MGMT W9

Entrepreneurs and entrepreneurship

An entrepreneur is someone who is able to

• Discover and recognise a business opportunity

• Create a viable idea for a business product or service to generate value

• Build a vision and carry it out by organising the necessary resources by taking into account associated risks and rewards

• Innovation spirit is at the heart of entrepreneurship

Entrepreneurs require managerial functions ( planning, organising leading and controlling) and need to have skills in management ( human technical and conceptual) and opportunity identification, take risks and create product and services

People become entrepreneurs to

• Be their own boss

• Pursue their own ideas

• Pursue financial and social rewards

• Out of necessity

Pull entrepreneurial motivation

Push entrepreneurial motivation

Need for High achievement - excessive desire for taking personal responsibility for problem solving, and setting and reaching goals

Tolerance of ambiguity - they are not big risk takers, rather moderate, calculated risk takers. Entrepreneurs are comfortable with uncertainty/ambiguity

Internal locus of control - strong internal locus of control, the degree to which people believe that their lives are in their own control, closely linked with self confidence

Opportunity - a gap in the market for products and services and there is a market demand usually due to market trends or problems in the existing market

Resources include financial, social, human and natural resources, they acquire resources as the proceed and usually start business by using their own resources

Team

Relates to both founder and management teams

Quality team with: relevant and complementary skills and experience, motivation to succeed, commitment, determination and persistence, leading and managing team dynamics is essential

You identify opportunities by

• Observing trends ( economic, social, political)

• Solving problems ( economic, social, cultural or environmental)

• Finding 'social needs' in the market

Maori Entrepreneurship

The desire to be both culturally and commercially successful

• Making a positive difference in community

• Increasing mana by having a positive reputation

• Making profits and using profits to support the stated values and principles

Core principles of Maori entrepreneurship

• Communalism rather than individually

• Reciprocity ( the concepts of giving something in return for something one has received rather than - acquisitiveness ( desire to acquire things)

• And social gain rather than financial profit

Innovations ca be

• Products/services

• Process

• Marketing

• Business model

• Organisational (eg structure, new forms of management and work environments)

Innovations contain a degree of newness

Types of Innovation

Characteristics of breakthrough innovation

• They take time - often years

• The climate needs to be conducive

• Trial and error are the norm

• They are driven by personal curiosity

• Resources, mostly financial are often scarce

• There is significant risk

• It takes courage, dedication and tenacity

Innovation is a combination of the managers vision to create a good idea and the perseverance and dedication to remain with the concept through implementation

Change is any alteration of the status quo, innovation is the introduction of something new

Disruptive thinking

• Innovations that help create new markets and value propositions

• Ultimately disrupt an existing market and value propositions over a period of years displacing the earlier technology

Commercial exploitation of innovation

To be commercially successful the innovation must:

• Be fit for purpose

• Have a sound selling proposition

• Be capable of 'scaling up'

• Have a capable team to bring it to commercialisation

• Be sustainable

• Have an acceptable financial return

Small business

NZ definition - those enterprises with fewer than 20 employees

The Bolton Report (1971)

• The business is owner-managed in a personalised way, not through a formal, specialised management structure

• The business is an independent entity, in the sense that it is not a subsidiary of a larger enterprise and the owner is free of outside control in making decisions ( franchisee)

• The business has a relatively small market share, serving a local or regional rather than a national market (digital age)

Unique contribution of small business

• A vehicle for entrepreneurship - a budding entrepreneur typically starts with a  small business

• Encouraging innovation and flexibility - being small can make a business more nimble and prepared to trying new things

• Maintaining close relationships with customers and the community - owners are often part of the community

• Keep larger firms competitive - small business may do it better

• Provide employees with comprehensive learning experiences - a lot of variety when working in small business

• Generate new employment - 42% of all new jobs

Inception:

• Focused on producing products and services and obtaining customers

• The owner's direction, managerial skills and dedication are important

Survival:

• The business has demonstrated that it is workable entity

• It is producing a product/service with enough customers, but generating sufficient cashflow is a concern

• The business will grow in size and profitability

Growth:

• The business is economically strong and has sufficient size and market penetration

• Business now requires professional managers and systems and enhanced planning

• Threats from larger competitors

Expansion

• Includes team building and delegation

• The owner must develop a management team capable of taking over increasingly complex tasks

• Owner needs to delegate responsibilities to manage growth

Maturity

• Business will either succeed and develop into larger business or not

• Business will become more formalised in its accounting, management and other systems

Reasons for small business failure

• Lack of experience - don't understand fundamentals of business

• Lack of expertise - limited industry or technical knowledge

• Lack of a strategy - no forward planning

• Lack of financial control - poor cash flow management

• Growing too fast - negative impact on cash flow and the delivery of the product or service

• Lack of commitment - it takes hard work and long hours to make a small business successful

• Ethical failure - fraud or behaviour that deters customers

Entrepreneurial wellbeing and 'three R's" of entrepreneurial recovery