AGRC2023 LECTURE 4

Entrepreneurship Introduction
Entrepreneurship is a dynamic process of vision, change, and creation. It requires an application of
energy and passion towards the creation and implementation of new ideas and creative solutions.

Essential Entrepreneurship ingredients include:

1. The willingness to take calculated risks in terms of time, equity, or career.
2. The ability to formulate an effective venture team; the creative skill to marshal needed resources.
3. The fundamental skills of building a solid business plan.
4. The vision to recognize opportunity where others see chaos, contradiction, and confusion.

Entrepreneurship: A process of innovation and new-venture creation through four major

dimensions: individual, organizational, environmental, process that is aided by collaborative
networks in government, education, and institutions.
Entrepreneur: A catalyst for economic change who uses purposeful searching, careful planning, and
sound judgment when carrying out the entrepreneurial process.

The Entrepreneurial Mindset: Describes the most common characteristics associated with successful
entrepreneurs as well as the elements associated with the dark side of entrepreneurship.

Who Are Entrepreneurs?

Independent individuals, intensely committed and determined to persevere, who work very hard.
They are confident optimists who strive for integrity.
They burn with the competitive desire to excel and use failure as a learning tool.

Entrepreneurs versus Small Business Owners: A Distinction

Small Businesses Owners: Manage their businesses by expecting stable sales, profits, and growth
Entrepreneurs: Focus their efforts on innovation, profitability and sustainable growth

Encouraging an Intrapreneurial Environment

Steps to help restructure corporate thinking and encourage an intrapreneurial environment:

1. Early identification of potential intrapreneurs

2. Top management sponsorship of intrapreneurial projects
3. Creation of both diversity and order in strategic activities
4. Promotion of intrapreneurship through experimentation
5. Set explicit goals.
6. Create a system of feedback and positive reinforcement.
7. Emphasize individual responsibility.
8. Give rewards based on results.
9. Do not punish failures.
10. Development of collaboration between intrapreneurial participants and the organization at large

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3Ms Innovation Rules
Dont kill a project: If idea can find a home in one of 3Ms divisions, a staffer can devote 15% of his
or her time to prove it is workable.
Tolerate failure: encouraging plenty of experimentation and risk taking allows chance for new
product hit.
Keep divisions small: Division manager must know each staffers first name. When the division gets
too big, split it up
Motivate the champions: When 3M employee has a product idea, he or she recruits an action team
to develop it.
Stay close to the customer: researcher, marketer and manager visit with the customers and
routinely invite them to brainstorm product ideas.
Share the wealth: technology whenever it is developed belong to everyone.

Entrepreneurs in the United States

Reasons for the exceptional entrepreneurial activity in the U.S. include:
A national culture that supports risk taking and seeking opportunities.
Americans alertness to unexploited economic opportunity and a low fear of failure.
U.S. leadership in entrepreneurship education at both the undergraduate and graduate level.
A high percentage of individuals with professional, technological or business degrees who are likely
to become entrepreneurs.
The Common Myth of Failure: 85% of all firms fail in the first yearin actuality, about half of all start-
ups last between 5 and 7 years.

Commitment, determination, and perseverance AND Drive to achieve

Opportunity orientation AND Initiative and responsibility
Common Persistent problem solving AND Seeking feedback AND Independence
Characteristics of Internal locus of control AND Tolerance for ambiguity AND team building
Entrepreneurs Calculated risk taking AND Tolerance for failure
High energy level AND Creativity and Innovativeness
1. Exams Question Vision AND Self-confidence and optimism
1. Entrepreneurial Stress
The extent to which entrepreneurs work demands and expectations exceed
Stress and the their abilities to perform as venture initiators, they are likely to experience
Entrepreneur stress.
2. Causes of Entrepreneurial Stress
Loneliness AND Immersion in business
People problems AND Need to achieve

Chronic and severe sense of time urgency.

Entrepreneurs: Constant involvement in multiple projects subject to deadlines.
Type A Neglect of all aspects of life except work.
Personalities A tendency to take on excessive responsibility, combined with the feeling
that Only I am capable of taking care of this matter.
Explosiveness of speech and a tendency to speak faster than most people.

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 1. Self-Destructive Characteristics
Overbearing need for control AND Sense of distrust
Overriding desire for success AND Unrealistic optimism
The 2. Entrepreneurial Motivation
Entrepreneurial The quest for new-venture creation as well as the willingness to sustain that
Ego venture.
Personal characteristics, personal environment, business environment,
personal goal set (expectations), and the existence of a viable business idea

Unique group of people, but behave in patterns, weaknesses:

o Empathy (want return on time & effort)
Skills that o Self-management (too much on the go, need micromanagers)
Entrepreneurs lack o Planning & organizing (minds elsewhere, big picture stuff)
o Analytical problem solving (focus on dreams / vision, not detail)
2.Exam Question Recognition of weaknesses equally important (balanced team)

Requires networking 24/7

Some not wired to be around people all the time
Entrepreneurs vs. Not a logical fit, but can work:
Introverts - Go deep, not wide AND Find an extrovert
- Pace yourself (in terms of people)
- Fake it til you make it

Test for the Faint Hearted,

Do you have what it takes? 5 questions:
1. Are you comfortable stretching the rules?
2. Are you prepared to make powerful enemies?
3. Do you have the patience to start small?
4. Are you will to shift strategies quickly?
5. Do you know how to close a deal?

Learning the ropes (not fatal -work experience, mentor, partner, etc.)

15 Characteristics of an Entrepreneur (Exam Question No.3)

1. Take an action 9. You enjoy novel gazing
2. Youre insecure 10. Youre motivated by challenges
3. You crafty 11. You consider yourself an outsider
4. Youre obsessed with cash flow 12. You recover quickly
5. You get into hot water 13. You fulfill needs
6. You cant sit still 14. You surrounded yourself with advisors
7. Youre malleable 15. You work and play hard
8. Youre fearless

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 AGRC2023 Lecture 5
Entrepreneurship Start-up phase (a)
THREE COMPETENCIES OF THE COMPLETE ENTREPRENEUR

The 3 roles are: Innovator-Inspirer-Implementer

3 Roles of Great Entrepreneurs

1. The Architect: Big Picture Planning or the Innovator

o Set vision, romance and culture around big daring goal

o General plan, not hung up on perfect plan, will adapt
o Venture capitalists bet on people first, plan second
o Easier to adjust plan than adjust people
o Plans should clear purpose and top few priorities, detail can come

Entrepreneurs set the vision, the romance, and culture around a big and daring goal. In doing so, they
must have a general plan for where they want to go, but they should not get hung up on developing the
perfect plan. Their thinking should be like an architect in the concept and design development phase
rather than one in the detailed schematic phase. The details of every initiative should change with new
customer and market feedback. This is why the best venture capitalists bet first and foremost on the
people and second and its a distant second on the plan. There is no doubt that its easier to adjust
a plan than it is to adjust people. Plans at the start-up stage need a clear purpose and the top few
priorities for achieving it, but many other aspects, including product development, have to be viewed as
a first direction at this point in time.

