ENTREPRENEUR AND ENTREPRENEURSHIP

Entrepreneurs plays vital role in the economic development of a country.

Economic development of a country depends primarily on its entrepreneurs. An
entrepreneur is often considered as a person who sets up his own business or
industry. He has initiative, drive, skill and spirit of innovation who aims at high
goals. The entrepreneur is the individual that identifies the opportunity, gathers
the necessary resources and is ultimately responsible for the performance of the
organisation. Entrepreneurs are action oriented, highly motivated individuals
who take risks to achieve goals.
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. Entrepreneurship is
very often associated with adventurism, risk bearing, innovating creativity etc.
It is concerned with making dynamic changes in the process of production,
innovation in production, new usage for materials etc. It is a mental attitude to
take calculated risks with a view to attain certain objectives. It also means doing
something in a new and better manner.

MEANING AND DEFINITION OF ENTREPRENEUR

An entrepreneur is ordinarily called a businessman. He is a person who
combines capital and labour for the purpose of production. He organizes and
manages a business unit assuming the risk for profit. He is the artist of the
business world.
In the words of J.B. Say, “An entrepreneur is one who brings together the
factors of production and combines them into a product”. He made a clear
distinction between a capitalist and an entrepreneur. Capitalist is only a
financier. Entrepreneur is the coordinator and organizer of a business enterprise.
Joseph A Schumpeter defines an entrepreneur as “one who innovates, raises
money, assembles inputs and sets the organization going with the ability to
identify them and opportunities, which others are not able to fulfil such
economic opportunities”. He further said, “An entrepreneur is an innovator
playing the role of a dynamic businessman adding material growth to economic
development”.

Who is an Entrepreneur:
E:xamine needs, wants, and problems to see how they can improve the way
needs and wants are met
and problems overcome.
N: arrow the possible opportunities to one specific "best" opportunity.
T:hink of innovative ideas and narrow them to the "best" idea.
R:esearch the opportunity and idea thoroughly.
E:nlist the best sources of advice and assistance that they can find.
P:lan their ventures and look for possible problems that might arise.
R:ank the risks and the possible rewards.
E:valuate the risks and possible rewards and make their decision to act or not
to act.
N:ever hang on to an idea, no matter how much they may love it, if research
shows it won't work.
E:mploy the resources necessary for the venture to succeed.
U:nderstand that they will have to work long and hard to make their venture
succeed.
R:ealize a sense of accomplishment from their successful ventures and learn
from their failures to
help them achieve success in the future.
Difference between a Manager and Entrepreneur:
Difference between Entrepreneur and Intrapreneur:

