Concept of Entrepreneurship

Everything you need to know about the concept of entrepreneurship. The word

entrepreneur is borrowed from the French language. It is derived from ‘entreprendre’
meaning to ‘undertake’.
Thus, entrepreneur is an ‘undertaker’ in the literal sense of the word. Its usage in
French language can be traced much before the emergence of activities generally
associated with entrepreneurs today. Entrepreneurship is neither a science nor an art. It
is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an
end.
An entrepreneur is a person who is devoted to search something new and exploit the
novel notions and visions into gainful opportunities by bearing the risk involved in the
process.

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The entrepreneur conceives the idea of an enterprise, lives with it, and finally
establishes the enterprise. Entrepreneurship refers to the process of activities
undertaken by an entrepreneur.
Learn about the concept of entrepreneurship.

Additionally, learn about the definitions provided by eminent authors, nature and
expert’s views on entrepreneurship.

Learn about the Concept of Entrepreneurship

Concept of Entrepreneurship – Definitions by Renowned Authors
An entrepreneur is a person who is devoted to search something new and exploit the
novel notions and visions into gainful opportunities by bearing the risk involved in the
process. The entrepreneur conceives the idea of an enterprise, lives with it, and finally
establishes the enterprise. Entrepreneurship refers to the process of activities
undertaken by an entrepreneur.

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Jeffry. A. Timmons in ‘New Venture Creation, entrepreneurship for the 21 st century’

opines “Entrepreneurship is a way of thinking, reasoning, and acting that is opportunity
obsessed, holistic in approach, and leadership balanced for the purpose of value
creation and capture.”
He further adds that, “Entrepreneurship results in the creation, enhancement,
realization, and renewal of value, not just for owners, but for all participants and
stakeholders. At the heart of the process is the creation and/or recognition of
opportunities, followed by the will and initiative to seize these opportunities. It requires a
willingness to take risks both personal and financial-but in a very calculated fashion in
order to constantly shift the odds of success, balancing the risk with the potential
reward.”
According to Arthur Cole, “Entrepreneurship may be defined in simplest terms as the
utilization by one productive factor of the other productive factors for the creation of
economic goods.”
Entrepreneurship -the entrepreneurial function- can be conceptualized as the discovery
of opportunities and the subsequent creation of new economic activity, often via the
creation of a new organization.

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Entrepreneurship is therefore a process which incorporates the activities like visualizing,

risk bearing, organizing and establishing a business enterprise. By essence the concept
of entrepreneurship is dynamic. It is totally engrossed with something new, innovative
and novel. Entrepreneurship as a dynamic process gets manifested through the
endeavours of the entrepreneurs to bring about new combinations, new products, new
production processes, and establishing of new enterprises.
Entrepreneurship is a vital constituent that influences the economic growth of a country
and also influences the global competitiveness of the country.
The process of entrepreneurship involves identification, evaluation and implementation
of new business prospects. The process also involves establishment of new business
firms and enterprises. The innovation also forms an integral part of the process. The
process results in employment generation and improves the living standard of the
people and influence the growth and development of the economy.
According to A. H. Cole, “Entrepreneurship is the purposeful activity of an individual or a
group of associated individuals, undertaken to initiate, maintain or aggrandize profit by
production or distribution of economic goods and services”.

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“The essence of entrepreneurship lies in the perception and exploitation of new
opportunities in the realm of business … it always has to do with bringing about a
different use of national resources in that they are withdrawn from their traditional
employ and subjected to new combinations.”
The Global Entrepreneurship Monitor (GEM) is the world’s one of the foremost study of
entrepreneurship. GEM defines entrepreneurship as – “Any attempt at new business or
new venture creation, such as self-employment, a new business organization, or the
expansion of an existing business, by an individual, a team of individuals, or an
established business”.

Concept of Entrepreneurship – A Detailed Explanation

The concepts of enterprise/entrepreneur and entrepreneur- ship have evolved through
various stages each of which emphasises a different aspect of entrepreneurial function.
The first systematic application of the term ‘entrepreneur’ to business activities was
made by J.B. Say around 1800. While explaining this concept Say’s focus was on the
entrepreneurial functions of coordination, organisation and supervision.
The next phase in the evolution of the concept of entrepreneur is marked by emphasis
on innovation. Joseph A. Schumpeter, an Australian economist, focused on innovation
and defined entrepreneur thus: “The entrepreneur in an advanced country is an
individual who introduces something new in the economy— a method of production not
yet tested by experience in the branch of manufacture concerned, a product with which
consumers are not yet familiar, a new source of raw material or new markets and the
life.”

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Briefly, an enterprise/entrepreneur is one who innovates, establishes an organisation

and sets the organisation going with his distinctive ability. Schumpeter’s
entrepreneurship is, however, more appropriate in the context of a developed economy.
In a developing economy like India, Schumpeter’s innovations may not come true due to
lack of proper infrastructure and inadequate capital.
Further, in such economies even if one imitates technique of production from a
developed economy, he would be called an entrepreneur.
Peter F. Drucker too played with the word ‘innovation’ and said- The entrepreneur
always searches for change, responds to it, and exploits it as an opportunity. Further
elaborating his viewpoint, Drucker observed, Entrepreneurs innovate. Innovation is the
specific instrument of entrepreneurship.
Entrepreneurs need to search purposefully for the sources of innovation, the changes
and their symptoms that indicate opportunities for successful innovation. And they need
to know and to apply the principles of successful innovation.

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According to Drucker, the following are the sources of systematic innovation:

Sources which lie within the enterprise:
1. The unexpected—the unexpected success, the unexpected failure, the unexpected
outside event.
2. The incongruity—between reality as it actually is and reality as it is assumed to be or
as it ‘ought to be’.

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3. Innovation based on process need.

4. Changes in industry structure or market structures that catch everyone unawares.
Sources which lie outside the enterprise:
1. Demographic—population changes.
2. Changes in perception, mood and meaning.
3. New knowledge, both scientific and non-scientific.

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Another thinker who has emphasised innovation as a basic element of entrepreneurship

is E.E. Hagen. According to Hagen, “An entrepreneur is an economic man who tries to
maximise his profits by innovation. Innovations involve problem-solving and the
entrepreneur gets satisfaction from using his capabilities in attacking problems.”
The modern concept of entrepreneurship is much wider and does not confine to any
single aspect like risk-bearing, promotion, decision-making or innovation. Thus B.
Higgins defines entrepreneurship as “the function of seeking investment and production
opportunity, organising an enterprise to undertake a new production process, raising
capital, hiring labour, arranging the supply of raw materials, finding site, introducing a
new technique or commodity, discovering new sources of raw materials and selecting
top managers for day to day operations of the enterprise.”
In conclusion, it may be said that today’s concept of entrepreneurship is all-inclusive in
nature. It refers to the entrepreneurial functions of creating something new, organising
and coordinating business activities, risk-bearing and handling economic uncertainty.

