Basics of Entrepreneurship Schu: fi economic developmen’: eS entrepreneur as the bearer of the mechanism for change and , ent, and entrepreneurship as the undertaking of new ideas and ne combinations that is innovations. H n a bee ccording to Peter Drucker “A - n Entrepreneur always searches for a change, responds t it and always exploits it” i nore soy Cbster definition of entrepreneur “the one, who organizes, manages and assumes risks of a business or an enterprise” ¥ 1.4 DEFINITION OF ENTREPRENEURSHIP The set of actions or processes through which entrepreneur creates a value/ product/ service is basically entrepreneurship. Entrepreneurship, according to Onuoha (2007), “is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities.” ___ According to Professor Howard Stevensonof Harvard BusinessSchool,”Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled.” Peter Drucker defined entrepreneurship as, “a systematic innovation, which consists of the purposeful and organized search for changes, and it is the systematic analysis of the opportunities. Such changes might offer economic and social innovation.” 1.4.1. Elements of Entrepreneurship Entrepreneurship in the-modern world is inherently about introducing the di: change, creation ‘of ‘novelty through innovations, to make work and. leisure much more enjoyable and everlasting. Entrepreneurship inherently involves three elements which are uptive * Identification of opportunity * Value creation and : Bereinicuishe ioe fat 3 * Resource mobilization: The three basic elements of entrepreneurship are depicted in the following diagram: value creation through : resource “| mobilization identification of ‘ opportunity innovation and creativity The success of any venture / entrepreneurial derive would greatly rely on the ability to profitably convert an opportunity into a sustainable business model by adding bigger value to the resources than the value being added by competitors. Value creation depends upon the extent to which a customer is willing to happily spend a sum of money on a product/service. For e.g. a consumer may spend 10 million on a painting by a famous painter say M.F. Hussain or buy a penthouse constructed by a realty developer like DLF.7 Entrepreneurship Entrep y t nly when the value derive, of money © acs a eeces being spent for suchautiliyy | an the sum of tangible and intangible reso cores of people er differ C8 Mobile phones industry expanded es Racilitated by more cost effective ferent parts of worlds switched to mobile phones. This was fact ne one offers Mee eohivesics tie Bae eer Vivo and o| Peay dlitintingte, With advanced features at an affordable prices to the end consumer margin of big companivs like Motorola, Nokia and as a certa SoU S¥eE the customer would like to spend asum im is more th; 4 Apple ete in set of functions that lead to following Entrepreneurship can also be studied activities: * Undertaking an economic activity, * Dynamic in natu * > Risk bearing innovation and creativity, * Organizing activity Ff + Aimed at filling the gap while giving reward for it Mean also be mierpreted through the following Diagram 1 ee Kn Ecotiomie activity ‘A Dynamic function A gap filling function while being rewarding J° also 1.5 CAN AN ENTREPRENEUR BE A MANAGER ALSO? Often it is debated whether an entrepreneur is a Manager or not. An entrepreneur is an takes to bring an entity through an idea generation,conceptualizatior as well as ow, time while a with in the entrepreneu acts, distincti n and pooling of resources, Entre ers; hence an entrepreneur can be Manager cannot be an ent Well defined contours of hi ur may also cease to work have grown ‘up toa certain level. At th: to separately look for day to day activi Basics of Entrepreneurs) ities. * ae ;Preneurs perform the function of managers an owner and a manager at a same point of repreneur. A manager functions and fulfills his duties is employment contract with an employer. Further an a5 a manager once his enterprise starts expanding and ‘at point of time, he may also induct a qualified manager An entrepreneur can be a manager but a manager cannot be an entrepreneur unless he cea intrapreneur with a large corporate house’. For readers understanding, a clear cut jon between an entrepreneur and a manager is given in the following Table 2 Table 2: Difference between an Entrepreneur and a Manager S.No Basis Entrepreneur Manager 1 Motive To seize an- opportunity by|To render his services as per pooling resources through a] terms of employment contract business model between him and employer/ owner Status Owner as well asa manager __| Only Manager Bearing of risk Directly bears the risk and|No onus to bear the risk, uncertainty attached — with | only responsible for the tasks running the business assigned to him, sa feet Reward Gels the whole” reward. for| Obtains reward in the form of bearing the risk but reward is | Salary which is certain and fixed uncertain and varying also. ‘ 5. | Tasks being Innovator, an organizer, a Executor of the tasks beirig performed change agent 8 assigned tohim 6 Qualification No specific professional | Professional and, management competence or skill required, | knowledge along with preferred : However, must ‘possess some| experience in the similar basic, traits like creativity, risk | industry or job profile yg and far sightédness 5 e i growth Limited and dependent on his - pana ieaiabr performance ee aligned with the firm’s objectives.ty 1.9 ENTREPRENEURIAL PROCESS me ar A typical entrepreneurial process will begin with the following steps: 1 ie) Discovery of an Idea: an entrepreneur .generates an idea and looks after the opportunity. If the opportunity seems profitable he would like to align his own set of hobbies, interest with the business proposition. He would also look at the consumer base by conducting market research to’ assess the expected market demand for the potential product. For example. idea’ of switching from hand