Description
The PPT that describes about entreprenerurship basics.
Entrepreneurship
Global Entrepreneurs
• Richard Branson • • Bill Gates Fredrick Smith • Amar Bose • • • Mark Zuckerman Robert Swanson/
•
•
Steve Case
Gordon Moore/ Andrew Grove
Herbert Boyer
Sergey Brin/Larry Page • Anita Rodick
•
Edwin Land
• Mitch Kapor
• Dietmar Hopp/ Hasso Plattner
Evolution of Entrepreneurship
?
?
Origin of the Word “Entrepreneur” ? The word was originally used to describe people who “take on the risk” between buyers and sellers or “undertake” a task such as starting a new venture. ? The “undertake” interpretation of the word has been central to its usage in English Difference Between an Inventor and an Entrepreneur ? An inventor creates something new ? An entrepreneur puts together all the resources needed – the money, the people, the strategy and the risk-bearing ability to transform the invention into a viable business
Entrepreneurship Defined
?
The essence of entrepreneurial behavior is
?
identifying opportunities and putting useful ideas into practice
?
The set of tasks called for by this behavior can be accomplished by either an individual or a group and typically
?
requires creativity, drive and a willingness to take risks
?
Entrepreneurship is the process by which individuals pursue opportunities
?
without regard to the resources they currently control
Essence of Entrepreneurship
? ?
?
? ? ?
Nexus of: ? Valuable opportunities and enterprising individuals Opportunity ? a situation in which a person can exploit a new business idea that has the potential to generate profit Mindset: a way of looking at things that is ? Opportunity – focused ? Creative Passionate - doing what you love Creating wealth and gaining independence Persistent and innovative
Essence of Entrepreneurship
?
(cont..)
Entrepreneurship is the knack for sensing opportunity
where others see
?
chaos, contradiction and confusion
?
An entrepreneur is someone who works for himself/ herself for 16 hours a day so he/she doesn’t have to
?
work eight hours a day for someone else
NEXUS of Enterprising Individuals and
Valuable Opportunities
The Price System
?
?
?
Prices contain all of the information ? From all participants in the economy ? Needed to allocate resources People can therefore make decisions about allocation of resources through established decision rules When equilibrium is reached, people then have no reason to change their approach to buying on selling
Limits to the Price System
?
?
?
?
?
Prices do not always allocate resources effectively Impose limits on the types of decisions that the price system can be used to make An inventor developing a new product must make decisions about the use of resources Information about new products does not exist till it enters the market place Prices and revenues for new products cannot determine the resource allocation decision
Technology
?
?
Prices do not provide information ? About a way of producing or organizing ? That requires a technology that does not yet exist By definition, such information is not available to market participants
Entrepreneurship creates technology and is enabled by i
Prices & Entrepreneurship
?
Prices do not provide information about
? The
actions of competitors in response to entrepreneurial entry
?
?
?
This requires the entrepreneur to make a conjecture Key element of entrepreneurial decision is not contained in the prices, but in Entrepreneur's conjecture as the cause for price movement
Role of Asymmetry
?
Entrepreneurship requires differences between people:
specifically, entrepreneurship requires the preferential access to information ? ability to recognize opportunities ? both of which vary across people
?
?
In the absence of variation across people
Everyone would recognize and act upon all opportunities making it impossible for any one person ? to gain access to resources at a price at which recombination would yield profit
?
Economic Impact of Entrepreneurial Firms
?
?
Innovation ? Process of creating something new, which is central to the entrepreneurship ? Small entrepreneurial firms are responsible for 60% of all innovations Job Creation ? In the past two decades, economic activity has moved in the direction of smaller entrepreneurial firms;
?
unique ability to innovate and focus on specialized tasks
Entrepreneurial Firms’ Impact on Society and Larger Firms
?
Impact on Society
?
The innovations of entrepreneurial firms have a dramatic impact on society through new products and services that
? ? ? ?
make our lives easier, enhance our productivity at work, improve our health; and entertain us in new ways
?
Impact on Larger Firms
?
Many entrepreneurial firms have built their entire business models around
? ?
Products and services that help large firms become More efficient and effective
Global Entrepreneurship Monitor
Entrepreneurship Around The Globe
According to the GEM
There is tremendous interest in entrepreneurship around the world 2005 study, about 330 million people, or 14% of the adults in the 35 countries surveyed, are involved in forming new businesses
GEM Conceptual Model
General National Framework Conditions •Openness (External Trade) •Government (Extent/Role) •Financial markets (Efficiency) •Technology, R&D (Level, intensity) •Infrastructure (Physical) •Management (Skills) •Labor markets (Flexible) •Institutions (Unbiased, Rule of Law) Entrepreneurial Framework Conditions •Financial •Government Policies •Government Programs •Education & Training •R&D Transfer •Commercial, Legal Infrastructure •Internal market Openness •Access to Physical Infrastructure •Cultural, Social Norms Major Established Firms (Primary Economy) Micro Small & Medium Firms (Secondary Economy) Entrepreneurial Opportunities Entrepreneurial Capacity -Skills -Motivation New Establishments
Social, Cultural Political Context
National Economic Growth (Jobs & Technical Innovation)
New Firms
TEA Index
?
Total Entrepreneurial Activity (TEA) Index is the sum of nascent entrepreneurs and new businesses
? Nascent
entrepreneurs:
individuals between 18 and 64 years who have taken some action to create new businesses
? Owner
– managers:
firms which have paid wages for more than three months and less than 42
Entrepreneurship in India
?
More respect for entrepreneurship now than these was a few years ago More and more people are experimenting with it Age and experience are not the critical factors
? Idea
? ?
and vision are the key
?
Corporate executives are increasing
? Starting ? Or
new ventures
Joining start-ups
Start-up
?
Easy access to customer and market
? Ability
to develop primary demand
?
Effective and timely access to innovations
? Inventiveness/ ? Strong
creativity
investment in innovations knowledge dissemination
? Effective
? ?
Investment in business infrastructure
Access to risk financing
? Availability
? Mechanisms
Growth
?
Value retention and reinvestment
?
? ?
Efficient and timely access to people
Environment conducive to effective employee motivation Effective and available supporting business services
Exit
?
