Entrepreneurial Mind Notes

I. Decision to Become an Entrepreneur

A. Introduction to Entrepreneurship

  • The word "Entrepreneur" originates from the French words "entre" (meaning "between") and "prendre" (meaning "to take").
  • Richard Cantillon, a French economist, coined the term. Entrepreneurship is a mindset.
  • Entrepreneurship involves:
    • Seeking opportunities.
    • Taking risks beyond security.
    • Having the tenacity to push an idea to reality.
  • Entrepreneurship is an individual's ability to turn ideas into action, including creativity, innovation, and risk-taking.
  • It also includes planning and managing projects to achieve objectives.
  • Entrepreneurship supports:
    • Day-to-day life at home and in society.
    • Employees' awareness of their work context.
    • Establishing new ventures.

B. Changing Demographic of Entrepreneurs

  • 1. Women Entrepreneurs:
    • Women entrepreneurs initiate, organize, and operate business enterprises, undertaking risks and handling economic uncertainty.
    • They are crucial for economic growth through their ingenuity.
  • 2. Minority Entrepreneurs:
    • Minority entrepreneurship includes business owners from religious, ethnic, racial, cultural, gender, or sexuality minority groups.
    • Growth facilitated by support networks and resources.
  • 3. Senior Entrepreneurs:
    • Individuals aged 50 or above who start or plan to start a business.
  • 4. Young Entrepreneurs:
    • Young individuals who take risks to start and operate a business or improve existing business practices.
    • Entrepreneurship courses are increasingly common in schools.

C. Entrepreneurship Importance

  • Joseph Schumpeter (Austrian Economist) articulated entrepreneurship’s importance in 1934.
  • Entrepreneurs develop new products and technologies, making current ones obsolete (creative destruction).
  • Start-ups drive creative destruction by improving on existing products and strategies.
  • Creative destruction includes new products, technologies, pricing, and distribution strategies.
  • Economic Impact:
    • Innovation: Creating something new is central to entrepreneurship.
    • Job Creation: Small businesses create most new jobs and employ over half of private-sector employees.
  • Impact on Society:
    • Innovations improve lives, enhance productivity, and improve health; however, they also can create moral and ethical issues.
  • Impact on Larger Firms:
    • Entrepreneurial firms positively impact larger firms by offering innovations and partnership opportunities
    • Many entrepreneurial firms build business models that help larger firms be more efficient or effective.

D. The Entrepreneurial Processes

  • The Entrepreneurial Process consists of four steps:
    • Step 1: Deciding to become an entrepreneur.
    • Step 2: Developing successful business ideas.
    • Step 3: Moving from an idea to an entrepreneurial firm.
    • Step 4: Managing and growing the entrepreneurial firm.

II. Recognizing Opportunities and Generating Ideas

A. Identifying and Recognizing Opportunities

  • Opportunity: A favorable set of circumstances creating a need for a new product, service, or business.
  • Most entrepreneurial ventures start by identifying an opportunity gap.
  • Opportunity Gap: Determining a product or service that individuals need and are willing to purchase that is not currently available.
  • An opportunity should be:
    • Attractive
    • Durable
    • Timely
    • Anchored in a product, service, or business that creates value
  • Window of Opportunity: The time period in which a firm can realistically enter a new market.
  • Three ways to identify an opportunity:
    • Observing Trends
    • Solving a Problem
    • Finding Gaps in the Marketplace
1. Observing Trends
  • Observe trends to identify opportunities for entrepreneurs. Key trends include:
    • Economic Trends
    • Social Trends
    • Technological Advances
    • Political and Regulatory Changes
  • Differentiate between trends and fads and recognize their interconnectedness.
  • Economic Forces:
    • Understanding economic trends helps identify areas for new business ideas and areas to avoid.
    • A strong economy increases discretionary spending.
  • Social Forces:
    • Understanding the effect of social forces on product and business ideas.
    • Products and services often fulfill social needs.
    • Examples of social trends:
      • Aging of baby boomers
      • Increasing diversity of the workforce
      • Interest in social networks like Facebook and Twitter
      • Proliferation of mobile phones and mobile apps
      • Focus on health and wellness
      • Emphasis on clean energy
      • Increasing interest in healthy foods and "green" products
  • Technological Advances:
    • Advances in technology create opportunities that dovetail with economic and social changes.

