Management 51: Entrepreneurial Management 1

Textbook Reference: Entrepreneurship, 8th edition by R.H. Hisrich, M.P. Peters and D.A. Shepherd, Mc Graw Hill Irwin, Copyright 2010. Chapter 1: Entrepreneurship and the Entrepreneurial Mind-Set NATURE & DEVELOPMENT OF ENTREPRENEURSHIP Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort; assuming the accompanying financial, psychic, and social risks and uncertainties; and receiving the resulting rewards of monetary and personal satisfaction. Entrepreneur = Individual who takes risks and starts something new. Creation Process Creating something new of value. Must have value to the entrepreneur. Must have value to the audience for which it is developed. Devotion of the necessary time and effort. Part of the reward is independence followed by personal satisfaction. Entrepreneurial Action Refers to behavior in response to a judgmental decision under uncertainty about a possible opportunity for profit. Inventor An individual who creates something new. ENTREPRENEURIAL PROCESS The process of pursuing a new venture, whether it is new products into existing markets, existing products into new markets, and/or the creation of a new organization. 1. Opportunity Identification. The process by which an entrepreneur comes up with the opportunity for a new venture. Most entrepreneurs do not have a formal mechanism but use their network of resources to identify trends. Window of Opportunity. The time period available for creating the new venture. Opportunity versus personal skills and goals. Creation and length of opportunity. Competitive environment. 2. Develop a Business Plan. The description of the future direction of the business. Marketing & Financial Plan. Description of the business and industry. Organization Plan. Operational Plan

3. Determining the Resources Required. Appraisal of the entrepreneurs present resources. Resources that are critical need to be differentiated from those that are just helpful. Care must be taken not to underestimate the amount a variety of resources needed. Asses the downside risks associated with insufficient or inappropriate resources. Strive to maintain control while acquiring financial resources. Identifying alternative suppliers enables you to acquire resources at the lowest possible costs. This is a constant function throughout the life of the organization. 4. Manage the Enterprise. Examining the operational problems of the growing venture. Determine the key available resources. Implementing a management style and structure. A control system must be implemented. Some entrepreneurs have difficulty managing and growing the venture they have created. 5. Types of Start-Ups. Lifestyle Firms. A small venture that supports the owners and usually does not grow. Foundation Company. The type of company formed from research and development that usually does not go public. High Potential Venture. A venture that has high growth potential and therefore receives great investor interest. Gazelles. Very high growth ventures. HOW ENTREPRENEURS THINK Effectuation 1. Causation is the focus on the means to generate the out come and does not focus on the desired outcome. 2. Effectuation Process is the process that starts with what one has (who they are, what they know, and whom they know) and selects among possible outcomes. 3. Patchwork Quilt Principle. Means driven action that emphasizes the creation of something new with existing means rather than discovering new ways to achieve given goals. 4. Affordable Loss Principle. Prescribes committing in advance to what one is willing to lose rather that investing in calculations about expected returns to the project. 5. The Bird in Hand Principle. Involves negotiating with any and all stakeholders who are willing to make actual commitments to the project: determines the goals of the project. 6. Lemonade Principle. Prescribes leveraging surprises for benefits rather than trying to avoid them, overcome them, or adapt to them. This uses unexpected situations as an opportunity instead of dealing with them. 7. The Pilot in the Plane Principle. Urges relying on and working with people as the prime driver of opportunity and not limiting entrepreneurial efforts to exploiting factors, external to the individual. They will focus on aspects of the future you can control; they do not need to predict the future.

