1 introduction to entrepreneurship


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1 introduction to entrepreneurship

  1. 1. Introduction to EntrepreneurshipLecture 1 13.12.2012 © Aleksei Efimov 13.12.2012 1
  2. 2. 13.12.2012• The entrepreneur is a factor in microeconomics, and the study of entrepreneurship reaches back to the work of Richard Cantillon and Adam Smith in the late 17th and early 18th centuries, but was largely ignored theoretically until the late 19th and early 20th centuries and empirically until a profound resurgence in business and economics in the last 40 years. History 2
  3. 3. 13.12.2012 • What is Entrepreneurship?1. The act of being an entrepreneur or "one whoundertakes innovations, finance and businessacumen in an effort to transform innovations intoeconomic goods“ (Shane, Scott, 2003)2. The pursuit of opportunity without regard to h i f i ih dresources currently controlled.(Stevenson, 1983)3.It’s neither a science nor a an art. It is a practice.(Peter Drucker 1985) Drucker, Introduction 3
  4. 4. 13.12.2012• What is Entrepreneurship?4. A independent activity, performed at ones An i d d t ti it f d t own risk, aimed at systematically deriving a profit f fit from th use of th property, th sale of the f the t the l f commodities, the performance of work or the rendering of services b th persons, registered d i f i by the i t d in this capacity in conformity with the law- established procedure (The Civil Code Of The Russian t bli h d d Federation). Introduction 4
  5. 5. 13.12.2012Attitude towards entrepreneurship in Russia, 2011, % 5
  6. 6. 13.12.2012Assessments of conditions for opening a business, 2011, % 6
  7. 7. 13.12.2012Dynamics of entrepreneurial intensions in Russia, % 7
  8. 8. 13.12.2012Dynamics of entrepreneurial activity in Russia, % 8
  9. 9. 13.12.2012• What is Entrepreneurship?What’s the difference between doing Business and Entrepreneurship?What’s the difference bet een Businessman and betweenEntrepreneur? Introduction 9
  10. 10. 13.12.2012• Y Your b i business will only achieve i true potential when ill l hi its i l h you begin to "think business."• By adopting the right entrepreneurial mindset, you can improve your chances for success and avoid suffering a similar fate as that of most of new small firms. What is Entrepreneurial Mindset? 10
  11. 11. 13.12.20121. Check Your Ego at the Door• Have you ever heard yourself say, "This is my business; Ill do whatever I want with it!” d h t t ith• You may be brilliant, but you need to realize that you do not know everything; in fact, no one does. Hence you fact does Hence, may need collaboration and inputs from other people, which you can only maximize if y set y y y you your ego aside. g• In entrepreneurial mode, you also have to stop thinking in black or white. You need to learn how to explore every option in bbetween, including every imaginable exception. l d bl The Entrepreneurial Mindset: some rules 11
  12. 12. 13.12.20122. Create Curiosity• Curiosity is the driving force behind business thinking. Curiosity C i it provides you th motivation t seek out new id the ti ti to k t options, opens your minds and creates an atmosphere of asking "what if questions that get to the heart of the what if" matter.• What you currently know sometimes g in the way of y y gets y what you need to know, but dont know.• For your creativity to produce outstanding results, you need to f d first l learn as much as possible outside your own h bl d knowledge and expertise. Be a sponge for information and use it to refresh your experience and knowledge rather than allowing yourself to feel as if new information puts y at risk. p you The Entrepreneurial Mindset: some rules 12
  13. 13. 13.12.20123. Move Off the SolutionDontD prematurely fl focus on the solution i lf and fi d h l i itself d find "quick fixes" to your problems.A solution is worthless unless and until it creates value, prevents a problem or invents a new result the business needs. The Entrepreneurial Mindset: some rules 13
  14. 14. 13.12.20124. Get Evidence• T clarify the problem, you need to ask the f ll i To l if h bl d k h following questions: What proves you have a problem? What? How? When? Where? Who? Then start searching searching, digging and looking for evidence.• Some of the best businesspeople ask the obvious questions, the answers to, which are almost never obvious. In fact, its the obvious questions or the politically sensitive questions that many are afraid to ask. ask Collect soft evidence and then turn it into hard evidence that the business can measure. The Entrepreneurial Mindset: some rules 14
  15. 15. 13.12.20125. Calculate the Impact• Y need to abide b i to weigh every i You d bid by is i h investment against its return. What is the impact, financially or strategically, strategically of this decision on your business?• You must never let cash out the door that doesnt strictly ultimately bring more cash back. Any expense - whether y g y p technology, training, equipment, advertising - should be eliminated if it will not contribute either to increasing revenue or d decreasing costs.• You also need to identify benchmarks to help you determine and measure your success success. The Entrepreneurial Mindset: some rules 15