2. The storyteller: Researching and selling or the Inspirer, the communicator

o Constantly sell the story of their vision

o Researching how it should evolve
o Pitch constantly, enforcing vision throughout
o Companys chief storyteller - sell the sizzle, not the steak
o By selling, gain valuable customer and product research
o Selling slightly ahead of perfect product cycle cheap testing
Great entrepreneurs need to be constantly selling the story of their vision, as well as researching how it
should evolve. Whether raising funds, evangelizing the vision among employees, recruiting top new
talent, or selling the product itself, an entrepreneur needs to constantly pitch like a salesman out of
Glengarry Glen Ross and act as the companys chief storyteller. More business schools should

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integrate the art and science of communications and selling into the curriculum. In my experience,
people can learn and develop many aspects of effective selling. Even if they turn out to be only
moderately good at it, they realize that by selling on the front lines, they gain access to invaluable
customer and product research. These customer interactions help turn a directional vision into one with
more precise focus. This is especially true in the digital world where strategies are iterative with more
frequent version releases. Selling slightly ahead of the perfect product cycle early can help you test
cheaply and make adjustments as required.

3. The Disciplinarian: Executing or the operator

o Excellent execution, adhere to = tight controls & operating principles

o Need appropriate metrics to measure planned progress
o Set up appropriate dashboard, review regularly
o Act as leading indicators for financial indicators and outcomes
Excellent execution comes from adhering to a tight set of controls and operating principles. In my view,
the starting point for this is having the right set of operating metrics to measure the progress you are
trying to achieve. Across our portfolio companies, we work with CEOs to establish the right big priorities
and then set the right operating metrics in a dashboard, which we review at regular intervals. This
dashboard might include, for example, customer counts, recurring customers, and online usage metrics.
The key to delivering what you want to deliver is to know how to pick the few customer and operating
metrics that can serve as leading indicators for the ultimate financial metrics desired. To read more on
my thoughts on this subject, see my prior blog entry, The Fallacy of Financial Metrics.

Hard to be good at all 3 roles

Planning, selling, and executing sound straightforward, but playing the three roles at once can be
challenging for early-stage CEOs. At times these aspects of the job can seem the opposites of each other,
and few people possess the talent to do all three equally well. Fortunately, you dont need to, if you
build a strong team.

Self-assess and match up with best talent

To assess your own entrepreneurial aptitude and effectiveness, take a hard look at your recent tasks,
meetings, and other activities. How do they fit into these three buckets? Once you understand which of
these areas you are strongest in, focus on the priorities that map to your skills and quickly fill the gaps
with the best talent you can find.

3 Questions every Entrepreneur must answer

1. Clarifying Goals: Where Do I Want to Go? What you want personally from your business:
flexibility, embody your values, quick profits?

An entrepreneurs personal and business goals are inextricably linked. Whereas the manager of a public
company has a fiduciary responsibility to maximize value for shareholders, entrepreneurs build their
businesses to fulfil personal goals and, if necessary, seek investors with similar goals.

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Before they can set goals for a business, entrepreneurs must be explicit about their personal goals. And
they must periodically ask themselves if those goals have changed. Many entrepreneurs say that they
are launching their businesses to achieve independence and control their destiny, but those goals are
too vague. If they stop and think about it, most entrepreneurs can identify goals that are more specific.
For example, they may want an outlet for artistic talent, a chance to experiment with new technology, a
flexible lifestyle, the rush that comes from rapid growth, or the immortality of building an institution
that embodies their deeply held values.
Financially, some entrepreneurs are looking for quick profits, some want to generate a satisfactory cash
flow, and others seek capital gains from building and selling a company. Some entrepreneurs who want
to build sustainable institutions do not consider personal financial returns a high priority. They may
refuse acquisition proposals regardless of the price or sell equity cheaply to employees to secure their
loyalty to the institution.
Only when entrepreneurs can say what they want personally from their businesses does it make sense
for them to ask the following three questions:

What kind of enterprise required: sell-on, infrastructure, daily intervention?

What kind of enterprise do I need to build?
Long-term sustainability does not concern entrepreneurs looking for quick profits from in-and-out deals.
Similarly, so-called lifestyle entrepreneurs, who are interested only in generating enough of a cash flow
to maintain a certain way of life, do not need to build businesses that could survive without them. But
sustainabilityor the perception thereofmatters greatly to entrepreneurs who hope to sell their
businesses eventually. Sustainability is even more important for entrepreneurs who want to build an
institution that is capable of renewing itself through changing generations of technology, employees,
and customers.
Entrepreneurs personal goals should also determine the target size of the businesses they launch. A
lifestyle entrepreneurs venture neednt grow very large. In fact, a business that becomes too big might
prevent the founder from enjoying life or remaining personally involved in all aspects of the work. In
contrast, entrepreneurs seeking capital gains must build companies large enough to support an
infrastructure that will not require their day-to-day intervention.

Your risk tolerance: trust inexperience, guarantee debt, delayed payoffs?

What risks and sacrifices does such an enterprise demand?
Building a sustainable businessthat is, one whose principal productive asset is not just the founders
skills, contacts, and effortsoften entails making risky long-term bets. Unlike a solo consulting
practicewhich generates cash from the startdurable ventures, such as companies that produce
branded consumer goods, need continued investment to build sustainable advantages. For instance,
entrepreneurs may have to advertise to build a brand name. To pay for ad campaigns, they may have to
reinvest profits, accept equity partners, or personally guarantee debt. To build depth in their
organizations, entrepreneurs may have to trust inexperienced employees to make crucial decisions.
Furthermore, many years may pass before any payoff materializesif it materializes at all. Sustained risk
taking can be stressful. As one entrepreneur observes, When you start, you just do it, like the Nike ad
says. You are nave because you havent made your mistakes yet. Then you learn about all the things
that can go wrong. And because your equity now has value, you feel you have a lot more to lose.

