CH-7 Entrepreneurship – Management: Leading and Collaborating in a Competitive World : Chapter Notes

Chapter 7 Entrepreneurship LEARNING OBJECTIVES 1 Describe why people become entrepreneurs and what it takes, personally. 2 Summarize how to assess opportunities to start new businesses. 3 Identify common causes of success and failure. 4 Discuss common management challenges. 5 Explain how to increase your chances of successes, including good business planning. 6 Describe how managers of large companies can foster entrepreneurship. CHAPTER OUTLINE Entrepreneurship Why Become an Entrepreneur? What Does It Take to Succeed? What Business Should You Start? What Does It Take, Personally? Success and Failure Common Management Challenges Increasing Your Chances of Success Corporate Entrepreneurship Building Support for Your Idea Building Intrapreneurship Management Challenges Entrepreneurial Orientation CHAPTER RESOURCES Experiential Exercises 7-1. Take an Entrepreneur to Dinner 7-2. Starting a New Business Cases Rolling Out ScrollCo Part II Supporting Case Will Foxconn Remain Apple’s Top Supplier of iGadgets? Social Enterprise Empowering Latina Entrepreneurs Lecturettes 7.1. The Entrepreneur 7.2. Intrapreneurship in Small Business KEY STUDENT QUESTIONS The three questions most often asked by my students include: 1. “What does it take to be successful as an entrepreneur?” 2. “Where can I get ideas for an entrepreneurial venture?” 3. “Who can help me to write a business plan?” Question 3 opens a whole series of nuts and bolts questions about starting a business, including things like “Where do I go to get a business license?” “What are the advantages and disadvantages of having a home-based business?” etc. While these kinds of details are beyond the scope of the class, it is useful to have resources to give to students. Some of the ones that I have used in the past include: •U.S. Small Business Administration (www.sba.gov) In addition to offering a wealth of information about starting and running a small business, the SBA also sponsors SCORE - the Service Core of Retired Executives. (www.score.org) SCORE offers free counseling to small business owners and budding entrepreneurs, and their help can be invaluable in getting a business off the ground. •U.S. Chamber of Commerce (www.uschamber.com) The U.S. Chamber of Commerce also provides a wealth of information for entrepreneurs. In particular, their toolkits on everything from office management to sales and marketing to government contracting can be useful in helping to get a small company up and running. Local chambers of commerce will often sell business startup kits that contain all of the forms a small business owner needs to register his or her business name, obtain a business license, etc. CLASS ROADMAP POWERPOINTS Slide 1 Entrepreneurship Chapter 7 Slide 2 Chapter Introduction Quote Slide 3 Learning Objectives Slide 4 Entrepreneurship Slide 5 Entrepreneurial Venture Slide 6 Some Myths about Entrepreneurship Slide 7 Entrepreneur or Intrapreneur MANAGEMENT IN ACTION Starbucks’ Entrepreneurial Beginnings Shortly after joining Starbucks, a four-store Seattle retailer and wholesaler of fresh-roasted coffee beans, a young employee named Howard Schulz traveled to Italy. Deeply impressed by the popularity of the neighborhood espresso bars and coffeehouses he visited in Italy, Schulz noted how much people enjoyed gathering there, in “a place between work and home,” to socialize and enjoy leisurely conversations. He returned home to Seattle determined to persuade the owners of Starbucks to let him try the coffeehouse concept in the United States. The experiment was so successful that within a few short years Schulz had left Starbucks to found his own coffeehouse chain, called Il Giornale, and then purchased Starbucks himself. The company now operates thousands of stores around the world. Schulz describes his entrepreneurial ambitions this way: “I willed it to happen,” he says. “I took my life in my hands, learned from anyone I could, grabbed what opportunity I could, and molded my success step by step.” I. INTRODUCTION A. Definitions 1. Entrepreneurship: The pursuit of lucrative opportunities by enterprising individuals. 2. Small Business: A business having fewer than 100 employees, independently owned and operated, not dominant in its field, and not characterized by many innovative practices. 