  16. 16. 13.12.20126. Explore the Ripple EffectMore than calculating the fiM h l l i h financial i i l impact of a b i f business decision, you must always ask yourself, "Who else will be affected by my decision?" decision?You may want to know how the current problem or the opportunity under consideration could affect your life, your family, or your employees. The Entrepreneurial Mindset: some rules 16
  17. 17. 13.12.20127. Slow Down For Yellow LightsIf the problem or opportunity i so bi ask what h h bl i is big, k h has stopped you in the past from doing something about it, and what could stop you in the future future.Watch out for possible obstacles. If you get a yellow light early, take your best shot at resolving it. Even if you fail and get to a red light, youll have saved time and money at the very least. The Entrepreneurial Mindset: some rules 17
  18. 18. 13.12.20128. Find the CauseSimply kiSi l asking why will give you the tools to di f the h ill i h l dig for h underlying reason for the problems, and to make sure you re youre treating the source, rather than the effects source effects.Having proof you need a solution (the effects), and knowing what solution y need are two different things. g you gYou need to understand the underlying truths. Ask yourself the questions: Why is this happening? Are these symptoms or causes? The Entrepreneurial Mindset: some rules 18
  19. 19. 13.12.2012• Is this 8 rules about entrepreneurial mindset? behavior?• Or just business thinking?• What is inside a head of an entrepreneur?• Is this a way of your behavior or a part of your personality? The Entrepreneurial Mindset: some rules 19
  20. 20. 13.12.20121. They are comfortable “living in a fog.”Living in 40/70 zone –making decisions with at least 4 g 40% but usually no y more than 70% of the data normally required for action.62% of entrepreneurs in the USA claim “innate innate drive” as the number one motivator in starting their business. Portrait of an Entrepreneur 20
  21. 21. 13.12.20122. They assemble a team of people to work with them.If an entrepreneur’s vision cannot convince at p least one other person to join him or her, then p perhaps the vision is not so fantastic. pAll ideas must be chiseled away at in order to make them viable. Portrait of an Entrepreneur 21
  22. 22. 13.12.20123. They show persistence and determination.Persistence should not, however, be confused with stubbornness.Stubbornness is a failing.Entrepreneurs are always listening for and using the data they receive to tweak their ideas until an idea morphs into something fundable, something that gains traction. Portrait of an Entrepreneur 22
  23. 23. 13.12.20124. They have conviction.True entrepreneurs are good at paying attention to trends and adjusting their thought p j g g processes accordingly.An entrepreneur is a bit like a sculptor at work; they start with a slab of marble which, over time, with skill, passion and hard work is shaped into a beautiful thing. Portrait of an Entrepreneur 23
  24. 24. 13.12.20125. They have passion.Entrepreneurs have a passion for an idea and are not put off by the p p p y prospect of hard work.Without true passion, an entrepreneur would give up at the first obstacle. Passion motivates the entrepreneur. Portrait of an Entrepreneur 24
  25. 25. 13.12.2012 Internal Factors:• Desire to do something new.• Educational background.• Occupational background or experience. p g pExternal Factors:• Government assistance and support support.• Availability of labour and raw material.• Encouragement from big business houses houses.• Promising demand for the product. Factors motivating people to be Entrepreneurs 25
  26. 26. 13.12.2012Factors Intrinsic to Entrepreneurs• Enterprising attitude.• Training /education in such type of production.• Previous experience in the same or related line. pFactors Extrinsic to Entrepreneur• Shortage of demand for product product.• Govt. and institutional assistance.• Advice of business friends friends.• Profit earned by friends in same concern.• C t t with others. Contact ith th• Unsound unit available at cheap price. Intrinsic and Extrinsic factors 26
  27. 27. 13.12.2012• Devotion of organisational skills to areas other than business e.g. politics• C t Customs and traditions of th l lit either restricting d t diti f the locality ith t i ti business or prohibiting it.• Poor response to monetary incentives incentives.• Low status given to businessmen in the society.• Lack of adequate infrastructure facilities.• High cost of production.• High risk involved in new enterprises. g p• Imperfect conditions prevailing in the market which discourage prospective entrepreneurs to organise new business ventures.• Frequent changes in govt. policies and laws being administered quite arbitrarily. d i i t d it bit il Barriers inhibiting entrepreneurship 27