Reasonable capital gains rates
? Share
in the value
?
Effective exit markets
? Trade ? IPO
sales
?
Efficient bankruptcy treatment
Entrepreneurship is a Process that causes change through innovation brought about by Individuals who generate or respond to economic opportunities
that Create Value for
both themselves and society
Context
?
Positive attitude towards business
?
? ?
Positive view of business
Positive view of initiative over conformity Role models
?
Constructive social Dynamic
?
Focus on sharing a growing pie and not on seizing and dividing the pie
?
Positive attitude toward success and failure
? ?
Permit and promote success Don’t punish well-intended failure
?
Good demographics
Entrepreneurial Process
Context Start-up Growth Exit
Value Creation
Entrepreneurial Process
?
A typical manager asks
? What ? What
resources do I control? structure determines our company’s relationship to
its market?
? How
can I minimize the impact of others on my ability to
perform?
? What
opportunity is appropriate?
Entrepreneurial Process …cont
?
The entrepreneur tends to ask:
? Where ? How
is the opportunity?
do I capitalize on it? resources do I need?
? What ? How
do I gain control over them?
? What
structure is best
Beyond Business As Usual
?
Entrepreneurial judgment required since
? No
decision rule that can be applied
using freely available information
? No
way to model complex decisions
involving uncertainty and discovery
? Major
impact on account of risk and
innovation
Sailing in Uncharted Waters
? ?
Exploitation of opportunity is, by definition, uncertain Information necessary to determine whether a particular effort to exploit an opportunity will be profitable
?
cannot be known with certainty at the time that the opportunity is identified because
? ?
?
that information does not come into existence
until the entrepreneur pursues the opportunity.
The pursuit of opportunity, itself, determines
?
? ?
whether the demand exists,
whether the entrepreneur can compete with others, and whether a new value chain can be created?
Shumpeter Model
From Innovation to Entrepreneurship
Changes in Political forces Regulation Macroeconomic factors Social trends CREATE New Information that Entrepreneurs use to Figure out how to Recombine resources into NEW AND VALUABLE FORMS
Environment for Entrepreneurship
?
Entrepreneurship flourishes in communities where resources are mobile
Entrepreneurship is greater when successful members of a community reinvest excess capital in the projects of other community members Entrepreneurship flourishes in communities in which success of other community members is celebrated rather than derided Entrepreneurship is greater in communities that see change as positive rather than negative.
?
?
?
Looking at Situations in the New Light
Entrepreneurial Situation Industry Known business conditions/ established technologies ? Risk factors known ? Predicable patterns ? Known players ? Stability and predictability ? Critical success factors clear Unknown business conditions/ new technologies ? Turbulence ? Volatility ? New unknown competitors ? Unpredictability ? Competitive conditions unclear
Looking at Situations in the New Light (cont..)
Entrepreneurial Situation Strategy Process Known business conditions/ established technologies ? Convergent thinking ? Analytical methods ? Focus on competitive advantages ? Known cash flows ? Known dilemmas ? Clear objectives Unknown business conditions/ new technologies ? Divergent thinking ? Scenario design ? Focus on adjustment and flexibility ? Option based ? Iterative processes ? Ad hoc assessments
Resource Allocation
Looking at Situations in the New Light (cont..)
Entrepreneurial Situation Market Assessment Known business conditions/ established technologies ? Structured analysis in known surroundings Unknown business conditions/ new technologies ? Experiments
Development Process ? Well defined, incremental Organization ? Well defined boundaries ? Conflicts avoided or moderated ? Calculating culture
? Experimental
? Fluid, dynamic network ? Conflicts encouraged ? Open-ended
A Different Process
Driven by Perception of opportunity Quick Commitment
Strategic Orientation
Driven by Resources Currently Controlled Evolutionary with Long Duration
Commitment to Opportunity Multistage with minimal Commitment Exposure at each stage Process
Episodic Use of Rent Of Required Resources
Flat with Multiple Informal Networks
Single stage with Complete Commitment Upon Decision
Control of Resources Management Structure Reward System
Ownership of Employment Of Required Resources
Formalized Hierarcy
Value Based and Team Based
Resource-Based Individual & promotional Oriented
Entrepreneurship : A Personal Journey
Key Phases in Entrepreneurship process
- Individual Level Variables (skills, motives, characteristics of entrepreneurs
-Group Level variables (ideas, input from others, effectiveness in interactions with venture capitalists, customers, potential employees) - Societal level variables (government policies, economic conditions, technology)
All phases are influenced by these three level variables
Idea for New Product / Service and/or Opportunity Recognition
Initial Decision to Proceed
Assembling the Required Resources (information, financial, people)
Actual Launch of New Venture
Building a Successful Business
Harvesting the Rewards (exit by founders)
Entrepreneur’s Approach
? ? ?
? ?
Challenge the incumbent firms Introduce new inventions Make current technologies and products obsolete Create high knowledge asymmetry Establish knowledge as the source of comparative advantage
Entrepreneurial Process in Social and Commercial Context
PERSONAL
Achievement Locus of Control Ambiguity Tol. Risk Taking Personal Values Education Experience
PERSONAL
Risk Taking Job Dissatisfaction Job Loss Education Age Commitment
SOCIOLOGICAL
Networks Teams Parents Family Role Models
PERSONAL
Entrepreneur Leader Manager Commitment Vision
OROGANIZATIONAL
Team Strategy Structure Culture Products
INNOVATION
TRIGGERING EVENT
IMPEMENTATION
GROWTH
ENVIRONMENT
Opportunities, Role Models, Creativity
ENVIRONMENT
Competition, Resources Incubator, Government Policy
ENVIRONMENT
Competitors, Customers, Suppliers, Investors, Bankers, Lawyers, Resources, Govt. Policy
Perspectives in the Entrepreneurial Process
Full understanding of the entrepreneurial process comes though
?
?
The Micro-perspective ? Focuses on behaviour and thought of individuals, and The Macro-perspective ? Focuses on primarily environmental factors
Both are Necessary
External Pressures Trigger Opportunity Recognition
?