TYPES OF ENTREPRENEURS
Entrepreneurs may be classified in a number of ways.
A. ON THE BASIS OF TYPE OF BUSINESS. Entrepreneurs are classified
into different types. They are
1) Business Entrepreneur: He is an individual who discovers an idea to start a
business and then builds a business to give birth to his idea.
2)Trading Entrepreneur: He is an entrepreneur who undertakes trading
activity i.e; buying and selling manufactured goods.
3) Industrial Entrepreneur: He is an entrepreneur who undertakes
manufacturing activities.
4) Corporate Entrepreneur: He is a person who demonstrates his innovative
skill in organizing and managing a corporate undertaking.
5) Agricultural Entrepreneur: They are entrepreneurs who undertake
agricultural activities such as raising and marketing of crops, fertilizers and
other inputs of agriculture. They are called Agripreneurs.
B. ON THE BASIS OF USE OF TECHNOLOGY: Entrepreneurs are of
the following types.
1) Technical Entrepreneur: They are extremely task oriented. They are of
craftsman type. They develop new and improved quality goods because of their
craftmanship. They concentrate more on production than on marketing.
2) Non-Technical Entrepreneur: These entrepreneurs are not concerned with
the technical aspects of the product. They develop marketing techniques and
distribution strategies to promote their business. Thus, they concentrate more on
marketing aspects.
3) Professional Entrepreneur: He is an entrepreneur who starts a business unit
but does not carry on the business for long period. He sells out the running
business and starts another venture.
C. ON THE BASIS OF MOTIVATION:
Entrepreneurs are of the following types:
1) Pure Entrepreneur: They believe in their own performance while
undertaking business activities. They undertake business ventures for their
personal satisfaction, status and ego. They are guided by the motive of profit.
For example, Dhirubhai Ambani of Reliance Group.
2) Induced Entrepreneur: He is induced to take up an entrepreneurial activity
with a view to avail some benefits from the government. These benefits are in
the form of assistance, incentives, subsidies, concessions and infrastructures.
3) Motivated Entrepreneur: These entrepreneurs are motivated by the desire
to make use of their technical and professional expertise and skills. They are
motivated by the desire for self-fulfilment.
4) Spontaneous Entrepreneur: They are motivated by their desire for self-
employment and to achieve or prove their excellence in job performance. They
are natural entrepreneurs.
D. ON THE BASIS OF STAGES OF DEVELOPMENT: They may be
classified into;
1) First Generation Entrepreneur: He is one who starts an industrial unit by
means of his own innovative ideas and skills. He is essentially an innovator. He
is also called new entrepreneur.
2) Modern Entrepreneur: He is an entrepreneur who undertakes those
ventures which suit the modern marketing needs.
3) Classical Entrepreneur: He is one who develops a self-supporting venture
for the satisfaction of customers’ needs. He is a stereo type or traditional
entrepreneur.
E. CLASSIFICATION ON THE BASIS OF ENTREPRENEURIAL
ACTIVITY: They are classified as follows:
1) Novice: A novice is someone who has started his/her first entrepreneurial
venture.
2) Serial Entrepreneur: A serial entrepreneur is someone who is devoted to
one venture at a time but ultimately starts many. He repeatedly starts businesses
and grows them to a sustainable size and then sells them off.
3) Portfolio Entrepreneurs: A portfolio entrepreneur starts and runs a number
of businesses at the same time. It may be a strategy of spreading risk or it may
be that the entrepreneur is simultaneously excited by a variety of opportunities.
F. CLASSIFICATION BY CLARENCE DANHOF: Clarence Danhof, On
the basis of American agriculture, classified entrepreneurs in the following
categories:
1) Innovative Entrepreneurs: They are generally aggressive on
experimentation and cleverly put attractive possibilities into practice. An
innovative entrepreneur, introduces new goods, inaugurates new methods of
production, discovers new markets and reorganizes the enterprise. Innovative
entrepreneurs bring about a transformation in lifestyle and are always interested
in introducing innovations.
2) Adoptive or Imitative Entrepreneurs: Imitative entrepreneurs do not
innovate the changes themselves; they only imitate techniques and technology
innovated by others. They copy and learn from the innovating entrepreneurs.
While innovating entrepreneurs are creative, imitative entrepreneurs are
adoptive.
3) Fabian Entrepreneurs: These entrepreneurs are traditionally bounded. They
would be cautious. They neither introduce new changes nor adopt new methods
innovated by others entrepreneurs. They are shy and lazy. They try to follow the
footsteps of their predecessors. They follow old customs, traditions, sentiments
etc. They take up new projects only when it is necessary to do so.
4) Drone Entrepreneurs: Drone entrepreneurs are those who refuse to adopt
and use opportunities to make changes in production. They would not change
the method of production already introduced. They follow the traditional
method of production. They may even suffer losses but they are not ready to
make changes in their existing production methods.
FUNCTIONS OF AN ENTREPRENEUR
Entrepreneurs are broadly classified into/our categories as mentioned below:

1. Entrepreneurial Functions

2. Managerial Functions

3. Promotional Functions

4. Commercial Functions

1. Entrepreneurial Functions:
The major entrepreneurial functions include

 risk bearing,
 organizing, and
 innovation.

2. Managerial Functions:
In simple words, management is getting things working with and through
others. Different experts have defined term management differently. According
to Henri Fayol (1949) who is considered the father of ‘principles of
management,’ “management is to forecast, to plan, to organize, to command, to
co-ordinate, and to control.”

