Team Presentation from Economy & Innovation course University of Graz international summer school Seggau 2012

1. “ Add your company slogan ”
Project :
«Entrepreneurial process: growth of firms
and changes in organizational structure
and entrepreneurial leadership styles»
Students:
Darousis Eleftherios
Olga Gladuniak
Victoriia Shevchenko
Kamila Hajivena
Seminar Module: Economy & Innovation
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2. Entrepreneurial Process
 To understand the process nature of entrepreneurship
 To recognize the existence, core contents and
interrelatedness of two entrepreneurial sub –processes:
discovery and exploitation
 To appreciate the non–existence of a universally best
approach to exploiting venture ideas
 To understand under what conditions a systematic,
planned and linear process may be suitable, and when a
more iterative and flexible process is appropriate

3. What are the outcomes of setting up new
businesses?
 It gives consumers new choice alternatives
 It gives incumbent firms reason to shape up
 It attracts additional followers to enter the market,
further reinforcing the first two effects

4.  Business idea
 Product
 Market
 Organization
 Core group expertise
 Core group commitment
 Customer relations
 Other relations

5. Sequence of start-up behaviours
 Write a business plan
 Gather information about customers
 Talk to customers
 Make financial projections
 Establish a legal entity
 Obtain permits and licenses
 Secure intellectual property as far as possible
 Seek financing
 Acquire inputs

6. The potential roles of uses of business plan
Analysis tool
Communication tool
Commitment
Guide to action

7. The Discovery Process
 Discover is used for the ideas side of business
development, as opposed to the realization side, which
is called exploitation
 Researching Davidsson could confirm that business
ideas were the result of three different search
processes
 Proactive search
 Reactive search
 Fortuitous discovery

8. The Exploitation Process
Efforts to legitimize the start-up, such as creating a legal entity,
obtaining permits and licences, developing a working prototype of
the product and developing relations with various stakeholders
Efforts to acquire resources,such as core group
expertise,financial capital,intellectual property, and other inputs.
Efforts to combine and coordinate these resources through the
creation of functional organisation.
Efforts to generate demand through marketing and the
development of customer relations.

9. The Exploitation Process
Shane and Eckhardt emphasise that sufficient research-based knowledge
about the prevalence and success rates of these does not yet exist
It is possible to exercise informed speculation about the fit between type
of idea and exploitation mode
The four cases are as follows:
•Case one this concerns discovery as well as exploitation by independent
individuals: the independent start-up mode.
•Case two this concerns both discovery and exploitation within a
corporate venturing mode
•Case three discovery within an existing corporation and exploitation by
an independent start-up the spin-off mode.
•Case four this concerns discovery by independent individual and
exploitation by established corporations: the acquisition mode of
exploitation.

10. Growing Concerns
 Small businesses vary widely in size and capacity
for growth
 Characterized by:
Independence of action
Differing organizational structures
Varied management styles
 A framework that describes five stages of business
development

11. Developing of a small business
 Stage I. Existence
 Stage II. Survival
 Stage III. Success
 Substage III-D. Success-Disengagement
 Substage III-G. Success-Growth
 Stage IV. Take-off
 Stage V. Resource Maturity

12. Stage I. Existence
 Main issue is to obtain customers and delivering the
product/service
 Companies that are newly started restaurants and
retail stores to high-technology manufacturers that
have to stabilize either their production process or
product quality

13. Stage II. Survival
 Business has realize that it is a “workable business
entity”
 Main issues in this stage
Enough money to achieve break even and to cover
the repair/replacement of our capital assets?
 Generate enough cash flow to stay in business
and to achieve finance growth to a reasonable big
size

14. Stage III. Success
 Exploit the company’s accomplishments and expand
or keep the company stable and profitable
 Substage III-D. Success-Disengagement
Achieved true economic health, efficient size and
gain big product market space  economic
success
 Substage III-G. Success-Growth
Achieve union and collaboration inside the
business and use all available resource for the
purpose of growth

15. Stage IV. Take-off
 Main issues in this stage:
Ways to grow rapidly
How to finance that growth
 Areas of interest:
Delegation
Cash

16. Stage V. Resource Maturity
 Main concerns:
Consolidate and control the financial gains
brought on by rapid growth
Retain the advantages of small size(flexibility of
response/entrepreneurial spirit)

17. Key Management Factors
 Financial resources, including cash and borrowing power
 Personnel resources, relating to numbers, depth, and
quality of people, particularly at the management and staff
levels
 Systems resources, in terms of the degree of
sophistication of both informational and planning and
control systems
 Business resources, including customer relations, market
share, supplier relations, manufacturing and distribution
processes, technology, and reputation

18. Key Management Factors
 Owner’s goals for himself or herself and for the
business
 Owner’s operational abilities in doing important jobs
such as marketing, inventing, producing, and managing
distribution
 Owner’s managerial ability and willingness to delegate
responsibility and to manage the activities of others
 Owner’s strategic abilities for looking beyond the
present and matching the strengths and weaknesses of
the company with his or her goals

19. Critical developmental questions
Where has an organization been?
Where is it now?
What do the answers to these questions
mean for where we are going?