Rapid changes in
? Technology ? Consumer
economics ? Social values ? Political action ? Regulatory standards
Effect of Individual Attributes on the Decision to Exploit
Non-psychological factors • Education • Career experience • Age • Social position • Opportunity cost
Opportunity Exploitation
Psychological factors • Motivation • Core evaluation • Cognition
Becoming an Entrepreneur
? ? ? ? ? ? ? ?
Can you handle uncertainty? Are you energetic? Do you believe in yourself and your abilities? Can you handle reversals and failures well? Are you passionate about your goals or vision? Are you good with other people? Are you adaptable? Are you willing to take risks or leaps or faith?
Serial Entrepreneurs
? ?
?
?
Temperamentally suited to start-ups Do not hesitate to give up control or sell once the company enters the growth phase Track record helps in obtaining backing at an early stage Those who did it
Type E Personality
? ?
?
? ?
Aggressively pursues goals ? Pushes both self and others Seeks autonomy, independence and freedom from boundaries Sends consistent messages ? Very focused and doesn’t deviate from purpose Acts quickly, often without deliberating Keeps distance and maintains objectivity ? Expects others to be self sufficient and tangy-minded
Type E Personality
?
(cont…)
?
?
?
?
Pursues simple, practical solutions ? Able to cut through complexity ? Find the essential and important issues Willing to take risks ? Comfortable with uncertainty Exhibits clear opinions and values ? Makes quick judgments ? Often finds faults ? Has high expectations Impatient regarding results and with others ? Has “just do it” mentality Positive, unbeat, optimistic ? Communicates confidence
Clarifying Goals
Where do I want to go?
? ?
What kind of enterprise do I need to build? What risks and sacrifices does such an enterprise demand? Can I accept those risks and sacrifices?
?
Cognitive Factors
?
Studies have shown that opportunity recognition may be an innate skill or cognitive process Some people believe that entrepreneurs have a “sixth sense” that allows them to see opportunities that other miss This “sixth sense” is called entrepreneurial alertness, which is formally defined as the ability to notice things without engaging in deliberate search
?
?
Cognitive Style
Intuitive Holistic Thinking
Rational Analytical Thinking
Role of Individual in Discovery of Opportunities
INDIVIDUAL DIFFERENCES AND THE DISOCVERY OF ENTREPRENEURIAL OPPORTUNITIES
Access to information
Life experiences Social networks Search processes
Opportunity recognition
Absorptive capacity Intelligence Cognitive properties
The Three Key Capacities
Diagnostic Capacity
Creative Capacity
Communicative Capacity
5 Characteristics of Entrepreneurs
Audacity
Closer
Courage
Adaptive
Patience
Personal Characteristics of the Entrepreneur
Characteristics that tend to make some people better at recognizing opportunities than others
Prior Experience
Social Networks
Cognitive Factors
Creativity
Prior Industry Experience
?
Several studies have shown that prior experience in an industry helps an entrepreneur recognize business opportunities. There are several explanations for this
?
By working in an industry, an individual may spot a market niche that is underserved It is also possible that by working in an industry, an individual builds a network of social contacts who provide insights that lead to recognizing new opportunities
?
Social Networks
?
The extent and depth of an individual’s social network affects opportunity recognition People who build a substantial network of social and professional contacts will be exposed to more opportunities and ideas than people with sparse networks In one survey of 65 start-ups, half the founders reported that they got their business idea through social contacts
?
?
Social Networks
?
(cont…)
Nature of Strong-Tie Vs. Weak – Tie Relationships
? Strong-tie
relationship are characterized by frequent interaction and form between co-workers, friends and spouses relationships are characterized by infrequent interaction and form between casual acquaintances
? Weak-tie
?
Result
? It
is more likely that an entrepreneur will get new business ideas through weaktie rather than strong-tie relationships
Social Networks (cont…)
Why weak-tie relationships lead to more new business ideas than strong-tie relationships Strong – Tie Relationships These relationships, which typically form between likeminded individuals, tend to reinforce insights and ideas that people already have Weak – Tie Relationships The relationships, which form between casual acquaintances, are not as apt to be between likeminded individuals, so one person may say something to another that sparks a completely new idea
Critical Abilities
Pursuit
and
Persuasion
Successful Intelligence
Practical Intelligence
Ability to solve problems of everyday life
Analytic Intelligence
Ability to think critically and analytically
Creative Intelligence
Successful Intelligence
Ability to formulate new ideas and new ways of solving problems
Social intelligence skills required to get along effectively with others & obtain necessary backing
Success as an
Entrepreneur
The Making of an Entrepreneur
Why Become an Entrepreneur ?
There are three primary reasons that people become Entrepreneurs and start their own firms
Desire to be their own boss
Desire to pursue their own ideas
Financial rewards
Characteristics of Successful Entrepreneur
Four Primary Characteristics of Successful Entrepreneurs Passion for the Business Product/ customer focus
Successful Entrepreneur Tenacity despite failure Execution Intelligence
Characteristics of Successful Entrepreneurs
?
Passion for the Business
?
The number one characteristic shared by successful entrepreneurs is a passion for the business This passion typically stems from the entrepreneur's belief that the business will positively influence people’s lives A second defining characteristic of successful entrepreneurs is a product/ customer focus An entrepreneur’s keen focus on products and customers typically stems from the fact that most entrepreneurs are at heart, craftspeople
?
?
Product/ Customer Focus
?
?
Characteristics of Successful Entrepreneurs (Cont…)
?
Tenacity Despite Failure
?
Because entrepreneurs are typically trying something new, the failure rate is naturally high
A defining characteristic for successful entrepreneurs is their ability to persevere through setbacks and failures The ability to fashion a solid business idea into a viable business is a key characteristic of successful entrepreneurs ? The ability to translate thought, creativity and imagination into action and measurable results is the essence of execution intelligence
?
?
Execution Intelligence
?
True or False ?
?
?
? ?
?
?
? ? ? ?
Entrepreneurs are motivated by money The idea is what matters Entrepreneurs are born not made Startups are one man bands Entrepreneurs are inventive geniuses Entrepreneurs are academic rejects with no qualifications Most new business fail Entrepreneurs are loners Entrepreneurs have chaotic personal lives Entrepreneurs are gamblers
Characteristics of Entrepreneurs
? ? ? ?
