Notes on Entrepreneurship

Entrepreneur: A person who maximises their utility. Utility = What you want. o Entrepreneur has good management skills and good networks along with being highly creative and innovative. Entrepreneurial activity can be Productive, Unproductive or Destructive (eg. Crime, robbery, trafficking drugs or people). For entrepreneurship, Access to resources is important not ownership Behavioural Model

Belief Structures Self-Image Perceived societal norms Fear of failure Heuristics Ethical values Motivation Self-efficacy

Psychological state
Aptitude Intelligence (IQ, EQ) Education Training Experience

Personality

Ability

Difference between Entrepreneurial and Managerial behaviour (Stevenson 1998) Entrepreneur Manager Opportunity Driven Strategic Orientation Resources Driven Quick and Short Commitment to Opportunity Long and Slow Minimal, Multi-Stage Commitment of Resources Single Stage Use or Rent Control of resources Own or Employ Networks, non-hierarchical Management Structure Formalised Hierarchical Value & team based Compensation and Rewards Individual, Hierarchical

Entrepreneurial Opportunities
Types of opportunities

Needs (Problem)
Unidentified Undefined Fantasy Identified Market Pull

Solutions

Defined

Technology Push

Business Opportinity

Ansoffs Growth Vectors New C D

Market
Essential/ Existing

A Essential/Existing

B New

Products
A) Market Penetration: Risk o Customer Service o Quality o Marketing B) Product Development: Risk o New products for existing customers o New Product Development (NPD) o Latent customer needs C) Market Development: Risk o Existing products for new markets o Marketing o Geography o Type of customer D) Diversification: Risk o New product to new customer

Customer Activity Cycle 1. PRE before purchase, use of purchase service, research into product 2. DURING while product/service is in use 3. POST Aftercare, future needs PEST(EL) Analysis: Political, Economic, Social, Technological, Environmental, Legal

Market Assessment
1. Market Segmentation: Identify Niche market 2. Gather Market info: quantitative and qualitative 3. Sales strategy: milestones and decisions

Technology led: Technology customer Market led: customer (market research)Product New players have to follow Market led strategy.

Market Segmentation is very important: 3 segmentation factors: 1. Characteristics of the customer Who is the customer? 2. Purchase/Use How will the customer purchase and use the product/service? 3. Needs and Preferences What are the customers needs and preferences?

Entrepreneurial team
Importance of team Very difficult to raise funds without a team Contribution of capital Diversity of perspectives Mix of functional skills Social and psychological support Personality: Thinking styles Clarifier 1. Clarifies the need/pain 2. Focuses on details to identify the exact need to be fulfilled 3. Detailed analysis of problem 4. Does not rush to find a solution Ideator 1. Looks at the bigger picture 2. Innovative thinking to come up with workable solutions 3. May not be detailed or thorough about solution Developer 1. Assemble workable solutions 2. Weighs the pros and cons of each solution 3. Plans a strategy for implementation 4. May be a perfectionist and may get stuck developing a perfect solution Implementor 1. Gives structures to ideas 2. Focuses on workable solutions implements solution with a just-do-it (JDT) approach 3. May jump to actions too quickly Integrator 1. Responsible for team performance 2. Is usually clear about roles and responsibilities 3. Understands team dynamics 4. Give equal energy across all thinking styles and bridges the differences

Value Chain
Value Chain: shows all the stages involved in making and delivering the product/service to the customer Complementary Assets: Assets needed to translate an innovation in to commercial returns (teece,1986)

Value Chain Analysis 1. Plot the Value Chain around the business 2. Identify the position of the product/service/idea in the chain 3. Identify where the value is created 4. Analyse the chain: what is the weight/power of the business in relation to the upstream (Technological) and downstream (Distribution) players in the chain 5. Identify the economic and operational impact of the chain on the business Teece Framework

Complementary Assets
Freely available / unimportant Appropriability Low Difficult to make money Tightly held & important Holder of Complementary Assets

High

Inventor

Inventor or party with bargaining power

Strategy based on Teece Framework

Complementary Assets
Freely available / unimportant Appropriability Low Established businesses can easily imitate (Attackers Advantage) Choice between contracts and market (Greenfield competition) Tightly held & important Possibility of contracts (Reputation based ideas trading) Contract with established companies (Idea Factory)

High

Translated into entrepreneurial strategy: 3 types of growth 1. Employment growth Business seeks exit strategy Attracts external capital for technology development Builds legitimacy and trust in market o Signalling: Active public communications, high visibility in market o Hire Top Management Team (TMT) members Seeks Venture Capitalists for funding 2. Revenue growth No external capital Growth is financed by generated cashflow Under the radar operation 3. Employment + Revenue growth (Check for addition and updates in a couple of days.)