Entrepreneurship: Study Notes on The Practice of Entrepreneurship

Predictive vs Creation Views of Entrepreneurship

• Two views of entrepreneurship exist: the older predictive approach and the newer creation approach.
  • Predictive approach (traditional): viewed as a linear, goal-driven process with predetermined outcomes. Uses known resources and well-defined problems; decisions rely on historical data and forecasting tools. Suited for well-established companies operating under ambiguity with enough information. Even large firms using predictive methods can fail despite planning.
  • Creation approach (effectual/entrepreneurial): views entrepreneurship as a mindset and a method applicable when the future is uncertain and not well defined. Goals are often formed from available means, and action starts despite scarcity of resources. Startups and small ventures frequently begin with broad ideas and gather information in the real world to inform decisions later. The end goal is similar to the predictive approach, but the path differs.
• Practical stance for new ventures: balance both standpoints depending on the situation; use a combination of prediction and creation to maximize results when starting anew.
• Illustrative example: Habi Footwear.
  • Habi Footwear began as a thesis project at Ateneo de Manila University.
  • Founders: Chiong and teammates Paola Savillo and Bernadee Uy.
  • They visited a small community in Quezon City, which sparked the venture into footwear.
  • In early stages, creation is vital because the market and customers are unknown; data is collected through action and experimenting with limited resources.
• End goal alignment: both approaches aim to identify opportunities and act, but the means differ; entrepreneurs should know when to apply each method and how to combine them for new ventures.
• Practical guidance: for new ventures, balance prediction and creation to achieve the best outcomes.

The Start of Entrepreneurship in the Philippines

• Philippines as a developing country faces poverty challenges: poverty prevalence is beyond $20\%$ of the population, despite average economic growth around $6\%$.
• Entrepreneurship as a solution: used to address poverty via job formation, wealth creation, and social empowerment; government emphasizes entrepreneurship as a primary mechanism to improve livelihoods.
• Constitutional backing: the 1987 Philippine Constitution identifies entrepreneurship as an instrument of economic growth (Article XII, Section 1).
  • Role of private enterprises includes supporting fair income/wealth distribution, production of goods/services, and productivity growth to raise living standards.
• Policy framework: entrepreneurship development is central to the Philippine Development Plan (PDP), emphasizing trade and investment to strengthen competitiveness and job creation.
• Global context: globalization and fast economic integration influence the evolution of entrepreneurship beyond production factors; modern entrepreneurship entails recognizing opportunities, organizing resources, and forming ventures not only locally but internationally.
• Institutional support: the Philippine Center for Entrepreneurship (PCE) under the Philippine Chamber of Commerce and Industry (PCCI) collaborates with academia, business, and government to create supportive ecosystems (the Go Negosyo Communities).
  • These communities network, mentor, and cooperate to sustain start-ups and a policy infrastructure favorable to entrepreneurship.
• Education integration: entrepreneurship is embedded in school curricula to cultivate an enterprise culture; Senior High School emphasizes entrepreneurial mindset, while college-level programs include a Bachelor in Entrepreneurship.
• Cultural and leadership aspects: entrepreneurship is presented as a way of thinking and a mechanism to motivate innovative individuals to pursue opportunities despite risk; effective leadership is needed for social reforms through entrepreneurship to propel economic and societal progress.

The Skills Important in Entrepreneurship

• In the creation approach, five key skills are developed through action and deliberate practice:

The Skill of Play

• Imagination exploration leads to a treasure of opportunities and greater innovation.
• Historical reference: Piaget highlighted the benefits of play for development.
• Benefits to entrepreneurship: play enhances attention, involvement, excitement, problem solving, ideation, and relationship-building.
• Methods to cultivate play: educational games, simulations, role-playing, and reality-based games to challenge creativity.

The Skill of Experimentation

• Action-to-learn: entrepreneurs act to learn, then structure learning for future similar events.
• Real-world data gathering: go beyond online data; ask questions, confirm assumptions, and record details.
• Product/service viability: new offerings typically undergo experimentation to assess market interest and improve offerings before full launch.

The Skill of Empathy

• Definition: ability to understand the feelings, situations, purposes, opinions, and wants of others by experiencing events from their perspective.
• Significance: enables deeper understanding of entrepreneurial reality and aids in evaluating oneself as an entrepreneur.
• Practical use: interviews with entrepreneurs reveal challenges; placing oneself in others’ shoes helps assess stakeholder needs and informs product/service design.

The Skill of Creativity

• Purpose: create, discover opportunities, and solve problems.
• Research-based claim: entrepreneurship students are often more creative than peers in other business disciplines.
• Focus: not only to identify opportunities but to form them into executable ventures.
• Determinants of successful creativity: desire to learn, interest, effort, available resources, collaboration over competition, willingness to risk, and readiness to learn from failure.
• Outcome: ideas alone are not enough; execution and testing are essential.