Age Education Gender Work Status
Characteristics of Entrepreneur: Age
?
Different income groups have different entrepreneurial activity across all ages
levels
of
?
People between 24-36 years of age are the most active group regardless of the income of their country
?
After the age of 36, all populations show a decline in entrepreneurial activity
The relationship between age and entrepreneurship is changing
?
?
Older entrepreneurs are responsible for 50% more business start-ups than 10 years ago
Characteristics of the Entrepreneur: Education
?
?
?
?
The relationship between education and entrepreneurial activity is complex and very much country-specific About 30% of those who start a business have a secondary level education across all 3 income groups In high-income countries 57% of entrepreneurs have a post-secondary education while 13% have not completed a secondary education In low-income countries 23% of entrepreneurs have a post-secondary education while about 50% have not completed a secondary education
Characteristics of the Entrepreneur: Gender
There are almost twice as many men who are active entrepreneurs than women
?
In middle-income countries men are 75% more likely than women to be active entrepreneurs In high-income countries men are 33% more likely than women to be active entrepreneurs In low-income countries, men are 41% more likely than women to be active entrepreneurs The gender gap is narrower for necessity entrepreneurship than for opportunity entrepreneurship
?
?
?
Characteristics of the Entrepreneur: Work Status
The overwhelming majority of people starting business in all national income group are currently working ? In middle-income countries 91% have jobs ? In high-income countries 81% have jobs ? In low-income countries 77% have jobs The percentage of people starting a business without being also employed as ? 6% in middle-income countries ? 17% on low income countries ? 5% in high-income countries
Entrepreneurial Expectation
?
Regardless of income, the majority of start-ups intend
to create little if any employment
?
Start-ups that are export focused are more prevalent in the high-income countries
?
As income increases the business services sector is the
most important
?
About 3% of start-ups qualify as businesses with high potential; expect to create significant employment and exports
Story of an Indian Entrepreneur
C.K. Ranganathan
? ? ? ?
His inspiration : Chinni Krishnan, his father
CKR in School : Poor in academics
Father suggestion : Agriculture or start a business Siblings : Good in studies – became doctors and lawyers. Were put in English Medium School. CKR into Tamil Medium School Studies did not interest CKR
?
?
But pets did ? 500 pigeons ? Lots of fish ? Variety of birds ? Used to earn pocket money out of pet business
Entry into Entrepreneurship
? ?
Father died when CKR entered college Father believed in little packets as a means to reach a large number of small customers ? Talcum powder (100gm/ 50 gm/ 20 gm) ? Epsom salt (5 gm)
?
?
However, father was unable to market the concept well CKR joined family business in 1982
? Velvet
shampoo
?
Left within a year due to clash of business ideas – without any stake in property or business
Starting Small
? ?
Started new business with a saving of Rs 15,000/Initial investment ? House cum office @ Rs 250 p.m. (Advance Rs 1,000) ? Factory @ Rs 300 p.m. (Advance Rs 1,200) ? Shampoo packing machine @ Rs 3,000/-
? ? ?
?
Launched Chik Shampoo Slow sales – 20,000 sachets per month Moved to Chennai in 1989 ? Manufacturing continued in Cuddalore Took three years to get a bank loan ? First loan Rs 25,000/-
Making Chik Click
? ?
Big companies sold shampoo in big bottles and from fancy stores CKR saw opportunity in serving ? Rural markets through ? Petty shops
?
?
?
? ?
Targeted rural areas in South India where people hardly used shampoo Ran live demonstrations Sponsored shows of Rajnikanth’s films Introduced new fragrances – jasmine and rose Growth: Rs 35000/ month to Rs 12 lac/ month to Rs 30 lac/ month to Rs 1 crore/ month in three years
India in GEM Survey
?
?
India below average on ? Government policies ? Physical infrastructure ? Education system ? R&D transfer ? Respect for entrepreneurship in society Average score on ? Opportunity perception by individual ? Ease of market entry for a new player
India in GEM Survey
?
(cont…)
India above average on
? Market
dynamism ? Entrepreneurial capacity ? Commercial and professional infrastructure ? Financial support
?
Necessity based v/s opportunity based entrepreneurship
? No.1 on necessity based ? No.25 on opportunity based
Who Are They?
?
About 2/3rd, 26-39 years 25%, bachelor’s degree
?
?
69%, master’s/ doctorate
Employed for five to eight years Over 90% are male
?
?
Company Profile
?
?
?
?
Over 60% in business for 3 to 6 years Median annual revenue: Rs 1.5 crore ? 85% less than Rs 1 crore Median number of employees: 15 ? 84% less than 100 employees Parents and relatives own the business in 28% of cases
Support Systems
?
Rely on friends and family to start
business
?
Significant help from former co-workers and university mates specially in
marketing
? ?
Finance mainly from family and friends Limited use of consultants and government institutions
Success Criteria
?
Revenue, customers, profits
?
Personal factors like satisfaction and goal achievement
Creating something new and durable Leaving a legacy Proving themselves Contribution to Indian business
?
? ? ?
Total Entrepreneurial Activity (TEA) Index
? ? ? ?
India USA Japan
18% 10.2% 2%
Global average 7%
Entrepreneurship in India
?
India below average on
? Government ? Physical
policies
infrastructure system
? Education ? R&D
transfer for entrepreneurship in society perception by individual
? Respect
?
Average score on
? Opportunity ? Ease
of market entry for a new player
Entrepreneurship in India
?
India above average on
? Market
dynamism capacity and professional infrastructure
? Entrepreneurial ? Commercial ? Financial
?
support
Necessity based v/s opportunity based entrepreneurship
? No.1 ? No.
on necessity based
25 on opportunity based
Successful Indian Entrepreneurs
Subhash Goel N.R. Narayana Murthy Sunil Mittal Rajendra Pawar/ Shiv Nadar Dilip Shanghvi Manmohan Shetty Alok Kejriwal • Kiran Mazumdar • Ramoji Rao • Aroon Purie • Kishor Biyani • R. Sriram/ Hemu Ramaiah/ BS. Nagesh • Raman Roy Rajesh Jain
Thank You
doc_296521499.pptx
The PPT that describes about entreprenerurship basics.
