to be positive (encouraging acts)

what is the third thing that ethics researcher LeRue T. Hosmer reached regarding the relationship between legal requirements and moral judgement?

legal requirements usually lag behind the acceptable moral standards of society

why does unethical behavior take place in businesses?

• greed

• distinctions between activities at work and activities at home

• a lack of foundation in ethics

• survival (bottom line thinking)

• a reliance on other social institutions to convey and reinforce ethics

complexities of business decisions (bullet points)

• ethical decisions have extended consequences 

• business decisions that involve ethical question have multiple alternatives 

• ethical business decisions often have mixed outcomes

• most business decisions have uncertain ethical consequences 

• most ethical business decisions have personal implications 

code of conduct

a statement of ethical practices or guidelines to which an enterprise adheres

what is true about code of conducts and modern times?

• codes of conduct are being come more prevalent in industry 

• the recent ones are proving to be more meaningful in terms of external legal and social development 

ethical consciousness

the responsibility of the entrepreneur, because the entrepreneur’s vision created the venture

ethical process and structure

refer to the procedures, position statements, and announced ethical goals designed to avoid ambiguity

institutionalization

a deliberate step to incorporate the entrepreneur’s ethical objective with the economic objectives of the venture

Corporate entrepreneurs

managers or employees who do not follow the status quo of their coworkers are depicted as visionaries who dream of taking the company in new directions

the internal network issues

structures, policies and procedures, culture, strategic direction, and people

the internal network issues advises

(1) establish the needed flexibility, innovation, and support of employee initiative and risk taking,

(2) remove the barriers that the entrepreneurial middle manager may face to more closely align personal and organizational initiatives and reduce the need to behave unethically,

(3) include an ethical component to corporate training that will provide guidelines for instituting compliance and values components into state-of-the-art corporate entrepreneurship programs

corporate entrepreneurship strategy

a vision-directed, organization-wide reliance on entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations through the recognition and exploitation of entrepreneurial opportunity

strategy manifested through the presence of

• an entrepreneurial strategic vision 

• a pro-entrepreneurship organizational architecture

• entrepreneurial processes and behavior as exhibited across the organizational hierarchy

model linkages

• (1) individual entrepreneurial cognitions of the organization’s members

•  (2) external environmental conditions that invite entrepreneurial activity, 

• (3) top management’s entrepreneurial strategic vision for the firm, 

• (4) organizational architectures that encourage entrepreneurial processes and behavior, 

• (5) the entrepreneurial processes that are reflected in entrepreneurial behavior,

• (6) organizational outcomes that result from entrepreneurial actions.

the five critical steps of a corporate entrepreneurship strategy

• (1) developing the vision,

•  (2) encouraging innovation, 

• (3) structuring for an entrepreneurial climate, 

• (4) preparing individual managers for corporate innovation,

• (5) developing venture teams

why is there a need for corporate entrepreneurship?

• to get more ideas in the work place 

• essential for established companies to foster innovation, maintain a competitive edge, and drive growth in rapidly changing markets. It drives revenue through new product development, increases employee morale and retention by fostering a proactive culture, and ensures long-term survival by preventing stagnation

sustainable entrepreneurship

the process of discovering, evaluating, and exploiting economic opportunities to create, improve, or sustain environmental, social, and economic value

what are the three forms?

• environmental entrepreneurship (ecopreneurship)

• social entrepreneurship

• social-environmental entrepreneurship

environmental entrepreneurship (ecopreneurship) 

focusing on exploiting opportunities within environmental market failures, such as renewable energy, waste reduction, and eco-friendly packaging

social entrepreneurship

primarily aiming to solve societal challenges- such as poverty, inequality, or lack of education - through sustainable business models

social-environmental entrepreneurship 

combing both to achieve environmental benefits that also improve social well-being

shared value

an approach to creating economic value that also creates value for society by addressing its needs and challenges

what two things does shared value do?

• transforms business thinking by addressing issues through innovation and methods 

• it connects company success with social progress

triple bottom line

an accounting framework that goes beyond the traditional measures of profit, return on investment, and shareholder value to include environmental and social dimensions

what two things does the triple bottom lime do/measure?

• interrelated dimensions of profits, people, and planet 

• an important tool to support sustainability 

what are the three dimensions of performance for the triple bottom line?