The Skill of Reflection

• Rationale: reflection helps organize and integrate the four prior skills, leading to deeper insights and continuous learning.
• Why practice is often missing: reflection is not widely taught or practiced.
• Reflection methods:
  1) Narrative: describe what happened, what was said, who was involved.
  2) Emotional: focus on feelings and their management.
  3) Perceptive: insights and feedback; how different views or needs influenced the experience.
  4) Analytical: rationalize skills and insights, link to prior knowledge.
  5) Evaluative: assess what went well or poorly and determine usefulness.
  6) Critical: consider roles, approaches, possible improvements, lessons, questions, and anticipated outcomes.
• Outcome: reflective practice fosters insight and deep learning for future experiences.

The Truths About Entrepreneurship

• There are no shortcuts to entrepreneurship; it is a hard commitment without a guaranteed formula for success.

Entrepreneurship is Not Solely for Startups

• Startups are new ventures with feasible business models; traditional view equates entrepreneurship with starting a business.
• A business evolves beyond being a startup and can take many forms (corporate ventures, franchises, non-profit, family businesses).

Entrepreneurs Do Not Have Exceptional Personality Qualities

• Although traditional views emphasize traits like achievement, influence, willingness to take risks, and openness to uncertainty, there is no definitive evidence that entrepreneurs possess unique personalities.
• Modern research focuses on how entrepreneurs think and act rather than fixed traits; anyone can think and act entrepreneurially with the right mindset.

Entrepreneurship Can Be Taught Yet Entails Practice

• Many schools teach entrepreneurship as a linear process (opportunity identification, resource gathering, planning, implementing, harvesting).
• In reality, entrepreneurship is unpredictable and requires a set of adaptable skills developed through deliberate practice, not just theory.

Entrepreneurs Are Not Only Risk-Takers

• The stereotype of gamblers is inaccurate; entrepreneurs are risk-aware and typically calculate potential losses before taking steps.
• Each action is treated as a learning opportunity; risks are managed and outcomes inform subsequent decisions.

Entrepreneurs Work in Partnership More than They Compete

• Collaboration with communities, customers, investors, and networks is central to entrepreneurship.
• Partnership increases efficiency, introduces new ideas, and expands resource bases.

Entrepreneurs Are More on Doing than Planning

• Some successful ventures thrived without formal business plans; evidence shows action, customer engagement, and networks are often more important than lengthy plans.
• Investors are interested in the entrepreneur’s ability to engage with customers, solve problems, and respond to feedback, in addition to numbers.

Entrepreneurship Is Truly a Life Skill

• Modern view treats entrepreneurship as a transferable life skill useful across professions.
• Key life skills associated with entrepreneurship include:
  • Resilience: bounce back from setbacks and refocus.
  • Agility: respond quickly to dynamic environments and seize opportunities.
  • Negotiating: establish boundaries and maintain good relationships.
  • Problem solving: develop solutions to a range of challenges.
  • Relationship building: manage supplier, investor, and employee relationships.
  • Mindfulness: manage stress and maintain focus through techniques like breathing or meditation.

Types of Entrepreneurship

• Intrapreneurship
  • Definition: entrepreneurship within a large organization, pursuing high-risk, high-reward concepts with corporate backing.
  • Example: Google’s 20% time policy leading to innovations such as Gmail’s search functionality and enhanced storage.
• Entrepreneurs Inside
  • Similar to intrapreneurship but across organizations like government agencies, non-profits, religious entities, cooperatives, etc.
  • Requires organizational support to enable entrepreneurial activity.
  • Example: Puregold’s Palengke Day initiative as a market-access strategy.
• Franchising (Buying a Franchise)
  • Franchisee buys a license to operate under an established brand’s model, logos, pricing, and promotions.
  • Benefits: ready-to-run business with proven systems; ongoing royalties to franchisor.
  • Examples: 7-11, Ace Hardware, Pizza Hut, Jollibee, McDonald’s, etc.
• Buying a Small Business
  • Entering the market by acquiring an existing operation with established cash flow, customers, and employees.
  • Advantages: reduced risk compared to starting from zero; potential access to valuable patents or copyrights.
• Social Entrepreneurship
  • Pursues innovative solutions to community problems, often focusing on social impact, sustainability, and profitability.
  • Examples include environmentally friendly products, serving underserved communities, or philanthropic activities.
  • Notable PH example: Bayani Brew (ice tea using indigenous ingredients like lemongrass, pandan, and sweet potato tops) supporting local farmers.
• Family Business
  • Owned and managed by family members across generations; entrepreneurship is practiced with each generation contributing innovations.
  • Global prevalence: Harvard Business School data suggest family firms account for two-thirds of all businesses worldwide; in the Philippines, about $80\%$ of businesses are family-owned and controlled.
  • Cultural note: the Chinese proverb Fu Pu Kuo San Tai (wealth does not pass three generations) reflects generational wealth dynamics.
• Serial Entrepreneurs
  • Continuously starts new ventures; may step away from daily operations as companies mature.
  • Example: Oprah Winfrey – started as a local TV anchor, founded Harpo Productions in 1986, and expanded into media and philanthropy; built a diverse entrepreneurial portfolio including OWN and O, The Oprah Magazine.