3. Entrepreneurial Venture: A new business having growth and high profitability as primary objectives. B. The Excitement of Entrepreneurship C. Some myths about entrepreneurs (Exhibit 7.1) CONNECT Case Analysis: To Be or Not to Be an Entrepreneur SUMMARY Simply put, entrepreneurs generate new ideas and turn them into business ventures. But entrepreneurship is not simple, and it’s exhausting. Even if you don’t have employees, you should expect communication breakdowns and other “people problems” with agents, vendors, distributors, family, subcontractors, or lenders. The case describes Larry’s journey to entrepreneurship. Larry sees his intelligence as virtually guaranteeing success and is sure he will be making a profit within a year of launch. Larry wants to be boss and as such not have to be a team player. His confidence is further enhanced by his access to a large base of start-up capital. ACTIVITY After viewing the video, students are directed to answer a series of multiple-choice questions regarding Larry’s perspective on his prospects for success. CLASS DISCUSSION IDEAS A discussion of these questions might foster an exploration on the predictors of entrepreneurial success. If Larry hired you as an executive coach, what would you suggest to Larry? II. ENTREPRENEURSHIP POWERPOINTS Slide 8 Successful Entrepreneurs Who Started in Their 20s Slide 9 Exhibit 7.3 Who is The Entrepreneur? Slide 10 The Idea Slide 11 Opportunities Entrepreneurs Should Consider Slide 12 Franchising Slide 13 The Next Frontiers Slide 14 Internet Business Models Slide 15 Social Entrepreneurship Slide 16 Examples of Social Enterprises Slide 17 Social Enterprise Slide 18 What Does It Take, Personally? Slide 19 Exhibit 7.5 Entrepreneurial Strategy Matrix Slide 20 Incubators and Accelerators Slide 21 Common Management Challenges Slide 22 Initial public offering (IPO) Slide 23 Increasing Your Chances of Success Slide 24 Questions the Opportunity Analysis Should Address Slide 25 Planning Slide 26 Outline of a Business Plan Slide 27 Five Key Factors Slide 28 Nonfinancial Resources LO 1: Describe why people become entrepreneurs, and what it takes, personally See Exhibit 7.2 Successful Entrepreneurs Who Started in Their 20s. A. Why Become an Entrepreneur? 1. Entrepreneurs start their own firms because of the challenge, the profit potential, and the enormous satisfaction they hope lies ahead. 2. New immigrants may find existing paths to economic success closed to them. 3. The excitement of entrepreneurship - entrepreneurs report the highest levels of pride, satisfaction, and income. Example 7.1 Why become an entrepreneur? Dave Domm, cofounder and executive vice president of Raceline Motorworks, in Vernon Hills, Illinois, wanted to start a business that had a really engaging, interactive environment for boys. They took an already successful product, remote-control cars, and coupled this with a sophisticated racetrack design in their store to also attract the parents, teenagers and younger siblings. They have had early success in suburban Chicago and have plans for 100 stores in the next five years. B. What Does It Take to Succeed? (Exhibit 7.3) 1. Varies by creativity and innovation/general management skills a. inventor b. entrepreneur c. promoter d. manager, administrator LO 2: Summarize how to assess opportunities to start new companies C. What Business Should You Start? 1. The idea – a great product, viable market, and good timing are essential ingredients in any recipe for success. 2. The opportunity – entrepreneurs spot, create and exploit opportunities in a variety of ways. 3. Franchising – when evaluating a franchise, consider market presence, market share, and profit margins 4. The next frontiers – where do they lie? Healthcare, education, mobile apps, etc. a. One fascinating opportunity for entrepreneurs is outer space based on the expansion of private sector companies in this industry and increasing demand for satellite launches b. Changes in the healthcare sector due to the Affordable Care Act and advances in technology represent another key opportunity. 5. The Internet a. Five successful business models: i. Transaction fee model ii. Advertising support model iii. Intermediary model iv. Affiliate model v. Subscription model 6. Social Entrepreneurship refers to leveraging resources to address social problems (Exhibit 7.4) 7. Social Enterprises are organizations that engage in social entrepreneurship using market-based methods CONNECT Click and Drag: Opportunity Analysis for Shoes with Soul (Keyboard navigable alternate version available.) SUMMARY After identifying a business opportunity, the first formal planning step is to do an opportunity analysis. The opportunity analysis, or opportunity assessment plan, focuses on the opportunity, not the entire venture. It provides the basis for making a decision on