In the opinion of George Terry (1953), “management is a distinct process

consisting of planning, organizing, actuating, and controlling performance to
determine and accomplish the objectives by the use of people and resources.”

The significance of management function lies in the fact that enterprises with
excellent facilities and quality resources have floundered and fizzled out due to
either no management or poor management and enterprises with good
management but with poor facilities and resources have flourished and
performed exceedingly well. In small-scale enterprises, the entrepreneur who is
the owner of the enterprise also, has to perform the management functions as
well.

The management functions performed by entrepreneur are classified into

the following five types:
1. Planning

2. Organizing

3. Staffing

4. Directing

5. Controlling

1. Planning:
In common parlance, planning is pre-determined course of action to accomplish
the set objectives. In other words, planning is today’s projection for tomorrow’s
activity. Planning pervades in all aspects of business. An entrepreneur has to
make decisions as to what is to be done, how it is to be done, when it is to be
done, where it is to be done, by whom it is to be done and so on.

The importance of planning lies in the fact that it ensures the smooth and
effective completion and running of a business enterprise. Absence of planning
causes confusion which, in turn, affects the smooth performance of job
whatsoever it may be.
2. Organising:
The organizing function of an entrepreneur refers to bringing together the men,
material, machine, money, etc. to execute the plans. The entrepreneur assembles
and organizes the above-mentioned different organs of an enterprise in such a
way that these combinedly start functioning as one, i.e., enterprise. Thus,
organizing function of an entrepreneur ultimately provides a mechanism for
purposive, integrated and co-operative action by many people in a joint and
organized effort to implement a business plan.

3. Staffing:
Staffing involves human resource planning and human resource management.
Thus, staffing function of an entrepreneur includes preparing inventory of
personnel available, requirement of personnel, sources of manpower
recruitment, their selection, remuneration, training and development and
periodic appraisal of personnel working in the enterprise.

Business history is replete with evidences that it is basically the staff, i.e.,
personnel working in the organization that makes all the difference. While
appreciating the role of personnel in the success of an organization, L. F.
Urwick had remarked that, “business houses are made or broken in the long-run
not by markets or capital, patents or equipments, but by men.”

Andrew Carniege’s view that “Take my people and leave my factory, soon
grass will grow on the floor. Take my factory and leave my people, soon we
shall build a better factory” also underlines the significance of people or staffing
in the making of an organization. However, staffing function is as crucial for the
success of a business enterprise is equally complex as well.

4. Directing:
The functions like planning, organizing, and staffing are merely preparations for
setting up a business enterprise. The directing function of entrepreneur actually
starts the setting up of enterprise. Under the directing function, the entrepreneur
guides, counsels, teaches, stimulates and activates his/ her employees to work
efficiently to accomplish the set objectives.

Thus, directing function of entrepreneur concerns the total manner in which an

entrepreneur influences the actions of his / her employees/ workers. It is the
final action of an entrepreneur in making his / her employees actually act after
all preparations have been completed.

5. Controlling:
Controlling is the last management function performed by the entrepreneur. In
simple words, controlling means to see whether the activities have been
performed in conformity with the plans or not. Thus, controlling is comparison
of actual performance with the target or standard performance and identification
of variation between the two, if any, and taking corrective measures so that the
target is accomplished.

3. Promotional Functions:
1. Identification and Selection of Business Idea:
Every intending entrepreneur wants to start the most profitable and rewarding
project. The selection of the most suitable business project involves a process.
The intending entrepreneur, based on his /her knowledge, experience, and
information gathered from friends and relatives, generates some possible
business ideas which can be examined and pursued as a business enterprise.

This process is also described as ‘opportunity scanning and identification’.

Then, the generated ideas are analysed in terms of costs and benefits associated
with them. Having made cost-benefit analysis of all the ideas, the most
beneficial idea is finally selected to be pursued as business enterprise.

2. Preparation of Business Plan or Project Report:

The entrepreneur prepares a statement called ‘business plan’ or ‘project report’
of what he / she proposes to take up. In other words, business plan is a well
evolved course of action devised by entrepreneur to achieve the specified
objectives within a specified period of time.

