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CSE5ENT 1

LECTURE 1
ENTREPRENEURIAL PROCESS

Juliet Simon
Sum -1- 2017

Reference: Bygrave & Zacharakis, Entrepreneurship,


3rd Ed. Ch. 2, New York: Wiley, 2014.
Entrepreneurship Defined

• What is the definition of Entrepreneurship? - Many researchers have


provided their own definitions of entrepreneurship.

• The definitions capture a broad range of activities including the creation of


organisations, the exploration of opportunities, the bearing of uncertainty,
the bringing together of factors of production, and others.

• First known definition of entrepreneurship is by an Irish-French economist


Richard Cantillon (circa 1730) is self-employment of any sort. Entrepreneurs
buy at certain prices in the present and sell at uncertain prices in the
future. The entrepreneur is a bearer of uncertainty.

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Entrepreneurship Defined

• In our context, entrepreneurship can be defined as “the process of


identifying, developing, and bringing a vision to life. The vision may
be an innovative idea, an opportunity, or simply a better way to do
something. The end result of this process is the creation of a new
venture, formed under conditions of risk and considerable
uncertainty.1”

• Entrepreneurs will undertake managerial roles in their activities, but


routine management of an ongoing operation is usually not
considered to be entrepreneurship.

1Definition provided by The Entrepreneurship Centre, University of Miami, USA


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Entrepreneurship Defined
• Entrepreneur: someone who perceives an opportunity and builds an
organisation to pursue that opportunity.

• Entrepreneurship process involves all the functions, activities, and actions


associated with perceiving opportunities and creating organisations to
pursue them.
These include:
• Team Building • Finding & managing resources
• Market & customer research • Managing intellectual properties
• Product & service innovation • etc.

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What is an Entrepreneur?

Entrepreneur: A person who organises and manages


an enterprise, especially a business, usually with
considerable initiative and risk.
– Initiative: Readiness and ability in initiating action.
– Risk: The hazard or chance of loss.

Source: Webster’s College Dictionary (Random House/McGraw Hill)


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Why
are
entrepreneurs
Unique??

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Coz…

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Some Defined their lives

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Some Changed the world

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Some are in school

CEO, Elementeo
www.elementeo.com

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Some Changed their countries

Some are in college Mark Zuckerberg


CEO, Facebook

Some …

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Factors Influencing an Entrepreneur

Personal Environmental
Attributes Factors

• Higher internal locus of control • Local, regional, or national attitudes


• Desire for financial success • Social and cultural pressures for or
• Desire to achieve self-realization against risk taking
• Desire for recognition • Access to entrepreneurial role models
• Joy of innovation • Responsibilities to family and
• Risk tolerance community
• 10Ds characters

Remember: No single type of person is best suited for entrepreneurship.


Entrepreneurs come from all walks of life!

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Ten D’s of a successful Entrepreneur
Devotion
Dream
Details

Doers
Destiny
Characteristics of
Entrepreneurs
Decisiveness
Dollars

Determination
Distribute
Dedication

The most important characteristics of a successful entrepreneur

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Why become an Entrepreneur?
What was the main reason why you
decided to start your business?

Global Youth Entrepreneurship Study (2011)


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Rewards of Entrepreneurship

being your own boss

doing something you enjoy

being creative

setting your own schedule

having job security

making more money

being recognised in the community

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Risks of Entrepreneurship

working long hours

having an uncertain income

being fully responsible

rising one’s investment

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Characteristics of Entrepreneurs

Key Personal
Attributes

Strong Managerial
Competencies

Successful
Good Technical Skills
Entrepreneurs

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Ten Essential Entrepreneurial Skills

communication organizing and planning

math teamwork

problem-solving social

technology and computer adaptability

decision-making basic business

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Common myths about entrepreneurs

– Entrepreneurs are born, not made.


– Entrepreneurs are gamblers.
– Money is the key to entrepreneurial success.
– You have to be young to be an entrepreneur.
– You must have a degree in business to be an
entrepreneur.

