Description
This particular brief breakdown amplify entrepreneurship a trap for the unready.
ENTREPRENEURSHIP –
A TRAP FOR THE UNREADY
Evan Douglas, Professor of Entrepreneurship
Department of Marketing, Griffith Business School
Griffith University, Queensland, Australia
Why that title?
! Starting your own business is too easy
! Any fool can do it, and many do"
! The failure rate of new businesses is high
! About 50% of start-ups fail within a few years
! About 40% of new businesses are taken over
! About 10% mature to become large businesses
! Failure costs money and personal pain
! Too many “wannapreneurs” just jump in without
sufficient entrepreneurial education!
Folklore about Entrepreneurs
! Successful entrepreneurs will often tell you that you
cannot learn to be an entrepreneur
- “You either have it or you don’t”
- “Entrepreneurs are born, not made”
! Substitute “football player” for “entrepreneur”
- No need to study football skills or strategies?
- No need to train – just turn up and be a star?
! Entrepreneurship education equips and trains you
for entrepreneurial success
- No-one knows what they don’t know
- You can always learn how to be better
! Like pieces of a jigsaw puzzle"
What is Entrepreneurship?
! It is a behavioural phenomenon that is:
1. Pro-active
2. Risk-taking
3. Innovative
! It is the management of innovation
! New products, services, business processes
! Is starting your own business necessarily
entrepreneurship?
It is driven by Attitudes
! Entrepreneurial attitudes
! Income
! Autonomy
! Risk
! Work effort
! Work enjoyment
- Social interaction with co-workers, customers, suppliers
- Sense of achievement, recognition, pride, passion
- Negative issues – stress, worry, difficult decisions
! The Perceived Desirability of Entrepreneurship
These are the outcomes
of entrepreneurship
(The WIIFM)
"and by Abilities
! Perceived Feasibility of Entrepreneurship
! Can I successfully complete the tasks involved?
! Entrepreneurial Self-efficacy
! To find an entrepreneurial opportunity
! To screen it for feasibility and viability
! To pull together the required resources
! To manage the new business venture
- Production and Operations
- Marketing and Sales
- People management
- Financial management
The purpose of entrepreneurship?
! To make money?
! Profit-and-growth oriented ventures
- Tend to be more risky, more stressful
! To enjoy your life?
! Independence or Lifestyle oriented ventures
- Tend to be less risky, more job satisfaction
! To do good for others?
! Social-purpose oriented ventures
- May be an emotional roller coaster ride
So, how to be successful?
! Find a new venture opportunity
! That suits your attitudes and abilities
! Screen it for prospective viability
! Will the technology deliver the benefits envisioned?
! Will customers actually demand & buy the product?
! Will rivals arise and compete you to death?
! Assemble the required resources
! Human, technical, financial
! Produce, market, warrant, and service it (very well)
! Innovate relentlessly, because rivals will follow you
Opportunity Recognition
! The ‘opportunity’ is the chance to make money, (or
enjoy life, or do good for others)
! Opportunities have a demand and a supply side
! There must be sufficient demand for the new product
! There must be technologies that can deliver the benefits
! Entrepreneurial “Alertness”
! Is the ability to find (perceive) or create opportunities
- Depends on knowledge of customer needs
- And knowledge of technological possibilities
! Business and technical education
! Experience in the same or similar markets/industries
What can you see out there?
Can you see the pattern?
Sustainable competitive advantage
! It is important that you have “proprietary
rights” to the opportunity
! To avoid followers replicating your business
model and competing away your profits
! Sustainable competitive advantage comes
from ‘strategic’ resources, which are:
! Valuable
! Rare
! Hard-to-copy
! Non-substitutable
Inimitable
Strategic Resources
! Physical
- Land, buildings, equipment, vehicles
! Reputational
- Differentiation; Brand; Trust
! Organisational
- Quality and cost efficiency
! Financial
- Cash and the ability to raise cash
! Intellectual
- Knowledge, absorptive capacity
! Technical
- Legal and other agreements
SCA requires VRIO
! You must have Valuable, Rare, Inimitable (VRI) resource(s)
! And the Organisational capability (O) to properly exploit the
business opportunity
! People, management skills, and organisational culture
! Which other resources are likely to be VRI?
! Physical is rarely VRI for long
! Reputational can be VRI for a relatively long time
! Organisational must be VRI to attain SCA
! Financial can be VRI initially, but financial markets work!
! Intellectual can be VRI initially, but can be learned by others
! Technical can be VRI initially, but can be ‘invented around’
! Investors are ‘ready’ when they are willing to give
money to the new venture
- If they are not ready, then neither should you be"
! A new venture concept needs 3 things before
investors will commit their funds to it:
- A sufficiently-robust technology/new idea
- A sufficiently-rewarding market for that idea
- A sufficiently-capable management team
! Like the legs on a stool:
- If one leg is too short, it leans over....