Concept of Entrepreneurship:

The concept of entrepreneurship has been around for a very longtime, but its resurgent
popularity implies a sudden discovery. Richard Cantillon is credited with giving the
concept of entrepreneurship a central role in Economics. According to him
Entrepreneurs consciously make decisions about resource allocations.
They would always seek the best opportunities for using resources for the highest
commercial yields. Adam Smith spoke of the enterpriser in his Wealth of Nations as an
individual who undertook the formation of an organisation for commercial purposes.

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He has ascribed to the entrepreneur the role of industrialist, but he also viewed
entrepreneur as a person with unusual foresight who could recognise potential demand
for goods and services. Another economist, Jean Baptiste Say described an
entrepreneur as one who possessed certain arts and skills of creating new economic
enterprises, yet a person who had exceptional insight into society’s needs and was
“able to fulfill them.

Concept of Entrepreneurship – Meaning and Definitions

The word entrepreneur is borrowed from the French language. It is derived from
‘entreprendre’ meaning to ‘undertake’. Thus, entrepreneur is an ‘undertaker’ in the literal
sense of the word. Its usage in French language can be traced much before the
emergence of activities generally associated with entrepreneurs today.
Initially, the concept was used in the military sphere and later on it began to be applied
to construction, engineering, and other related activities. It was only in the 18th century
that the term entrepreneurship was applied almost exclusively to economic activities in
general. Like many other terms, entrepreneurship as a concept remains rather vague.
Even today it is very difficult to define the term precisely. In the past two centuries,
several scholars have attempted to define the concept by referring to the various ways
in which it was employed. In the modern context, Richard Cantillon is supposed to have
used the term entrepreneur for the first time in 1755.

He defined an entrepreneur as – ‘an agent who buys means of production at certain

prices in order to combine them into a product that he is going to sell at prices, which
are uncertain.’ He further goes on to say, ‘the farmer pays out fixed contractual rate of
rent and wages to the landlord and labourers. He, however, sets that product at prices
that are not fixed. So do the merchants’. This shows that entrepreneurship is essentially
an ability to take risk in production and marketing.

According to Jean-Baptiste a French economist, entrepreneurship is essentially a

function of co-ordination, organization and supervision. He is an agent who arranges for
the assembly of production factors. In his own words, ‘the entrepreneur is the economic
agent who unites all means of production.’ Thus, entrepreneurs are the ones who
combine land, labour and capital for the purpose of production.

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Entrepreneur, according to Joseph A. Schumpeter, is a person who foresees a

potentially profitable opportunity and tries to exploit it. He is basically an innovator who
introduces new combinations. He makes new things or makes things in a new way. His
innovations of this kind may take such forms as introduction of new goods, introduction
of new method of production, opening of a new market, conquest of a new source of
material, etc.

He, however, makes a distinction between an inventor and an innovator. An inventor

discovers and finds out new methods or techniques. Innovators make use of these
inventions for commercial purposes. Thus, the innovator applies to practice the ideas
conceived by the inventor.

Similarly, an innovator is very distinct from the routine manager. A manager more or
less looks after day-to-day routine affairs of an organization. On the other hand, the
innovator attempts to change the course of action to raise production and/or
productivity. Thus, the entrepreneur is an innovator, endowed with an innate ability to
innovate something new or do the same in a different manner.

Since, he charts a different course; there is no past experience to guide him in his
chosen path. As such, there is an element of risk involved in this new approach of his. It
is possible that an entrepreneur does not succeed in his willingness to assume the
business risk and commit himself to that cause.

According to Frank H. Knight, entrepreneurs are a specialized group of persons who

bear uncertainty. Uncertainty is some amount of risk which cannot be ensured against
and is incalculable. So, an entrepreneur is the economic function that undertakes the
responsibility of uncertainty.

According to McClelland, an entrepreneur is one who likes to take reasonable risk,

wants to know how they can turnout as quickly as possible and has high degree of need
for achievement. He is an individual responsible for the operation of a business
including the choice of a project, the mobilization of necessary capital, decisions or
product prices and quantities, the employment of labour, and expanding or reducing the
productive facilities.

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In another economic theory, the entrepreneur is seen as an individual who bears the
risk of operating a business in the face or uncertainty about future conditions and who is
rewarded accordingly by his profits or losses. David Holt defines an entrepreneur as an
individual who assumes the risk of starting a new business, creating a new commercial
product or service, and consequently seeking profitable regard within a free enterprise
system.

Leibenstein defines entrepreneur as an individual or a group of individuals having four

major characteristics – connection of different markets, capability of making up market
deficiencies (gap filling), input completion, and creation and expansion of time defined.
An entrepreneur is one who always searches for change, responds to it, and exploits it
as an opportunity. The response to change is innovation.
According to him, innovation is the purposeful and organized search for changes and in
the systematic analysis of the opportunities such changes might offer scope for
economic or social innovations. An entrepreneur makes things happen rather than see
things happen. He can thus be expected to have two sets of skills—venture skills and
management skills.

Concept of Entrepreneurship – Some Major Definitions

The various definitions of entrepreneurship are as follow:

According to J. Schumpeter, entrepreneurship can be defined as a creative activity, the

entrepreneur being an innovator, who introduces something new into the economy, a
new method of production not yet tested by experience in the branch of manufacturing
concern, a product with which the consumers are not familiar, a new source of raw
materials or of new market hitherto unexploited.
According to Cole, entrepreneurship is the purposeful activity of an individual or a group
of associated individuals undertaken to initiate, maintain and aggrandise profit by
production or distribution of economic goods and services.

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Entrepreneurship is the process of identifying opportunities in the market, mobilising the

resources required to pursue these opportunities and investing the resources to exploit
the opportunities for long term gains.

The activity of bringing together the factors of production (namely labour, land and
capital) required for producing goods or services is called entrepreneurship.
Entrepreneurship is the inclination (attitude) of mind to take calculated risk with
confidence to achieve a pre-determined business or individual objective.

The above definitions state that entrepreneurship is a goal-oriented process involving

production or distribution of products or services. It may be undertaken by one person
or by a group of persons.
Entrepreneurship refers to the general trend of setting up new enterprises in a society.
Entrepreneurship is also the process of developing hidden potential in a person to
become an entrepreneur. Traditionally, it was believed that entrepreneurs were born
and not made, but recent studies have proved that entrepreneurship can be developed
through creating opportunities, extending facilities, allowing incentives and by proper
training.

Hence, it can be believed that entrepreneurs are not only born, but they can be made.
Entrepreneurship is not a matter of heritage only, it is with the individuals who respond
to external opportunities.

Concept of Entrepreneurship – With Qualities and Pre-Qualities

Development economists are concerned with, among others, the study of human
resources and entrepreneurship in particular. The study of role of human resources in
economic development will include aspects no only like educational levels and
productive skills acquired by the labor force (which includes all types of labor), but also
the aspects like “social response to economic opportunity readiness to undergo
economic change” on the part of the labor force.