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Entrepreneurs who operate small-scale, or lifestyle, ventures face different risks and stresses. Talented
people usually avoid companies that offer no stock options and only limited opportunities for personal
growth, so the entrepreneurs long hours may never end. Because personal franchises are difficult to sell
and often require the owners daily presence, founders may become locked into their businesses. They
may face financial distress if they become sick or just burn out. Im always running, running, running,
complains one entrepreneur, whose business earns him half a million dollars per year. I work 14-hour
days, and I cant remember the last time I took a vacation. I would like to sell the business, but who
wants to buy a company with no infrastructure or employees?

2. How will I get there? (Setting Strategy) Serve the enterprise long-term: Future
competition, market saturation, technological change
Many entrepreneurs start businesses to seize short-term opportunities without thinking about long-
term strategy. Successful entrepreneurs, however, soon make the transition from a tactical to a strategic
orientation so that they can begin to build crucial capabilities and resources.

Formulating a sound strategy is more basic to a young company than resolving hiring issues, designing
control systems, setting reporting relationships, or defining the founders role. Ventures based on a
good strategy can survive confusion and poor leadership, but sophisticated control systems and
organizational structures cannot compensate for an unsound strategy. Entrepreneurs should periodically
put their strategies to the following four tests:

1. Is the strategy well defined?

Provide clear direction: Policies, geographic reach, capabilities, decision-making framework. A
companys strategy will fail all other tests if it doesnt provide a clear direction for the enterprise. Even
solo entrepreneurs can benefit from a defined strategy. For example, deal makers who specialize in
particular industries or types of transactions often have better access to potential deals than generalists
do. Similarly, independent consultants can charge higher fees if they have a reputation for expertise in a
particular area.

An entrepreneur who wants to build a sustainable company must formulate a bolder and more explicit
strategy. The strategy should integrate the entrepreneurs aspirations with specific long-term policies
about the needs the company will serve, its geographic reach, its technological capabilities, and other
strategic considerations. To help attract people and resources, the strategy must embody the
entrepreneurs vision of where the company is going instead of where it is. The strategy must also
provide a framework for making the decisions and setting the policies that will take the company there.

2. Can the strategy generate sufficient profits and growth?

Generate sufficient profits and growth: Desired business results. Once entrepreneurs have
formulated clear strategies, they must determine whether those strategies will allow the ventures to be
profitable and to grow to a desirable size. The failure to earn satisfactory returns should prompt
entrepreneurs to ask tough questions: Whats the source, if any, of our competitive edge? Are our
offerings really better than our competitors? If they are, does the premium we can charge justify the
additional costs we incur, and can we move enough volume at higher prices to cover our fixed costs? If

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we are in a commodity business, are our costs lower than our competitors? Disappointing growth
should also raise concerns: Is the market large enough? Do diseconomies of scale make profitable
growth impossible?

3. Is the strategy sustainable?

Establish the right growth rate: Sustainable growth. The next issue entrepreneurs must confront is
whether their strategies can serve the enterprise over the long term. The issue of sustainability is
especially significant for entrepreneurs who have been riding the wave of a new technology, a
regulatory change, or any other changeexogenous to the businessthat creates situations in which
supply cannot keep up with demand. Entrepreneurs who catch a wave can prosper at the outset just
because the trend is on their side; they are competing not with one another but with outmoded players.
But what happens when the wave crests? As market imbalances disappear, so do many of the erstwhile
high fliers who had never developed distinctive capabilities or established defensible competitive
positions. Wave riders must anticipate market saturation, intensifying competition, and the next wave.
They have to abandon the me-too approach in favour of a new, more durable business model. Or they
may be able to sell their high-growth businesses for handsome prices in spite of the dubious long-term
prospects.

4. Are my goals for growth too conservative or too aggressive?

After defining or redefining the business and verifying its basic soundness, an entrepreneur should
determine whether plans for its growth are appropriate. Different enterprises can and should grow at
different rates. Setting the right pace is as important to a young business as it is to a novice bicyclist. For
either one, too fast or too slow can lead to a fall. The optimal growth rate for a fledgling enterprise is a
function of many interdependent factors.

3. Can I do it? (Executing Strategy)

Resources: Workforce with needed skills, knowledge, and values
The third question entrepreneurs must ask themselves may be the hardest to answer because it
requires the most candid self-examination: Can I execute the strategy? Great ideas dont guarantee
great performance. Many young companies fail because the entrepreneur cant execute the strategy;
for instance, the venture may run out of cash, or the entrepreneur may be unable to generate sales or
fill orders. Entrepreneurs must examine three areas: resources, organizational capabilities, and their
personal roles; to evaluate their ability to carry out their strategies.

Infrastructure: Required organisational system to execute strategy

How strong is the organization?
An organizations capacity to execute its strategy depends on its hard infrastructure: its organizational
structure and systems; and on its soft infrastructure: its culture and norms.
The hard infrastructure an entrepreneurial company needs depends on its goals and strategies. Some
entrepreneurs want to build geographically dispersed businesses, realize synergies by sharing resources
across business units, establish first-mover advantages through rapid growth, and eventually go public.
They must invest more in organizational infrastructure than their counterparts who want to build
simple, single-location businesses at a cautious pace.

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Role flexibility: Change from doing the work to teaching others
Can I play my role?

Entrepreneurs who aspire to operate small enterprises in which they perform all crucial tasks never have
to change their roles. In personal service companies, for instance, the founding partners often perform
client work from the time they start the company until they retire. Transforming a fledgling enterprise
into an entity capable of an independent existence, however, requires founders to undertake new roles.

Founders cannot build self-sustaining organizations simply by letting go. Before entrepreneurs have
the option of doing less, they first must do much more. If the business model is not sustainable, they
must create a new one. To secure the resources demanded by an ambitious strategy, they must manage
the perceptions of the resource providers: potential customers, employees, and investors. To build an
enterprise that will be able to function without them, entrepreneurs must design the organizations
structure and systems and mold its culture and character.