Entrepreneurship
Global Entrepreneurs
• Richard Branson • • Bill Gates Fredrick Smith • Amar Bose • • • Mark Zuckerman Robert Swanson/
•
•
Steve Case
Gordon Moore/ Andrew Grove
Herbert Boyer
Sergey Brin/Larry Page • Anita Rodick
•
Edwin Land
• Mitch Kapor
• Dietmar Hopp/ Hasso Plattner
Evolution of Entrepreneurship
?
?
Origin of the Word “Entrepreneur” ? The word was originally used to describe people who “take on the risk” between buyers and sellers or “undertake” a task such as starting a new venture. ? The “undertake” interpretation of the word has been central to its usage in English Difference Between an Inventor and an Entrepreneur ? An inventor creates something new ? An entrepreneur puts together all the resources needed – the money, the people, the strategy and the risk-bearing ability to transform the invention into a viable business
Entrepreneurship Defined
?
The essence of entrepreneurial behavior is
?
identifying opportunities and putting useful ideas into practice
?
The set of tasks called for by this behavior can be accomplished by either an individual or a group and typically
?
requires creativity, drive and a willingness to take risks
?
Entrepreneurship is the process by which individuals pursue opportunities
?
without regard to the resources they currently control
Essence of Entrepreneurship
? ?
?
? ? ?
Nexus of: ? Valuable opportunities and enterprising individuals Opportunity ? a situation in which a person can exploit a new business idea that has the potential to generate profit Mindset: a way of looking at things that is ? Opportunity – focused ? Creative Passionate - doing what you love Creating wealth and gaining independence Persistent and innovative
Essence of Entrepreneurship
?
(cont..)
Entrepreneurship is the knack for sensing opportunity
where others see
?
chaos, contradiction and confusion
?
An entrepreneur is someone who works for himself/ herself for 16 hours a day so he/she doesn’t have to
?
work eight hours a day for someone else
NEXUS of Enterprising Individuals and
Valuable Opportunities
The Price System
?
?
?
Prices contain all of the information ? From all participants in the economy ? Needed to allocate resources People can therefore make decisions about allocation of resources through established decision rules When equilibrium is reached, people then have no reason to change their approach to buying on selling
Limits to the Price System
?
?
?
?
?
Prices do not always allocate resources effectively Impose limits on the types of decisions that the price system can be used to make An inventor developing a new product must make decisions about the use of resources Information about new products does not exist till it enters the market place Prices and revenues for new products cannot determine the resource allocation decision
Technology
?
?
Prices do not provide information ? About a way of producing or organizing ? That requires a technology that does not yet exist By definition, such information is not available to market participants
Entrepreneurship creates technology and is enabled by i
Prices & Entrepreneurship
?
Prices do not provide information about
? The
actions of competitors in response to entrepreneurial entry
?
?
?
This requires the entrepreneur to make a conjecture Key element of entrepreneurial decision is not contained in the prices, but in Entrepreneur's conjecture as the cause for price movement
Role of Asymmetry
?
Entrepreneurship requires differences between people:
specifically, entrepreneurship requires the preferential access to information ? ability to recognize opportunities ? both of which vary across people
?
?
In the absence of variation across people
Everyone would recognize and act upon all opportunities making it impossible for any one person ? to gain access to resources at a price at which recombination would yield profit
?
Economic Impact of Entrepreneurial Firms
?
?
Innovation ? Process of creating something new, which is central to the entrepreneurship ? Small entrepreneurial firms are responsible for 60% of all innovations Job Creation ? In the past two decades, economic activity has moved in the direction of smaller entrepreneurial firms;
?
unique ability to innovate and focus on specialized tasks
Entrepreneurial Firms’ Impact on Society and Larger Firms
?
Impact on Society
?
The innovations of entrepreneurial firms have a dramatic impact on society through new products and services that
? ? ? ?
make our lives easier, enhance our productivity at work, improve our health; and entertain us in new ways
?
Impact on Larger Firms
?
Many entrepreneurial firms have built their entire business models around
? ?
Products and services that help large firms become More efficient and effective
Global Entrepreneurship Monitor
Entrepreneurship Around The Globe
According to the GEM
There is tremendous interest in entrepreneurship around the world 2005 study, about 330 million people, or 14% of the adults in the 35 countries surveyed, are involved in forming new businesses
GEM Conceptual Model
General National Framework Conditions •Openness (External Trade) •Government (Extent/Role) •Financial markets (Efficiency) •Technology, R&D (Level, intensity) •Infrastructure (Physical) •Management (Skills) •Labor markets (Flexible) •Institutions (Unbiased, Rule of Law) Entrepreneurial Framework Conditions •Financial •Government Policies •Government Programs •Education & Training •R&D Transfer •Commercial, Legal Infrastructure •Internal market Openness •Access to Physical Infrastructure •Cultural, Social Norms Major Established Firms (Primary Economy) Micro Small & Medium Firms (Secondary Economy) Entrepreneurial Opportunities Entrepreneurial Capacity -Skills -Motivation New Establishments
Social, Cultural Political Context
National Economic Growth (Jobs & Technical Innovation)
New Firms
TEA Index
?
Total Entrepreneurial Activity (TEA) Index is the sum of nascent entrepreneurs and new businesses
? Nascent
entrepreneurs:
individuals between 18 and 64 years who have taken some action to create new businesses
? Owner
– managers:
firms which have paid wages for more than three months and less than 42
Entrepreneurship in India
?
More respect for entrepreneurship now than these was a few years ago More and more people are experimenting with it Age and experience are not the critical factors
? Idea
? ?
and vision are the key
?
Corporate executives are increasing
? Starting ? Or
new ventures
Joining start-ups
Start-up
?
Easy access to customer and market
? Ability
to develop primary demand
?
Effective and timely access to innovations
? Inventiveness/ ? Strong
creativity
investment in innovations knowledge dissemination
? Effective
? ?
Investment in business infrastructure
Access to risk financing
? Availability
? Mechanisms
Growth
?
Value retention and reinvestment
?
? ?
Efficient and timely access to people
Environment conducive to effective employee motivation Effective and available supporting business services
Exit
?