It is in the context of later aspects, socio-cultural besides economic factors assume

considerable importance. Entrepreneurship is a form of human resource and is as much
influenced by socio-cultural factors as any other. Different views on the role of
entrepreneurship and the theories, which purport to isolate and explain the factors
which, determine the nature and performance of entrepreneurship is worth studying.
Development economists tell us that the level and rate of economic growth depend on
natural resources, physical capital accumulation, human resource development and
technological progress, provided the socio-cultural environment is favourable to growth.
The behaviour pattern of people is also responsible for economic development.

Human qualities, which are conducive to economic development, are:

(i) An interest in material well-being;

(ii) An interest in techniques and innovations;

(iii) An ability to look ahead and a willingness to take risk;

(iv) Perseverance;

(v) An ability to collaborate with other people and to observe certain rules.

The above pre-qualities are necessary for the reason that:

(i) It provides a motive,

(ii) Many different technical aids are use in modern industry and these are
continuously changing,

(iii) Installation of capital goods produces results only after considerable time and
these results may sometimes prove disappointing.

(iv) Whole process requires continuous and harmonious co-operation if it is of work.

Now the question arises is, can these human qualities necessary for economical
development be acquired by the populations of developing economics and for such
acquisition of human qualities what is the most appropriate socio-cultural environment?

To understand this, the phases of industrialization will helpful.

Till the Industrial Revolution in the late 10 th century, which took place in Britain and later
spread to other countries, the state of science and technology applied to industry and
other economic activities was stagnant. Before reaching the present stage of modern
capitalism with highly developed and sophisticated technology, western economies
have passed through wells defined, but by no means non-overlapping stages like
primitive, tribal, ancient agricultural, medieval feudal and traditional capitalist.

In these earlier stages, neither economic organization nor technology was complex
enough to require or engender entrepreneurship of a high order. No doubt in all these
stages the functions performed by a peasant, an artisan, a feudal lord and a capitalist
resembled the functions of their prototypes in the modern age.
The situation of the developing economy in the second half of the twentieth century is
entirely different. The last two centuries have witnessed enormous progress in science
and technology, which has come to remain as a decisive factor in the economic
environment. Each developing economy is facing challenges from changes taking place
within the country and also changes taking place elsewhere owing to its exposure
through trading and other relations with other countries.

The internal challenges are the results of growing awareness on the part of the people
of their economic backwardness. The challenges from outside are the results of its
contact with countries that have progressed rapidly over the last 150 years. It is in this
context, entrepreneurship assumes a prominent role.

The difference in setting and relative position between the present day and developing
economies and the industrialized economies in their early stage of development makes
the entrepreneurial role in the developing economies different from that of typical
entrepreneur during the early periods of industrialization of industrially advanced
countries.

The term entrepreneur first appeared in the French Language and was applied to
leaders of military expeditions in the beginning of the sixteenth century. After 1700 the
term was applied to other types of adventures, particularly to the fields of civil
engineering projects like construction of roads, bridges, harbors and buildings. Later on
the term was applied to the function of buying labor and martial at uncertain prices and
selling the resultant product at a contracted price.

Richard Cantillon, an Irishman living in France was the first person to use the term
“entrepreneur” to refer economic activities. He defined an entrepreneur as a person who
buys factor services at certain prices with a view to sell its product at uncertain prices in
the future. He conceived of an entrepreneur as bearer of non-insurable risk.

That is entrepreneur carry on production and exchange of goods at some risk, facing
the possibility of bankruptcy, when the demand for their products is depressed. He also
distinguished between the owner and an entrepreneur and writes that the essential
characteristics of entrepreneur were to take risk and create innovations.
J.B. Say, French Economist defines that an entrepreneur is the agent who unites all
means of production and who finds in value of the products the re-establishment of the
entire capital he employs, and the value of the wages, the interest, and the rent which
he pays, as well as the profits belonging to himself. He may or may not supply capital
but he must have judgement, perseverance and knowledge of the world of business. He
must possess the art of superintendence and administration.

Development economists tell is that the level and rate of economic growth depend on
natural resources, physical capital accumulation, human resources development and
technological progress, provided the socio-cultural environment is favourable to growth.
The behaviour pattern of people is also responsible for economic development human
qualities, which are conducive to economic development.

Indian agriculture was very important because as many as 75% of its population
depends on agricultural production. Slowly India has realized that industrial production
is as important as agriculture. In the early stages, then government has dedicated to
start giant industries in various fields by importing technology and manpower. But the
father of nation was favouring the village and small-scale industries so that the country
can use available raw material and manpower.

By doing so India would have built strong industrial base and would have become a
landmark in industrial revaluation. After a long spell, India has realized that small-scale
industries sector will help in building Industrial India. Thus, Indian government started
promoting the small-scale industries in all states by giving incentives and support. At
this stage, a special class of people emerged, known as Entrepreneurs.

Concept of Entrepreneurship – Explained!

According to Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006
“Enterprise means an industrial undertaking or a business concern or any other
establishment, by whatever name called, engaged in the manufacture or production of
goods, in any manner, pertaining to any industry specified in the First Schedule to the
Industries (Development and Regulation) Act, 1951 or engaged in providing or
rendering of any service or services.”
The act of creating a new enterprise in response to identified opportunities is called
entrepreneurship. In other words, entrepreneurship can be defined as an action taken
by an entrepreneur to establish a new enterprise. The activities of an entrepreneur can
be understood in terms of either starting a new enterprise or revitalizing the existing
enterprise with respect to a perceived opportunity.

Starting a business always involves a certain degree of risk. The act of

entrepreneurship is often allied with true uncertainty, particularly when it involves
bringing something new to the world, whose market never exists. Although if the market
exists, there is no guarantee that a particular new entrepreneur would be successful to
develop his/her foothold in the exiting market.

For example, in case of beverage industry, there is the monopoly of few organizations,
such as Coca-Cola and Pepsi. These are dominant players in the global market. If a
new entrepreneur decides to launch a new flavored soft drink, there is no guarantee
whether his/her venture would be successful or not.

Some of the management experts have defined entrepreneurship in the following

ways:

According to Kuratko & Hodgetts, “Entrepreneurship is a dynamic process of vision,

change, and creation. It requires an application of energy and passion towards the
creation and implementation of new ideas and creative solutions. Essential ingredients
include the willingness to take calculated risks in terms of time, equity, or career – the
ability to formulate an effective venture team; the creative skill to Marshall needed
resources – and fundamental skill of building solid business plan – and finally, the vision
to recognize opportunity where others see chaos, contradiction, and Confusion.”

According to Frank H. Knight and Peter Drucker, “Entrepreneurship is about taking risks
and the behavior of the entrepreneur reflects a kind of person who wishes to put his
career and financial security on the line and take risks in the name of an idea, spending
much time as well as capital on an uncertain venture.”

According to D.C. McClelland, “Entrepreneurship is doing things in a better way and

decision-making under the condition of uncertainty.”
Benjamin Higgins has defined entrepreneurship as, “The function of foreseeing
investment and production opportunity, organizing an enterprise to undertake a new
production process, raising capital, hiring labor, arranging for the supply of raw
materials, and selecting to managers for the day-to-day operation of the enterprise.”