In this sense, business plan is just like an operating document. The preparation
of business plan is not must, but it is very much useful for the entrepreneur to
establish his / her enterprise in an effective and smooth manner. But, it is must
for those entrepreneurs who intend to apply for financial assistance from the
financial institutions and banks for their enterprises.

It contains information about the intending entrepreneur, location of enterprise,

requirement for land and building, plant and machinery, raw material, utilities,
transport and communication, manpower, requirement for funds including
working capital along with its sources of supply, break-even point and
implementation schedule of the project.

. Requirement for Finance:

The entrepreneur prepares requirement for funds with its detailed structure. The
financial requirement is also classified into short-term and long-term separately.
Then, the sources of supply to acquire the required fund are also mentioned.
How much will be the share capital in terms of equity and preference shares and
how much will be borrowed capital from different financial institutions and
banks are clearly determined.

4. Commercial Functions:

1. Production / Manufacturing:
Once the enterprise is finally established, it starts producing goods or offering
services, whichever be the case. Production function includes decisions relating
to the selection of factory site, design and layout, types of products to be
produced, research and development, and design of the product.

The ancillary activities include production planning and control, maintenance

and repair, purchasing, store-keeping, and material handling. The effective
performance of production function, to a large extent, depends on the proper
production planning and control.

2. Marketing:

All production is basically meant for marketing. Marketing is the performance

of those business activities that direct the flow of goods and services from
producer to consumer or user. Thus, marketing essentially begins and ends with
the customers. It is important to note that marketing is not just selling. In fact,
marketing includes much more than selling. Selling is the last function in
marketing activities.

The examples of marketing activities are market or consumer research, product

planning and development, standardization, packaging, pricing, storage,
promotional activities, distribution channel, etc. The success of marketing
function is linked with an appropriate ‘marketing mix’. Traditionally, marketing
mix referred to 4 Ps, namely, product, price, promotion, and physical
distribution. Of late, 3 more Ps namely, packaging, people, and process are also
added to ‘marketing mix’.

3. Accounting:
The main objective of any business enterprise is to earn profits and create
wealth. Whether the business is fulfilling its objective or not is ascertained
through accounting. What is accounting? According to the American Institute of
Certified Public Accountants, “Accounting is the art of recording, classifying
and summarizing in a significant manner and, in terms of money, transactions
and events which are, in part at least, of a financial character and interpreting
the results thereof.”

Thus, accounting involves a process consisting of the following four stages:

1. Recording the Transactions

2. Classifying the Transactions

3. Summarising the Transactions

4. Preparing the Final Accounts

5. Analysing and Interpreting the Results.

The Profit & Loss Account is prepared for ascertaining whether the business
earned profit or incurred loss during a particular period of time also called
‘accounting year’. The Balance Sheet is prepared to know the financial position
of business during the accounting period. Hence, the Balance Sheet is also
called ‘Position Statement.’

Characteristics of Successful Entrepreneurs:

 An eye for opportunity: Many entrepreneurs starts by finding a need
and quickly satisfying it.
 Independence: Even though most entrepreneurs know how to work
within the framework for the sake of profits, they enjoy being their own
boss.
 An appetite for hard work: Most entrepreneurs start out working long,
hard hours with little pay.
  Self-confidence: Entrepreneurs must demonstrate extreme self-
confidence in order to cope with all the risks of operating their own
business.
 Discipline: Successful entrepreneurs resist the temptation to do what is
unimportant or the easiest but have the ability to think through to what is
the most essential.
 Judgment: Successful entrepreneurs have the ability to think quickly and
make a wise decision.
 Ability to accept change: Change occurs frequently when you own your
own business, the entrepreneur thrives on changes and their businesses
grow.
 Make stress work for them: On the roller coaster to business success the
entrepreneur often copes by focusing on the end result and not the process
of getting there.
 Need to achieve: Although they keep an "eye" on profits, this is often
secondary to the drive towards personal success.
 Focus on profits: Successful entrepreneurs always have the profit margin
in sight and know that their business success is measured by profits.
Creativity and Innovation
One of the key requirements for entrepreneurial success is your ability to
develop and offer something unique to the marketplace. Over time,
entrepreneurship has become associated with creativity, the ability to develop
something original, particularly an idea or a representation of an idea.
Innovation requires creativity, but innovation is more specifically the
application of creativity. Innovation is the manifestation of creativity into a
usable product or service. In the entrepreneurial context, innovation is any new
idea, process, or product, or a change to an existing product or process that adds
value to that existing product or service.