Entrepreneurship as a Method

• Distinction: method vs process
  • Process: a sequence of steps aimed at a predictable outcome; relies on planning and forecasting; suitable for some larger, planned ventures but not all.
  • Method: a non-linear, dynamic approach to manage uncertainty and ambiguity; emphasizes adaptability and practical thinking.
• The Entrepreneurial Method (Saras Sarasvathy’s Effectuation)
  • Core idea: the future is unpredictable but can be influenced; focus on shaping the future rather than predicting it.
  • Five effectual principles:

1) Bird in Hand

• Start with who you are, what you know, and who you know; use available means rather than waiting for perfect goals.
• Do not lock into a single predetermined goal; stay open to new possibilities.
• Example: Socorro C. Ramos and The National Bookstore started with limited means (initial capital of $Php211$ in 1942; about $Php15,047$ in 2015 dollars) and grew by leveraging available resources and networks.

2) Affordable Loss

• Define what you are willing to lose rather than calculating expected gains; invest only what you can afford to lose.
• If the affordable loss is manageable and potential gains are meaningful, proceed.
• Example: Mariano Que, founder of Mercury Drug, started with Php100 in a drugstore setting and a pushcart, testing the market and expanding from that small initial risk.

3) Crazy Quilt

• Seek partnerships to create new opportunities and reduce uncertainty; collaboration is often more effective than competing alone.
• Partnerships help form new markets and bring complementary skills.
• Example: Jollibee Foods Corporation (JFC) partnered with Globe Business to centralize express delivery via a single number (#8-7000), leveraging technology to improve service and customer focus.

4) Lemonade

• Expect surprises and contingencies; view surprises as opportunities to pivot or improve.
• Example: Dr. Cecilio Pedro’s Aluminum Containers Inc. faced a shift when Colgate-Palmolive and PRC switched to plastic laminated tubes in 1985; Pedro retooled to form Lamoiyan Corporation, launching Hapee and Kutitap toothpaste lines with a lean team.

5) Pilot in the Plane

• Focus on actions within control rather than trying to predict the entire future; capable entrepreneurs execute the steps they can control to achieve outcomes.
• Example: Corazon D. Ong’s CDO Foods created processed meats (corned beef, hotdogs, meatloaf, hamburger patties) leveraging her dietitian background and understanding of Filipino tastes.

Components of the Entrepreneurship Method

• Identify Desired Impact
  • Entrepreneurs pursue goals that go beyond pure profit; many are motivated by autonomy, creating something new, or shaping their work experiences.
• Begin with Means at Hand
  • Critical questions: "Who am I?", "What do I know?", "Whom do I know?"; these define available resources and network.
• Describe the Idea Today
  • Combine desired impact with available means to articulate the current idea and start action immediately.
• Estimate Affordable Loss
  • Explicitly determine what you are willing to lose (money, reputation, time, opportunity cost) to avoid letting fear control decisions.
• Reflect and Be Honest
  • Regularly assess whether the venture still has the desired impact within the affordable loss; decide whether to quit or pivot.
• Take Small Action
  • Begin with a small, calculated step; avoid excessive risk while building momentum.
• Network and Enjoin Others in the Journey
  • Collaboration and co-creation expand resources, increase possibilities, and validate the idea.
• Build and Learn from What Has Been Learned
  • Evaluate performance, celebrate successes, and embrace failures as learning opportunities to improve.

Managerial vs Entrepreneurial Thinking

• Managerial Thinking:

• Focuses on managing and mitigating risk; safeguarding inventions/insights; avoiding failure; operating within the current environment; improving the bottom line; relies on data and planning tools for forecasting.

• Focuses on evaluating and embracing risk; exchanging ideas and learnings; failing fast and trying again; thinking in terms of possibilities; creating value and making a difference.

• Entrepreneurship method is both a mindset and a practice; expertise arises from deliberate practice and repetition, not merely from experience or innate talent.
• Malcolm Gladwell’s Outliers argues for roughly $10{,}000$ hours of deliberate practice to achieve mastery in a craft.
• Example: Bill Gates began programming at a young age (Grade 8) and accessed a computer laboratory early, contributing to his early mastery before computers became widespread.
• Key idea: Repetition leads to incremental improvement; with deliberate practice, basic competencies become automatic, developing discipline and expertise over time.
• Practical takeaway: Daily deliberate practice is essential for ongoing growth; milestones should push individuals to continually raise the difficulty level to sustain progress.