What Entrepreneurs get Wrong (typical for entrepreneur) Exam Question +/- No.4

Starting selling too late

Most develop fully before getting feedback: Dont make anything until you sell it
Many people fully developed their products before getting feedback from potential buyers. In
observation, most viewed this as a mistake. Lean start-up philosophy: Get in front of prospects from
day one. Youll learn more from talking to five customers than you will from hours of market research
at a computer. The goal should be to measure customer reaction to the general concept you plan to
build. Dont make anything until you sell it, advised one entrepreneur. Get people really interested in
buying it before you invest too much time and effort.
Failing to listen
o Dont want to hear bad news; Passion and ego let you discount criticism
Some people who started selling early said they were too focused on convincing prospects of the new
products merits and not concerned enough with finding out what prospects thought of the idea.
Some realized that their passion and ego made them respond negatively to criticism and discount
ideas for changes that they later saw would have increased the marketability of their offerings.
Listen to the feedback from the customers and reshape your idea and your product to fit what they
actually want, one interviewee advised.
Its really all about understanding what the pain point is in the marketplace, and the best way to do
that is to talk to prospects and validate your idea.
Offering discounts
Keen to close an early deal and Discounts unsustainable
Faced with pressure to make early sales, many founders offered price discounts in order to close initial
deals. This often establishing unsustainable pricing models with those customers. Consequently, news
of the discounts spread around small industries, crippling the ventures long-term pricing power. In
retrospect, the entrepreneurs wished they had found alternative sweeteners to close early dealsfree
shipping, say, or a discount on orders placed before a certain date. And if youre going to offer
temporary discounts, its smart to put the terms in writing

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 Selling to family and friends: Dont know why they are buying, pleasing you
Making early sales to family members was especially common among entrepreneurs outside the U.S.
and for those in the restaurant, clothing, and wealth management industries. But you never know why
relatives are buying from youoften their motivation is love, pity, or a sense of obligation, not
compelling product quality. In retrospect, founders believed those sales created a false sense of
validation and that they would have been better off pursuing arms-length transactions with customers
who would have given them candid feedback.

Seek valuable feed-back first customers, referrals, credibility etc.

Failing to seek strategic buyers. For cash-strapped entrepreneurs with no sales record, the thrill of
getting the first yes can blind them to other considerations. Can this customer open new doors or
provide referrals? Can the customer supply usage data that could make my value proposition more
compelling? Thus it is important to conducted a strategic assessment of their first buyers. Choose the
first clients deliberately in order to get feedback, perform beta testing, get referrals, or guarantee repeat
business. These strategic first sales often led to long-term success

Typical Obstacles: Sorry, Youre Too Small

1. Efficacy: Sceptical about ability to deliver

Potential customers were consistently sceptical about the ability of new products to deliver on their
value propositions. Some entrepreneurs could show results from beta tests or independent lab results,
but that wasnt possible for all products and services. In those cases, offering samples or free trials often
proved effective.

2. Credibility: Experience and track record of team

Prospects also expressed doubt about a new company on the basis of the founders age, gender,
personal background, or experience level. Founders with relevant experience highlighted that; those
who lacked it touted partners or board members with solid industry reputations

3. Size: Are you going to last? Will you cope with demands?
For companies selling physical products, quality and value helped dispel concerns. Ultimately, though,
overcoming objections about size required founders to develop trust with prospects and to take steps to
reduce the risk of dealing with a start-up. For instance, some founders did not ask for a deposit from
their earliest customers but instead used a pay-on-delivery model until they achieved a track record.

4. Price: People expect discounts from eager start-ups

Price objections often stemmed from prospects incomplete, biased, or subjective cost/benefit analyses,
so savvy founders developed tactics to counter these. For entrepreneurs who believed their prices were
fair, a price objection could indicate that they were failing to adequately describe the offering. Usually
when prospects said they couldnt afford our service, I interpreted it as they didnt want it or didnt
understand it, a founder told us. That meant we had to go back and do a better job explaining our
service and how we could add value.

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5. Switching costs: Often must make considerable changes to offering, expensive
To adopt a new product or service, prospects might need to modify their routines, procedures, systems,
or internal or external relationships. Making such modifications to switch to a new, untested offering
can seem especially costly, but buyers do not always verbalize these concerns. To address tacit
objections about switching costs, the entrepreneurs we interviewed took it upon themselves to ask
questions that would lead prospects to talk freely

The Global Entrepreneurs: New breed of Entrepreneurs thinking across borders, from day one

Todays entrepreneurs cross borders for two reasons. One is defensive: to be competitive, many
ventures, like manufacturing, service delivery, capital sourcing, or talent acquisition, for instance cross
the border the moment they start up. The other reason is to take the offense. Many new ventures are
discovering that a new business opportunity spans more than one country or that they can use distance
to create new products or services.
Typically, only venture abroad when established at home. Moreover, when they have looked
overseas, they havent ventured too far afield, initially
Companies being born global today, by contrast.
Entrepreneurs dont automatically buy raw materials from nearby suppliers or set up factories close to
their headquarters. They hunt for the planets best manufacturing locations because political and
economic barriers have fallen and vast quantities of information are at their fingertips. They also scout
for talent across the globe, tap investors wherever they may be located, and learn to manage operations
from a distancethe moment they go into business.
Often do business in many counties before dominating home markets

Main reasons:
1. To be competitive, you must globalise some aspect of business.
2. To take the offence see global opportunities
Challenges:
1. Distance, lack of infrastructure
New ventures usually lack the infrastructure to cope with dispersed operations and faraway markets.
Moreover, physical distances create time differences, which can be remarkably tough to navigate. Even
dealing with various countries workweeks takes a toll on a start-ups limited staff: In North America,
Europe, China, and India, corporate offices generally operate Monday through Friday. In Israel, theyre
open Sunday through Thursday. In Saudi Arabia and the UAE, the workweek runs Saturday through
Wednesday, but in other predominantly Muslim countries like Lebanon, Morocco, and Turkey, people
work from Monday through Friday or Saturday

2. Context, localised differences

Nations political, regulatory, judicial, tax, environmental, and labor systems vary. The choices
entrepreneurs make about, say, where to locate their companies headquarters will affect shareholder
returns and also their ability to raise capital. When Pixamo online photo management company started,
the location choices was difficult for difference in political and taxation system in different countries.