whether to act. Then, the business plan describes all the elements involved in starting the new venture. The mini-case describes Renee Albertelli and Richard Rodriguez’s business start-up story. Both took business and marketing courses and began their careers in established businesses so that they could gain experience and in doing so developed their concept. In her travels, Albertelli saw an opportunity and with Rodriguez created a business plan and using their retirement savings launched. At first, interest in their product was limited, but before long demand took off. Rodriguez and Albertelli were excited by their popularity—but were faced with new questions. How could they fulfill orders, expand their product line, and grow at a sensible pace? ACTIVITY After reviewing the case, students match phrases with the areas of opportunity analysis. CLASS DISCUSSION IDEAS The success of entrepreneurial ventures is often determined by a specific set of seemingly independent factors. Ask if there was a “key” to the success of Renee and Richard’s venture. Example 7.2 Today’s entrepreneur Who is today’s entrepreneur? Meet Jefferson Han, the son of Korean immigrants, who spent his childhood taking apart virtually anything that moved, while taking violin lessons “like any good Asian kid.” But Han has done something revolutionary—invented a new way of interacting with computers through touch screen technology that has the potential to eliminate today’s mouse, keyboard, and Windows pointers. Watch Han demonstrating his new screen on YouTube, and you, like the “Fast Company” reporter who interviewed him, might say “He’s going to get rich.” Han’s advice to the teenager who wanted to become a computer engineer, too? “Study math.” D. What Does It Take, Personally? 1. Commitment and determination – successful entrepreneurs are decisive, tenacious, disciplined, willing to sacrifice, and able to immerse themselves totally in their enterprises. 2. Leadership – self-starters, team builders, superior learners, and teachers. 3. Opportunity obsession – intimate knowledge of customers’ needs, market-driven, and obsessed with value creation and enhancement. 4. Tolerance of risk, ambiguity, and uncertainty – calculated risk takers, risk minimizers, tolerant of stress, able to resolve problems. 5. Creativity, self-reliance, and ability to adapt – open-minded, restless with the status quo, able to learn quickly, highly adaptable, creative, skilled at conceptualizing, and attentive to details. 6. Motivation to excel – clear results orientation, set high but realistic goals, strong drive to achieve, know your own weaknesses and strengths, and focus on what can be done rather than on the reasons things can’t be done. 7. Making good choices a. Entrepreneurial strategy matrix (Exhibit 7.5) i. Innovation ii. Risk LO 3: Identify common causes of success and failure. E. Success and Failure 1. Risk a. Be realistic, and anticipate risks ahead 2. The role of the economic environment a. Business incubators are protected environments for new, small businesses. b. Business accelerators can also provide additional support. c. The most amazing region for start-ups is Silicon Valley, in California. However other regions include Boston, North Carolina, Austin, and Seattle. Example 7.3 Risk In 2004, Richard Branson, a British entrepreneur, introduced an early prototype became the fastest amphibious vehicle ever to cross the English Channel. The Aquada, a three-seater vehicle with wheels that fold up is due to go into production in 2008 and will sell for around $85,000 according to its maker, Gibbs Technologies. The Aquada will be built in America (several states are vying to attract the plant). The Aquada certainly has novelty value, but its success depends on there being enough paying customers who decide that it floats their boat. LO 4: Discuss common management challenges F. Common Management Challenges 1. You might not enjoy it a. If you don’t want to sell, you don’t want to be an entrepreneur 2. Survival is difficult a. Small businesses feel mistakes more strongly 3. Growth creates new challenges a. Start-up mentality is often “high performance, cheap labor.” b. Growth requires hiring people at higher wages that are less dedicated than the founders 4. It’s hard to delegate a. Leadership deteriorates into micromanagement 5. Misuse of funds a. Failure to use money that is available properly 6. Poor controls a. Aversion to record keeping b. People like to spend money, don’t focus on fundamentals like customers and creating value 7. Mortality a. Companies outlive entrepreneurs when: i. the company has gone public ii. the entrepreneur has planned an orderly succession, usually to a family member. 