INTRODUCTION TO ENTREPRENEURSHIP
ENTREPRENEURS
Create
ventures of all kinds
Driven
by the satisfaction derived
from accomplishment itself
Ventures created for other purposes, (power, money, fame,
etc.) fail more frequently than those arising from the need for accomplishment.
A VENTURE IS
different from other activities because of its SCALE
with respect to its degree of difficulty: time, effort, analysis, planning,
resources and RISK
A Venture is a difficult undertaking
It must be difficult or it could not fill a deep need for satisfaction
While any venture must be difficult it may take many different forms:
Since there are DIFFERENT degrees of difficulty, there are DIFFERENT degrees of entrepreneurship.
Degrees of Entrepreneurship (on a continuum)
| Activity | Degrees of Entrepreneurship |
|---|---|
| 1. normal life or work activities | none as an adult (significant for a child) |
| 2. selecting a career, employer or marriage | possible |
| 3. becoming self-employed starting any new organization (public private or charitable) an employee attempting to change established company practices |
minimum level (probably on the edge) |
| 4. leading an organization whose goal is to grow to unspecified
size in scale or scope an employee who is advocating a new initiative which requires budget and approval from the next level of management; opposition is discernible |
significant |
| 5. leading an organization whose goal is to grow strongly in scale
or scope; targets are aggressive but no limits are assumed an employee with an initiative of such scale or degree of change that approval and budget are necessary from senior management; opposition is strong and formalized |
strong |
| 6. leading an organization whose goal is to grow strongly and
indefinitely in both scale and scope through continuing experimentation
and innovation; to continuously reinvent itself and its functions;
to have a major impact on human society an employee with an initiative of such scale or degree that it implies a repudiation of much of past practice and that if adopted, would have a major impact on the future of the organization; approval of the CEO is necessary; if the initiative is turned down, the employee is likely to leave |
very strong |
There are hundreds of gradations on this scale
Individuals should see themselves as positioned somewhere on this continuous scale of many small distinctions; if they wish to move, they should do so at the pace and to the degree they believe is appropriate.
However, note that professional employees who fall below level 3 (just applying established practice, procedure or technology) put their careers at risk.
Some degree of entrepreneurial behaviour will be required of almost all employees; the degree of entrepreneurship required is likely also to rise over time.
Changing Nature of Work
All work is becoming more entrepreneurial meaning: the need to question established practice and to suggest improvement AT THE LEAST. Why? Rising competition - more competing products - more competitors.
Rising competition arises from
AND
More competition means more persons experimenting more aggressively. Which results in a rapidly changing social and economic environment.
More change
More dramatic change
Faster reaction time
More aggressive reaction
More complex relationship
So for individuals and organizations the need to ADAPT FASTER increases and to KNOW MORE increases. And the accelerating need to adapt is causing traditional hierarchies to fail: change leaves them behind. This is because in more and more situations to greater and greater degree an organization of a few order-givers and many order-takers is overwhelmed: The few order-givers do not know enough fast enough to issue instructions fast enough. Their REACTION time is too SLOW. Therefore, the order-giving function (see a problem, fix it; see an opportunity, take it; suggest improvements) must be delegated to most workers.
How many workers are ready for this change?
Warning: Some aspiring entrepreneurs believe that this argument only applies to large or very large organizations. They believe that the guru-leader is all that a small organization still needs. Such organizations are doomed to stay small, at best.
A common mistake of entrepreneurs is to think that this orientation is for the elite few, of which they are one. ULTIMATELY, the growth of entrepreneurial work and the decline of non-entrepreneurial work is a function of the fact that the routine applications of established practice is what computers do best through robotics and expert problems.
And this trend affects chief executives, managers, professionals, supervisors and line workers.
Entrepreneurship is About the Satisfaction of Accomplishment
What determines accomplishment, successfully completing a difficult undertaking?
A person fundamentally unsuited to an entrepreneurial undertaking either in general or in particular can (and likely will) destroy any venture, no matter how good the idea or how skilled is the implementation.
A poor idea cannot be rescued by a talented person or saved by a brilliant implementation strategy; a poor idea has within it the seeds of its own destruction.
Warning: A talented person can keep a poor idea alive well past its natural death - wasting time and resources of great amount.
A good idea cannot stand on its own; without its entrepreneurial champion, it remains an intellectual curiosity. All good ideas break the norm; they will be resisted; they need a champion - warrior.
Warning: Failure has come to almost all who believe that their idea is so brilliant that "the world will beat a path to the door."
The right person and the right idea will still not be successful without highly developed implementation skills. Attention to details, hundreds of them is vital.
The Function of Entrepreneurship Entrepreneurs need to accomplish difficult undertakings.
What makes something easy?
You've done it before
Someone else has done it before
Difficulty is necessarily implied by doing something new
Entrepreneurship, therefore, necessarily involves doing something new - a departure from past practice or technology
So entrepreneurs endlessly experiment, try to innovate.