Components of Creativity
Two of the primary components of creativity include:1
 1. Originality: The idea should be something new that is not simply an
extension of something else that already exists.
2. Functionality: The idea needs to actually work or possess some degree
of usefulness.

Creativity, Innovation, and Invention

Concept Description

Creativity ability to develop something original, particularly an idea or a representation

with an element of aesthetic flair

Innovatio change that adds value to an existing product or service

n

Invention truly novel product, service, or process that, though based on ideas and prod
come before, represents a leap, a creation truly novel and different

Entrepreneurs work with two types of thinking. Linear thinking—sometimes

called vertical thinking—involves a logical, step-by-step process. In contrast,
creative thinking is more often lateral thinking, free and open thinking in
which established patterns of logical thought are purposefully ignored or even
challenged. You can ignore logic; anything becomes possible. Linear thinking is
crucial in turning your idea into a business. Lateral thinking will allow you to
use your creativity to solve problems that arise. 
The 5 Stages of the Creative Process
While all creative people apply unique methods and thought processes to their
work, there are five stages that most creators subconsciously follow while
pursuing their creative endeavours. The five stages of the creative process
each flow logically into the next phase of the process. As you embark on your
own creative process, unleash your mind and let your ideas grow through the
five stages of creativity.

1. Preparation stage: As you begin the creative journey, the first stage
involves prep work and idea generation. This is when you gather
materials and conduct research that could spark an interesting idea.
Brainstorm and let your mind wander, or write in a journal to foster
divergent thinking; this will help you consider all possible approaches to
building out your idea. In this first part of the process, your brain is using
its memory bank to draw on knowledge and past experiences to generate
original ideas.
2. Incubation stage: When you have finished actively thinking about your
idea, the second stage is where you let it go. Part of creative thinking is
taking a step away from your idea before you sit down to flesh it out. You
might work on another project or take a break from the creative process
altogether—regardless, you are not consciously trying to work on your
idea. Walking away from your idea might seem counterproductive, but
 it’s an important stage of the process. During this time, your story or song
or problem is incubating in the back of your mind.
3. Illumination stage: Sometimes called the insight stage, illumination is
when the “aha” moment happens. The light bulb clicks on as spontaneous
new connections are formed and all of that material you’ve gathered
comes together to present the solution to your problem. In this third stage,
the answer to your creative quest strikes you. For example, you overcome
writer’s block by figuring out the ending to your story. It can take you by
surprise but after the incubation stage, an idea has emerged.
4. Evaluation stage: During this stage, you consider the validity of your
idea and weigh it against alternatives. This is also a time of reflection
when you look back at your initial concept or problem to see if your
solution aligns with your initial vision. Business professionals might do
market research to test the viability of the idea. During this phase, you
might go back to the drawing board or you might forge on, confident in
what you’ve come up with.
5. Verification stage: This is the final stage of the creative process. It’s
when the hard work happens. Your creative product might be a physical
object, an advertising campaign, a song, a novel, an architectural design
—any item or object that you set out to create, propelled by that initial
idea that popped into your head. Now, you finalize your design, bring
your idea to life, and share it with the world.