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Eventually the founders chose to base the company in the relatively tax-friendly Swiss canton of Zug, a
decision that helped shareholders when they sold Pixamo to Name Media in 2007.

3. Resources, even more stretched to compete

Customers expect start-ups to possess the skills and deliver the levels of quality that larger companies
do. Thats a tall order for resource-stretched new ventures. Still, they have no option but to do whatever
it takes to retain customers.

Competencies Global Entrepreneurs Need

All entrepreneurs must be able to identify opportunities, gather resources, and strike deals. They all
must also possess soft skills like vision, leadership, and passion. To win globally, though, they must
improve four additional competencies.

1. Articulating a global purpose.

2. Alliance building.
3. Supply-chain creation.
4. Multinational organization.

BOSI DNA
Builder: controlling and relationship biding
Opportunist: optimistic, up and down income
Specialist: Analytical, networking
Innovator: Business operator, the lab

B = Builder Entrepreneur DNA: A Builder is someone with the skills to scale and sustain a profitable
business.

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Builders often start, grow and exit businesses and then restart the process with multiple ventures. Size
matters to a Builder: how many staff do I have, how many sites, how many vehicles do we have on the
road, how many countries are we active in etc. Builders do display weaknesses in people management
and relationships, both personally and professionally. Their single-mindedness and total focus on driving
the business forward often leaves a trail of relationship destruction behind as people are used and
discarded to meet their goals.

O = Opportunist Entrepreneur DNA: An Opportunist dreams of being in the right place at the right
time.

They wanted to be an early employee of Google or Facebook. They work extremely hard but their job or
business is a means to an end. They want to make their money and spend the rest of their days enjoying
the profit while lying on a beach or travelling the world. Opportunists are incentive driven and highly
optimistic people, who dont dwell long by setbacks. Always looking for the next big thing they can be
easily distracted and often take on too much at a time. The tendency to be distracted means
Opportunists should never start their own business. However, an opportunist will work hard and put
their heart and soul into someone elses business if the prize at the end is worth it.

S = Specialist Entrepreneur DNA: Specialists are methodical, diligent, experts in their field.

They may be, for example, accountants, solicitors, architects, who have worked in a single industry their
entire career and they pride themselves on providing the highest levels of service to their clients. They
are risk averse in nature and struggle to push themselves beyond their comfort zone, especially if
personal income targets have been reached. They are also reticent in putting themselves out in the
market to generate new business, instead relying on their customer service and results to generate
referrals.

I = Innovator Entrepreneur DNA: Innovators may not really class themselves as business people at all.

They are in business by accident because they developed a product that people want to buy. In an ideal
work they would spend all day behind a computer screen coding the next market leading piece of
software. Given the time to do so they could generate an almost limitless amount of products for a
business, but run a business they cannot. They have a wider mission that their product must solve, and
maintaining this vision often takes precedence over otherwise sound commercial decisions. Innovators
therefore need space to create and to leave the business processes someone else

Why Your Entrepreneur DNA Matters

You may be wondering why it matters what sort of entrepreneur you are. Its valuable information,
because it helps you understand what motivates you and how you work well with other people.

Its important to learn to evaluate people you are dealing with: If youre trying to sell something to a
specialist, for example, you need to present data, earn their trust and show them how it will help their
customers.

THE BUILDER-INNOVATOR COMBINATION (BI)

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"The Builder-Innovator (BI) is a Cross-Quadrant combination. Entrepreneurs with a BI profile tend to
build breakthrough companies. Over time, these breakthrough companies end up with copycat
competitors.

BI entrepreneurs are highly driven but incredibly creative at the same time. They find it almost
impossible to switch their business mind "off". When their brain isn't thinking about the business
operation, it is in creative mode inventing new products/services.

The Specialist-Builder Combination (SB)

Specialist-Builder is a left-quadrant combination that has its unique strengths and weaknesses.
Individuals who possess this combination tend to be methodical and systematic in
their approach to business. They are long-term planners. They find it well within their gifting
to hire and manage staff. This DNA combination lends itself well to multi-location businesses
and tiered management systems.
Specialist-Builder entrepreneurs are excellent at delegating and managing process so they
are drawn to employees who are good at administrative tasks. This DNA combination does
not do well with highly creative, out-of-the-box employees.
Specialist-Builder entrepreneurs when left unchecked can become prideful, self-reliant people. They try
to do it
all and find it hard to admit that they dont know it all. In some cases, this confidence serves them well
in a highly
competitive marketplace. However, in the long run, it can prove costly as too many decisions get made
in a vacuum
and without objective third-party insight.

The builder and Opportunist combination (BO)

It is interesting to note that despite their differences, the Builder and the Opportunist DNAs do have
some things in common. Thats why they fall together in the top quadrants. Entrepreneurs who have a
Builder-Opportunist or an Opportunist-Builder BOSI Profiles are called upper-quadrant
entrepreneurs.

These entrepreneurs tend to have multi-industry experience. They just go about their business careers
very differently. The Builder starts, builds, and sells a company. Then the Builder tends to move on to do
it again and againquite often in a totally different industry.

The Opportunist, on the other hand, tends to leverage multiple business ventures at the same time with
the intent of creating multiple streams of income. At the end of the day, both the Builder and the
Opportunist end up having generated income from more than one industry. Thats something they both
have in common.

Builders and Opportunists share some other traits as well.

They both tend to be big-vision, big-picture thinkers. They dont get too excited about being part of a
venture that generates a few hundred thousand dollars of revenue in a year. Their juices start to flow
when there is talk of being part of multimillion- or multibillion-dollar enterprises.

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Upper-quadrant entrepreneurs are also bigger risk takers than their lower-quadrant counterparts. If
youve ever seen an entrepreneur light his or her hair on fire and jump off a cliff (figuratively speaking,
of course), I can assure you that his or her top-quadrant DNA was in high gear.

Upper-quadrant entrepreneurs share a common weakness peoplebut for different reasons. For the
Builder, it is hard to maintain long-term interpersonal relationships because the Builder tends to try to
control people. The Opportunist tends to look at people as glorified check booksa source of money,
referrals, and more business. In both cases, when left unattended, the Builder and the Opportunist
DNAs leave a trail of relational casualties in their wake.

