International Affairs Training

New Venture Planing, Growth and Development

by David A Robinson PhD

Visiting Associate Professor of Management:
National Sun Yat Sen University
The Entrepreneur
Defined

A person who creates something

of value and assumes the risk of
building a business around it
[Robinson, 2002]
Six critical dimensions
of Business Practice

 Strategic orientation
 Commitment to Opportunity
 The Resourcing Process
 Degree of Control over Resources
 The concept of Management
 Compensation Policy
What is Entrepreneurial
Management
A range of
managerial
behaviour that
consistently falls
at the promoter
end of the
spectrum, as
distinct from the
‘trustee’ end.
[Prof. Howard Stevenson,
1988]
Dimension 1: Strategic
Orientation
Trustee Promoter
 I will prune my  I am driven by
‘opportunity tree’ my perception of
according to the opportunity. I will
resources I acquire the
currently control. resources as
needed to pursue
these
opportunities.
Dimension 2:
Commitment to
Opportunity
Trustee Promoter
 Slow-moving  Action-oriented

 Convoluted  Short decision

decision window
processes  Rapid risk-
 Emphasis on risk- management
reduction  Flexibility
 Rigid policies and
procedures
Dimension 3: The
Resourcing Process
Trustee Promoter
 ‘Front-end-  ‘Bootstrapping’ –
loaded’ – upfront multi-staged
total commitment.
commitment [mistaken for
lack of
commitment]
 Do more with
 Excess resources
(reducing less
personal risk)
Dimension 4:
Degree of Control over
Resources
Trustee Promoter
 Need to own all  The ability to use
resources it
 Use other
people’s where
possible
 Leads to high [may be seen as
overheads exploitive]
 Low overheads
Dimension 5:
The Concept of
Management

Trustee Promoter
 Formal hierarchy  Flat structure

 Clearly-defined  Fluidity:
authority & - co-ordinate (not
responsibility control)
- empower (not
stifle)
Dimension 6:
Compensation Policy
Trustee Promoter

 Little  Reward in
differentiation in proportion to
reward - loyalty contribution
and obedience
seen as more  Competition to
important than achieve
performance
New Venture Modeling

Is it viable?

 Will revenue exceed expenses?

 Will there be a sustainable
demand?
 Will there be an acceptable return
on investment?
 Will we be distinguishable from
our competitors?
 Can the business generate a profit?
i.e. will revenue exceed expenses?

Quantities Sold Revenues Prices Sold at

productivity Profits price recovery

Quantities Sum of Prices

Used Costs Bought at
Will there be a
sustainable demand?

How will we create customer

‘value’?

Are there enough potential and

reachable customers?

What will be our competitive

strategy to reach them all?
1. How will the firm
create value?
 What products or services will be
sold (mix, depth, breadth)?
 Are we manufacturing it (our own
design or under license),
supplying an outsourced product,
or just providing access to
products?
 What intermediaries are involved?
2. For whom will we
create value?
(i.e. nature of market)
 Business to consumer (B2C)

 Business to Business (B2B)

 Where in the ‘value chain’ are your

customers?
(upstream, downstream, wholesale,
retail)
 One-off transactions or ongoing
relationships?
3. How will the firm
differentiate itself?

 By core competency
 By unique offering
 By occupying sustainable
strategic positions: Product
quality, Long-term relationships,
Operational excellence, Low cost,
Innovation, Technological
monopoly.
4. How will the firm
make money?
 The ‘economic model’ provides a
consistent vehicle for earning
profits
 Fixed vs. variable costs?
 Market demand/opportunity vs.
Capacity
 Margins?
 Prices fixed or variable (creative
revenue sources)?
5. Scope, size and time
considerations?
 What type of business is it:
– Subsistence or lifestyle type business
– Income maximisation (short term / cash
cow)
– Growth (market share maximisation /
brand-building)
– Speculation (quick in and out)

 The business is also an ‘investment

model’ – HOW LONG WILL IT TAKE us
to harvest an acceptable return on our
investment.
Entrepreneurial
Culture
 Stations along the road of life
 Tracks, ravines, rules and
paradigms
 Crossing divides and thinking
lines
 Stepwise progression, limitations
on progress
 Who can lead whom? & Who will
follow whom?
Paradigm – a way of
thinking

Paradigms are
ontological
orientations that
influence the way
we construct our
realities.
Copyright: David A Robinson 1998
Limitations on
Progress

Copyright: David A Robinson 2006

Who Should Lead
Whom?