8. Entrepreneurial Mindset. Involve the ability to rapidly sense, act, and to mobilize, even under uncertain conditions. Cognitive Adaptability Definition: Describes the extent to which entrepreneurs are dynamic, flexible, self-regulating, Engaged in the process of generating multiple decision frameworks focused on sensing and processing changes in their environment. Then acting on them! We can achieve this by asking ourselves a series of questions that relate to: 1. Comprehension Questions. Designed to increase entrepreneurs understanding of the nature of the environment. 2. Connection Tasks. Tasks designed to stimulate entrepreneurs to think about the current situation in terms of similarities and differences with situation previously faced and solved. 3. Strategic Tasks. Designed to stimulate entrepreneurs to think about which strategies are appropriate for solving the problem or pursuing an opportunity. 4. Reflection Tasks. Designed to think about their understanding and feelings as they progress through the entrepreneurial process. HOW SMART ENTREPRENEURS HARNESS THE POWER OF PARANOIA Learning from Business Failure Businesses fail. Common because of the newness and inexperience of the venture. There are benefits to take risks even if the potential is failure. Other businesses can learn from an entrepreneurs failure. Some businesses are an extension of the owners personal creativity and it is difficult for them to be objective. Family businesses have an emotional core that makes it difficult to be objective. Grief is a negative emotional response a person feels from the loss of something important. Grief can interfere with the persons ability to learn from the failure. Grief can interfere with the allocation of attention in the processing of information. Grief Recovery Process 1. Loss Orientation. Working through some aspect of the loss breaking the emotional bonds to the object loss. 2. Restoration Orientation. An approach based on both avoidance and proactiveness toward secondary sources of stress arising from a major loss. It also applies how a person attends to their aspects of their life. This enables a person to distract themselves from thinking about the loss while simultaneously maintaining essential activities necessary for restructuring aspects of their lives. Dual Process for Grief Moving between the two grief processes. Enables a person to obtain the benefits of each while minimizing the cost of maintaining one to long.

Feelings and reactions being experienced are normal. There are both psychological & physiological symptoms of grief. The feelings will diminish as the process moves through the steps.

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT 1. Product Evolution Process. The process for developing and commercializing an innovation. 2. Iterative Synthesis. The intersection of knowledge and social need that starts the product development process. 3. Ordinary Innovations. New products with little technological changes. 4. Technological Innovations. New products with significant technological advancement. 5. Breakthrough Innovations. New products with some technological change. Government as an Innovator A government active in commercializing technology. Technology transfer is commercializing the technology in the laboratories into new products. Federal labs have required the commercialization of their research and have implemented entrepreneurial training. Corporate Entrepreneurship Within an existing business can bridge the gap between science and the marketplace. Existing businesses have the resources, skills, and marketing and distribution systems in place. There is a need for fostering creativity and innovation establishes an entrepreneurial spirit within companies. Independent Entrepreneurship Entrepreneurs often do not know how to interact with all the necessary entities. They may lack resources or managerial skills. Yet, this is the most effective method to bridge the gap between science and the marketplace. Entrepreneurial activities significantly impact the economy by building the economic base and creating jobs. THE FUTURE OF ENTREPRENEURSHIP Risk taking, rewards, independence, and creativity will continue to be the driving force. We live in an age where this is supported by education and governmental units. Entrepreneurial education throughout the world is growing. Increase in course offerings is accompanied by increases in research. Governments understand that innovation is the only way to improve economic bases and create jobs. Society supports entrepreneurs and tends to hold them in reverence in public. These trends will continue.

ETHICS AND SOCIAL RESPONSIBILITY OF ENTREPRENEURS Business Ethics = The study of behavior and morals in a business situation. Entrepreneurship is not an easy lifestyle. The daily stressful situations you must develop a balance between ethical issues and social responsibility. Entrepreneurs tend to depend on their own personal value system because they do not have a support group. The increase of internationally orientated business has impacted ethics in dealing with different cultures. Individual morality and behavioral habits are related and identified as an essential quality of existence. The central question is, For whose benefit and at what expense should the firm be managed? If resource deployment is not fair than a stakeholder in the firm may be exploited. Think of the entrepreneurial process as a tool to achieve outcomes for the benefits of others rather than to the detriment of others. ETHICS: COMPANYS CODE OF ETHICS A guide of principles designed to help professionals conduct business honestly and with integrity. A code of ethics document may outline the mission and values of the business or organization, how professionals are supposed to approach problems, the ethical principles based on the organization's core values and the standards to which the professional will be held. - http://www.investopedia.com/terms/c/code-of-ethics.asp#axzz1wzPe2Xdl