• economic

• environmental

• social

economic measurement

deals with the bottom line and income flows 

environmental measurement

• natural resources and reflect potential influences to its viability 

• long-range trends for environmental variables help organizations identify the impacts a project or policy would have on an area

social measurement

social dimensions of a community or region such as education, social resources

what is developing entrepreneurial vision supposed to do?

to recognize that problems are to solutions what demand is to supply

what is needed for creativity to occur

chaos

phase 1: background or knowledge accumulation

successful creations are generally preceded by investigation and information gathering

how to gather background information (9 ways)

• (1) read in a variety of fields;

•  (2) join professional groups and associations; 

• (3) attend professional meetings and seminars; 

• (4) travel to new places; 

• (5) talk to anyone and everyone about your subject; 

• (6) scan magazines, newspapers, and journals for articles related to the subject; 

• (7) develop a subject library for future reference; 

• (8) carry a small notebook and record useful information; 

• (9) devote time to pursue natural curiosities

phase 2: the incubation phase

• Creative individuals allow their subconscious to mull over tremendous amounts of information gathered during the preparation phase

• often occurs when they are engaged in activities totally unrelated to the subject or problem

some ways to induce incubation (6 ways)

• (1) engage in routine, “mindless” activities (cutting the grass, painting the house), 

• (2) exercise regularly, 

• (3) play (sports, board games, puzzles), 

• (4) think about the project or problem before falling asleep, 

• (5) meditate or practice self-hypnosis, 

• (6) sit back and relax on a regular basis

phase 3: the idea experience

• This phase of the creative process is often the most exciting because it is when the idea or solution the individual is seeking is discovered. 

• Sometimes referred to as the “eureka factor,”

•  this phase is also the one the average person incorrectly perceives as the only component of creativity

ways to speed up the idea experience (6 ways)

• (1) daydream and fantasize about your project, 

• (2) practice your hobbies, 

• (3) work in a leisurely environment (e.g., at home instead of at the office), 

• (4) put the problem on the back burner, 

• (5) keep a notebook at bedside to record late-night or early-morning ideas,

• (6) take breaks while working.

phase 4: evaluation and implementation

another important part of this phase is the reworking of ideas to put them into final form

suggestions to carry out this phase successfully: (8 suggestions)

• (1) increase your energy level with proper exercise, diet, and rest; 

• (2) educate yourself in the business-planning process and all facets of business; 

• (3) test your ideas with knowledgeable people; 

• (4) take notice of your intuitive hunches and feelings; 

• (5) educate yourself in the sell-ing process; 

• (6) learn about organizational policies and practices; 

• (7) seek advice from others (friends, experts, etc.); 

• (8) view the problems you encounter while implementing your ideas as challenges

innovation is planned and predictable

this is based on the old idea that only research and development teams should be the one innovating. in truth, innovation is unpredictable and may be introduced by anyone 

technical specifications must be thoroughly prepared 

comes from the engineering approach, where drafts complete plans before moving on is helpful. this sometimes takes too long. it is more important to sue a try/test/revise approach 

innovation relies on dreams and blue sky ideas

the creative process is extremely important to recognizing innovative ideas, however, accomplished innovators are very practical people and create opportunities grounded in reality— not daydreams 

big projects will develop better innovations than smaller ones 

larger firms are now encouraging their people to work in smaller groups, where it often is easier to generate creative ideas

technology is the driving force of innovation success

Technology is a one source for innovation, but is not the only one. numerous sources exist for innovative ideas; technology is not the only success factor. the customer or market is the driving force behind any innovations. market-driven or customer-based innovations have the highest probability of success. 

how many new firms have emerged in the US every year since 2010?

400,000

US patent office receives approx _______ patent application per year 

500,000

why entrepreneurs start new ventures (7 reasons)

• (1) the need for approval, 

• (2) the need for independence, 

• (3) the need for personal development, 

• (4) welfare (philanthropic) considerations, 

• (5) perception of wealth, 

• (6) tax reduction and indirect benefits, 

• (7) following role models.

pitfalls: lack of objective evaluation 

many entrepreneurs lack objectivity. they are prone to falling in love with an idea for a product or service, they seem unaware of the need for the scrutiny they would give to other projects. the way to avoid this pitfall is to subject all ideas to rigorous study and investigation

pitfalls: no real insight into the market

• Many entrepreneurs do not realize the importance of developing a marketing approach in laying the foundation for a new venture. They show a managerial shortsightedness. Also, they do not understand the life cycle that must be considered when introducing a new product or service

• No product is instantaneously profitable, nor does its success endure indefinitely. Entrepreneurs must not only project the life cycle of the new product, they must also recognize that introducing the product at the right time is important to its success. Timing is critical. Action taken too soon or too late will often result in failure.

pitfalls: inadequate understanding of technical requirements 

The development of a new product often involves new techniques. Failure to anticipate the technical difficulties related to developing or producing a product can sink a new venture. Entrepreneurs cannot be too thorough when studying the project before initiating it. Encountering unexpected technical difficulties frequently poses time-consuming and costly problems.

pitfalls: poor financial understanding 

A common difficulty with the development of a new product is an overly optimistic estimate of the funds required to carry the project to completion. Sometimes entrepreneurs are ignorant of costs or are victims of inadequate research and planning. Quite often they tend to underestimate development costs by wide margins. It is not unusual for estimates to be less than half of what is eventually required

pitfalls: lack of venture uniqueness 

A new venture should be unique. The best way to ensure customer awareness of differences between the company’s product and competitors’ products is through product differentiation. Pricing becomes less of a problem when the customer sees the product as superior to its competitors. A product that is unique in a significant way can gain the advantage of differentiation

pitfalls: ignorance of legal issues 

• Business is subject to many legal requirements. 