Reasonable capital gains rates
? Share
in the value
?
Effective exit markets
? Trade ? IPO
sales
?
Efficient bankruptcy treatment
Entrepreneurship is a Process that causes change through innovation brought about by Individuals who generate or respond to economic opportunities
that Create Value for
both themselves and society
Context
?
Positive attitude towards business
?
? ?
Positive view of business
Positive view of initiative over conformity Role models
?
Constructive social Dynamic
?
Focus on sharing a growing pie and not on seizing and dividing the pie
?
Positive attitude toward success and failure
? ?
Permit and promote success Don’t punish well-intended failure
?
Good demographics
Entrepreneurial Process
Context Start-up Growth Exit
Value Creation
Entrepreneurial Process
?
A typical manager asks
? What ? What
resources do I control? structure determines our company’s relationship to
its market?
? How
can I minimize the impact of others on my ability to
perform?
? What
opportunity is appropriate?
Entrepreneurial Process …cont
?
The entrepreneur tends to ask:
? Where ? How
is the opportunity?
do I capitalize on it? resources do I need?
? What ? How
do I gain control over them?
? What
structure is best
Beyond Business As Usual
?
Entrepreneurial judgment required since
? No
decision rule that can be applied
using freely available information
? No
way to model complex decisions
involving uncertainty and discovery
? Major
impact on account of risk and
innovation
Sailing in Uncharted Waters
? ?
Exploitation of opportunity is, by definition, uncertain Information necessary to determine whether a particular effort to exploit an opportunity will be profitable
?
cannot be known with certainty at the time that the opportunity is identified because
? ?
?
that information does not come into existence
until the entrepreneur pursues the opportunity.
The pursuit of opportunity, itself, determines
?
? ?
whether the demand exists,
whether the entrepreneur can compete with others, and whether a new value chain can be created?
Shumpeter Model
From Innovation to Entrepreneurship
Changes in Political forces Regulation Macroeconomic factors Social trends CREATE New Information that Entrepreneurs use to Figure out how to Recombine resources into NEW AND VALUABLE FORMS
Environment for Entrepreneurship
?
Entrepreneurship flourishes in communities where resources are mobile
Entrepreneurship is greater when successful members of a community reinvest excess capital in the projects of other community members Entrepreneurship flourishes in communities in which success of other community members is celebrated rather than derided Entrepreneurship is greater in communities that see change as positive rather than negative.
?
?
?
Looking at Situations in the New Light
Entrepreneurial Situation Industry Known business conditions/ established technologies ? Risk factors known ? Predicable patterns ? Known players ? Stability and predictability ? Critical success factors clear Unknown business conditions/ new technologies ? Turbulence ? Volatility ? New unknown competitors ? Unpredictability ? Competitive conditions unclear
Looking at Situations in the New Light (cont..)
Entrepreneurial Situation Strategy Process Known business conditions/ established technologies ? Convergent thinking ? Analytical methods ? Focus on competitive advantages ? Known cash flows ? Known dilemmas ? Clear objectives Unknown business conditions/ new technologies ? Divergent thinking ? Scenario design ? Focus on adjustment and flexibility ? Option based ? Iterative processes ? Ad hoc assessments
Resource Allocation
Looking at Situations in the New Light (cont..)
Entrepreneurial Situation Market Assessment Known business conditions/ established technologies ? Structured analysis in known surroundings Unknown business conditions/ new technologies ? Experiments
Development Process ? Well defined, incremental Organization ? Well defined boundaries ? Conflicts avoided or moderated ? Calculating culture
? Experimental
? Fluid, dynamic network ? Conflicts encouraged ? Open-ended
A Different Process
Driven by Perception of opportunity Quick Commitment
Strategic Orientation
Driven by Resources Currently Controlled Evolutionary with Long Duration
Commitment to Opportunity Multistage with minimal Commitment Exposure at each stage Process
Episodic Use of Rent Of Required Resources
Flat with Multiple Informal Networks
Single stage with Complete Commitment Upon Decision
Control of Resources Management Structure Reward System
Ownership of Employment Of Required Resources
Formalized Hierarcy
Value Based and Team Based
Resource-Based Individual & promotional Oriented
Entrepreneurship : A Personal Journey
Key Phases in Entrepreneurship process
- Individual Level Variables (skills, motives, characteristics of entrepreneurs
-Group Level variables (ideas, input from others, effectiveness in interactions with venture capitalists, customers, potential employees) - Societal level variables (government policies, economic conditions, technology)
All phases are influenced by these three level variables
Idea for New Product / Service and/or Opportunity Recognition
Initial Decision to Proceed
Assembling the Required Resources (information, financial, people)
Actual Launch of New Venture
Building a Successful Business
Harvesting the Rewards (exit by founders)
Entrepreneur’s Approach
? ? ?
? ?
Challenge the incumbent firms Introduce new inventions Make current technologies and products obsolete Create high knowledge asymmetry Establish knowledge as the source of comparative advantage
Entrepreneurial Process in Social and Commercial Context
PERSONAL
Achievement Locus of Control Ambiguity Tol. Risk Taking Personal Values Education Experience
PERSONAL
Risk Taking Job Dissatisfaction Job Loss Education Age Commitment
SOCIOLOGICAL
Networks Teams Parents Family Role Models
PERSONAL
Entrepreneur Leader Manager Commitment Vision
OROGANIZATIONAL
Team Strategy Structure Culture Products
INNOVATION
TRIGGERING EVENT
IMPEMENTATION
GROWTH
ENVIRONMENT
Opportunities, Role Models, Creativity
ENVIRONMENT
Competition, Resources Incubator, Government Policy
ENVIRONMENT
Competitors, Customers, Suppliers, Investors, Bankers, Lawyers, Resources, Govt. Policy
Perspectives in the Entrepreneurial Process
Full understanding of the entrepreneurial process comes though
?
?
The Micro-perspective ? Focuses on behaviour and thought of individuals, and The Macro-perspective ? Focuses on primarily environmental factors
Both are Necessary
External Pressures Trigger Opportunity Recognition
?