Negative Attitudes That Block Creativity

1. Oh no, a problem! The reaction to a problem is often a bigger problem than

the problem itself. Many people avoid or deny problems until it's too late,
largely because these people have never learned the appropriate emotional,
psychological, and practical responses. A problem is an opportunity. The
happiest people welcome and even seek out problems, meeting them as
challenges and opportunities to improve things. Definition: a problem is (1)
seeing the difference between what you have and what you want or (2)
recognizing or believing that there is something better than the current situation
or (3) an opportunity for a positive act. Seeking problems aggressively will
build confidence, increase happiness, and give you a better sense of control over
your life.
2. It can't be done. This attitude is, in effect, surrendering before the battle. By
assuming that something cannot be done or a problem cannot be solved, a
person gives the problem a power or strength it didn't have before. And giving
up before starting is, of course, self-fulfilling. But look at the history of
solutions and the accompanying skeptics: man will never fly, diseases will
never be conquered, rockets will never leave the atmosphere. Again, the
appropriate attitude is summed up by the statement, "The difficult we do
immediately; the impossible takes a little longer."

3. I can't do it. Or There's nothing I can do. Some people think, well maybe
the problem can be solved by some expert, but not by me because I'm not (a)
smart enough, (b) an engineer, or (c) a blank (whether educated, expert, etc.)

4. But I'm not creative. Everyone is creative to some extent. Most people are
capable of very high levels of creativity; just look at young children when they
play and imagine. The problem is that this creativity has been suppressed by
education. All you need to do is let it come back to the surface. You will soon
discover that you are surprisingly creative.

5. That's childish. In our effort to appear always mature and sophisticated, we

often ridicule the creative, playful attitudes that marked our younger years. But
if you solve a problem that saves your marriage or gets you promoted or keeps
your friend from suicide, do you care whether other people describe your route
to the solution as "childish?" Besides, isn't play a lot of fun? Remember that
sometimes people laugh when something is actually funny, but often they laugh
when they lack the imagination to understand the situation.

6. What will people think? There is strong social pressure to conform and to

be ordinary and not creative.

7. I might fail. Thomas Edison, in his search for the perfect filament for the
incandescent lamp, tried anything he could think of, including whiskers from a
friend's beard. In all, he tried about 1800 things. After about 1000 attempts,
someone asked him if he was frustrated at his lack of success. He said
something like, "I've gained a lot of knowledge--I now know a thousand things
that won't work."
Characteristics of the Creative Person

 curious
 seeks problems
 enjoys challenge
 optimistic
 able to suspend judgment
 comfortable with imagination
 sees problems as opportunities
 sees problems as interesting
 problems are emotionally acceptable
 challenges assumptions
 doesn't give up easily: perseveres, works hard

Creative Thinking Techniques:

 Brainstorming: Brainstorming is an idea generating technique. Its main

goals are (1) to break us out of our habit-bound thinking and (2) to produce
a set of ideas from which we can choose.

Brainstorming is extremely effective problem-solving and idea-generating

technique that encourages a group of people to think at the same time
creatively about the solution of a specific problem or to come up with an
innovative idea.

During brainstorming sessions, the participants are encouraged to share all

the ideas that come in their heads without to be shy or to think about the
quality of the idea. Brainstorming is more about quantity than quality. This
technique works excellent when it comes to generating brave, unorthodox
ideas that usually wouldn’t make the list. You never know where the next
big idea will come from.
  Attribute Analysis. Attribute analysis is the process of breaking down a
problem, idea, or thing into attributes or component parts and then thinking
about the attributes rather than the thing itself.

Attribute analysis is sometimes described as a smashing technique, because

it smashes our fixed and frozen collection of thoughts about a problem or
idea. This is accomplished by refocusing onto something belonging to the
problem but more general or abstract or more specific and concrete. Often,
attribute analysis is another way of recognizing that a given problem is
really a collection of interrelated smaller problems.

 Morphological Analysis. Morphological analysis builds upon attribute

analysis by generating alternatives for each attribute, thereby producing
new possibilities.
 Reverse thinking: Sometimes, to find the solution for a problem, you just
need to change your perspective. The reverse thinking technique enables
you to take a different look at a situation by focusing on the opposite
scenario. If you are considering making an action, focus on the scenario
that will occur if you don’t take this action. What will the outcome be?
Looking in a new way at a problem, may give you the answers and think in
reverse can help you with this process. This technique works extremely
well when you have spent a lot of time thinking about a problem and you
feel stuck.