  • One is the need to make the workplace safe for employees. 

  • A second is to provide reliable and safe products and services. 

  • A third is the necessity for patents, trademarks, and copyrights to protect inventions and products. 

• When these legal issues are overlooked, major problems can result

Entrepreneurs must put ideas through ____________ to discover if their proposals contain any fatal flaws

feasibility analyses

profile analysis approach

• a profile analysis is a tool that enables entrepreneurs to judge a business venture’s potential by sizing up the venture’s strengths and weaknesses along a number of key dimensions or variables. A single strategic variable seldom shapes the ultimate success or failure of a new venture. In most situations, a combination of variables influences the outcome. It is important, therefore, to identify and investigate these variables before committing resources to launch a new venture.

• Through careful profile analysis, entrepreneurs can mitigate for possible weaknesses that may inhibit the growth of their ventures, avoiding many of the mistakes cited earlier in this chapter that can lead to venture failures

feasibility criteria approach questions

• is it proprietary?

• are initial production costs realistic?

• are the initial marketing costs realistic?

• does the product have potential for very high margins?

• is the time required to get to market and reach the break even point realistic?

• is the potential market large?

• is the product the first of a growing family?

• does an initial customer exist?

• are the development costs and calendar times realistic?

• is this a growing industry?

• can the product - and the need for it - be understood by the financial community?

feasibility criteria approach analysis

The criteria selection approach provides a means of analyzing the internal strengths and weaknesses that exist in a new venture by focusing on the marketing and industry potential critical to assessment. If the new venture meets fewer than six of these criteria, it typically lacks feasibility for funding. If the new venture meets seven or more of the criteria, it may stand a good chance of being funded

comprehensive feasibility approach

incorporates external factors in addition to those included in the criteria questions cited above

technical feasibility

identify the technical requirements for producing a product or service that will satisfy the expectations of potential customers

three major areas in marketability analysis

• (1) investigating the full market potential and identifying customers (or users) for the goods or service, 

• (2) analyzing the extent to which the enterprise might exploit this potential market, 

• (3) using market analysis to determine the opportunities and risks associated with the venture

general sources would include:

• General economic trends - Various economic indicators such as new orders, housing starts, inventories, and consumer spending 

• Market data - Customers, customer demand patterns (e.g., seasonal variations in demand, governmental regulations affecting demand)

• Pricing data - Range of prices for the same, complementary, and substitute products; base prices; and discount structures

• Competitive data- Major competitors and their competitive strength

why does someone want to buy an ongoing venture?

A prospective entrepreneur may seek to purchase a business venture rather than start an enterprise. This can be a successful method of getting into business, but numerous factors need to be analyzed

reasons why someone would want to buy an ongoing venture

• personal preferences

• examination of opportunities

personal preferences

Entrepreneurs need to recognize certain personal factors and to limit their choices of ventures accordingly. An entrepreneur’s background, skills, interests, and experience are all important factors in selecting the type of business to buy. In addition, personal preferences for location and size of a business should guide the selection process. If an entrepreneur always has desired to own a business in the South or West, then that is exactly where the search should begin

examination of opportunities

Entrepreneurs in search of a possible venture to buy need to examine the available opportunities through various sources:

• business brokers

• newspaper ads

• trade sources

• professional sources

• online sources

advantages of acquiring on ongoing venture

• 1. Because the enterprise is already in operation, its successful future operation is likely.

• 2. The time and effort associated with starting a new enterprise are eliminated.

• 3. It sometimes is possible to buy an ongoing business at a bargain price

more about:

• Because the enterprise is already in operation, its successful future operation is likely.

• Less fear about successful future operation

• a successful business already has demonstrated the ability to attract customers, control costs, and make a profit. many of the problems a new formed firm faces are sidestepped. the purchase of an existing successful operating venture can be a wise investment

more about:

• The time and effort associated with starting a new enterprise are eliminated

• reduced time and effort 

• an ongoing enterprise already has assembled the inventory, equipment, personnel, and facilities necessary to run it. new owners don’t really have to worry about hiring, place, and training personnel 

• the previous owners have established relations with suppliers, bankers, and other business people. there are old relationships waiting to be used by the new owners should they need them

more about:

• it sometimes is possible to buy an ongoing business at a bargain price

• a good price

• seldom does someone in business sell a successful firm at an extraordinary low price. they will sell it for per the operation’s fair market value. yet, the prospective owner must avoid bidding high on a poor investment or walking away from a good bargain because “it smells fishy.” The way to prevent making the wrong decision is to evaluate the existing operation in a logical manner

what are the inhibitors to market research?

• cost

• complexity

• strategic decisions

• irrelevancy

cost

Marketing research can be expensive, and some entrepreneurs believe that only major organizations can afford it. Indeed, some high-level marketing research is expensive, but smaller companies can also use very affordable marketing techniques