8. Going public Example 7.4 Lessons from failure Kamran Elahian was born in Teheran, immigrated to the United States in 1972 and worked in HP as a design automation software engineer. He co-founded several companies, including CAE systems, Cirrus Logic Inc and NeoMagic Corp. But it is his one failure – Momenta Corp – that he chooses to remember most. The license plate of his Ferrari reads Momenta – a caustic reminder of his fallibility that keeps him grounded in reality. It reminds me not to be too proud, Mr. Elahian says. I celebrate failure – it can temper your character and pave the way for great achievement. Teaching Tip The student discussion question above can be enriched by asking students to compare two businesses - one which folded, and one which was successful. In looking at the factors of success, be sure the students consider both environmental and personal factors. For example, Southwest Airlines is a success, whereas People’s Express failed. a. Initial stock offerings (IPOs) sale to the public, for the first time, federally registered and underwritten shares of stock in the company. b. Global start-ups i. It is a new venture that is international from the very beginning. ii. Several questions must be answered to determine whether you should begin with a domestic or global outlook. a.) Where are the best people? b.) Where is the financing easiest and most suitable? c.) Where are the targeted customers? d.) When global operators learn about your venture, will they go head-to-head with yours? Management in Action Progress Report Starbucks Risks Success and Failure Part of being an entrepreneur is experiencing occasional failures. Despite its worldwide success, which has created hundreds of thousands of jobs and made founder and former CEO Howard Schulz a billionaire, Starbucks has not always succeeded in its attempts to be innovative. Some of Schulz’s bold moves have, of course, been famously successful, including in the areas of social responsibility and sustainability. But some product ideas have missed the mark. A product called drinking chocolate, essentially a liquid dessert and popular in Europe, was an almost immediate failure. A partnership between Starbucks and Pepsi-Co yielded a bottled blend of coffee and soda that failed, though it did make way for bottled Frappuccino, a successful extension of the company’s iconic blended cold coffee drink. Efforts to build a new Starbucks brand with a line of low-calorie fruit smoothies billed as a healthy option failed as well. Smoothies are still offered, but the brand-building effort was abandoned. • How would you categorize Starbuck’s decisions to test new products in terms of high or low innovation and risk? Why? Student answers will vary; however, as we see primarily product line expansions and application of items that exist in other formats, one may say low innovation. Risk discussions will vary, but an astute respondent may include the potential for a negative impact of failure on the Starbuck’s band which increases risk. • How is Starbucks’ decision-making about new products different from that of a start-up company, and how is it similar? Starbucks’ scale may make market research more feasible, test marketing possible, and the tolerance of a potential loss on a product launch possible. The size may make product launches more challenging, due to supply, training, and bureaucratic concerns. Regardless of established or start-up, as the write-up indicated, new ideas are not always successful, but even a failure can lead to future success. • How would you like to work for a big company (Starbucks, or choose your favorite) and hold the title “entrepreneur in residence”? What would your job entail? Students answers will vary. LO 5: Explain how to increase your chances of success, including good business planning. G. Increasing Your Chances of Success 1. Planning a. The first step is to do an opportunity analysis, which includes a description of the product or service, an assessment of the opportunity, an assessment of the entrepreneur, specification of activities and resources needed to translate your idea into a viable business, and your source(s) of capital. (Exhibit 7.6) b. A business plan is a formal planning step in starting a new business that focuses on the entire venture and describes all the elements involved in starting it. (Exhibit 7.6) 2. Key planning elements a. People should be energetic and have skills and expertise directly relevant to the venture. b. Opportunity should allow a competitive advantage that can be defended. c. Identify current competitors and their strengths and weaknesses, predict how they will respond to the new venture, indicate how the new venture will respond to the competitors’ responses, identify future potential competitors, and consider how to collaborate with actual or potential competitors. d. Context should be favorable, regulatory and contain economic perspectives. e. Risk must be understood and addressed as fully as possible. 