20. Evolution describes prolonged periods of
growth where no major upheaval occurs in
organization practices
Revolution is used to describe those periods
of substantial turmoil in organization life

21. Key Forces in Development
 Age of the organization
Size of the organization
Stages of evolution
Stages of revolution
Growth rate of the industry

22. Model of Organization Development

23. The Five Phases of Growth

24. Tip

25. Phase 1: Creativity
 The company’s founders are usually technically or entrepreneurially
oriented, and they disdain management activities; their physical and
mental energies are absorbed entirely in making and selling a new
product
 Communication among employees is frequent and informal
 Long hours of work are rewarded by modest salaries and the promise of
ownership benefits
 Control of activities comes from immediate marketplace feedback; the
management acts as customers react

26. The Leadership Crisis
 Larger production runs require knowledge about the
efficiencies of manufacturing
 Increased numbers of employees cannot be managed
exclusively through informal communication
 New employees are not motivated by an intense dedication
to the product or organization
 Additional capital must be secured, and new accounting
procedures are needed for financial control

27. Phase 2: Direction
 A functional organization structure is introduced to separate
manufacturing from marketing activities, and job assignments become
more specialized
 Incentives, budgets, and work standards are adopted
 Communication becomes more formal and impersonal as a hierarchy
of titles and positions builds
 The new manager and his key supervisors take most of the
responsibility for instituting direction, while lower-level supervisors
are treated more as functional specialists than as autonomous
decision-making managers

28. Phase 2: Direction
 A functional organization structure is introduced to separate
manufacturing from marketing activities, and job assignments become
more specialized
 Incentives, budgets, and work standards are adopted
 Communication becomes more formal and impersonal as a hierarchy
of titles and positions builds
 The new manager and his key supervisors take most of the
responsibility for instituting direction, while lower-level supervisors
are treated more as functional specialists than as autonomous
decision-making managers

29. The Autonomy Crisis
 The new directive techniques become inappropriate for
controlling a larger, more diverse and complex
organization
 Lower-level employees find themselves restricted by a
cumbersome and centralized hierarchy, they have come to
possess more direct knowledge about markets and
machinery than do the leaders at the top; consequently,
they feel torn between following procedures and taking
initiative on their own

30. Phase 3: Delegation
 Much greater responsibility is given to the managers of plants and
market territories
 Profit centers and bonuses are used to stimulate motivation
 The top executives at headquarters restrain themselves to managing
by exception, based on periodic reports from the field
 Management often concentrates on making new acquisitions which
can be lined up beside other decentralized units
 Communication from the top is infrequent, usually by
correspondence, telephone, or brief visits to field locations

31. The Control Crisis:
 Top executives sense that they are losing control over a
highly diversified field operation
 Autonomous field managers prefer to run their own shows
without coordinating plans, money, technology, and
manpower with the rest of the organization

32. Phase 4: Coordination
 Decentralized units are merged into product groups
 Formal planning procedures are established and intensively reviewed
 Numerous staff personnel are hired and located at headquarters to
initiate company-wide programs of control and review for line
managers
 Capital expenditures are carefully weighed and parceled out across
the organization

33. Phase 4: Coordination
 Each product group is treated as an investment center where return
on invested capital is an important criterion used in allocating funds
 Certain technical functions, such as data processing, are
decentralized at headquarters, while daily operating decisions remain
decentralized
 Stock options and company wide profit sharing are used to
encourage.

34. The Red-Tape Crisis:
 A lack of confidence gradually builds between
headquarters and the field
 The proliferation of systems and programs begins to
exceed its utility

35. Phase 5: Collaboration
 The focus is on solving problems quickly through team action
 Teams are combined across functions for task-group activity
 Headquarters staff experts are reduced in number, reassigned, and
combined in interdisciplinary teams to consult with, not to direct, field
units
 A matrix-type structure is frequently used to assemble the right teams
for the appropriate problems
 Previous formal systems are simplified and combined into single
multipurpose systems

36. Phase 5: Collaboration
 Conferences of key managers are held frequently to focus on major
problem issues
 Educational programs are utilized to train managers in behavioral
skills for achieving better teamwork and conflict resolution
 Real-time information systems are integrated into daily decision
making
 Economic rewards are geared more to team performance than to
individual achievement
 Experiments in new practices are encouraged throughout the
organization

37. Organization Practices During Evolution in
the Five Phases of Growth

38. Explicit guidelines for managers of growing
organizations
 Know Where You are in the Developmental
Sequence
 Recognize the Limited Range of Solutions
 Realize that Solutions Breed New Problems

39. Conclusions
 Growing organizations move through five distinguishable
phases of development, each of which contains a
relatively calm period of growth that ends with a
management crisis
 Since each phase is strongly influenced by the previous
one, a management with a sense of its own organization’s
history can anticipate and prepare for the next
developmental crisis
 Appropriate management action in each of the five phases
can turn organizational crises into opportunities for the
future growth

40. Questions for the class
 What are the different possible uses of a business plan?
 What’s the affect of technology in change management
procedure by your opinion?
 What about the managements of very large
organizations? Can they find new solutions for continued
phases of evolution?

41. “ Add your company slogan ”
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