Key Notes on Entrepreneurship

Supporting presentation on Entrepreneurship The Road Least Taken

For Seminar on GIS, Project Management and Entrepreneurship organized by SM Foundation Nepal

Presented and Compiled by: Sohan Babu Khatri - CEO - Three H Management

The importance of Entrepreneurship Economic development of every economic development of every country Through entrepreneurship new ideas and inventions are developed and this enables continual improvement of their organizations, societies and economy Integral part of the renewal process that pervades and defines market economies. Plays a crucial role in the innovations that lead to technological change and productivity growth. In short, they are about change and competition because they change market structure. Essential mechanism by which millions enter the economic and social mainstream Definition, Meaning and Factors of Importance 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 ingredients include the willingness to take calculated risks- in terms of time, equity, or career; the ability to formulate an effective venture team; the creative skill to marshal needed resources; and fundamental skill of building solid business plan; and finally, the vision to recognize opportunity where others see chaos, contradiction, and confusion. An entrepreneurial perspective can be developed in individuals. This perspective can be exhibited inside or outside an organization, in profit or not-for-profit enterprises, and in business or non-business activities for the purpose of bringing forth creative ideas. Thus, entrepreneurship is an integrated concept that permeates an individuals business in an innovative manner. Entrepreneurs are people who create and grow enterprises. Entrepreneurship is the process through which entrepreneurs create and grow enterprises. Entrepreneurship development refers to the infrastructure of public and private policies and practices that foster and support entrepreneurship. Websters dictionary defines an entrepreneur as a person who organizes and manages a business undertaking, assuming the risk for the sake of the profit. The Kauffman Foundations version talks about visionary entrepreneurs [that] develop innovations, create jobs, and contribute to a more vibrant national and global economy. initiative, imagination, flexibility, creativity, a willingness to think conceptually, and the capacity to see change as an opportunity. What he describes is a set of skills, traits and

characteristics that could be useful in a variety of circumstances, not just as a business creator, but as a leader or employee in the private, public, or nonprofit sectors. An entrepreneur sees an opportunity, figures out a way to acquire the needed resources, and acts to turn the opportunity into a reward. One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them. Entrepreneurship is a management style that involves pursuing pursuit of opportunity without regard to resources controlled. Any attempt at new business or new venture creation, such as self-employment, a new business organization, or the expansion of an existing business, by an individual, a team, or an established business. A way of thinking and acting that is opportunity obsessed, holistic in approach and leadership balanced for the purpose of value creation.

The Entrepreneurial Process

Myths About Entrepreneurship 1. Successful entrepreneurship takes only a great idea. 2. Entrepreneurship is easy. 3. Entrepreneurship is a risky gamble. 4. Entrepreneurship is found only in small businesses. 5. Entrepreneurial ventures and small businesses are identical. Entrepreneurial Characteristics Passion Perseverance Credibility Enthusiasm Low Support Needs - "Burn Rate" Customer Driven Desire for responsibility Preference for moderate risk Confidence in their ability to succeed Desire for immediate feedback High level of energy

Future orientation Skilled at organizing Value achievement over money

Entrepreneurial Drives Personality -- nAch, internal locus of control, and high tolerance for ambiguity Background -- childhood family environment, education, age, and work history (corridor principle) Life circumstances -- unsatisfactory work environment, negative displacement, career transitions, and positive-pull influencers Entrepreneurship's BIG FIVE 1. Risk Taking Propensity 2. Need for Achievement 3. Need for Autonomy 4. Self-efficacy 5. Locus of Control A decision-making orientation toward accepting greater likelihood of loss in exchange for greater potential reward Entrepreneurs may not perceive or accept risk more than non-entrepreneurial counterparts, but rather that they are merely predisposed to access categories that suggest greater potential within business scenarios. People who are comparatively high on the dimensions of entrepreneurial self-efficacy should perceive more opportunities in a given situation, while people who are low on self-efficacy should perceive more costs and risks. People who are higher on self-efficacy should also feel more competent to cope with perceived obstacles, and should anticipate more positive outcomes. Locus of control : An attribute indicating the sense of control that a person has over life. Although internal beliefs appear to differential entrepreneurs from general public, they do not differentiate entrepreneurs from managers. Need for independence Being ones own boss Need for achievement An individuals need to be recognized. Needs to do things in his or her own way and has difficult time working for someone else. McClellands entrepreneurial characteristics: o Individual responsibility for solving problems, setting goals, and reaching these goals through their own efforts o Moderate risk taking as function of skill, not chance o Knowledge of results of decision/task accomplishments.