3. Selling the plan a. The goal is to get investors to agree on and back up the written plan. b. The plan should be marketed in order to obtain the necessary funding for the business. 4. Nonfinancial Resources a. Legitimacy b. Networks to increase social capital c. Top management teams d. Advisory boards e. Partners Example 7.5 Business plans Students can see real business plans, prepared by MBAs, at http://www.businessplans.org/businessplans.html. The plans presented on this website are winners of the MOOT CORP® Competition, and they include everything from a plan for developing innovative beverage equipment to a plan for a company that provides utility companies with electronic billing and bill payment. Plans are grouped into “Best of the Best,” “Internet Services,” “Services,” and “Products.” Multiple Generations at Work Millennial Entrepreneurs Can Learn from Others with More Experience Some areas in which Boomers can help start-ups achieve scalability and success are: 1. Angel investors and advisers. Boomers can bring funding and advice for business plan development and marketing strategies. 2. Partnership or executive positions. Boomers may be willing to work with founders for an equity stake in the business. This can create a win-win for the cash-starved start-up that needs experienced people. 3. Talent management. Boomers have decades of experience dealing with talent management issues such as hiring, firing, training, compensation, and performance evaluation. This can free up the founders to focus on the core activity of the start-up. CONNECT Video Case: Entrepreneurship in Action at 1154 Lill Studio SUMMARY Entrepreneurship involves creating new systems, resources, or processes to produce new goods or services and/or serve new markets. An entrepreneurial venture has growth and high profitability as primary objectives. Entrepreneurs manage aggressively and develop innovative strategies, practices, and products. They and their financial backers usually seek rapid growth, immediate and high profits, and sometimes a quick sellout with large capital gains. The 11-minute video features an interview with Jennifer Velarde, the founder of 1154 Lill Studio. In the interview, the founder discusses her journey as an entrepreneur and how they found success in a crowded market. While the company in the case closed its doors in 2014, it remains an effective example of the entrepreneurial process. ACTIVITY After viewing the video, students are directed to answer a series of multiple-choice questions. CLASS DISCUSSION IDEAS The case provides the opportunity to discuss strategy, marketing, and organizational culture. As the company closed in 2014, there may also be a potential for an interesting discussion regarding how entrepreneurs must be comfortable with failure as well as celebrating success III. CORPORATE ENTREPRENEURSHIP POWERPOINTS Slide 29 Building Support for your Idea Slide 30 Building Intrapreneurship Slide 31 Entrepreneurial Orientation Slide 32 Management in Action Slide 33 In Review LO 6: Describe how managers of large companies can foster intrapreneurship and an entrepreneurial orientation. A. Building support for your idea – capitalize on a market opportunity. 1. The first step involves clearing the investment with your immediate boss or bosses. You explain the idea and seek approval to look for wider support. 2. Making cheerleaders – people who will support the manager before formal approval from higher levels. 3. Horse-trading begins – you offer promises of payoffs from the project in return for support, time, money, and other resources that peers and others contribute. 4. Finally, getting the blessing of relevant higher-level officials. B. Building intrapreneurship 1. Skunkworks are project teams designated to produce a new product. 