Copyright: David A Robinson 2006

Implications to
business
Culture exists in the day-to-day
practices of the firm (‘the way we do
things here’):
1. How information is communicated
within the firm
2. Task vs. Relationship orientation
3. Structures, procedures and
processes
4. Rewards and recognition
5. Facilities and work environment
Be the best at something!
What?
 Offer what the customer values
– This allows the exploitation of a
market opportunity.
 Offer something rare
– Rivals do not also have access to the
resources.
 Make your offering hard to copy
– Rivals cannot simply duplicate or
emulate it
 Make it non-substitutable, as far as possible
 RESOURCE ANALYSIS
Resource: Valuable? Rare? Can’t copy? Can’t substitute?

Physical Yes Sometimes Not usually

Sometimes
Reputation Yes Yes Yes Yes
Organisation Yes Yes Yes Yes
Financial Yes Sometimes No No
Intellectual Yes Yes Usually Sometimes
Technology Yes Sometimes Sometimes Sometimes

Initial Competitiveness comes from P, F & T

Longer term competitiveness requires leadership in at least one of
R, O and I
Plotting Comparative
Strengths
Competitor 1 Competitor 2 Competitor 3 Self RS or RW

Resource V R H N V R H N V R H N V R H N
Factors
Physical

Reputational

Organisation
al
Financial

Intellectual

Technical
Where is your ‘SCA
potential’ greatest?
 A strength of ours vs. a weakness
of the rival(s)
 Our strength is stronger than
theirs
 There is an industry-wide
opportunity, that we can make
gains from (first-mover)
 The industry has a weakness, that
we can improve on
 Beyond Generic
Strategies
Porter gave us:
Differentiation: quality, service,
segmentation management
(positioning)
Cost Leadership: lowest-cost producer,
economies of scale, lean and mean
Focus: Best at some-things to some-
people
These are fine for revising or strengthening an
existing business, but too general for a new
business that must carve out a specific niche for
Considerations in
developing your Business
Strategies
1. Opportunities that appear imminent in
the business environment in which you
will operate
2. Threats that may arise
Note: The opportunities and threats apply
equally to you and your direct competitors
3. Your comparative strengths and
weaknesses (i.e. relative to your
competitors – choose at least two
direct and one indirect)
Opportunities and
Threats
Consider Porter’s 5 use PESTEL:
forces OR
Political
 Buyers’ Power – how
many? collusion? Economic
 Suppliers –
monopoly? oligopoly?
 Substitutes – Social
existing/in-the-
pipeline? Technology
 Barriers to entry – Environment
how to keep rivals Legal
out
 Rivalry – price vs.
quality/service
The Cross Impact
Analysis
Business Strategy Finder
Apparent Apparent
Opportunities Threats

Our relative Decide how best to Is it possible to

Strengths Exploit change the
(go-for-it) business
environment?
(conquer)
Our relative Manage internal Is it possible to
Weaknesses processes avoid the threats?
(shine-up) (avoid)
Cross Impact Analysis
[method]
List our relative List the apparent List the apparent
strengths and opportunities threats
weaknesses • O1 • T1
• S1 • O2 • T2
• S2 • O3 • T3
• W1
• W2
Compare each to all the others, i.e. How does S1 match with
O1, O2, O3, T1, T2, T3 and decide how to make best use of S1.
Repeat (eg. O1-S2; T2-W1). Converge upon 3 to 5 competitive
strategies, with at least one from the ‘Exploit’ quadrant.
Business Ethics
 Why should a business be ‘good’?