Common Traits of Entrepreneurs: Aggressively pursues goals; pushes self and others Seeks autonomy, independence and freedom from boundaries Sends consistent messages; very focused Acts quickly, often without deliberating Keeps distance and maintains objectivity Pursues simple, practical solutions Willing to take risks; comfortable with uncertainty Exhibits clear opinions and values; has high expectations Impatient; just do it mentality Positive, upbeat, optimistic; communicates confidence The Entrepreneurs Mind-Set Thinking outside the box o Stop thinking like everybody else o Open up to new possibilities and ideas Ambiguity o Thrive in an environment filled with change o Means opportunity and must be embraced The market is your only judge Trial and Error o Not afraid to fail, use it as a learning experience Networking and Mentors No excuses o Take the credit and blame for their actions Differing Motivations Survival entrepreneurs who resort to creating enterprises to supplement their incomes because there are few other options available. Sometimes called entrepreneurs by necessity. Lifestyle entrepreneurs are people who chose self-employment because they no longer want to work for someone else, or because it provides a better way of balancing work and home demands, or because it enables them to stay in communities to which they have great attachment. Growth entrepreneurs are those who are motivated to grow their businesses so that they can create wealth and jobs in their community.

Serial entrepreneurs are people who enjoy the process of business creation and over their lifetimes will create several businesses, often selling their ventures in the process. These are the high-flyers in any community and a rare breed

Stages of Entrepreneurship 1. Discovery In which the entrepreneur generates ideas, recognizes opportunities, and determines the feasibility of ideas, markets, and ventures 2. Concept Development In which the entrepreneur plans the venture, identifies needed resources using a business plan, and identifies strategies for penetrating markets or protecting intellectual property 3. Resources In which the entrepreneur identifies and acquires the financial, human, and capital resources needed for the venture start-up 4. Actualization In which the entrepreneur operates the venture and utilizes resources to achieve its goals and objectives 5. Harvesting In which the entrepreneur decides on the ventures growth, development, or even demise. The Entrepreneurial Process The process through which a new venture is created by an entrepreneur. Involves more than just problem solving in a typical management position find, evaluate and develop an opportunity by overcoming the forces that resist the creation of something new. 4 distinct phases: 1. Identification and evaluation of the opportunity Opportunities always doesnt appear suddenly, but rather result from an entrepreneurs alertness to possibilities or, in some cases, the establishment of mechanisms that identify potential opportunities. Sources of Opportunities: Consumers, Business associates, members of distribution mechanisms, macro-environmental changes, technical people etc. The evaluation of perceived opportunity is crucial. The evaluation process: Creation and length of opportunity Real and perceived value of opportunity Risk and Returns of opportunity Opportunity vs Personal Skills and goals

 Competitive situation Entrepreneur should understand the cause of the opportunity : technology change ? , market shift ?, government regulations? , competition ? The market size and the length of the window of opportunity (time period available for creating the new venture) form the primary basis for determining risk and rewards. Opportunity assessment plan is not business plan. Opportunity analysis plan includes: Description of product or service An assessment of the opportunity What market need does it fulfill ? What personal observations have you experienced or recorded with regard to the market need ? What social condition underlines this market need ? What market research data can be marshaled to describe this market need ? What patents might be available to fulfill this need ? What competition exists in this market ? How would you describe the behavior of this competition ? What does the international market look like ? What does the international competition look like ? Where is the money to be made in this activity ? An assessment of the entrepreneur and the team Specifications of all the activities and resources needed Source of capital to finance venture and growth 2. Development of the business plan Title page Table of contents Executive summary Description of business Description of industry Marketing plan Financial plan Production plan Organization plan Organization plan Operational plan

Summary Appendices (Exhibits)