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Model of Entrepreneurial Process
PERSONAL ORGANIZATIONAL
PERSONAL SOCIOLOGICAL
Job Loss Team
Achievement Networks
Job Dissatisfaction Structure
Locus of Control Parents & Family
Education Culture
Ambiguity Tolerance Teams
Age Strategy
Risk Taking Role Models PERSONAL
Gender
Education Advisors Manager & Leader
Commitment
Experience Commitment
Resources
Vision

TRIGGERING IMPLEMENTA GROWTH


INNOVATION
EVENT TION

ENVIRONMENTAL
Role Models ENVIRONMENTAL ENVIRONMENTAL
Creativity Economy Competitors
Opportunities Competition Customers
Incubator Suppliers
Moore Government Policy Investors
Economy
Model Policies

Moore, C. “Understanding Entrepreneurial Behavior: A Definition and Model”, Academy of Management


20 Proceedings, 1986, pp. 66-70.
Model of Entrepreneurial Process
Rework
Market/Tech/Cost
Concept feasibility
Initial financial projection
OPPORTUNITY
DISCOVERY FEASIBILITY
RECOGNITION
Innovation Invention disclosure
Invention Concept development
Provisional patent
Refine & decision
Redesign Other IP analysis
Regulatory reqs.
MARKET IP AND
PROTOTYPE
TEST REGULATORY
Application Dev.
Field test
Testing
Clinical trials
Pre-clinicals

LAUNCH BUSINESS
LAUNCH
STRATEGY PLAN
License Develop PLANS
Allen Joint venture Team, Funding,
Start a business etc
Model
Allen, K.“Entrepreneurship for Scientists and Engineers”, Prentice Hall, 2010
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Model of Entrepreneurial Process
Timmons Model –
Start Up Stage
Uncertainty

Opportunity Entrepreneur

Fits & Gaps


Business plan

Uncertainty Uncertainty

Resources

“The crucial ingredients for entrepreneurial success are a superb entrepreneur


with a first-rate team and an excellent market opportunity”
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Timmons Model’ Components
• The Opportunity
– Is there a clear customer need?
– Is the timing right: team ready, market ready?
– What due diligence you need to test the opportunity?

• The Resources
– Capital, technology, equipment, and most importantly – people
– Low overhead, high productivity, and controlling, but not owning resources
– Find ways to get things done faster, cheaper or better.

• The Lead Entrepreneur and Management Team


– Two type of experiences needed: (i) experience within the proposed
industry/business and (ii) management experience.
– Investors prefer to see a track record of driving growth and profits
– An ‘A’ team with a ‘B’ idea is almost always better than the opposite

Timmons, J. “New Venture Creation”, Richard D. Irwin, 2001.


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Key Forms of Start Up Capital
Debt Equity
• No transfer of company ownership • Investors gain an ownership stake
• Potentially higher risk for the • Investor takes some risks
entrepreneur • No repayment, but requires careful
• Requires repayment, and therefore capital planning and investment
careful cash flow planning

Most companies will never take on outside investors, and many will never use debt
financing for growth. 87% of start up companies started with own money, 19% from
family/friends, 17% bank loans, 4% only from VC.

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Nine F’s of a Successful Company
• Once the entrepreneurs decide to pursue the opportunity, these nine
F’s are important factors to become a winning business (adapted
from the original list by Rosabeth Moss Kanter*).

• Founders • Forever-innovating
• Focused • Flat
• Fast • Frugal
• Flexible • Friendly
• Fun

*Kanter, R.M. “Change Masters: Innovation and Entrepreneurship in the American Corporation”, Simon & Schuster,
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Nine F’s of a Successful Company
Founders. Successful companies are led by a first-class, experienced
entrepreneur. This experience can be achieved through past
business experience or an in-depth entrepreneurial education, but
not by entrepreneurial zeal.
Focus. Successful company founders don't try to focus on broad
markets with their products or services. Instead, they specialize by
focusing on niche markets within these larger markets where there
are unmet customer needs and less competition.
Fast. When they know what they want, successful entrepreneurs go
for it. They make strategic decisions rapidly and thoughtfully,
implementing them quickly.
Flexible. These business owners are not fixed in their ways. They
always keep an open mind so they are able to respond to change.
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Nine F’s of a Successful Company
Forever innovating. By definition entrepreneurs are innovators. They are tireless
in their innovative zeal, which can sustain future product development as more
unmet market needs are discovered.
Flat. Because they abhor too much management, these entrepreneurs maintain the
minimal number of management layers possible within the business.
Frugal. These business owners know the difference between profit and cash flow,
and they strive to maximize both by keeping overhead costs low and productivity
high, thus minimizing expenses.
Friendly. These companies maintain a strong commitment to customer service
(providing customers what they want), as well as to the well-being of their
employees and satisfaction of their suppliers.
Fun. This is why these entrepreneurs started the business, and they never lose sight
of it, especially in the tough times.

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Summary
• We have covered:
• Our context of entrepreneur and entrepreneurship
• Rationales of people becoming entrepreneurs
• Characteristics of entrepreneurs
• Several entrepreneurship process models
• Brief introduction of funding issues for a start up

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