Essien has defined entrepreneurship, “As the total of self-asserting attribute that
enables a person to identify business opportunity together with the capacity to organize
needed resources with which to profitability, taken advantage of such opportunities in
the face of calculated risks and uncertainties.”

In the view of Harvard School, “Entrepreneurship consists of any earnest activity that
starts, maintains, or develops a profit-oriented business in interaction with internal
situation of the business and with the external situations such as economic, social, and
political situations surrounding the business.”

Economist Joseph Schumpeter has given a significant contribution in understanding the

concept of entrepreneurship. According to him, “An entrepreneur is a person who is
willing and able to convert a new idea or invention into a successful innovation.” In the
view of Schumpeter an entrepreneur employs “the gale of creative destruction.”
Creative destruction can be defined as the process of creating new product, business
model, or other business innovations by replacing the old ones.

Thus, new products and technologies developed by entrepreneurs over time make
current products and technologies obsolete. For example, before the advent of mobile
phones, pagers were very popular among people, but with the invention of mobile
phones, pagers became obsolete.

Therefore, Schumpeter held the argument that creative destruction is the main factor
behind economic growth and industry dynamism. He also held a view that
entrepreneurship results not only in new industries, but also in new combinations of
currently existing inputs.

Schumpeter exemplified this concept with the invention of a steam engine, which was
used to develop a horseless carriage. Further, the horseless carriage was transformed
into a car. This formation of car from steam engine was not the development of a new
technology, but the application of existing technologies in a novel manner.
Thus, we can say that entrepreneurship is an act of bearing risks, bringing innovation,
generating employment, and mobilizing resources.

Concept of Entrepreneurship – Definition, Meaning and Concept

Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge

base. Knowledge in entrepreneurship is a means to an end.

Definition:
Some of the definitions of entrepreneurship are given below:

Schumpeter – “Entrepreneurship is based on purposeful and systematic innovation. It

included not only the independent business man but also company directors and
managers who actually carry out innovative functions.”
Higgins – “Entrepreneurship is meant for the function of seeing investment and
production opportunity, organizing an enterprise to undertake a new production process,
raising capital, hiring labour, arranging for supply of raw materials, and selecting top
managers for day-to-day operations of the enterprise.”

Meaning:

In the above definitions, entrepreneurship refers to the functions performed by

entrepreneurs in establishing an enterprise. Just as management is regarded as what
managers do, entrepreneurship is regarded as what entrepreneurs do. Thus,
entrepreneurship is the act of being an entrepreneur. It is the process of giving birth to a
new enterprise. Thus, entrepreneurship means creating something new, organizing,
coordinating and undertaking risk, and handling economic uncertainty.

The meaning of entrepreneurship varies from country to country. While some consider
entrepreneurs primarily-as innovators, certain others think of them as managers of an
enterprise, some as bearers of risks and others as mobilisers and allocators of capital.
In India, an entrepreneur can be defined as a person or a group of persons who are
responsible for the existence of a new business enterprise.

Concept:
While John Kunkel considered entrepreneurship as a function of social, political and
economic structure, Max Weber treated it as a function of religious beliefs. The concept
of entrepreneurship involves four key elements.

They are:
1. Organising
2. Risk-bearing
3. Vision and
4. Innovating.
These four elements are interrelated and form a continuous process in business.

1. Organising:

Organising involves mobilization of resources and utilization of them to initiate, maintain

or enhance profit by the production or supply of goods or services. Entrepreneurs also
mobilize other factors of production such as land, labour and capital.

2. Risk-Bearing:

Starting a new enterprise always involves risk. The enterprise may earn profit or incur
loss. The entrepreneurs should be bold enough to assume this risk.

3. Vision:
Entrepreneurial vision encompasses the relentless pursuit of operational excellence,
innovative technology and responsiveness to the needs of the market.

3. Innovation:

Innovation refers to introduction of something new in the economy, ex. a new product or
a new method of production. According to Schumpeter, economic development can
take place only through creative innovations and changes. The innovations may be
related to new products, new technology, new sources of raw material, new market or
new organisation.
To sum up, entrepreneurship is the practical ability to create and build up something
new from nothingness. It is fundamentally an act of human creativity. The act of merely
observing, analysing or interpreting a process is not entrepreneurship.

Concept of Entrepreneurship – Explained in a Nutshell

Entrepreneurship is the dynamic process of creating incremental wealth. This wealth is

created by individuals who assume the major risks in terms of equity, time, and/or
career commitment of providing value for some product or service. The product or
service itself may or may not be new or unique but value must somehow be infused by
the entrepreneur by securing and allocating the necessary skills and resources.
Also, it was generally recognized that entrepreneurs serve as agents of change, provide
creative, innovative ideas for business enterprises and help businesses grow and
become profitable.

Whatever the specific activity they engage in, entrepreneurs in the twenty-first century
are considered the heroes of free enterprise.

Many of them have used innovation and creativity to build huge enterprises.
Entrepreneurship is now regarded as “pioneer ship” of business. According to Peter E
Drucker “Entrepreneurship is defined as ‘a systematic innovation, which consists in the
purposeful and organized search for changes, and it is the systematic analysis of the
opportunities such changes might offer for economic and social innovation”

The concept of Entrepreneurship refers to a special skill or ability to mobilize the factors
of production – Land, labour & capital and use them to produce new goods and
services. The history of the early industrial development and trade and subsequent
innovation in any country is largely the history of its entrepreneurs.

It describes people with the pioneering spirit, intuitive and inspiration and a willingness
to work hard and take risks. They are the energetic self-starters who make it their
mission to meet business challenges, independently and are restless in working for
someone else, for a salary.
In a nutshell, concept of entrepreneurship can be understood as under:

(i) Entrepreneurship involves decision making, innovation, implementation, forecasting

of the future, independency, and success.
(ii) Entrepreneurship is a discipline with a knowledge base theory and is an outcome of
complex socio-economic, psychological, technological, legal and other factors.
(iii) It is a dynamic and risky process.
(iv) It involves a fusion of capital, technology and human talent.
(v) Entrepreneurship is equally applicable to big and small businesses, to economic and
non-economic activities.
(vi) Different entrepreneurs might have some common traits but all of them will have
some different and unique qualities.
(vii) Entrepreneurship is a process. It is not a combination of some stray incidents.
(viii) It is the purposeful and organized search for change, conducted after systematic
analysis of opportunities in the environment.
(ix) Entrepreneurship is a philosophy – it is the way one thinks, one acts and therefore it
can exist in any situation, be it business or government or in the field of education,
science & technology.
(x) Entrepreneurship can be described as a process of action that an entrepreneur
undertakes to establish his enterprise.
(xi) Entrepreneurship is a creative activity.
(xii) It is the ability to create and build something from practically nothing.
(xiii) It is a knack of sensing opportunity where others may see chaos, contradiction and
confusion.
(xiv) Entrepreneurship is the attitude of mind to seek opportunities, take calculated risks
and derive benefits by setting up a venture.
(xv) It comprises of numerous activities involved in conception, creation and running an
enterprise.
(xvi) Entrepreneurship is a dynamic process of vision, change, and creation. It requires
an application of energy and passion towards the creation and implementation of new
ideas and creative solutions.
(xvii) Essential ingredients include the willingness to take calculated risks-in terms of
time, equity, or career; the ability to formulate an effective venture team; the creative
skill to marshal needed resources;
Therefore “Entrepreneurship is a dynamic process of vision, change, and creation. It
requires an application of energy and passion towards the creation and implementation
of new ideas and creative solutions. Essential ingredients include the willingness to take
calculated risks-in terms of time, equity, or career, ability to formulate an effective
venture team, creative skill to organize needed resources, the fundamental skill of
building a solid business plan and, above all, the vision to recognize opportunity where
others see chaos, contradiction, and confusion.”