- If one leg breaks, it falls over"
Investor readiness
! Producer ignorance => Technology risk
- Are these reduced to a reasonable level?
! Has a prototype been developed and tested?
- Does it work effectively? Is it durable?
! Is the new product socially responsible
- Is it legal? Is it safe? Environmentally sound?
! Is it good for the company?
- Will it build the firm’s culture, reputation, networks?
! Can it be mass-produced at reasonable cost?
! Can we get Intellectual Property Protection?
Technology Readiness
! Customer ignorance => Market risk
! Do potential customers want or need it?
- What problem does it solve?
- Has there been any market research?
! Will they prefer it?
! Six factors preventing new product adoption
- Do they know about it? (awareness)
- Do they like it (attractiveness)
- Do they experience ‘quality risk?’ (aversion)
- Do they have switching costs? (alternatives)
- Can they afford it? (affordability)
- Do they know where to get it? (accessibility)
Market Readiness
! Management Ignorance => Management Risk
! Is prior education relevant?
! Is prior experience relevant?
- Same market - to understand the customers?
- Same industry - to understand the technology?
- Prior start-up – to cope with exigencies?
! Are they sufficiently entrepreneurial?
- Entrepreneurial Attitudes & Abilities?
- Passion – Commitment – Resilience?
! Are advisors and mentors in place?
- Advisory Boards, Professional service firms
Management Readiness
The Internet is the great enabler
! It is now easier for entrepreneurs to search for
new product ideas and new technologies
! Customers can find new ventures more easily
! They search by product category, not brand
! Low-cost start-ups – no bricks and mortar needed
! Negative invoice period when you sell on-line
! Get paid before you produce
! Crowd-funding – raise capital from small investors
! Global reach aggregates thin markets
! Local markets too small to support a shopfront firm
SEGWAY Personal Transporter
! A ‘self-balancing electric vehicle’
! Two electric motors
! 5 gyroscope sensors
! Computing power!!
! It goes where you lean it
! Lean forward to start
! Lean back to stop
! Lean handlebars to turn
! Mostly existing technology
! 32 patents, including software
Where is the demand for it?
How is Segway going?
! Launched in December 2001, with a factory to
produce 50,000 Segways a year
! A ‘recall’ in 2003 revealed only 6,000 Segways sold in total
! A recall in 2006 revealed 23,500 Segways had then been sold
! In March 2009, Segway said 50,000 units had been sold
! Why did sales grow so slowly?
! Knee-jerk reactions – they might hit pedestrians
! People were falling off, suing the dealers
- Several deaths, including British billionaire Jim Heselden,
who bought the company (and died) in 2010
! Other problems
Legal barriers
! Segway has 32 patents relating to
its technology
! In 2001 Segway named dozens of firms
who had the (high) technology to
compete with them, including Toyota!
! But here is a simple (low-tech) rival for
Segway =>
! No gyroscopes
! One electric motor
! No computer
! Motorcycle controls
! Other high-tech
solutions arose"
! Patents vs Design protection
Inventing around technology
! Market reasons
- Customers didn’t know about it
- Customers didn’t like it
- Customers couldn’t afford it
! Technology failure
- Product did not work
- Quality was unreliable
- Didn’t have Intellectual Property Protection
! Management failure
- Venture was underfinanced
- Managers were not sufficiently educated/trained
- Managers were inexperienced in business
- Managers lacked commitment and resilience
Ten reasons new ventures fail
Management Education
! Correlates with new venture success
! Corporate management education may not
be sufficiently tailored for entrepreneurs
! Corporate finance, large firm marketing, HRM
! Entrepreneurial management education
should cover different things
! Creative thinking, opportunity recognition
! Bootstrap finance, bootstrap marketing
! Building a brand from nothing
What is Griffith doing about it?
! New major in Entrepreneurship & Self-employment
! A stand-alone new BBus major to add into any
‘Technical’ degree
- Musicians, artists, entertainers, athletes"
- Nutritionists, dieticians, personal trainers"
- App designers, code-writers, IT engineers..
- Dentists, doctors, psychiatrists, counsellors
- Engineers, architects, lawyers, accountants
! Let’s lose the 50% failure rate of new ventures!
! By preparing people for successful entrepreneurship
Summary – the Main Issues
! Entrepreneurship can be very fulfilling, but is risky
! Risks recognised can be mitigated
! Risk recognition requires managerial and technical
knowledge
! Opportunity recognition requires “alertness”
! This requires knowledge of needs and technologies
! Prior experience in the same industry with the same
customers is also recommended
! Entrepreneurial success (SCA) requires VRIO
! ‘O’ requires business education & experience
Thank you!
doc_816165848.pdf
This particular brief breakdown amplify entrepreneurship a trap for the unready.