 Brain-Writing: In this exercise, participants simply write down a few

rough ideas for solving a particular problem on a piece of paper. Each piece
of paper is then passed on to someone else, who reads it silently and adds
their own ideas to the page. This process is repeated until everyone has had
a chance to add to each original piece of paper. The notes can then be
gathered, ready for discussion. The big advantage of brain-writing is that it
makes sure everybody is given the opportunity to have their thoughts and
ideas thoroughly considered by the group. This avoids the loudest or most
extroverted people unintentionally dominating the sessions.
 Synectics : It was developed by William J. Gordon. He associated the
creative process with certain psychological states, believing that if these
could be induced then creative break throughs would increase their
occurrence. Synectics is an approach to creative thinking that depends on
understanding that which is apparently different. Its main tool is the
 analogy or metaphor. The approach, which is often used by groups, can
help students develop creative responses to problem solving, to retain new
information, to assist in generating writing, and to explore social and
disciplinary problems. It helps users break existing minds sets and
internalize abstract concepts. Synectics can be used with all ages and works
well with those who withdraw from traditional methods.

Synectics is an approach to problem-solving that focuses on cultivating

creative thinking, often among small groups of individuals with diverse
experience and skills. Often used by skunkworks and other cross-functional
teams, the approach can help group members explore problems; retain new,
often abstract, information; and develop creative solutions by breaking
from existing mindsets. The term "synectics" is derived from the Greek
word "synectikos," which means to bring different things into unified
connection.

 S.C.A.M.P.E.R.: is essentially a process for expanding and improving

upon ideas by testing and questioning them from different angles. For
each letter of the mnemonic, ask yourself a related question about your
project or the problem at hand:

 Substitute, e.g.: What would happen to the project if we swapped X for Y?

 Combine, e.g.: What would happen to the project if we combined X and Y?
 Adapt, e.g.: What changes would need to be made to adapt this project to a
different context?
 Modify, e.g.: What could we modify to create more value on this project?

 Put to another use, e.g.: What other uses or applications might this project
have?

 Eliminate, e.g.: What could we remove from the project to simplify it?
 Reverse, e.g.: How could we reorganize this project to make it more
effective?

This method forces you to approach your project or problem in unexpected

ways. Each question asks you to dig a little deeper into the issue and
consider new possibilities.
Types of Innovation

Incremental innovation

Most innovations are incremental, gradual and continuous improvements in

the existing concepts, products or services in the existing market.

Incremental innovations are just a little better than the previous version of the
product or service and has only slight variations on an existing product
formulation or service delivery method.

Products can be made smaller, easier to use or more attractive without

changing the core functionality of it and services can be made more efficient
through constant improvement.
Although incremental innovation does not create new markets and often
does not leverage radically new technology, it can attract higher paying
customers because it fulfils the customer needs identified from their behaviour
or feedback.

Disruptive Innovation

Disruptive innovation is a theory that refers to a concept, product, or a

service that creates a new value network either by entering an existing
market or by creating a completely new market.

In the beginning, disruptive innovations have lower performance when

measured by traditional value metrics but has different aspects that are valued
by a small segment of the market. These types of innovations are often
capable of turning non-customers into customers but do not necessarily
appeal to the needs and preferences of the mainstream customers, at least
not just yet.

Another example of disruptive innovation is Netflix, whose initial mail-in movie

subscription service wasn’t attractive to Blockbuster’s mainstream customers,
but rather to those early adopters who were already used to online shopping.

Sustaining innovation

Sustaining innovation is the opposite of disruptive innovation as it exists in the

current market and instead of creating new value networks, it improves and
grows the existing ones by satisfying the needs of a customer.

Just like incremental innovation, the product performance of sustaining

innovation is made slightly better with every iteration, reducing defects. The
new improved version of the product can be more expensive and have higher
margins than the previous one if it targets more demanding, high-end
customers with better performance than what was previously available.

However, it might as well be cheaper if it leads to higher volumes and thus

higher absolute profits.

Radical innovation

Radical innovation is rare as it has similar characteristics to disruptive

innovation but is different in a way that it simultaneously uses revolutionary
technology and a new business model.  