Rapid changes in
? Technology ? Consumer
economics ? Social values ? Political action ? Regulatory standards
Effect of Individual Attributes on the Decision to Exploit
Non-psychological factors • Education • Career experience • Age • Social position • Opportunity cost
Opportunity Exploitation
Psychological factors • Motivation • Core evaluation • Cognition
Becoming an Entrepreneur
? ? ? ? ? ? ? ?
Can you handle uncertainty? Are you energetic? Do you believe in yourself and your abilities? Can you handle reversals and failures well? Are you passionate about your goals or vision? Are you good with other people? Are you adaptable? Are you willing to take risks or leaps or faith?
Serial Entrepreneurs
? ?
?
?
Temperamentally suited to start-ups Do not hesitate to give up control or sell once the company enters the growth phase Track record helps in obtaining backing at an early stage Those who did it
Type E Personality
? ?
?
? ?
Aggressively pursues goals ? Pushes both self and others Seeks autonomy, independence and freedom from boundaries Sends consistent messages ? Very focused and doesn’t deviate from purpose Acts quickly, often without deliberating Keeps distance and maintains objectivity ? Expects others to be self sufficient and tangy-minded
Type E Personality
?
(cont…)
?
?
?
?
Pursues simple, practical solutions ? Able to cut through complexity ? Find the essential and important issues Willing to take risks ? Comfortable with uncertainty Exhibits clear opinions and values ? Makes quick judgments ? Often finds faults ? Has high expectations Impatient regarding results and with others ? Has “just do it” mentality Positive, unbeat, optimistic ? Communicates confidence
Clarifying Goals
Where do I want to go?
? ?
What kind of enterprise do I need to build? What risks and sacrifices does such an enterprise demand? Can I accept those risks and sacrifices?
?
Cognitive Factors
?
Studies have shown that opportunity recognition may be an innate skill or cognitive process Some people believe that entrepreneurs have a “sixth sense” that allows them to see opportunities that other miss This “sixth sense” is called entrepreneurial alertness, which is formally defined as the ability to notice things without engaging in deliberate search
?
?
Cognitive Style
Intuitive Holistic Thinking
Rational Analytical Thinking
Role of Individual in Discovery of Opportunities
INDIVIDUAL DIFFERENCES AND THE DISOCVERY OF ENTREPRENEURIAL OPPORTUNITIES
Access to information
Life experiences Social networks Search processes
Opportunity recognition
Absorptive capacity Intelligence Cognitive properties
The Three Key Capacities
Diagnostic Capacity
Creative Capacity
Communicative Capacity
5 Characteristics of Entrepreneurs
Audacity
Closer
Courage
Adaptive
Patience
Personal Characteristics of the Entrepreneur
Characteristics that tend to make some people better at recognizing opportunities than others
Prior Experience
Social Networks
Cognitive Factors
Creativity
Prior Industry Experience
?
Several studies have shown that prior experience in an industry helps an entrepreneur recognize business opportunities. There are several explanations for this
?
By working in an industry, an individual may spot a market niche that is underserved It is also possible that by working in an industry, an individual builds a network of social contacts who provide insights that lead to recognizing new opportunities
?
Social Networks
?
The extent and depth of an individual’s social network affects opportunity recognition People who build a substantial network of social and professional contacts will be exposed to more opportunities and ideas than people with sparse networks In one survey of 65 start-ups, half the founders reported that they got their business idea through social contacts
?
?
Social Networks
?
(cont…)
Nature of Strong-Tie Vs. Weak – Tie Relationships
? Strong-tie
relationship are characterized by frequent interaction and form between co-workers, friends and spouses relationships are characterized by infrequent interaction and form between casual acquaintances
? Weak-tie
?
Result
? It
is more likely that an entrepreneur will get new business ideas through weaktie rather than strong-tie relationships
Social Networks (cont…)
Why weak-tie relationships lead to more new business ideas than strong-tie relationships Strong – Tie Relationships These relationships, which typically form between likeminded individuals, tend to reinforce insights and ideas that people already have Weak – Tie Relationships The relationships, which form between casual acquaintances, are not as apt to be between likeminded individuals, so one person may say something to another that sparks a completely new idea
Critical Abilities
Pursuit
and
Persuasion
Successful Intelligence
Practical Intelligence
Ability to solve problems of everyday life
Analytic Intelligence
Ability to think critically and analytically
Creative Intelligence
Successful Intelligence
Ability to formulate new ideas and new ways of solving problems
Social intelligence skills required to get along effectively with others & obtain necessary backing
Success as an
Entrepreneur
The Making of an Entrepreneur
Why Become an Entrepreneur ?
There are three primary reasons that people become Entrepreneurs and start their own firms
Desire to be their own boss
Desire to pursue their own ideas
Financial rewards
Characteristics of Successful Entrepreneur
Four Primary Characteristics of Successful Entrepreneurs Passion for the Business Product/ customer focus
Successful Entrepreneur Tenacity despite failure Execution Intelligence
Characteristics of Successful Entrepreneurs
?
Passion for the Business
?
The number one characteristic shared by successful entrepreneurs is a passion for the business This passion typically stems from the entrepreneur's belief that the business will positively influence people’s lives A second defining characteristic of successful entrepreneurs is a product/ customer focus An entrepreneur’s keen focus on products and customers typically stems from the fact that most entrepreneurs are at heart, craftspeople
?
?
Product/ Customer Focus
?
?
Characteristics of Successful Entrepreneurs (Cont…)
?
Tenacity Despite Failure
?
Because entrepreneurs are typically trying something new, the failure rate is naturally high
A defining characteristic for successful entrepreneurs is their ability to persevere through setbacks and failures The ability to fashion a solid business idea into a viable business is a key characteristic of successful entrepreneurs ? The ability to translate thought, creativity and imagination into action and measurable results is the essence of execution intelligence
?
?
Execution Intelligence
?
True or False ?
?
?
? ?
?
?
? ? ? ?
Entrepreneurs are motivated by money The idea is what matters Entrepreneurs are born not made Startups are one man bands Entrepreneurs are inventive geniuses Entrepreneurs are academic rejects with no qualifications Most new business fail Entrepreneurs are loners Entrepreneurs have chaotic personal lives Entrepreneurs are gamblers
Characteristics of Entrepreneurs
? ? ? ?