held devices to mobile phones j sj Concept development: when the entrepreneur is assured about the lucrative opportunity, then he will construct formal and detailed business plan to figure out how, when and where he wants to achieve this. For e.g. Development of mobile phones in the year 1973 by Martin cooper, an employee of Motorola Company. Seeking resources: now the entrepreneur would like to sell his business novelty to venture capitalists to ensure thathis proposal comes on the floor. Along with finances he will seek human, physical and other ancillary resources to carve out the requisite resources for the business operations. For example, necessary band width, network towers and other infrastructure were sought by mobile ee companies to provide connectivity for mobile phone users. Actualization of operations: finally the business by employing the pooled resources at the pre-decided location will produce the product or service. Through both online and offline marketing, the product or service will be eventually distributed/ supplied to theend reach customers. During this process the business starts generating revenues also, For e.g. after the successful testing of hand held mobile phones, they were produced for masses by Nordic Countries (Sweden, Finland and Norway). 5. Harvesting: the outcome of the operations will now guide the future course of action for the entrepreneur: the success would motivate the entrepreneur to draw future expansion and growth strategy. On the other hand if not well received by consumers, the entrepreneur would have to take the final call and close the business or alternatively discover and locate another opportunity. For example, the success of mobile phones has led to introduction and adoption of M-Commerce. The entrepreneurial process has been depicted through a diagram in Figure 1 Discovery: gendeation of Idea, recognize the | opportunity, find.them’ gap in the market Harvesting: deciding the future growth, expansion or closure pooling venturer capitalists and other resources Actualization and start of operations Figure 1 1.10 PREREQUISITES/ TRAITS / CHARACTERISTICS OF ANENTREPRENEUR The streak of young as well as successful entrepreneurs under the’age of 30 years or 40 years have made Entrepreneurship, a promising and ‘at least try for once’ career option. The notable young entrepreneurs like Mark Zuckerberg (Facebook), Kevin Systrom (Instagram), Biz Stone and Evan Williams (Twitter), by making billions of wealth in a short span of time, have strongly made youngsters to believe in themselves and follow their passions and creative zeal. Many times researchers, academicians and business men discuss whether entrepreneurs are born or made. But still, most of them agree on some common traits of an entrepreneur. In the following section, our readers are provided by a crisp list of some of the most desired quintessential traits to become a successful entrepreneur: * Creativity * Innovativeness * High appetite for Risk taking * Vision coupled with diligence ?{ i Basics of Entrepreneurship * Perseverance * Self belief * Trying the ‘New’ + Leadership skills + Negotiation and coordination * Communication skills * Adaptability to hostile conditions * Quick decision making to seize the opportunity * Optimism to rise after failure * Integrity, honesty and empathy The above list is not an exhaustive list, yet it tries to reflect some of the preferred characteristics which have been demonstrated by successful entrepreneurs over the years © 4.41. DETERMINANTS: OF ENTREPRENEURSHIP Entrepreneurship can’t sustain and thrive for long without the right kind of support from various stakeholders. The requirement for much needed impetus is though more apparent in nevertheless a well groomed entrepreneurial he real benefits of entrepreneurship to all Cooperation and Development (OECD) erminants the nascent stages than towards the later ones, ecosystem is always needed to penetrate down t sections of society. The Organisation for Economic Eurostat Entrepreneurship Indicators Programme (EIP), has drawn list of certain det for entrepreneurship from the reports “Quality Assessment of Entrepreneurship Indicators”, prepared by an agency called FORA in Denmark. The list includes six factors which are only the broad dimensions for facilitating a fruitful and everlasting environment for promoting entrepreneurship in any economy: 1. - Regulatory framework ‘Market conditions Access to finance Creation and diffusion of knowledge Entrepreneurial capability Entrepreneurial culture. Regulatory framework: It includes control or procedures that may act a like administrative norms for entry and exit regulations, bankruptcy norms, court and le; income and wealth taxes, patents procedures and standards, regulatory framework only. As per the list of ease of doing the business, complied by World Bank, New Zealand top the list with just.a single day needed to start a business, whereas way back home, India managed to beg, 100th staggering 155 days to start a business in India. 2. Market Access: it covers aspects like entry and exit barriers, integration in the industry, relevant rules and regulations covet Payee LP various Government administered and introduced a facilitator or obstructer for a startup. Factors it of business, product and labour market gal framework, social and health security, constitute part of place in the list, having degree of vertical ing exports and114 Entrepreneurship imports, licensing requiréments, availability of land or other ancillary facilities, availability of information and communication technology (ICT), area population and po on. A new industry vis-a vis an established industry provides greater access and bigger opportunities to grow. Meanwhile old established industries also need new firms to innovate and rejuvenate the saturated industry. 