Concept of Entrepreneurship – With Qualities of an Entrepreneur

The concept of entrepreneur came into existence since 16 th century. In the beginning it
was limited to the military services and civil engineering fields. With growth of time the
scope of entrepreneurship developed and today “An entrepreneur is one who is ready to
create something new with risks of economic uncertainty”.

According to the above definition, an entrepreneur is “An organiser who can undertake
a number of complex operations like obstacles to be surmounted, anxieties to be
suppressed, misfortunes to be repaired and expedients to be devised”.

It gives a feeling that, besides the above factors an entrepreneur should also
possess the following qualities:

(i) Knowledge of business world

(ii) Capital command
(iii) Moral qualities of work judgement
(iv) Perseverance
(v) Economic aspect.
As stated above an entrepreneur is “an inventor” and hence he should have
foresightedness, visualization, marketability of the product, economic aspect and risks’
involvement, a successful entrepreneur may create the following prospective –
(i) May introduce new product in the market
(ii) May bring new manufacturing technology
(iii) May create a new market
(iv) May establish a new organization
(v) May generate a new avenue for the market.
Concept of Entrepreneurship – Modern Concept: With Views on Entrepreneurship
Modern Concept:
Entrepreneurship is a capacity which is used for establishing a venture, controlling the
venture, directing the venture as well as improving and changing the venture.

Features of Modern Concept:

(i) Capacity of establishing a venture.

(ii) Capacity of controlling a venture.
(iii) Capacity of directing a venture.
(iv) Capacity of improving a venture.
(iv) Capacity of changing a venture.

Various Views of Entrepreneurship:

The various views of entrepreneurship by different authors are as following:

1. Risk Bearing Capacity:

Richard Cantillion, “It is a function of bearing non insurable risk.”
According to him, risk bearing forms a unique constitutive function of entrepreneurship.
E.g., the farmer pays out contractual incomes which are certain to the landlords and
labourers and sells at prices that are certain.
Investment → Transformation → Profit or losses
Frank H. Knight, “It is a risk bearing capacity which is incalculable and cannot be
insured as well.”
According to him, he distinguishes between risk and uncertainty. Farmer can be insured
and calculated while latter can neither be insured nor can be calculated.

2. Function of Organisation and Coordination:

J.B. Say, “Entrepreneurship is a function of organising and collecting the production

factor.”
Here, entrepreneur is an organiser and collector. He says that entrepreneurship is an
economic factor which includes all production factors.
Alfred Marshall, “Entrepreneurship is an economic factor which collects all production
factors.”
3. Managerial Skill:

B. F. Hoeslitz, “Financial ability is not the prime factor in entrepreneurship. Managerial

skill is an important factor of venture.”
J. S. Mill, “Superintendence, control and direction are the abilities of entrepreneurship.”
J. S. Mill, “Entrepreneurship is a capacity of risk bearing as well as direction.”

4. Innovation Activity:

Joseph Schumpeter, “Entrepreneurship is a creation and innovative activity.”

According to him, it is extraordinarily powerful like converting the crude oil into an
energy source, whereby established ways of doing things are destroyed by the creation
of new and better ways to get things done.

5. Groups Level Reactiveness:

F.W. Young, “Entrepreneurship is a group level reactiveness. It is not related to any

individual. Entrepreneurship is a cause of social and cultural changes.”

6. Organisation Building Ability:

Fedric Harbison, “Organisation building ability is an important base of industrial

development, human development and coordination between new views in venture.”

7. Capacity of High Achievement:

Mc Clelland, “There are two features in any entrepreneurship i.e.,

(1) Ability to do any function with new & skilled manner;
(2) Capacity to take any decision at the time of uncertain time period.”
They think that entrepreneurship is not a causal behaviour, it is fully related to
psychological activity.

Conclusion:

Thus, we can divide the concepts of entrepreneurship in three categories:

1. Classical concept
2. Neo classical concept
3. Modern concept
1. Classical Concept:
Richard Cantillon, Frank H. Knight, Adam Smith, J.B. Say, J.S. Mill, David Ricardo are
included in classical ideology.

Elements:

(i) Capacity of bearing uncertainty and risk.

(ii) Ability of collecting and organising various production factor.
(iii) Ability of collecting production factors and their control and superintendence. (It can
be applied on undeveloped economy)

2. Neo Classical Concept:

Waltus Alfred Marshall, Joseph Schumpeter are the supporters of neo-classical

concept.

Elements:

(i) Various managerial functions regarding business such as preparing plan, organising
the production factor, their control and direction ability.
(ii) The changing ability or innovative ability.
(iii) It is applied on all developing countries.

3. Modern Concept:

J.E. Stepnek, George Evens, Peter Kilby, Higgins, Peter F. Drucker, H.W. Johnson,
Robert Lamb are the supporter of modern concept.

Elements:
(i) Wider coverage area of commercial and industrial activities.
(ii) Risk bearing & promotion of new venture are the basic of modern ideology.
(iii) Searching new opportunities, new innovation, social innovation, dynamic leadership
are the result of modern concept.
The Concept of Entrepreneurship – Definition, Core Elements, Experts’
Views and Nature

Entrepreneurship is the process of identifying opportunities in the market place,

marshalling the resources required to pursue these opportunities and investing the
resources to exploit the opportunities for long term gains. It involves creating wealth by
bringing together resources in new ways to start and operate an enterprise.
According to Cole “entrepreneurship is the purposeful activity of an individual or a group
of associated individuals undertaken to initiate, maintain and aggrandise profit by
production or distribution of economic goods and services“.

This definition states that entrepreneurship is a goal-oriented process involving

production or distribution of products or services. It may be undertaken by one person
or by a group of persons.

In the words of Higgins, “entrepreneurship is meant the function of seeking investment

and production opportunity, organising an enterprise to undertake a new production
process, raising capital, hiring labour, arranging the supply of raw materials, finding site,
introducing a new technique, discovering new sources of raw materials and selecting
top managers for day to day operations of the enterprise.”