10 Things entrepreneur should never do:

1. You should never be jealous or envious: seen other people around you succeed should motivate you
even if they are your competitors. Every person has the ability to be successful. Focussing too much
on other people success will just sucks your own progress
2. Look back, you are going to face hard time, difficult decisions and even failure. Find ways to
manoeuvre around obstacles and continue to push forwards, never looking back
3. Make excuses. If you make bad decisions and things screws up, own it. If something go out of the
plan, dont look for excuses, search for the course of the problem and turn it into valuable business
lessons. If you constantly making excuses, youll continue to make excuses because you have not
properly identify the root of the problem
4. Stop learning: your age, your experience and your level success should never prevent you from
learning. We can all learn and be inspire by other entrepreneur
5. Associate with negative individuals: people who constantly complaining, making excuses or have
negative outlooks should be avoided. Surround yourselves with likewise individuals that are as
focussed and determined as you are.
6. Wake up without a plan, time management is a crucial part of been entrepreneur. To be efficient
you need to know what your goals are and what task you need to get done prior to starting your day
7. Be scare to make changes and adapt. You need to be able to adjust your plan and overall strategies
to maintain success in the future
8. Let your bark be bigger than your bite. To be successful, you need talk less but to plan, follow
through and conquer. Nothing is not going to be accomplish just by talking about it.
9. Focus solely on dollars to the decimal points. Instead of focusing on money, focus on product and
services that make a difference and provides values. create a path for the money to follow
10. Let failure stop you. By statistics, 8/10 new businesses fail. Successful new entrepreneur going
through every knowing that there is a chance of failure. If they fail if few as part of their log and they
keep plugging along

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MGTS2023 LECTURE 6
Entrepreneurship Start-up phase (b)

BOSI Personality Types

The most effective qualities in team are: Corporation, competence, trust

Why cant you go in business with family? Legal requirement, money change people

THREE COMPETENCIES OF THE COMPLETE ENTREPRENEUR (Exam Question No.5)

Blitzscaling
What is blitzscaling?
Blitzscaling is what you do when you need to grow really, really quickly. Its the science and art of rapidly
building out a company to serve a large and usually global market, with the goal of becoming the first
mover at scale.
This is high-impact entrepreneurship. These kinds of companies always create a lot of the jobs and
industries of the future. For example, Amazon essentially invented e-commerce. Today, it has over
150,000 employees and has created countless jobs at Amazon sellers and partners. Google
revolutionized how we find informationit has over 60,000 employees and has created many more jobs
at its AdWords and AdSense partners.

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Are there several dimensions to the idea of scale?
There are three kinds of scale. People naturally focus on two of them: growing your revenues and
growing your customer base. And of course, if you dont get those right, then nothing else matters. But
very few businesses can succeed on those fronts without also scaling the organization. An organizations
size and its ability to execute determine whether it can capture customers and revenue
Why this focus on fast growth?
Were in a networked age. And I dont mean only the internet. Globalization is a form of network. It adds
networks of transport, commerce, payment, and information flows around the world. In such an
environment, you have to move faster, because competition from anywhere on the globe may beat you
to scale.
Software has a natural affinity with blitzscaling, because the marginal costs of serving any size market
are virtually zero. The more that software becomes integral to all industries, the faster things will move.
Throw in AI machine learning, and the loops get even faster. So were going to see more blitzscaling. Not
just a little more, but a lot more
What organizational issues do you run into when blitzscaling?
Blitzscaling is always managerially inefficientand it burns through a lot of capital quickly. But you have
to be willing to take on these inefficiencies in order to scale up. Thats the opposite of what large
organizations optimize for.
In hiring, for instance, you may need to get as many warm bodies through the door as possible, as
quickly as you canwhile hiring quality employees and maintaining the company culture.

How did you settle on the term blitzscaling? It has some interesting associations.
The theory of the blitzkrieg was that if you carried only what you absolutely needed, you could move
very, very fast, surprise your enemies, and win. Once you got halfway to your destination, you had to
decide whether to turn back or to abandon the lines and go on. Once you made the decision to move
forward, you were all in. You won big or lost big. Blitzscaling adopts a similar perspective. If a start-up
determines that it needs to move very fast, it will take on far more risk than a company going through
the normal, rational process of scaling up. This kind of speed is necessary for offensive and defensive
reasons. Offensively, your business may require a certain scale to be valuable. LinkedIn wasnt valuable
until millions of people joined our network. Marketplaces like eBay must have both buyers and sellers at
scale. Payment businesses like PayPal and e-commerce businesses like Amazon have low margins, so
they require very high volumes. Defensively, you want to scale faster than your competitors because the
first to reach customers may own them, and the advantages of scale may lead you to a winner-takes-
most position. And in a global environment, you may not necessarily be aware of who your competition
really is.

Chaotic, sometimes gruelling growth

Path to High-Growth, High-Impact entrepreneurship
What you do when you need to grow really, really quickly
Why?
Networked age
Globalisation
Need to move faster
Competition may beat you to scale

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 First mover advantage
Need to scale revenue, customer base and organisation
Examples: Amazon, Google, Facebook, LinkedIn, Uber

Managing Risk

Smart Entrepreneurs aren't cowboys theyre methodical managers of risk

Core competency
Tackling the right risks first

Risk and value are inversely proportional: When you remove risk, you increase value. But it matters in
what sequence you tackle risks, because not all of them are created equal. Suppose a manager is
launching a new e-commerce business. He must remove a number of risks before the venture reaches
its peak value. He could simply remove them as they occur to him.
But unless he confirms demand, it doesnt matter how provocative his website is; customers wont buy.
And if he doesnt answer the product-mix question, he will fill his warehouse with products he cant sell.
Addressing these two risks early creates disproportionate value quickly, not only saving critical resources
but also moving the venture in the right direction sooner.
Risk vs. value inversely proportional
Not all risks are created equal
Deal-killer risks

Despite stereotypes to the contrary, the best entrepreneurs are relentless about managing risks-indeed,
thats their core competency. As the risk level of a new venture goes down, the value goes up..Risks
should be uncovered and hedged in order of their importance and affordability: deal-killers first; then
the risk of settling too early on a strategic direction; and finally, operational risks that can be disposed of
quickly and cheaply..All new ventures are partly wrong and partly right. Run small, cheap, fast
experiments to determine which bits are which and what course corrections you need to make.