B. Finding Gaps in the Marketplace

  • Identifying customer needs that are not being met.
  • Providing something unique, improving an existing idea, or introducing something to a different market.
  • Gaps exist because large retailers compete on price and offer mainstream items.
  • Product Gaps: Represent viable business opportunities.
    • Example: Daisy Rock Guitars fills the gap for guitars designed specifically for women.
    • ModCloth also fills a gap in the marketplace.
  • Recognizing frustration with unavailable products or services.
  • Create a new category by targeting a different market.

C. Techniques for Generating Ideas

  • Entrepreneurs generate numerous ideas to capitalize on opportunities.
  • Brainstorming:
    • Generating several ideas about a specific topic.
    • Rules for brainstorming:
      • No criticism allowed.
      • Freewheeling encouraged.
      • Move quickly.
      • Leapfrogging encouraged.
  • Focus Groups:
    • Gathering 5-10 people to discuss an issue.
    • Used to generate new business ideas by responding to questions and discussing topics.
  • Library and Internet Research:
    • Conduct library and internet research to generate ideas.
    • Use industry-specific magazines, trade journals, and industry reports.
    • Search online for "new business ideas".
  • Other techniques include customer advisory boards and day-in-the-life research( send researchers to the field to see the services the customer are using Personal Characteristics of the Entrepreneur::
    • Opportunity Recognition: Perceiving a profitable new business or product/service.
    • Prior Experience: Industry experience helps recognize opportunities.
    • Corridor Principle: Starting a firm leads to new venture opportunities.
    • Cognitive Factors: Innate skills in opportunity recognition.
    • Entrepreneurial Alertness: Noticing things without deliberate search.
    • Social Networks: Personal relationships and connections.
      • Solo Entrepreneurs: Identified ideas independently.
      • Network Entrepreneurs: Identified ideas through contacts.
      • Impact of strong-tie (frequent interaction) vs. weak-tie (casual acquaintances) relationships.

D. Encouraging and Protecting New Ideas.

  • Create an organization that encourages and protects new ideas.
  • Establishing a Focal Point for Ideas:
    • Designate a person to screen and track ideas.
    • Establish an idea bank (physical or digital repository).
    • Encourage employees to keep journals of their ideas.
  • Encouraging Creativity at the Firm Level:
    • Innovation: Successful introduction of new outcomes.
    • Creativity: Generating novel or useful ideas.
  • Protecting Ideas from Being Lost or Stolen:
    • Intellectual property protection (patents, trademarks, copyrights, and trade secrets).
    • Document ideas and secure them.
    • Avoid inadvertent disclosure.
      Personal Creativity and Opportunity Recognition
  • CREATIVITY is the process of generating a novel or useful idea. on an anecdotal basis, it
    is easy to see the creativity involved in forming many products, services, and businesses.
  • PREPARATION is the background, experience, and knowledge that an entrepreneur
    brings to the opportunity recognition process. Just an athlete must practice to excel, an
    entrepreneur needs experience to spot opportunities.
  • INCUBATION is the stage during which a person considers an idea or thinks about
    problem; its is the "mulling things over" phase. Sometimes it's a conscious activity, and
    sometimes it's unconscious and occurs while a person is engaged in another activity.
  • INSIGHT is the flash of recognition when the solution to a problem is seen or an idea are born. Also called "eureka" experience. In a business context, this is the moment when an entrepreneur recognizes and understand an opportunity.
  • EVALUATION is the stage of the creative process during which an idea is subjected to
    scrutiny and analyzed for its viability. It is a particularly challenging stage of the creative
    process because it requires an entrepreneur to take a candid look at the viability of an idea.
  • ELABORATION is the stage during which the creative idea is put into a final form. the
    details are worked out and the idea is transformed into something of value, such as a new product, service, or a new business concept.
4 AREAS OF FEASIBILITY ANALYSIS.

  • Product/Service Feasibility Analysis is an assessment of the overall appeal of the product or service being proposed.

  • Product/Service Desirability is to affirm that the proposed product or service is desirable and that it serves a need in the marketplace.

  • Product/Service Demand to determine if there is a demand for the product or service. There are two techniques for making this determination: administering a buying intentions survey and conducting library, Internet, and gumshoe research.

  • Industry/Target Market Feasibility Analysis This is an assessment of the overall appeal of the industry
    and the target market for the product or service being proposed.

    • Industry Attractiveness The top 3 factors are particularly important. Industries that are:

      • young rather than old
      • clearly growing rather than shrinking
      • early rather than late in their life cycle and fragmented rather than concentrated are more receptive to new

    • Target Market Attractiveness- is the limited portion of the industry that it goes after or to which it wants to appeal.