 Should a good business show empathy for

others, for the environment, for the future, or
just be selfish and greedy so that its
shareholders ar satisfied (this year)?

 Are there any acts that are always wrong in

business?

 When organizations are driven by rules,

policies and procedures, is there a place for
ethics?
Ethical Business
 Is it enough to stay within the
law?
 What ethical considerations are
important (to us / our business)?
 What ethical rule or code can I
apply?
 Can I ensure self-interest without
being unethical?
 How can I decide when faced with
 Theoretical Matrix
Issue Ethical Approach Action Required
e.g. Not accepting Consequentialist – Explain situation to
sub-standard Customer will be customer – let
materials will miss disappointed them choose
deadlines
Deontological – Notify customer of
Quality Controls unavoidable delay
disallow further
processing
Virtue – Manage supplier
Reputation for and customer
honesty and relationship
efficiency
Ethical Evaluation
Framework

 Involvement test  Light of day test

 Consequential  Self interest test
test  The discourse
 Fairness test test
 Enduring values  The
test communitarian
 Universality test test
 Common sense
test
Why Ethics may be
different for
Entrepreneurs
 Innovator

 Initiator

 Internal locus of
control

 ‘I’ – subjectivist
“Entrepreneurial
Ethics”
 Non-prescriptive

 A-universal
(relativist)

 Context-specific

 Subjectivist
(personal world-
view)
Putting it to the test
 Sample: ‘Run of the mill’
entrepreneurs, rather than high-
flyers
 Requirements: Accessible,
Articulate, Willing to share
(secrets), Non-academic, Pre-
reflective, Sufficient Variation
Methodology
 Diplomatically investigative
(conversational)
 Detailed (without being invasive)
 Short interviews (1.5 to 2 hours)
 Semi-structured
 Meaning-rich (metaphor &
anecdotes)
 Distillable
Dilemma 1: Can I operate a business that
is engaged in dishonest practices?

I wish to be influential in the

game, but at the same time I am
not willing to be untrue to my
conscience. To stay in the game,
it appears that I may be
perceived as condoning dishonest
business practice.
The Business Ethics
Synergy Star (BESS)
copyright David A. Robinson 2002

X Y
 Technique to
Business Ethical
Imperative Imperative
define and
resolve dilemmas
Z -Z
 Uses a
standardised
Implication Conflicting
Implication
argument format
 Prompts a
personalised
solution
‘BESS’
Business Ethics Synergy
Star copyright David A. Robinson 2002

Objective
O

Business
Ethical
Condition Condition

Imperative Imperative
for X for Y
Assembling ‘BESS’
 State the dilemma Objective (O)
as an either/or
proposition
X Y
 Place the dilemma
within the context of
a clearly defined
objective
Z -Z
 Define the business
imperative (X) that
implies Z, define the
ethical imperative
(Y) that implies –Z
BESS 1 Be
influential

Remain in Be true to
the game my
conscience

Not
Condone condone
dishonest dishonest
business business
practices practices
Findings
 Most business
dilemmas contain
an ethical
component

 Entrepreneurs
usually resolve
dilemmas alone

 Ethical dilemmas
require non-
normative, even
subjectivist,
Interesting Observations
from using BESS
 The ethical solution
generated by BESS
is usually from a
Objective higher value station
than the conflict
O

 BESS is especially
Business
Condition
Ethical
Condition
useful when the
leader already
knows the answer
but needs ‘buy in’
Imperative Imperative
for X for Y

 It helps you project

the firm forward
Finding the High Growth
Sweet Spot
Marketing
Strategic  Are we targeting the
 Are we in the right
right customers?
place at the right
 Have we given the
time?
 Is the business customers a compelling
viable and need to buy?
‘scaleable’?  Have we selected
 Do we have the appropriate marketing
right management channels?
team?  Do we have sufficient
 Do we have ongoing
capacity?
innovation
capability?