Path-dependent risks (research shows redirect at least 5 times)

Path-dependent risks. Rare is the new venture that never has to confront strategic forks in the road to
success. Path-dependent risks arise when pursuing the wrong path would involve wasting large sums of
money or time or both
Risks that dont need lot of time and money
Risks that can be resolved without spending a lot of time and money. Even after entrepreneurs have
considered both deal-killer and path-dependent risks, many uncertainties will remain on the table. If
every one were addressed, theyd never get their products to market. But the more risks that can be
eliminated, and the faster they can be removed, the greater the odds of success. Accordingly, successful
entrepreneurs also look for risks that are quick and cheap to resolve, applying a cost-benefit approach
that we think of as the experimental ROI the amount of risk that can be reduced for each dollar
invested in an experiment designed to resolve it.
Make mistakes while you can still afford them test early, test cheaply

Lean Strategy (Exam Question No.6)

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 Strategy vs. Entrepreneurship (central planning vs. chaos)
Strategy and entrepreneurship are often viewed as polar opposites. Strategy is seen as the pursuit of a
clearly defined pathone systematically identified in advancethrough a carefully chosen set of
activities. Entrepreneurship is seen as the epitome of opportunismrequiring ventures to pivot in new
directions continually, as information comes in and markets shift rapidly. Yet the two desperately need
each other. Strategy without entrepreneurship is central planning. Entrepreneurship without strategy
leads to chaos.
The solution is something I call a lean strategy process, which guards against the extremes of both rigid
planning and unrestrained experimentation. It emerged from the more than 20 years Ive spent studying
and working with entrepreneurial ventures and large companies. In this framework, strategy provides
overall direction and alignment. It serves as both a screen that novel ideas must pass and a yardstick for
evaluating the success of experiments with them. Strategy allowsindeed, encouragesfrontline
employees to be creative, while ensuring that they remain on the same page with the rest of the
organization and pursue only worthwhile opportunities.
Desperately need each other know what not to do
The opportunity cost of doing A is that you cannot also do B.
In a resource-constrained venture, choices are mutually exclusive. If you allocate two software
engineers to customize a product for a new customer, you will delay the release of version 2.0 of the
product by three months. No amount of experimentation will get around this problem. Lean promotes
efficiency in all aspects: time, capital, resources, etc. and continuous improvement / testing. The single
best piece of advice for entrepreneurs is this: Know what not to do
Every choice creates a unique path with a different outcome and unforeseen implications.
This is why you cannot simply do A now and B laterbecause circumstances will almost certainly have
changed. Competitors will have launched their own version 2.0. Key suppliers will have signed contracts
that commit all their capacity to others. Potential customers judgments about the service will already
be clouded by their experience with a competitors version. The employee who would have been
instrumental in pursuing B will have left the company. Every choice is an irrevocable rejection of
something else

Lean Strategy Process (combination of the two):

1) Vision (reason for existence)
The lean strategy process begins with perhaps the only aspect of the strategy that should in any sense
be permanent: the organizations vision or ultimate purposethe reason for its existence. A vision
should be compelling and motivational. It may also be aspirational and possibly even unachievable.
Microsofts original vision, for example, was to place a personal computer on every desk.
2) Analysis (SWOT): Deliberate strategy.
To deliver on the entrepreneurial vision, a deliberate strategy should be agreed upon by senior
executives. It should be crafted with involvement throughout the organization, from a rigorous
evaluation of the firms current strengths and weaknesses, internal resources and capabilities, and
external opportunities and threats. The deliberate strategy will identify the broad market position where
the firm can use its unique capabilities to satisfy customer needs in a way that no competitor can.
3) Deliberate Strategy (agree on firms objective, scope and advantage)
Probably the most critical strategic guide rail, scope identifies what business we are in and draws
boundaries around what the venture will and will not do. This is an articulation of the near-term goal

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that defines success in the eye of the ventures leader. If her objective is to go public within three years,
that will have implications very different from those of building a sustainable business shell still control
five years out, or of selling to a strategic buyer once the business is established. For each objective, the
strategy must also establish the metrics that will maximize the firms market value when achieved
4) Learning (managers at all levels decisions and experiments): competitive advantage
Managers at all level make daily decisions and conduct experiment guided by the strategy. Any venture
needs clarity about how it will winwhy customers will buy its products rather than those of
competitors. That advantage should help the company satisfy an underlying customer need and, ideally,
address an immediate customer pain point. It can be captured in a summary of features that are
superior to those of competitors, which may also acknowledge, if not even celebrate, those aspects of
the product or service that will underperform. This distinctive value proposition should align the firms
activities and shape future experiments.

5) Emergent Strategy (feedback and findings reshape strategy)

In implementing the strategy, managers at all levels in the organization make myriad decisions every
day. The sum of all these independent choices gradually alters the companys position and determines
the exact form the strategy takes over time. This is the emergent dimension of strategy.
Many frontline decisions, like daily flight departure times at Southwest, are routinized and require little
or no thought. Some, like whether to hold a plane at the gate to accommodate delayed connecting
passengers, require judgment and should be informed by the companys strategy. And some are
conscious variations that seek to improve an existing product or practice.

Lean Start-Ups

But recently an important countervailing force has emerged, one that can make the process of starting a
company less risky. Its a methodology called the lean start-up, and it favours experimentation over
elaborate planning, customer feedback over intuition, and iterative design over traditional big design
up front development. Although the methodology is just a few years old, its conceptssuch as
minimum viable product and pivotinghave quickly taken root in the start-up world, and business
schools have already begun adapting their curricula to teach them.
The lean start-up movement hasnt gone totally mainstream, however, and we have yet to feel its full
impact. In many ways it is roughly where the big data movement was five years agoconsisting mainly
of a buzzword thats not yet widely understood, whose implications companies are just beginning to
grasp. But as its practices spread, theyre turning the conventional wisdom about entrepreneurship on
its head. New ventures of all kinds are attempting to improve their chances of success by following its
principles of failing fast and continually learning. And despite the methodologys name, in the long term
some of its biggest payoffs may be gained by the large companies that embrace it.