This definition highlights risk-taking, innovating and resource organising aspects of

entrepreneurship.

According to Kao, “entrepreneurship is the attempt to create value recognition of

business opportunity, the management of risk-taking appropriate to the opportunity and
through the communicative and management skills to mobilise human, financial and
material resources necessarily to bring a project to friction.

This definition recognises that entrepreneurship involves the fusion of capital,

technology and human talent to complete a project successfully and with reasonable
degree of risk.

“Entrepreneurship is the professional application of knowledge, skills and competencies

and/or of monetizing a new idea, by an individual or a set of people by launching an
enterprise de novo or diversifying from an existing one (distinct from seeking self-
employment as in a profession or trade), thus to pursue growth while generating wealth,
employment and social good”. — National Knowledge Commission.

Four Core Elements of Entrepreneurship:

From various definitions, it emerges that entrepreneurship primarily – consists of

four main elements:

(a) Creativity and Innovation form the core of entrepreneurship that enables the
entrepreneur to think entire new ways of working. Key part of entrepreneurship is to
identify opportunities that no one else has noticed earlier. Such opportunities need not
be large; these can even be small ones. Creative people are receptive to new ideas
generated by other.
(b) Ability to Apply the Creativity – Besides the entrepreneurs have an ability to apply
the creativity to business problems. They understand the people and the environment
around them. They can effectively martial resources for the same. It is not enough to
think creatively, successful entrepreneurship demands thoughts be translated in to
action and result. They need an ability of getting things done.
(c) Change – They have a sound belief in their ability to change the status quo-the way
the things are being done presently. With their drive and passion to achieve success
they change the way things the being performed.
(d) Creating Value – Entrepreneurs focus on creating value by doing things in cheaper,
better an, faster manner.
Thus, entrepreneurship can be defined as – “Creation of value through people working
together 1 implement an idea through the application of drive and willingness to take
risk.”

Experts’ Views on Entrepreneurship:

Entrepreneurship is considered as the process or action of setting up of the new venture

and the venture so set-up is called the enterprise Schumpeter described it as a process
and the entrepreneurs as innovators who use the process to shatter the status quo
through the combination of resources and new methods of commerce.
McClelland’s View on Entrepreneurship:

McClelland’s Need Theory explains the concept of entrepreneurial motivation. He

identified three motivating needs, – (i) Need for power (ii) need for affiliation and (iii)
need for achievement. McClelland is of the view that the need for achievement is a
distinct human motive that can be distinguished from other needs.

McClellan’s subjected a group of fifty two entrepreneurs in India to the concentrated

achievement motivation course. Two thirds of them were found usually active in the
‘post training period’. Some of them actually started new business and others
investigated new product lines.

His study showed that achievement motivation is a major contributory factor for
entrepreneurship. Need for achievement is simply the desire to do well not so much for
the sake of social recognition or prestige, but for the sake of an inner feeling of personal
accomplishment. It is this need for achievement which guides an entrepreneur’s actions.

McClelland Identified Two Characteristics of Entrepreneurs:

(i) To do something in a new and better way,

(ii) To take decisions under uncertainty.
Entrepreneurial role involves doing things in a new and better way. A business man who
simply behaves in traditional ways is not an entrepreneur. On the other hand, if there is
no significant uncertainty and the action involves applying known and predictable results
entrepreneurship is no at all involved.

Following psychological factors contribute to entrepreneurial motivation:

(1) Need for achievement through self-study, goal setting and inter personal support.
(2) Keen interest in situations involving moderate risk.
(3) Desire for taking personal responsibility.
(4) Concrete measures of task performance.
(5) Anticipation of future possibilities.
(6) Organisational skills.
(7) Energetic or novel instrumental activity.
The needs are the basic stimulating factors and the need, or, achievement stimulates
the behaviour of a person to be an entrepreneurship.

Josheph A. Schumperter’s View of Entrepreneurship as a Function of Innovation:

Joseph A. Schumpeter, for the first time, put the human agent at the centre of process
of economic development and assigned a critical role to the entrepreneurship in his
theory of economic development. He described an entrepreneur as a key man in the
process of development.

He innovates new ideas and puts them into practice. Schumpeter treats entrepreneurs
as motivated and talented class of people who forces the profitable opportunities and
exploits them.

The entrepreneur Schumpeter’s view is basically an innovator, and innovator is

one who carries new combinations of means of production such as:

(1) The introduction of new goods, that is, one with which consumers are not yet
familiar, new quality of goods;
(2) The introduction of a new method of production, that is, one not yet tested by
experience in the branch of manufacture concerned which need by no means be
founded upon a discovery significantly new, and also exist in a way of handling in
commodity commercially;
(3) The opening of a new market, that is, a market into which that particular branch of
manufacture of the company in question has not previously entered, irrespective of
whether this source already exists or whether it has market has existed before;
(4) The conquest of a new source of raw materials or half manufactured goods, again
irrespective of whether this source already exists or whether it has to be created;
(5) The conquest of a new source of raw materials or half manufactured goods, again
irrespective of whether this source already exists or whether it has to be created;
(6) The carrying out of a new organisation of any industry, like the creation of a
monopoly position, for example, through trustification or the breaking up of a monopoly
position.
Entrepreneurship is not a profession or permanent occupation and therefore it cannot
formulate a social class like capitalists or wage earners. Psychologically, entrepreneurs
are not solely motivated by profit. According to Schumpeter, both interest and profit will
arise from progress (change) and would not exist in the static society.

Schumpeterian innovation’ is a creative response to a situation Schumpeterian theory of

economic development was conceived in the context of industrial revolution. His
explanations of development are influenced by the experiences of that period. As far as
the magnitude of this theory is concerned it was based on big private entrepreneurship.
This theory has less application in under developed countries.

Arthur Cole’s View of Entrepreneurship as a Decision-Making Process:

Arthur H. Cole of the view that main functions, of an entrepreneurs is make decisions.
He takes decisions regarding activities of the enterprise. He decides about the type of
business to be done and the ways of doing it. Herberton Evans views the entrepreneur
as the person or group of persons who has (or assumes) the task of determining the
kind of business to be operated.

Once decisions are taken then Implementing such decisions is the managerial part,
Evans notes that once these them are decided the role of the entrepreneur does not
cease, instead of must be continuously alert and ready to make new decisions in the
light of the changing market conditions and arising opportunities.

Arthur H. Cole describes an entrepreneur as a decision maker half a dozen spheres of

action in which he must engage.

He has the following functions of the entrepreneur:

(1) The determination of the business objective of the enterprise and the change of
those objectives as conditions require or make advantageous.
(2) The development and maintenance of an organisation, including efficient relation
with subordinates and employees.
(3) The securing of adequate financial resources, the retention of them and the creation
of good relations with investors.
(4) The acquision of effective technological equipment and the revision of it as new
machinery appear.
(5) The development of a market for products and the devising of new product to meet
or anticipate consumer demands.
(6) The maintenance of good relations with public authorities and with society at large.