Age Education Gender Work Status
Characteristics of Entrepreneur: Age
?
Different income groups have different entrepreneurial activity across all ages
levels
of
?
People between 24-36 years of age are the most active group regardless of the income of their country
?
After the age of 36, all populations show a decline in entrepreneurial activity
The relationship between age and entrepreneurship is changing
?
?
Older entrepreneurs are responsible for 50% more business start-ups than 10 years ago
Characteristics of the Entrepreneur: Education
?
?
?
?
The relationship between education and entrepreneurial activity is complex and very much country-specific About 30% of those who start a business have a secondary level education across all 3 income groups In high-income countries 57% of entrepreneurs have a post-secondary education while 13% have not completed a secondary education In low-income countries 23% of entrepreneurs have a post-secondary education while about 50% have not completed a secondary education
Characteristics of the Entrepreneur: Gender
There are almost twice as many men who are active entrepreneurs than women
?
In middle-income countries men are 75% more likely than women to be active entrepreneurs In high-income countries men are 33% more likely than women to be active entrepreneurs In low-income countries, men are 41% more likely than women to be active entrepreneurs The gender gap is narrower for necessity entrepreneurship than for opportunity entrepreneurship
?
?
?
Characteristics of the Entrepreneur: Work Status
The overwhelming majority of people starting business in all national income group are currently working ? In middle-income countries 91% have jobs ? In high-income countries 81% have jobs ? In low-income countries 77% have jobs The percentage of people starting a business without being also employed as ? 6% in middle-income countries ? 17% on low income countries ? 5% in high-income countries
Entrepreneurial Expectation
?
Regardless of income, the majority of start-ups intend
to create little if any employment
?
Start-ups that are export focused are more prevalent in the high-income countries
?
As income increases the business services sector is the
most important
?
About 3% of start-ups qualify as businesses with high potential; expect to create significant employment and exports
Story of an Indian Entrepreneur
C.K. Ranganathan
? ? ? ?
His inspiration : Chinni Krishnan, his father
CKR in School : Poor in academics
Father suggestion : Agriculture or start a business Siblings : Good in studies – became doctors and lawyers. Were put in English Medium School. CKR into Tamil Medium School Studies did not interest CKR
?
?
But pets did ? 500 pigeons ? Lots of fish ? Variety of birds ? Used to earn pocket money out of pet business
Entry into Entrepreneurship
? ?
Father died when CKR entered college Father believed in little packets as a means to reach a large number of small customers ? Talcum powder (100gm/ 50 gm/ 20 gm) ? Epsom salt (5 gm)
?
?
However, father was unable to market the concept well CKR joined family business in 1982
? Velvet
shampoo
?
Left within a year due to clash of business ideas – without any stake in property or business
Starting Small
? ?
Started new business with a saving of Rs 15,000/Initial investment ? House cum office @ Rs 250 p.m. (Advance Rs 1,000) ? Factory @ Rs 300 p.m. (Advance Rs 1,200) ? Shampoo packing machine @ Rs 3,000/-
? ? ?
?
Launched Chik Shampoo Slow sales – 20,000 sachets per month Moved to Chennai in 1989 ? Manufacturing continued in Cuddalore Took three years to get a bank loan ? First loan Rs 25,000/-
Making Chik Click
? ?
Big companies sold shampoo in big bottles and from fancy stores CKR saw opportunity in serving ? Rural markets through ? Petty shops
?
?
?
? ?
Targeted rural areas in South India where people hardly used shampoo Ran live demonstrations Sponsored shows of Rajnikanth’s films Introduced new fragrances – jasmine and rose Growth: Rs 35000/ month to Rs 12 lac/ month to Rs 30 lac/ month to Rs 1 crore/ month in three years
India in GEM Survey
?
?
India below average on ? Government policies ? Physical infrastructure ? Education system ? R&D transfer ? Respect for entrepreneurship in society Average score on ? Opportunity perception by individual ? Ease of market entry for a new player
India in GEM Survey
?
(cont…)
India above average on
? Market
dynamism ? Entrepreneurial capacity ? Commercial and professional infrastructure ? Financial support
?
Necessity based v/s opportunity based entrepreneurship
? No.1 on necessity based ? No.25 on opportunity based
Who Are They?
?
About 2/3rd, 26-39 years 25%, bachelor’s degree
?
?
69%, master’s/ doctorate
Employed for five to eight years Over 90% are male
?
?
Company Profile
?
?
?
?
Over 60% in business for 3 to 6 years Median annual revenue: Rs 1.5 crore ? 85% less than Rs 1 crore Median number of employees: 15 ? 84% less than 100 employees Parents and relatives own the business in 28% of cases
Support Systems
?
Rely on friends and family to start
business
?
Significant help from former co-workers and university mates specially in
marketing
? ?
Finance mainly from family and friends Limited use of consultants and government institutions
Success Criteria
?
Revenue, customers, profits
?
Personal factors like satisfaction and goal achievement
Creating something new and durable Leaving a legacy Proving themselves Contribution to Indian business
?
? ? ?
Total Entrepreneurial Activity (TEA) Index
? ? ? ?
India USA Japan
18% 10.2% 2%
Global average 7%
Entrepreneurship in India
?
India below average on
? Government ? Physical
policies
infrastructure system
? Education ? R&D
transfer for entrepreneurship in society perception by individual
? Respect
?
Average score on
? Opportunity ? Ease
of market entry for a new player
Entrepreneurship in India
?
India above average on
? Market
dynamism capacity and professional infrastructure
? Entrepreneurial ? Commercial ? Financial
?
support
Necessity based v/s opportunity based entrepreneurship
? No.1 ? No.
on necessity based
25 on opportunity based
Successful Indian Entrepreneurs
Subhash Goel N.R. Narayana Murthy Sunil Mittal Rajendra Pawar/ Shiv Nadar Dilip Shanghvi Manmohan Shetty Alok Kejriwal • Kiran Mazumdar • Ramoji Rao • Aroon Purie • Kishor Biyani • R. Sriram/ Hemu Ramaiah/ BS. Nagesh • Raman Roy Rajesh Jain
Thank You
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