2. Bootlegging refers to informal efforts by managers and employees to create new products and new processes. Example 7.6 Intrapreneurship A good example of intrapreneurship in action is Mobile World, a product that was created by David Goldie while working at Carphone Warehouse. Mobile World is a mobile-phone service targeted at people living in Britain who come from other countries and need to phone friends and relatives overseas. Goldie discussed the idea with a small team of colleagues and then worked with them to bring it to market. Goldie, now chief operating officer of Telecoms at Carphone Warehouse and a champion of intrapreneurship said Carphone Warehouse is an organization that encourages this sort of thing. C. Management challenges 1. The most dangerous risk is the risk of over-reliance on a single project. 2. Organizations also court failure when they spread their intrapreneurial efforts over too many projects. D. Entrepreneurial orientation 1. Entrepreneurial orientation is the tendency of an organization to engage in activities designed to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services. 2. Entrepreneurial orientation is determined by five tendencies: a. allow independent action b. innovate c. take risks d. be proactive e. be competitively aggressive. Management Connection Onward Starbucks Is Retaining Its Entrepreneurial Spirit Howard Schulz recently stepped down as CEO’s of Starbucks, the company he founded, to return to a more entrepreneurial role within the company. He will be in charge of developing two new premium brands. Roasteries is a line of new Starbucks stores that will serve Reserve coffee and food by Princi, a premium Italian bakery. Reserve coffee bars will also roll out in existing Starbucks stores, opening in the United States and internationally at the same time. There is further evidence of the value Starbucks places on entrepreneurship, even as it has become a worldwide corporate brand operating thousands of stores in more than 60 countries around the world. The company has its own “entrepreneur in residence.” In this position, which reports directly to the CEO, Richard Tait is responsible for “helping the company foster a culture of innovation” and lending an “entrepreneurial lens” to its planning and decision-making, with a focus on speed and agility. The company also continues to innovate as a socially conscious company as well, with a promise to open stores in low- and middle-income communities in the United States to provide jobs in these areas. • How successfully does Starbucks embody an entrepreneurial orientation? How willing to take risks does it appear to be? While student answers will vary, Starbuck’s continual initiatives and its continued success in a now-crowded market may indicate a healthy entrepreneurial culture within the firm. • What evidence do you see that Starbucks supports intrapreneurial behavior? What are some of the risks a large company takes in doing so? The position of entrepreneur in residence and the desire to foster a culture of innovation communicates a desire for intrapreneurial behavior. The scale of the organization may demand a level of consistency which could limit such behavior. CONNECT Self-Assessment: The Measurement of Stress at Work SUMMARY There are many causes of stress at work; some issues or situations are more stressful than others. ACTIVITY Students are asked to consider their current job, a job they once had, or ask an acquaintance to help out. The student or cooperating acquaintance should think of one work situation and answer the questioner. Students then total their scores and for an interpretation of their responses. CLASS DISCUSSION IDEAS In reviewing this assessment instructors may wish to highlight how role ambiguity and role conflict can lead to stress. A discussion regarding how students may address these situations to better manage stress at work may allow students to further understand the topic. BOTTOM LINE How is entrepreneurship different from inventing a new product? The invention is just an idea or a prototype until someone—an entrepreneur—sets up a venture with the resources and processes to produce and sell the new product. What are some environmentally friendly start-ups you’ve heard about? Do you think they have great profit potential? Students’ responses may vary widely here and may depend on their knowledge and awareness of corporate social responsibility trends. Some examples might include organic farming, environmentally friendly home cleaning products, such as Molly’s Suds laundry soaps, or other companies designed to reduce the carbon footprint of current business models. What might be a sign that a small company is growing too fast? The text provides an example in which the small company lacks the personnel to finish more work up to standards and on time. Students may not have covered all the relevant topics to answer this question fully, but with imagination, they may be able to