Nature of Entrepreneurship:

The main features of entrepreneurship are as follows:

(1) Economic activity – Entrepreneurship is primarily an economic function because it

involves the creation and operation of enterprise. It is basically concerned with the
production and distribution of goods and services.
(2) Creative activity – Entrepreneurship is a creative response to changes in the
environment. It involves innovation or introduction of something new and better. An
entrepreneur is a change agent.
(3) Purposeful activity – The entrepreneur creates and operates an enterprise to earn
profits through satisfaction of customers, therefore, entrepreneurship is goal-oriented
activity.
(4) Function of risk-bearing – Risk is an inherent and inseparable element of
entrepreneurship. An entrepreneur grantees rent to the landlord, wages to employees,
and interest to investors in the hope of earning more than the expenses. He assumes
the uncertainty of future. In the pursuit of profit, there is every possibility of loss.
(5) Organizing function – An entrepreneur brings together various factors of production
coordination and control efforts of all the persons engaged in his enterprise. He
harnesses land, labour, capital, and other resources for the benefit of mankind.
Therefore, an entrepreneur is an organization builder.
(6) Gap-filling function – The gap between human needs and the available products and
services gives rise to entrepreneurship. An entrepreneur identifies this gap and takes
necessary steps to fill the gap. He introduces new products and services, new methods
of production or distribution, new source of inputs and new markets.
(7) Dynamic function – Entrepreneurship is a dynamic function. Entrepreneurs thrive on
change in the environment which brings about useful opportunities for business.
Flexibility is the hallmark of a successful entrepreneur.
(8) Innovative function – Entrepreneurship is an innovative function as it involves doing
things in a new and better way. Innovation may take several forms a new product, a
new source of raw materials, a new market, and a new method of production.
Entrepreneurial passion is essential for venture success. It is required to convince a
team to devote themselves to the venture, investors to back the venture and customers
to pay for the product or service. Passion can therefore be a differentiating factor
between success and failure for an entrepreneur.

Passion defined

Entrepreneurial passion is a motivational construct characterized by positive emotional

arousal, internal drive and engagement with personally meaningful work that is salient
to the self-identify of the entrepreneur.

The passion effect

Entrepreneurs who convey passion are more persuasive, motivated, have larger social
networks and more social capital [1]. As a result, they have more income, sales revenue
and growth in sales and earnings compared with entrepreneurs who are less passionate
[2]. Passion is therefore is critical to an entrepreneur’s success.

Passion is palpable

Passion effects how customers, investors and employees view the entrepreneur and
their product. When they can feel the entrepreneur’s passion, they may be more
persuaded by it; and for good reason. To these individuals, passion is a strong indicator
of:

 Degree of motivation
 Level of commitment
 Confidence in their vision
 If they will persevere in the face of obstacles
 How well they can lead people in their venture
 Persuasion skills

It is therefore necessary to display passion when communicating with customers,

employees and anyone making funding decisions as it will help persuade them to
support the venture or vision.
Passion and decisions

Entrepreneurs must be passionate when pitching to an investor making funding

decisions, selling to a customer or hiring new employees. Passion will boost their
confidence in their evaluation of the business plan, product, company, team and the
entrepreneur.

However, passion alone is not sufficient to influence decisions. When passion is

integrated with a substantial business plan, product or service the entrepreneur will be
evaluated more favorably. When a passionate entrepreneur’s business plan lacks
substance, their product fails to deliver as promised or their service is insufficient, the
entrepreneur will likely be viewed as fake, manipulative and insincere.

The passion sweet spot

The amount of passion displayed also has an effect on decisions. If the entrepreneur
displays too much passion, it may appear as if they are not genuine, desperate or
pretentious. Of course too little passion can result in being perceived as not being
completed invested in the venture or not confident about the product, service, company
or team.

It is essential that entrepreneurs display an appropriate amount of passion and that their
passion is supported by an amazing product, service or business plan. Passion will
facilitate persuasive arguments, the buying process and funding
decisions. Entrepreneurs who convey passion will sell more, earn more and convince
more, all contributing to the success of their venture.

How to Create a Unique Value

 

Proposition (with Examples)

A value proposition is a promise of value to be delivered. It’s the primary reason a prospect
should buy from you.
It’s also the #1 thing that determines whether people will bother reading more about your
product or hit the back button. On your site, your value proposition is the main thing you need to
test—if you get it right, it will be a huge boost.
In fact, if I could give you only one piece of conversion optimization advice, “test your value
proposition” would be it.
The less known your company is, the better your value proposition needs to be. When I reviewed
a bunch of websites, a missing or poor value proposition was one of the most common
shortcomings.

What is a value proposition?

In a nutshell, a value proposition is a clear statement that offers three things:

1. Relevancy. Explain how your product solves customers’ problems or improves their

situation.
2. Quantified value. Deliver specific benefits.
3. Differentiation. Tell the ideal customer why they should buy from you and not from the
competition.

Your value proposition has to be the first thing visitors see on your homepage, but it should also
be visible at all major entry points to the site.
It’s not just for aesthetics or to placate a CEO or copywriter. Ultimately, it can improve
your customer lifetime value.

People should read and understand your value proposition.

A value proposition is something real humans are supposed to understand. It’s for people to read.
Here’s an example of what a value proposition is not supposed to be like:
Revenue-focused marketing automation & sales effectiveness solutions unleash collaboration
throughout the revenue cycle
Would you be able to explain the offer to your friend or how they’d benefit? Didn’t think so.
Unfortunately, it’s no joke. Such meaningless “jargon propositions” are abundant.
Avoid blandvertising at all costs.

Use the right language for your value proposition.

Your value proposition needs to be in the language of the customer. It should join the
conversation that’s already going on in the customer’s mind. To do that, you need to know the
language your customers use to describe your offering and how they benefit from it.
You cannot guess what the right language is. The way you speak about your services is often
very different from how your customers describe them. The answers are outside your office. You
have to interview your customers to find it out, or use a messaging research tool like Wynter.

What the value proposition is not

It’s not a slogan or a catch phrase. This is not a value proposition:
L’Oréal. Because we’re worth it.
It’s not a positioning statement. This is not a value proposition:
America’s #1 Bandage Brand. Heals the wound fast, heals the hurt faster.
A positioning statement is a subset of a value proposition, but it’s not the same thing.

What the value proposition consists of

The value proposition is usually a block of text (a headline, sub-headline, and one paragraph of
text) with a visual (photo, hero image, graphics).
There is no one right way to go about it. I suggest you start with the following formula:

 Headline. What is the end-benefit you’re offering in one short sentence? It can mention
the product and/or customer. Make it an attention grabber.
 Sub-headline or a 2–3 sentence paragraph. A specific explanation of what you
do/offer, for whom, and why it’s useful.
 3 bullet points. List the key benefits or features.
 Visual. Images communicate much faster than words. Show the product image, the hero
shot, or an image reinforcing your main message.