3. Determination of the required resources Existing resources of entrepreneur Resource gaps and available supplies Access to the needed resources Critical resources vs just useful resources Downside risk associated with insufficient or inappropriate resources should be assessed. Alternative suppliers of the resources along with their needs and desires must be identified. Cost and Control 4. Management of the resulting enterprise Management style Key variables for success Identification of problems and potential problems Implementation of control systems. Employment of resources in best possible manner Operational problems Rewards of Being an Entrepreneur High degree of independence freedom from constraints Get to use a variety of skills and talents Freedom to make decisions Accountable to only yourself Opportunity to tackle challenges Feeling of achievement and pride Potential for greater financial rewards Challenges of Being an Entrepreneur Must be comfortable with change and uncertainty Must make a bewildering number of decisions May face tough economic choices Must be comfortable with taking risks Need many different skills and talents

Must be comfortable with the potential for failure

Nine Deadly Mistakes of Entrepreneurship 1. Management incompetence 2. Lack of experience 3. Poor financial control 4. Failure to develop a strategic plan 5. Uncontrolled growth 6. Poor location 7. Improper inventory control 8. Incorrect pricing 9. Inability to make the entrepreneurial transition Difference between Traditional Managers and Entrepreneurs: Traditional Managers Promotion and other traditional corporate rewards, such as office, staff and power Short term- meeting quotas and budgets, weekly, monthly, quarterly, and the annual planning horizon Entrepreneurs Independence, opportunity create, and money to

Primary motives

Time orientation

Survival and achieving 5-10 year growth of business

Activity Risk Relationship others Status with

Delegates and supervises more than direct involvement Careful Hierarchy as basic relationship

Direct involvement

Moderate risk taker Transactions and deal making as basic relationship No concern about status symbols

Concerned about status symbols

Failure and Mistakes

Tries to avoid mistakes and surprises

Deals with mistakes and failures

Decisions

Usually agrees with those in upper management positions Others Family members worked for large organizations

Follows dream with decisions

Who serves

Self and customers Entrepreneurial small-business, professional, or farm background

Family history

Opportunity recognition What is an opportunity? How do you recognize opportunities? How do you screen opportunities How are concepts different from ideas? What is a business concept? Is the business concept worthwhile? How do you define a superior opportunity and concept? An opportunity is not an idea nor is it a business concept. An Opportunity is External o It is in the environment o It is a need to be fulfilled o It is a want to be addressed o It is a fear to be relieved o It is time limited o It is not a technology, service, or product but an application to situation

Ideas vs. Concepts Ideas are often seeing a need, want or fear and saying, Lets meet that Ideas are sometimes a technology hunting for an application or opportunity Concepts are when you put a technology together with the customer and understand the business and revenue models that lead to sales. Opportunity, Ideas & Concepts Good ideas are not always good opportunities nor viable concepts.

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 Concepts are built using ideas & entrepreneurial creativity in real time, take time & address real problems. Opportunities are attractive, durable, timely, and anchored in a product or service which creates real value for its buyer and end user. Concepts provide Need or Want Satisfaction, Pain and/or Suffering Relief. Opportunities yield measurable net benefits to the entrepreneur and to society. Questions to Answer Is this really an adequate business opportunity and concept? Is this one I/we want to pursue? What resources are required to exploit it? How do I/we acquire them? How do I/we manage the operation? How and when do I/we harvest?

Principles of Opportunity Seeking Systematically analyze all sources Go out: o look, o ask, & o listen Keep it simple, stay focused Start small (specific) Aim for leadership Be market focused, be market driven

References: Abernathy WJ and Clark KB 1985. Innovation: Mapping the Winds of Crative Destruction, Research Policy V14,February, 3-22 Aldrich H 1992, Methods in Our Madness? Trends in Entrepreneurship Research. In The State of the Art in Entrepreneurship, ed. DL Sexton, JD Kasarda, pp. 191-213, Boston: PWS-Kent Aldrich H 1999, Organizations Evolving, London: Sage Aldrich H, G Wiedenmayer, 1993, From traits to rates: an ecological perspective on organizational foundings. Adv. In Entrepreneurship, Firm Emergence, Growth 1:145-95 Ansoff, HI 1956, Corporate Strategy, New York, McGraw-Hill