think of other possibilities, such as a shortage of production space, limited access to capital for acquiring inventory, limits of the entrepreneur’s management skills, increase in product defects or customer complaints, lack of controls for ensuring quality or making important decisions, and flat or declining profits even as sales are growing. An entrepreneur who loves selling delegates bookkeeping to an accountant. What is the danger to the business? The danger is that the entrepreneur will assume the accountant is keeping track of money coming in and going out, so the entrepreneur doesn’t need to think about it. At best, the entrepreneur will then lose sight of what is making the company profitable and might make poor decisions as a result. Worse, if something causes the company’s financial performance to suffer, the entrepreneur won’t know or understand what is happening. Worst, the accountant could abuse that trust, and the entrepreneur wouldn’t find out until the business was seriously damaged or ruined. What skills would you need in order to get people on board with a new idea? In general, the innovator needs interpersonal and communication skills, discussed in Chapter 1. These would especially include the ability to forge positive relationships aimed at mutual goals, as well as the ability to communicate persuasively in writing and orally. Teamwork skills, too, would be relevant. Students will learn more about these skills in Part Four; this question is a chance to build their interest in what lies ahead. SOCIAL ENTERPRISE Empowering Latina Entrepreneurs 1. What factors are motivating Galan to help Latinas become successful entrepreneurs? Galan’s childhood idol has taught her that successful entrepreneurship by a woman is most definitely possible. Making Latinas more financially successful is important as this population is set to drastically grow to 13 percent of the U.S. population by 2050. A more financially savvy Latina community will have a positive impact on Latina families and communities. This ties in perfectly with social entrepreneurship. 2. Why do you think Coca-Cola, a consumer products company, is collaborating with Galan to empower women entrepreneurs? Coca-Cola’s sales are based on consumer consumption of its products. When you look at the fact that the U.S. domestic market is turning towards a 13 percent Latina population, it is important for Coca-Cola to ensure the success of its consumer base. This is how a social entrepreneurship venture can turn into a profitable venture for a large company like Coca-Cola. LECTURETTES LECTURETTE 7.1: The Entrepreneur ENTREPRENEURSHIP DEFINED 1. The concept of corporate entrepreneurship is one of the hottest topics in today’s management literature. Because the task of entrepreneurship is so complex, a simple definition of it is difficult to articulate. 2. Originally, entrepreneurship was defined in such economic terms as the buying, selling, and bringing together of the factors of production. 3. One does not have to sell or buy or bring together the factors of production to be an entrepreneur. More recently, entrepreneurship has been associated with the creation of new business enterprises. 4. The modern definition holds entrepreneurship to be a mental propensity to identify opportunities and threats that lie in the future and to take action now to exploit those opportunities and defend against the threats. 5. The entrepreneur is innovatively future-oriented toward market opportunities and willing to take chances to exploit those market opportunities. 6. Thus, the modern manager perceives entrepreneurship to be both a property and a process associated with innovative enterprises. ENTREPRENEURSHIP AS AN ATTRIBUTE 1. Entrepreneurship can be viewed, as a trait or attribute possessed by the entrepreneur. 2. Some of the psychological properties that tend to be shared by entrepreneurs are as follows: Entrepreneurs have a future-oriented attitude, a way of examining events and cause-and-effect relationships in the business environment in order to identify opportunities that can be exploited. Entrepreneurs have an others-oriented focus on the needs of others in order to identify need-satisfying opportunities to be exploited. Entrepreneurs have a change-oriented focus and understand that success lies in change. Entrepreneurs have an action-oriented focus, realizing that recognizing opportunity is not enough; action must be taken now to exploit opportunities. Entrepreneurs have a risk-taking propensity that allows them to take appropriate action to exploit opportunities, even when risk is involved. There is