The lean method has three key principles:

1. Business model canvas: Essentially, this is a diagram of how a company creates value for itself and
its customers. Rather than engaging in months of planning and research, entrepreneurs accept that
all they have on day one is a series of untested hypothesesbasically, good guesses. So instead of
writing an intricate business plan, founders summarize their hypotheses in a framework

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2. Customer development approach: get out of the building is to test their hypotheses. They go out
and ask potential users, purchasers, and partners for feedback on all elements of the business
model, including product features, pricing, distribution channels, and affordable customer
acquisition strategies. The emphasis is on nimbleness and speed: New ventures rapidly assemble
minimum viable products and immediately elicit customer feedback
3. Agile development, which originated in the software industry. Agile development works hand-in-
hand with customer development. Agile development eliminates wasted time and resources by
developing the product iteratively and incrementally. Its the process by which start-ups create the
minimum viable products they test

Decision making need to evolve with Growth

1) Flip-flopping will cost you

In startup mode, I changed my mind all the time. Most decisions didnt impact many people, so I didnt
hesitate to change course often. This became very problematic in scale-up mode: every time I changed
my mind it impacted hundreds of employees and typically involved retooling lots of processes and
systems. Over time, I learned that the cost of changing your mind becomes huge as your startup scales
upSail the ship set course

2) Fast vs. right

In startup mode everything comes at you quickly, and you tend to react fast. If youre a manager and
make a wrong decision, you just roll it back. Simple. In scale-up mode, however, you have a choice: You
can do things fast or you can do things right. Theres always a balance, but in scale-up mode you need to
shift toward doing things right more often than doing things fast Stop making uninspired compromises
trying to please everyone. If you do everything fast in a scale-up, you end up with shortcut debt.
Shortcut debt will leave you in the same predicament. If you take the easy way out the first time around,
youre left spending time cleaning up messes that never should have occurred. And what if too much
shortcut debt racks up? It cripples your ability to manage. Your whole team will be too preoccupied with
having their fingers in the dam, holding back the water

3) Its the bus analogy, and it goes like this:

A leader has three responsibilities, all of which can be illustrated by a bus trip.

First, the leader needs a clear set of directions in mind about where the bus is headed.
Second, the leader needs to know whom to pick up and whom to leave at the bus stop along the
way, a concept the management writer Jim Collins made famous. The people on the bus need to be
excited about the direction and ready to work together en route. Some will hop off along the way,
and thats normal.
Third, the leader needs to make sure there is enough gas in the tank (cash in the bank account) to
get to the destination.

Stay objective see the wood for the trees: if someone can't see the wood for the trees, they are
unable to understand what is important in a situation because they are giving too much attention to
details. When Im in a meeting and feeling like Im stuck in my companys or industrys box, I take an
unconventional approach. I ask: What if a Martian landed in the room right now and was faced with
this decision? What would she say? More often than not, asking what a total outsider might do

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someone with zero knowledge of conventional wisdom or company history can help pull a discussion
out of the weeds and help to make the right decision. At HubSpot, that means solving for long-term
enterprise value, not for short-term goals or what an investor wants to hear.

Style also needs to change from doer, manager to leader

Moving from being a doer a person applying their technical skills, to being a leader of people applying
technical skills. Allowing people below them to make (small) mistakes and using those as teaching
opportunities. Knowing there are various styles of leadership and it is important to vary ones style to
suit the individuals and teams being led rather than to expect those being led to all respond to the
leaders preferred style

First follower theory concept

What is crucial is the need to be very strategic and identify the first follower because the first follower
set the team. They can be effective or not depending on the environment as they are the one that
inspire others to come on board.

First follower theory is the concept that attracting an adherent to some kind of view or initiative is the
first step toward beginning a movement that might seem unusual or out-of-step with the surrounding
culture to the general population.

The first follower is considered to be as important to the development of a movement as the initiator
because they make the leaders viewpoint seem more credible. The first follower is what transforms an
individual with a unique idea into a leader.

The first follower risks ridicule in the same way that the initiator does. Once a single person follows the
initiative, however, it becomes less risky for others to join. Eventually, as enough people join, it becomes
riskier to stay on the sidelines than to become part of the movement.

Lecture 7
Start-Up: Sequential Process - Challenge

Production
Hospital demand Cost of production
Gatton supply? Cost of raw
Required quantity materials
St Lucia logistics
Quality specs Potential sales
Alternate suppliers
Machine capacity
Labour
requiurement
Procurement Financial

Cash Flow Summary (Exam Question No.7)

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 Cash Flow Profit
Relationship between: profitability, Cash Flow and Growth
Profitable companies can go bankrupt
Payment terms depends on Power Balance
Mechanisms to track cash efficiency: stock turnover and debtor days
Banks: where is the peak, up and down, security / collateral, permanent brick?
How to fund the cash flow? Depending on how much money I make as profit, the fund can be available
for expansion or to fund another project. The more money stay behind the more I can make more
investment. Thats why the profit is crucial in how fast you can grow the business. Thus, the profitability
is crucial in funding the growth.

Cash flow is the difference between the amount of cash a company receives and pays, whereas
profitability is the difference between revenues and expenses. Companies report on both their cash
holdings and profitability. Profitability is an accounting concept and is not measured in terms of cash
received or paid

What is a 'Growth Company'

A growth company is any company whose business generates significant positive cash flows or earnings,
which increase at significantly faster rates than the overall economy. A growth company tends to have
very profitable reinvestment opportunities for its own retained earnings. Thus, it typically pays little to
no dividends to stockholders, opting instead to put most or all of its profits back into its expanding
business.

Cash flow and profit dont always match up.

A company can be profitable and still go bankrupt from cash flow problems. If they must pay for
materials in January but dont get paid by their customers until June, they need a loan to survive until
June. If they dont get that loaneven if they have guaranteed sales in Junethen they will go out of
business. Sometimes customers themselves will pay in advance, effectively giving an interest-free loan
to a company to help cover cash flow

Profit is how much money you have left after you get your revenue and pay your expenses.
Cash flow is the money that is moving (flowing) in and out of your business in a month or
periodically.
In the short-term, even if youre profitable, you survive or fail based on whether you have cash to
pay the bills. Thats why they say Cash Flow is King.
In the long-term, you must eventually get profitable or find someone like stock investors to keep
giving you cash to make up for your losses.
Cash Flow When Starting a Business

Dealing with cash flow issues is most difficult when you are starting a business. You have many expenses
and money is going out fast. And you may have no sales or customers who are paying you. You will need
some other temporary sources of cash, like through a temporary line of credit, to get you going and on
to a positive cash flow situation

https://www.youtube.com/watch?v=UF8uR6Z6KLc

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