  28. 28. 13.12.2012• It is a process through which a new venture is created by an entrepreneur.• The entrepreneurial p p process consist of 4 Phases:I. Identification and evaluation of opportunity.II. Develop business plan.III.III Resources required required.IV. Manage the enterprise. Entrepreneurial process 28
  29. 29. 13.12.20121.Identify and evaluate the opportunity• Assessment of opportunity.• Creation and length of opportunity. g pp y• Real and perceived value of opportunity.• Risk and returns of opportunity opportunity.• Opportunity vs. personal skills and goals.• Competitive environment environment. Entrepreneurial process 29
  30. 30. 13.12.20122.Develop2 Develop business plan• Title page• Table of content content.• Executive summary.• Major sections: ▫ description of business, industry ▫ technology p gy plan ▫ marketing plan ▫ financial plan ▫ production plan ▫ organizational plan ▫ operational plan ▫ summary.• E hibi Exhibits. Entrepreneurial process 30
  31. 31. 13.12.20123.Resources required• Determine resources needed.• Determine existing resources. g• Identify resources gap and available suppliers.• Develop access to needed resources resources. Entrepreneurial process 31
  32. 32. 13.12.20124.Manage the enterprises• Develop management style.• Understand key variables for success. y• Identify problems and potential problems.• Implement control system system.• Develop growth strategy. Entrepreneurial process 32
  33. 33. 13.12.2012• Primary motive : Independence , opportunity to create and money.• Ti Time orientation : S i l and achieving 5-10 years i t ti Survival d hi i 10 growth of business.• Activity :Direct involvement of the entrepreneur entrepreneur.• Risk : they are moderate risk takers.• Status : They are not concerned about status symbols.• Failure :They deals with mistakes and failures.• Decisions: Follow dreams with decisions.• Who serves: Self and customers.• Family history : Entrepreneurial small business , professional or farm background.• Relationship with others : Transactions and deal making as basic relationship. ki b i l i hi Entrepreneurial Culture 33
  34. 34. 13.12.2012• Why should an entrepreneur change something around us?• And want is Innovation?• Innovation is a specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. (Peter Drucker, 1985) Innovation And Entrepreneurship 34
  35. 35. 13.12.2012• Everyone who can face up to decision making can learn to bean entrepreneur and to behave entrepreneurially.• Entrepreneurship is behavior rather than p personality trait. yLook around the room.What do you see?What will see an entrepreneur as an innovator? Innovation And Entrepreneurship 35
  36. 36. 13.12.2012• What is the main difference between two businesses? Between two entrepreneurs?• And what is very hard to copy?• Finance?• Idea?• People?• Place?• Product?• Price?• Something else? Improvisation, Intuition and Inspiration 36
  37. 37. 13.12.2012Improvisation • is a performer’s greatest creative act • something that is improvised in particular a piece improvised, of music, drama, etc. created spontaneously or without preparationIntuition • the ability to understand something instinctively, without the need for conscious reasoningInspiration • the process of being mentally stimulated to do or feel something especially to do something creative something, Improvisation, Intuition and Inspiration 37
  38. 38. 13.12.20121. Wh d I want to start a business? OR Why am I i Why do tt t t b i ? Wh in business?2. Specifically2 Specifically, what kind of business do I want to start (or am I in)?3. Why do I believe I can make this type of business work?4. Why do I believe this type of business is sustainable?55. What education, skill or experience do I have in this , p industry?6. What is my true purpose and/or the goal I hope to accomplish with this b l h h h business?7. What is the financial goal I am seeking to achieve?8.8 If I will need financing, do I have th resources and credit ill d fi i d h the d dit worthiness necessary to be eligible? [High credit score plus assets, assets collateral and good financial history.] history ] Are You Ready To Be In Business? 38
  39. 39. 13.12.20129. Wh t are my strengths? What t th ?10. What are my weaknesses?11.11 What is my physical, mental and emotional health and physical stamina?12.12 What knowledge and skills do I have to start and control the day-to-day operations of a business?13. Do I know and understand the technology necessary to be 3 gy y competitive in this business?14. Do I have good judgment in people and ideas?15. What sacrifices and Risks am I willing to take to be successful?16. Wh t will it take for me to balance personal lif and 6 What ill t k f t b l l life d business demands? Are You Ready To Be In Business? 39