ENTREPRENEURSHIP –
A TRAP FOR THE UNREADY
Evan Douglas, Professor of Entrepreneurship
Department of Marketing, Griffith Business School
Griffith University, Queensland, Australia
Why that title?
! Starting your own business is too easy
! Any fool can do it, and many do"
! The failure rate of new businesses is high
! About 50% of start-ups fail within a few years
! About 40% of new businesses are taken over
! About 10% mature to become large businesses
! Failure costs money and personal pain
! Too many “wannapreneurs” just jump in without
sufficient entrepreneurial education!
Folklore about Entrepreneurs
! Successful entrepreneurs will often tell you that you
cannot learn to be an entrepreneur
- “You either have it or you don’t”
- “Entrepreneurs are born, not made”
! Substitute “football player” for “entrepreneur”
- No need to study football skills or strategies?
- No need to train – just turn up and be a star?
! Entrepreneurship education equips and trains you
for entrepreneurial success
- No-one knows what they don’t know
- You can always learn how to be better
! Like pieces of a jigsaw puzzle"
What is Entrepreneurship?
! It is a behavioural phenomenon that is:
1. Pro-active
2. Risk-taking
3. Innovative
! It is the management of innovation
! New products, services, business processes
! Is starting your own business necessarily
entrepreneurship?
It is driven by Attitudes
! Entrepreneurial attitudes
! Income
! Autonomy
! Risk
! Work effort
! Work enjoyment
- Social interaction with co-workers, customers, suppliers
- Sense of achievement, recognition, pride, passion
- Negative issues – stress, worry, difficult decisions
! The Perceived Desirability of Entrepreneurship
These are the outcomes
of entrepreneurship
(The WIIFM)
"and by Abilities
! Perceived Feasibility of Entrepreneurship
! Can I successfully complete the tasks involved?
! Entrepreneurial Self-efficacy
! To find an entrepreneurial opportunity
! To screen it for feasibility and viability
! To pull together the required resources
! To manage the new business venture
- Production and Operations
- Marketing and Sales
- People management
- Financial management
The purpose of entrepreneurship?
! To make money?
! Profit-and-growth oriented ventures
- Tend to be more risky, more stressful
! To enjoy your life?
! Independence or Lifestyle oriented ventures
- Tend to be less risky, more job satisfaction
! To do good for others?
! Social-purpose oriented ventures
- May be an emotional roller coaster ride
So, how to be successful?
! Find a new venture opportunity
! That suits your attitudes and abilities
! Screen it for prospective viability
! Will the technology deliver the benefits envisioned?
! Will customers actually demand & buy the product?
! Will rivals arise and compete you to death?
! Assemble the required resources
! Human, technical, financial
! Produce, market, warrant, and service it (very well)
! Innovate relentlessly, because rivals will follow you
Opportunity Recognition
! The ‘opportunity’ is the chance to make money, (or
enjoy life, or do good for others)
! Opportunities have a demand and a supply side
! There must be sufficient demand for the new product
! There must be technologies that can deliver the benefits
! Entrepreneurial “Alertness”
! Is the ability to find (perceive) or create opportunities
- Depends on knowledge of customer needs
- And knowledge of technological possibilities
! Business and technical education
! Experience in the same or similar markets/industries
What can you see out there?
Can you see the pattern?
Sustainable competitive advantage
! It is important that you have “proprietary
rights” to the opportunity
! To avoid followers replicating your business
model and competing away your profits
! Sustainable competitive advantage comes
from ‘strategic’ resources, which are:
! Valuable
! Rare
! Hard-to-copy
! Non-substitutable
Inimitable
Strategic Resources
! Physical
- Land, buildings, equipment, vehicles
! Reputational
- Differentiation; Brand; Trust
! Organisational
- Quality and cost efficiency
! Financial
- Cash and the ability to raise cash
! Intellectual
- Knowledge, absorptive capacity
! Technical
- Legal and other agreements
SCA requires VRIO
! You must have Valuable, Rare, Inimitable (VRI) resource(s)
! And the Organisational capability (O) to properly exploit the
business opportunity
! People, management skills, and organisational culture
! Which other resources are likely to be VRI?
! Physical is rarely VRI for long
! Reputational can be VRI for a relatively long time
! Organisational must be VRI to attain SCA
! Financial can be VRI initially, but financial markets work!
! Intellectual can be VRI initially, but can be learned by others
! Technical can be VRI initially, but can be ‘invented around’
! Investors are ‘ready’ when they are willing to give
money to the new venture
- If they are not ready, then neither should you be"
! A new venture concept needs 3 things before
investors will commit their funds to it:
- A sufficiently-robust technology/new idea
- A sufficiently-rewarding market for that idea
- A sufficiently-capable management team
! Like the legs on a stool:
- If one leg is too short, it leans over....