3. Availability of finance: finance has been a very crucial element for the success of any business venture. Many times startups fail either at the seed stage or later at growth stage due to paucity of funds. The volume as well as the ease with which finance can be availed by entrepreneurs in a country like India is a decisive factor in the success story of any entrepreneurial venture. Factors like grant of loan, prevalent interest rates, Presence of venture capitalists and access to primary as well as secondary sources of finance, play pivotal role in the growth of many firms. 4. Creation and diffusion of technology: technological innovations have been the bedrock of many thriving “ventures. Especially in case of e-commerce industry, technological advancement and accompanying easé and cost effectiveness have led to. the exponential growth of this industry. Factors like Research and development (R&D), presence of institutions\ Government and international agencies supporting innovation and R&D and laws relating to Patents and’ Intellectual property Rights (IPR), promote as well lead to penetration of laws relating to technology in to common man’s life. 5. Entrepreneurial capability:. entrepreneurship being a milti:dimensional approach not only requires organization or environmental facilities: but also rely heavily on individual traits. Traits tike need to. achieve, hard work, education, age, risk taking appetite, creativeness and pérseverance also play a dominant role in deciding the success of any startup. 4 ~-&:Entrepreneurial culture: various factors like motivation, recognition and reward fo entrepreneurial ventures, institutes of tertiary: education, formal education of entrepreneurship, success rate, oferstw hileentrepreneurs, society and family perception about entrepreneurs, together form the right culture to foster entrepreneurship. Especially in the context to large organizations, employees are motivated to assume : risk and develop innovative products and services. This practice is known as, Corporate Entrepreneurship or Intrapreneurship, 1,12 MISCONCEPTIONS AND MYTHS ABOUT ENTREPRENEURSHIP | ptions and mis-beliefs w.r.t entrepreneurship. A startup There are number of misconcey re taking the leap. Following are should be careful while judiciously choosing his venture befo some of the misconceptions and myths about entrepreneurship : 1. Entrepreneurs are high risk takers: most of the people believe that entrepreneurs take uncalculated and unassuming risk to cash in on the opportunity. However adequate brain stormirig and detailed analysis is carried out by entrepreneurs to assume 1 calculated risk in the expectation of returns. 2. Entrepreneurs are born: though some entrepreneurs are born yet not all of them are bérn with a business idea. More than the nature, it is the nurturing that leads toBasics of Entrepreneurship 115 entrepreneurs, If someone has right passion to be an entrepreneur, he can become one Without necessarily having a relevant background. 3. It involves cutting edge technological innovations: all the entrepreneurs be Steve Jobs or Mark Zuckerberg or cult techie. They can pick any form oF line of business and add value to it ~ , 4 Starting business requires huge sum of money: not all the start ups need hug; to begin with. A typical startup can begin with a reasonable sum of $25000 to yet Started. Google was started by its founders from a garage only. More than the money itis the ability to judiciously employ the scarce capital 5. Entrepreneurship is all about getting rich and making qu the desire to earn quickly, it is the passion to create and innovate sum thing, with a utility to end consumers that derive entrepreneurs. Entrepreneurs have a strong, self beliet about an idea for eg. when Bhavish Aggarwal, founder of OLA cabs floated his venture his intent was to provide a hassle free ride to tourists and commuters rather k money: more than than to just make quick money. 6. Venture capitalists are must for success: unless one iittends'to take.up’a startup in nanotechnology, pharma sector, biotech séctor or other high tech ‘sector, business can be commenced with even the personal savings and snizall borrowings. Research shows that venture capitalist (VCs) fund about 3000 companies, and only one fourth companies funded by VCs are in seed or startup stage. 7. Starting a business is a cake walk: unless one is 100% committed and ready to seamlessly work, persevere and bear the tisk, one may not be able to convert the fll venture. Many at times even the personal lucrative business opportunity to succe: and professional lives of entrepreneurs are blurred to fulfill the entrepreneurial vigor s. Ignorance is bliss for entrepreneurs: entrepreneurs need to regularly equip themselves with the latest developments in the business environment and accordingly formulate/ discard or reformulate their detailed plan and strategies for future course of actions. Entrepreneurs proactively apprehend the changes and also devise their ways teaveather them rather than remaining unaware and uniformed about theny Entrepreneurs are doers, not the thinkers: in the éra of cut throat competition entrepreneurs need to think and chalk out a'well thought out strategy before it can be implemented, otherwise successive streaks of failure can knock out the business {rom the market. Hence, before implementation, entrepreneurs need to ponder and analyse in detail the prospects of business success: Entrepreneurs are academic and social misfit: this misconception has been strongly refuted by the presence of highly educated young entrepreneurs who have decided to leave behind their fat package jobs and travel the unexplored road to create a utility 10. "for masses. Closing Cas The Incredible ‘rags-to-riches’ journey of Chinese entrepreneur Li Ka- Shing Born in 1928, in Chiu Chow, a city in the southern Chinese province of Guangdong, LiKa-Shing lost his father at the age of 14 years and was forced to abandon his school to earn a living for his family. Working 16 hours a day in a factory manufacturing