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Notes on Entrepreneurship

Entrepreneur: A person who maximises their utility. Utility = What you want.
o Entrepreneur has good management skills and good networks along with being highly creative and
innovative.
Entrepreneurial activity can be Productive, Unproductive or Destructive (eg. Crime, robbery, trafficking drugs
or people).
For entrepreneurship, Access to resources is important not ownership
Behavioural Model

Belief Structures
Self-Image
Perceived societal


norms
Fear of failure
Psychological


Heuristics
Ethical values
state
Motivation
Self-efficacy
Aptitude
Intelligence (IQ, EQ)
Education
Training
Personality Ability Experience

Difference between Entrepreneurial and Managerial behaviour (Stevenson 1998)


Entrepreneur Manager
Opportunity Driven Strategic Orientation Resources Driven
Quick and Short Commitment to Opportunity Long and Slow
Minimal, Multi-Stage Commitment of Resources Single Stage
Use or Rent Control of resources Own or Employ
Networks, non-hierarchical Management Structure Formalised Hierarchical
Value & team based Compensation and Rewards Individual, Hierarchical

Entrepreneurial Opportunities
Types of opportunities
Needs (Problem)
Unidentified Identified

Undefined Fantasy Market Pull


Solutions

Defined Technology Push Business Opportinity


Ansoffs Growth Vectors

New
C D

Market

Essential/ A B
Existing
Essential/Existing New
Products

A) Market Penetration: Risk


o Customer Service
o Quality
o Marketing
B) Product Development: Risk
o New products for existing customers
o New Product Development (NPD)
o Latent customer needs
C) Market Development: Risk
o Existing products for new markets
o Marketing
o Geography
o Type of customer
D) Diversification: Risk
o New product to new customer

Customer Activity Cycle


1. PRE before purchase, use of purchase service, research into product
2. DURING while product/service is in use
3. POST Aftercare, future needs

PEST(EL) Analysis: Political, Economic, Social, Technological, Environmental, Legal

Market Assessment
1. Market Segmentation: Identify Niche market
2. Gather Market info: quantitative and qualitative
3. Sales strategy: milestones and decisions
Technology led: Technology customer
Market led: customer (market research)Product
New players have to follow Market led strategy.

Market Segmentation is very important: 3 segmentation factors:


1. Characteristics of the customer
Who is the customer?
2. Purchase/Use
How will the customer purchase and use the product/service?
3. Needs and Preferences
What are the customers needs and preferences?

Entrepreneurial team
Importance of team
Very difficult to raise funds without a team
Contribution of capital
Diversity of perspectives
Mix of functional skills
Social and psychological support
Personality: Thinking styles
Clarifier
1. Clarifies the need/pain
2. Focuses on details to identify the exact need to be fulfilled
3. Detailed analysis of problem
4. Does not rush to find a solution
Ideator
1. Looks at the bigger picture
2. Innovative thinking to come up with workable solutions
3. May not be detailed or thorough about solution
Developer
1. Assemble workable solutions
2. Weighs the pros and cons of each solution
3. Plans a strategy for implementation
4. May be a perfectionist and may get stuck developing a perfect solution
Implementor
1. Gives structures to ideas
2. Focuses on workable solutions implements solution with a just-do-it (JDT) approach
3. May jump to actions too quickly
Integrator
1. Responsible for team performance
2. Is usually clear about roles and responsibilities
3. Understands team dynamics
4. Give equal energy across all thinking styles and bridges the differences

Value Chain
Value Chain: shows all the stages involved in making and delivering the product/service to the customer
Complementary Assets: Assets needed to translate an innovation in to commercial returns (teece,1986)
Value Chain Analysis
1. Plot the Value Chain around the business
2. Identify the position of the product/service/idea in the chain
3. Identify where the value is created
4. Analyse the chain: what is the weight/power of the business in relation to the upstream (Technological)
and downstream (Distribution) players in the chain
5. Identify the economic and operational impact of the chain on the business
Teece Framework
Complementary Assets
Freely available /
Tightly held & important
unimportant

Holder of Complementary
Appropriability

Low Difficult to make money


Assets

Inventor or party with


High Inventor
bargaining power

Strategy based on Teece Framework


Complementary Assets
Freely available /
Tightly held & important
unimportant
Established businesses Possibility of contracts
Appropriability

Low can easily imitate (Reputation based ideas


(Attackers Advantage) trading)

Choice between contracts Contract with established


High and market companies
(Greenfield competition) (Idea Factory)

Translated into entrepreneurial strategy:


3 types of growth
1. Employment growth
Business seeks exit strategy
Attracts external capital for technology development
Builds legitimacy and trust in market
o Signalling: Active public communications, high visibility in market
o Hire Top Management Team (TMT) members
Seeks Venture Capitalists for funding
2. Revenue growth
No external capital
Growth is financed by generated cashflow
Under the radar operation
3. Employment + Revenue growth
(Check for addition and updates in a couple of days.)