- If one leg breaks, it falls over"
Investor readiness
! Producer ignorance => Technology risk
- Are these reduced to a reasonable level?
! Has a prototype been developed and tested?
- Does it work effectively? Is it durable?
! Is the new product socially responsible
- Is it legal? Is it safe? Environmentally sound?
! Is it good for the company?
- Will it build the firm’s culture, reputation, networks?
! Can it be mass-produced at reasonable cost?
! Can we get Intellectual Property Protection?
Technology Readiness
! Customer ignorance => Market risk
! Do potential customers want or need it?
- What problem does it solve?
- Has there been any market research?
! Will they prefer it?
! Six factors preventing new product adoption
- Do they know about it? (awareness)
- Do they like it (attractiveness)
- Do they experience ‘quality risk?’ (aversion)
- Do they have switching costs? (alternatives)
- Can they afford it? (affordability)
- Do they know where to get it? (accessibility)
Market Readiness
! Management Ignorance => Management Risk
! Is prior education relevant?
! Is prior experience relevant?
- Same market - to understand the customers?
- Same industry - to understand the technology?
- Prior start-up – to cope with exigencies?
! Are they sufficiently entrepreneurial?
- Entrepreneurial Attitudes & Abilities?
- Passion – Commitment – Resilience?
! Are advisors and mentors in place?
- Advisory Boards, Professional service firms
Management Readiness
The Internet is the great enabler
! It is now easier for entrepreneurs to search for
new product ideas and new technologies
! Customers can find new ventures more easily
! They search by product category, not brand
! Low-cost start-ups – no bricks and mortar needed
! Negative invoice period when you sell on-line
! Get paid before you produce
! Crowd-funding – raise capital from small investors
! Global reach aggregates thin markets
! Local markets too small to support a shopfront firm
SEGWAY Personal Transporter
! A ‘self-balancing electric vehicle’
! Two electric motors
! 5 gyroscope sensors
! Computing power!!
! It goes where you lean it
! Lean forward to start
! Lean back to stop
! Lean handlebars to turn
! Mostly existing technology
! 32 patents, including software
Where is the demand for it?
How is Segway going?
! Launched in December 2001, with a factory to
produce 50,000 Segways a year
! A ‘recall’ in 2003 revealed only 6,000 Segways sold in total
! A recall in 2006 revealed 23,500 Segways had then been sold
! In March 2009, Segway said 50,000 units had been sold
! Why did sales grow so slowly?
! Knee-jerk reactions – they might hit pedestrians
! People were falling off, suing the dealers
- Several deaths, including British billionaire Jim Heselden,
who bought the company (and died) in 2010
! Other problems
Legal barriers
! Segway has 32 patents relating to
its technology
! In 2001 Segway named dozens of firms
who had the (high) technology to
compete with them, including Toyota!
! But here is a simple (low-tech) rival for
Segway =>
! No gyroscopes
! One electric motor
! No computer
! Motorcycle controls
! Other high-tech
solutions arose"
! Patents vs Design protection
Inventing around technology
! Market reasons
- Customers didn’t know about it
- Customers didn’t like it
- Customers couldn’t afford it
! Technology failure
- Product did not work
- Quality was unreliable
- Didn’t have Intellectual Property Protection
! Management failure
- Venture was underfinanced
- Managers were not sufficiently educated/trained
- Managers were inexperienced in business
- Managers lacked commitment and resilience
Ten reasons new ventures fail
Management Education
! Correlates with new venture success
! Corporate management education may not
be sufficiently tailored for entrepreneurs
! Corporate finance, large firm marketing, HRM
! Entrepreneurial management education
should cover different things
! Creative thinking, opportunity recognition
! Bootstrap finance, bootstrap marketing
! Building a brand from nothing
What is Griffith doing about it?
! New major in Entrepreneurship & Self-employment
! A stand-alone new BBus major to add into any
‘Technical’ degree
- Musicians, artists, entertainers, athletes"
- Nutritionists, dieticians, personal trainers"
- App designers, code-writers, IT engineers..
- Dentists, doctors, psychiatrists, counsellors
- Engineers, architects, lawyers, accountants
! Let’s lose the 50% failure rate of new ventures!
! By preparing people for successful entrepreneurship
Summary – the Main Issues
! Entrepreneurship can be very fulfilling, but is risky
! Risks recognised can be mitigated
! Risk recognition requires managerial and technical
knowledge
! Opportunity recognition requires “alertness”
! This requires knowledge of needs and technologies
! Prior experience in the same industry with the same
customers is also recommended
! Entrepreneurial success (SCA) requires VRIO
! ‘O’ requires business education & experience
Thank you!
doc_816165848.pdf