Yes, the degree of experimentation, the degree to which you are attempting to depart from past practice, varies, but innovation must be present for an act of entrepreneurship to occur.
Note: innovation is not necessarily a new good or service; it might be using existing product in a new way or selling more of a product using a new sales technique.
(Scaling-up a venture to major degree normally requires "scale" innovations).
Entrepreneurs create
VENTURES which attempt INNOVATION
The Entrepreneur (the Person) is an innovator
The Venture (the Idea) is an innovation
As entrepreneurs continually experiment, they reinvent the world, finding new solutions and new answers. They are the ultimate source of economic, social and technical progress. They drive pure science as much as business. Working within, they reorient existing organizations; working without, they establish entirely new avenues of exploration.
Human society is their handiwork; history is their record; the future is their creation.
Function of the Entrepreneur
Entrepreneurs
in order to
collaborators
employees
partners
suppliers
customers
investors
in order to
in order to
design/create detailed alternative solutions*
market research simultaneously*
test detailed solutions*
prepare business plan*
* part of this function can be delegated by the entrepreneur
Persistence: The Double-edged Sword WARNING WARNING
THEN your persistence will suck your life away.
This is a common, almost tragic, mistake of entrepreneurs. If you wish to give birth to new ventures, then you must be prepared to kill new ideas, for your own safety, health and survival. But terminating even the preparations for a venture is very difficult. The longer-pursued, the more advanced is the venture, the more difficult it becomes. And if you fail to recognize the degree of your reluctance to "write off" a significant amount of your time (perhaps years), energy and money you will fail to be able to stop. (You will imagine reasons to delay, to wait "just" a little longer.)
When you have to kill a venture, do it fast, do it clean. BUT since persistence is a necessary force for success, HOW can you know if you should stop? What if you stop too soon, just before your venture becomes a success?
This is why entrepreneurship is the most difficult career to pursue, why it is intellectually rigorous and why analysis, thought and planning are so important.
ii) First Principles of Venture Formation
I want to launch a new business. What kind of business shall I start?
Never launch a business which intends to sell a product (good or service) that is exactly the same as any other product in the market place you wish to serve. That is the pathway to destruction. The established companies already selling that same product (the entrenched competition) will use their greater resources and reputation to trample you and your imitative product into the ground.
Therefore, you should start a new business if and only if you are able to offer the marketplace a product that is in some significant aspect innovative. No new business should ever be launched unless an innovative product has been designed and market-tested.
Of course, an innovative product does not guarantee success. But an imitative product does virtually guarantee failure.
Since developing a new product and launching a new business are extraordinarily demanding and time-consuming, you are strongly advised to investigate a product or industry that you find interesting for its own sake. Unless you find the particular idea of your venture fascinating you will probably not have the persistence to carry it to realization. But beware: just because you like an industry or a certain technological capability, you cannot assume there has to be a market for it. Just because you find value in a product does not mean anyone else does; your market research and market testing is designed to determine how many others share your judgment. All too often you may find out that no one does.
Never begin a major new product development program (or a major research and development project) without first having considered other alternative new product possibilities. Never launch a new business without first having considered other alternative new businesses. Always generate alternatives. There always are alternatives. Unless you have generated alternatives, you are not engaged in rational decision-making; unless you are choosing the best option of several, you are playing bingo. An entrepreneur cannot afford to be held hostage to random chance. By considering many alternatives, the entrepreneur minimizes the risks involved in any new venture. Your time is limited; your money is limited. Use both in their BEST alternative.
Recognize that creating an innovative product is very difficult. An innovative product is not just a new product. It most certainly is not just a product involving the latest technology. Nor is an innovative product destined to succeed. But innovative products are the foundation of truly successful entrepreneurial businesses. And there is a methodical process by which new products can be created which contributes to the likelihood of their success.
iii) The Essential Steps of Venture Formation
Adopt the widest possible perspective in your search for problems to be solved. An improved way to make people happier may take the form of any of the following:
b) If the results are strongly positive, if your business involves a new product and if extensive research and development is required, prepare an R&D Plan and do nothing until that plan is complete. A major R&D program is a venture in itself. An R&D plan is similar to a business plan (See step 25). The R&D plan explains how and why you are undertaking this research; it explicitly deals with the risk of failure. It describes personnel and organization and emphasizes the market opportunity sought. Alternative methods of undertaking the research are presented and the preferred path is justified. Procedures for efficiency of research are described. Of course, a budget and source of funding is provided. Most importantly, the research is carefully STAGED. As the research proceeds there are explicitly defined points at which market revaluation occurs. This means repeating steps 15, 16, 17 and 18. If the market research results continue to be positive, continue the R&D. When the final design and working model is complete, repeat steps 15, 16, 17 and 18 and if still positive, begin to plan your venture. Do not commit serious resources until the plan is finished in detail.
c) If the results are strongly positive and if the business concerns a new concept, begin to plan your venture. Do not commit serious resources until the plan is finished in detail.
Next Section: Introduction to Innovation