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Bhide A 1993, The Hidden Costs of Stock Market Liquidity. Journal of Financial Economics 34:31-51 Bhide A 2000, The Origins and Evolution of New Businesses, New York, Oxford University Press Bhide A, Stevenson H 1990 Why Be Honest If Honesty Doesnt Pay. Harvard Business Review 74 (6): 120-30 Birch D 1979, The Job Generating Process, Cambridge, MA: MIT Press Birch D 1987, Job Creation in America: How Our Smallest Companies Put the Most People to Work. New York, The FreePress Bower J 1986 The Resource Allocation Process, Boston: Harvard Business School Press Brandenburger A, Nalebuff BJ 1995, The Right Game: Use Game Theory to Shape Strategy. Harvard Business ReviewJuly-August:57-71. Chandler AD Jr. 1977, The Visible Hand. Cambridge, MA: Harvard University Press Christensen C 1998, The Innovators Dilemma: When New Technologies Cause Great Firms To Fail. Boston, MA:Harvard Business School Press Cole A 1968, The Entrepreneur: Introductory Remarks. American Review of Economics, May:60-63 Collins O and D Moore 1964, The Enterprising Man. East Lansing: Michigan State University Cooper A and W Dunkelberg 1986, Entrepreneurship and Paths to Business Ownership. Strategic Management Journal Darwall C and MJ Roberts 1998, The Band of Angels. Boston: Harvard Business School Publishing, Case No. 898-188 Drucker P 1985, Innovation and Entrepreneurship, Practice and Principles. New York Harper & Row Dyer D, M Salter & A Webber 1987, Changing Alliances. Boston: Harvard Business School Press

Lateral and Logical Thinking ability is one of the most important ability of a successful entrepreneur. Ability of seeing the non-obvious and thinking different can come handy for the success of business. Below are given some of the lateral/logical thinking exercises try it and check how logical/lateral thinker you are. 1. You are driving down the road in your car on a wild, stormy night, when you pass by a bus stop and you see three people waiting for the bus An old lady who looks as if she is about to die. An old friend who once saved your life. The perfect partner you have been dreaming about. Knowing that there can only be one passenger in your car, whom would you choose? 2. Acting on an anonymous phone call, the police raid a house to arrest a suspected murderer. They don't know what he looks like but they know his name is John and that he is inside the house. The police bust in on a carpenter, a lorry driver, a mechanic and a fireman all playing poker. Without hesitation or communication of any kind, they immediately arrest the fireman. How do they know they've got their man?

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3. A man lives in the penthouse of an apartment building. Every morning he takes the elevator down to the lobby and leaves the building. Upon his return, however, he can only travel halfway up in the lift and has to walk the rest of the way - unless it's raining. What is the explanation for this? 4. How could a baby fall out of a twenty-story building onto the ground and live? 5. A man and his son are in a car crash. The father is killed and the child is taken to hospital gravely injured. When he gets there, the surgeon says, 'I can't operate on this boy - for he is my son!!!' How can this possibly be? 6. There are six eggs in the basket. Six people each take one of the eggs. How can it be that one egg is left in the basket? 7. A police officer saw a truck driver clearly going the wrong way down a one-way street, but did not try to stop him. Why not? 8. A man buys rice at $1 a pound from American growers and sells them at $0.05 a pound in India. As a result of this he becomes a millionaire. How come? 9. Why is it better to have round manhole covers than square ones? 10. Assume there are 5 billion people in earth. What would you estimate to be the result, if you multiply together the number of fingers on every persons left hands? (For the purposes of this exercise, thumbs count as fingers, for five fingers per hand). If you cannot estimate the number, then try to guess how long the number would be. 11. Many shops have prices set just under a round figure, e.g. $9.99 instead of $10.00 or $99.95 instead of $100. It is assumed that this is done because the price seems lower to the consumer. But this is not the reason the practice started. What was the original reason for this pricing method? 12. You are trapped in a room with two doors. One leads to certain death and the other leads to freedom. You don't know which is which. There are two robots guarding the doors. They will let you choose one door but upon doing so you must go through it. You can, however, ask one robot one question. The problem is one robot always tells the truth, the other always lies and you don't know which is which. What is the question you ask? 13. A frog is at the bottom of a 30 meter well. Each day he summons enough energy for one 3 meter leap up the well. Exhausted, he then hangs there for the rest of the day. At night, while he is asleep, he slips 2 meters backwards. How many days does it take him to escape from the well? Note: Assume after the first leap that his hind legs are exactly three meters up the well. His hind legs must clear the well for him to escape. 14. Cathy has six pairs of black socks and six pairs of white socks in her drawer. In complete darkness, and without looking, how many socks must she take from the drawer in order to be sure to get a pair that match?

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