    • CHARACTERISTICS OF ATTRACTIVE INDUSTRIES

      • Are young rather than old
      • Are early rather than late in their life cycle
      • Are fragmented rather than concentrated
      • Are growing rather than shrinking
      • Are selling products or services that customers "must-have" rather than products or services that customers "want to have"

  • Organizational Feasibility Analysis: conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to successfully launch its business.

    • Management Prowess: Evaluate the ability of the initial management team.
    • Resource Sufficiency: Determine if the venture has sufficient resources to move forward.

  • Financial Feasibility Analysis: this is a preliminary financial assessment.

    • Total Start-Up Cash Needed: Prepare a budget that lists all anticipated capital purchases and operating expenses needed to get the business up and running.
    • Financial Performance of Similar Business: estimate a proposed start-up's potential financial performance by comparing it to similar, already established businesses. First, substantial individual firms. The easiest data to obtain is on publicly traded firms through Hoovers or similar sources.

5 COMMON MYTHS ABOUT ENTREPRENEURS

  • Entrepreneurs are born, not made.
  • Entrepreneurs are gamblers.
  • Entrepreneurs are motivated primarily by money.
  • Entrepreneurs should be young and energetic.
  • Entrepreneurs love the spotlight

Myth 1. ENTREPRENEURS ARE BORN, NOT MADE

  • This myth is based on the mistaken belief that some people are genetically predisposed to be entrepreneurs.
  • It can be interpreted as meaning that no one is "born" to be an entrepreneur and that everyone has the potential to become one.
  • Whether someone does or doesn't is a function of environment, life experiences, and personal choices.

Myth 2. ENTREPRENEURS ARE GAMBLERS

  • Entrepreneurs are usually moderate risk-takers, as are most people.
  • The myth that entrepreneurs are gamblers originates from two sources:
    • First, entrepreneurs typically have jobs that are less structured, and so they face a more uncertain set of possibilities than managers or rank-and-file employees.
    • Second, many entrepreneurs have a strong need to achieve and often set challenging goals.

Myth 3. ENTREPRENEURS ARE MOTIVATED PRIMARILY BY MONEY

  • Money is rarely the primary reason entrepreneurs start a new firm and persevere.

Myth 4. ENTREPRENEURS SHOULD BE YOUNG AND ENERGETIC

  • Entrepreneurial activity is fairly evenly spread out over ages. According to an Index of entrepreneurial activity maintained by the Kauffman Foundation,
    • 26% of entrepreneurs are aged 20 to 34,
    • 25% are ages 35 to 44, and
    • 23% ages
  • The increasing number of older-aged entrepreneurs is a big change in the entrepreneurial landscapes.

Myth 5. ENTREPRENEURS LOVE THE SPOTLIGHT

  • Some entrepreneurs are flamboyant; however, the vast majority of them do not attract public attention.
  • Many entrepreneurs avoid public attention because they are working on proprietary products or ideas.

CATEGORIES OF ENTREPRENEUR

Corporate Entrepreneurship

  • Also referred to as Intrapreneurship.
  • Entrepreneurship WITHIN existing organizations or companies.
  • Observed when the company organizes its structure to instigate innovation within the company.
  • The corporate entrepreneurs are managers or employees who lead the company to NEW directions.

Technopreneurship

  • This involves doing business with the use of technology in transforming ideas into products; use of new technology in the enhancement of the existing operations.
  • It is said that the first use of the term technopreneur was in 1997

Ecopreneurship

  • It involves the use of entrepreneurship principles in crafting businesses that solve environmental problems or that operate sustainably.
  • An ecopreneur is an entrepreneur whose business efforts are not only driven by profit but also by a concern

Social Entrepreneurship

  • This is a new form of entrepreneurship, which focuses on solving social problems through innovation and risk-taking; venturing into business in pursuit of a social mission.
  • This is different from the concept of corporate social responsibility
  • Characteristics of Social Entrepreneurs as Change Agents are:
    • Adoption of a mission to create and sustain social value (beyond personal value)
    • Recognition and relentless pursuit of opportunities for social value
    • Engagement in continuous innovation and learning
    • Action beyond the limited resources at hand

TYPES OF START-UP FIRMS

Salary-Substitute Firms

  • Firms that basically provide their owner or owners with a similar level of income to what they would be able to earn in a conventional job.

Lifestyle Firms

  • Firms that provide their owner or owners the opportunity to pursue a particular lifestyle and make a living at it. These firms are not innovative, nor do they grow.

Entrepreneurial Firms

  • Firms that bring new products and services to the market by creating and seizing opportunities regardless of the resources they currently control.
  • The essence of entrepreneurship is creating value and disseminating that value to customers.