always an element of risk in business, and the greatest opportunities often demand the greatest risk-taking. Entrepreneurs have a high tolerance for ambiguity. Taking innovative, risky action in the marketplace requires making decisions with less-than-clear information. In order to make such risky decisions; the entrepreneur needs to cultivate a high tolerance for ambiguity. Entrepreneurs have a propensity toward Type A behavior – they must work fast, think fast, demand high-quality work, and expect the same from others. Entrepreneurs have an internal locus of control believing that it is their own behavior – and not luck or fate – that controls their lives. Entrepreneurs have high need-achievement. 3. Some of the surveyed characteristics of entrepreneurs are as follows: Entrepreneurs tend to be mavericks and dreamers. Entrepreneurs tend to be uncompromising, insisting on doing things their way. Entrepreneurs are more apt to be expelled from college, to be fired often, and to jump from job to job. Entrepreneurs have worked and have been self-supporting since childhood and tend to work very long hours. Entrepreneurs tend not to be joiners or team players. ENTREPRENEURSHIP AS A PROCESS 1. Entrepreneurship may be seen as a process of change in three basic stages. Recognition of some change in the marketplace. The change may be in buyer behavior, buyer need, buyer ability to pay, a technological breakthrough, or some major event, such as war, oil embargo, material shortage, etc. For this stage, the entrepreneur must be alert to changes that he or she can convert into an opportunity. Perception of the “idea” of how this change can be successfully exploited – by a product change, a unique service, a bitter package, a bitter delivery, etc. Action – the need to get out of the planning and R&D stages and into the marketplace before someone else beats you to it or before the opportunity goes away. LECTURETTE 7.2: Intrapreneurship in Small Business CONCEPT OF INTRAPRENEURSHIP 1. It is difficult to agree on a generally accepted definition of entrepreneurship. 2. New definitions of the concept have emerged, introducing new aspects such as risk-taking and the creation of independent units. 3. Entrepreneurship necessarily ends when the venture creation stage is complete. 4. Entrepreneurship as a source of innovation is not the exclusive province of new venture creation. 5. What essentially distinguishes intrapreneurship from entrepreneurship in most works, if not all, is first and foremost the context in which the entrepreneurial act takes place. Entrepreneurs innovate for themselves, while intrapreneurs innovate on behalf of an existing organization. 6. Despite the lack of a clearly accepted definition of the term, an analysis of the literature on intrapreneurship reveals two main trends in the research. 7. The first of these trends is concerned principally with the individuals who implement innovations in the firms that employ them. 8. The second main trend identified in the intrapreneurship literature is concerned with the intrapreneurial process, the factors leading to its emergence, and the conditions required. MOTIVATORS AND FACTORS GOVERNING EMERGENCE 1. Simplicity of organizational structures. 2. Easy/difficult to identify intrapreneurs. 3. Ability of owner-manager to trust employees and delegate. 4. The right of employees to make mistakes MOTIVATORS IDENTIFIED DIVIDED INTO FOUR MAJOR CATEGORIES 1. Motivators related to the demands and constraints of the external environment (especially the competition). 2. Motivators related to the perception of an individual as an intrapreneur and that individual’s availability. 3. Motivators related to the firm’s growth objectives. 4. Motivators related to the management or production problems encountered in the internal environment. SIX POSTULATES SUPPORTING THE NEED TO RECONCILE THE CONCEPTS OF INTRAPRENEURSHIP AND SMALL BUSINESS 1. Intrapreneurial characteristics are not the exclusive property of employees of large firms. 2. Intrapreneurs can be first-class allies for owner-managers of growing small businesses. 3. The fact that intrapreneurs are absent from the small business literature does not mean that they have no right to be there. 4. The loss of an intrapreneur will have more serious consequences for small firms than for large firms. 5. Small firms are potential incubators for intrapreneurs. 6. Small business provides a favorable environment for innovation. Instructor Manual for Management: Leading and Collaborating in a Competitive World Thomas S. Bateman, Scott A. Snell, Robert Konopaske 9781259927645, 9781259546945