Note: Having solid product images are just one piece of the ecommerce pie. You’ll find
247 ecommerce guidelines in this research-based report.
Evaluate your current value proposition by checking whether it answers the questions below:

 What product or service is your company selling?

 What is the end-benefit of using it?
 Who is your target customer for this product or service?
 What makes your offering unique and different?

Use the headline/paragraph/bullets/visual formula to structure the answers. (Here’s a value

proposition worksheet you might find useful.)

Keys to a great value proposition

The best value proposition is clear: What is it? For whom? How is it useful? If those questions
are answered, you’re on the right path. Always strive for clarity first.
If your value proposition makes people go “hmph?”, you’re doing it wrong. If they have to read
a lot of text to understand your offering, you’re doing it wrong. Yes, a sufficient amount of
information is crucial for conversions, but you need to draw them in with a clear, compelling
value proposition first.
Research by MarketingExperiments says that the key challenge companies have is identifying an
effective value proposition, followed by communicating it clearly.
What makes a good value proposition?

 Clarity! It’s easy to understand.

 It communicates the concrete results a customer will get from purchasing and using your
products and/or services.
 It says how it’s different or better than the competitor’s offer.
 It avoids hype (like “Never seen before!” or “Amazing miracle product!”), superlatives
(“best”) and business jargon (“value-added interactions”).
 It can be read and understood in about 5 seconds.

Also, in most cases, there’s a difference between the value proposition for your company and
your product. You must address both.

The presentation of your value proposition matters.

Original research by CXL Institute showed that users:

 Noticed the value proposition more quickly when it had more text (i.e. took up more real
estate on the page).
 Spent longer on a value proposition as opposed to elsewhere on the page when there was
more to read.
 Recalled more services offered by the site when more services were listed.
 Described more website advantages when there were more features and benefits available
to read.
 Preferred information in the form of bulleted lists.
 Preference for page design was influenced by which variation was originally seen.

How to craft a powerful, unique value proposition

A key role for the value proposition is to set you apart from the competition. Most people check
out 4–5 different options/service providers before they decide. You want your offering to stand
out in this important research phase.
So how do you make your offer unique? Often, it’s hard to spot anything unique about your
offering. It requires deep self-reflection and discussion.
If you can’t find anything, you’d better create something. Of course, the unique part needs to be
something customers actually care about. There’s no point being unique for the sake of being
unique (e.g. “the ball bearings inside our bicycles are blue”). Even if what you sell isn’t unique,
you can still come up with a great value proposition.
Here are two articles that can help you find a “theme” or angle for your value proposition:

 Value Propositions That Work

 The Five Propositions that Help Companies Create Value for their Customers
Remember: You don’t need to be unique to the whole world, just in the customer’s mind.
The closing of a sale takes place in a customer’s mind, not out in the marketplace among the
competition.

“Boosters” for your value proposition

Sometimes, little things tip the decision in your favor. If all major things are pretty much the
same between you and your competitors, you can win by offering small value-adds. I call them
boosters.
These things work well against competitors who don’t offer them. Boosters can be things like:

 Free shipping;
 Fast shipping/Next-day shipping;
 Free bonus with a purchase;
 Free setup/installation;
 No setup fee;
 No long-term contract, cancel any time;
 License for multiple computers (vs. 1);
 (Better than) money-back guarantee;
 A discounted price (for a product);
 Customizable.

You get the idea. Think what small things you could add that wouldn’t cost you much but could
be attractive to some buyers.
Make sure the booster is visible with the rest of the value proposition.

Example of a value proposition “booster”

Notice the “Free Shipping” sign in the top left? That’s a booster.

7 Examples of great value propositions

It’s tough to find perfect value proposition examples. Probably because it’s hard to create a great
one. I find flaws or room for improvement with most value propositions I come across.
I’m also fully aware that I’m not the ideal customer for many of the examples shown below, and
my critiques are educated hypotheses that should be tested.
Here are some good examples along with my comments:
1. Campaign Monitor

Comments
  Very clear what it does;
 Specific lead paragraph;
 Relevant images that support text-based claims;
 Features a booster—”Instant signup. No credit card required.”

2. Stripe

Comments

 It’s clear what it is and for whom;

 Specific benefit-oriented sub-headline;
 Relevant visuals;
 Smooth transition into features and benefits.

3. Trello

Comments

 Clear statement about what it is and for whom;

 List of features and benefits in sub-headline;
 Relevant image.

4. Evernote

Comments

 Succinct explanations of what it’s for (“Your notes”), the benefit it provides
(“Organized”), and why it’s so great (“Effortless”).
 Key features and benefits in the subheadline;
 Relevant image.

5. Square

Comments

 Very clear headline;

 Clear call to action;
 Relevant image;
 Missing: comparison with the competition or more details in a sub-headline.

6. Zoom
Comments

 Like Evernote, the headline is clear and succinct.

 Booster with “Sign Up Free” and “Sign up, It’s free”;
 Use of a third-party review to compare favorably and credibly against competitors.

7. Prey

Comments

 The headline is okay but could be clearer (i.e. “Keep track of your laptop, phone or tablet.
Get it back when it gets stolen or lost.”
 The following paragraph does a good job explaining what it is, as does the image.
 An actual screenshot of the product may better demonstrate what it does.
 It uses boosters like social media proof and respected logos.

Examples of poor value propositions

Some lessons from the department of “Don’t do this!”:
1. Cloudflare
I use this service myself and think it’s great, but they really need to do a better job.

Comments:

 Awful clarity: “Helping Build a Better Internet”? Nobody will understand what that
means—nor does that solve anyone’s problem.
 Sub-headline offers some clarity and detail, but that info should be in the headline.
 Image looks like a stock photo.

2. Continuum Financial

Comments

 No proper value proposition in place at all—the headline congratulates themselves on a

five-year anniversary.
 Awkward phrasing if not flat-out incorrect (“…we look forward continuing to deliver…”
and “What stage of your financial journey are you at?”
 No imagery above the fold; those below are stock photos.

How to test your value proposition

You definitely have to test your value proposition. How? There are two main ways.

1. A/B testing
The best way to test your value prop is to craft two candidates (or more, if you have tons of
traffic) and split test them. Ideally, you’d measure sales conversions (for the most accurate
results), but if that’s not possible, lead counts or even click-throughs will do.
Learn how to run A/B tests here.

2. Pay-per-click advertising
A fast and cheap way to go about it is to use Google Ads or Facebook Ads.
Split test ads with different value propositions that target the same customer. The ad with a
higher click-through rate is obviously a better attention grabber and interest generator, although
it doesn’t necessarily mean higher sales conversions.
Send the traffic to a corresponding landing page and test conversions, too.

Conclusion
You need a value proposition and you need to communicate it clearly on all the main entry
pages: homepage, product pages, category pages, etc.
If you don’t state why users should buy from you, you will lose most of them. To craft a great
value proposition:

 Focus on clarity above all else.

 Use the headline, sub-headline, bullets, and image formula.
 Test, test, test.

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