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

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 Identified

Solu

tio

ns Undefined Fantasy Market Pull

Defined Technology Push Business Opportinity

Psychological state

Ability Personality

Belief Structures

Self-Image

Perceived societal norms

Fear of failure

Heuristics

Ethical values Motivation Self-efficacy

Aptitude Intelligence (IQ, EQ) Education Training Experience

Ansoff’s Growth Vectors

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

A

C

B

D

Essential/Existing New

New

Essential/

Existing

Products

Mar

ket

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 customer’s 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 Tightly held & important

Ap

pro

pri

abili

ty

Low Difficult to make money Holder of Complementary

Assets

High Inventor Inventor or party with

bargaining power

Strategy based on Teece Framework

Complementary Assets Freely available /

unimportant Tightly held & important

Ap

pro

pri

abili

ty

Low Established businesses

can easily imitate (Attacker’s Advantage)

Possibility of contracts (Reputation based ideas

trading)

High Choice between contracts

and market (Greenfield competition)

Contract with established companies

(Idea Factory)

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….)