Radical innovation solves global problems and addresses needs in completely

new ways than what we’re used to and even provides solutions to needs and
problems we didn’t know we had, completely transforming the market, or even
the entire economy.
Technological innovations, such as personal computer and the internet are
examples of radical innovations that have transformed the way the entire
world functions and communicates. These disruptive innovations provide our
society with a platform to build on top of, leading to highly accelerated
economic growth.

Architectural vs. modular innovation

In addition to the types of innovations mentioned above, I'd also like to briefly
introduce the concepts of architectural and modular innovation.

Architectural innovation is described as the reconfiguration of existing product

technologies, and was introduced by Rebecca Henderson and Kim Clark in
1990.

The main point in architectural innovation is that while the core components of
the product remain the same, the relationship between these components
changes. This type of innovation entails the overall design, system or the
way components interact.

Modular innovation (or component innovation), on the contrary, is the exact

opposite. In modular innovations, one or more components of a product
is changed while the overall design stays the same.

1.13 Multiple Choice Questions

1. Who is an entrepreneur?

(a) Someone who invests time and money to start a business.

(b) Someone who makes a lot of money.
(c) Someone who takes a risk to make a profit.
(d) Both A & C.
2. Define Free Enterprise:

(a) A business taking a risk to make a profit.

(b) A program administered by the Government.
(c) People in business trying to make a profit.
(d) A business adventure or undertaking.
3. Which one of the following is not an importance of entrepreneur?

(a) Provides employment to the people

(b) Contributes towards research and development system
(c) Creates wealth for the nation
(d) Provides self sufficiency
4. Point out the quality in an entrepreneur

(a) Initiative
(b) Lack of experience
(c) Lack of confidence
(d) Lack of decision making ability
5. Which one in not function of an entrepreneur?

(a) Turning ideas into action

(b) Feasibility study
(c) Resourcing
(d) Shutting down the existing business
6. Who can start a business?

(a) Only highly educated person

(b) Only an uneducated person
(c) Only rich person
(d) Any one of the above
7. While selecting line a business, an entrepreneur must keep in his mind

(a) Profitability
(b) Risk involved
(c) Profits
(d) All above
8. Match the Entrepreneur with their enterprise:

1 Verghese Kurien Flipkart

2 Azim Premji Future Group

3 Sachin Bansal and Binny Bansal Amul

4 Kishore Biyani Wipro

9. What are the 3S in the 3S model of entrepreneurship?

(a) Stimulatory, Support, Sustenance
(b) Support, Stimulatory, Sustenance
(c) Sustenance, Stimulatory, Support
(d) System, Support, Stimulatory

10. Which of the following is NOT recognized as a misconception about

entrepreneurship?
(a) Entrepreneurship is easy.
(b) Successful entrepreneurship needs only a great idea.
(c) Entrepreneurship is found only in small businesses.
(d) Entrepreneurial ventures & small businesses are different.

11. A/An ------------- is best described by stating it is any business that is independently
owned and operated and is not dominate in its market?
(a) Strategic Alliance
(b) Corporation
(c) Entrepreneurship
(d) Small Business

12. Which of the following is NOT a part of three stages of Entrepreneurship:

(a) Income Generation
(b) Sales
(c) Self Employment
(d) Entrepreneurship

13. Which of the following is NOT classified as Entrepreneur?

(a) Imitative Entrepreneur
(b) Drone Entrepreneur
(c) Conservative Entrepreneur
(d) Fabian Entrepreneur

14. The Entrepreneur who is committed to the entrepreneurial effort because it makes
good business sense is classed as a/an:
(a) Opportunist
(b) Hacker
(c) Craftsman
(d) Craftsperson

15. Which of the following management concepts is most difficult to understand?

(a) Intrapreneurship
(b) Entrepreneurship

16. Which of the following managers is most likely to obtain the help of others to
achieve dreams?
(a) Intrapreneurs
(b) Entrepreneurs
(c) Traditional Managers
(d) All types of managers

17. External links may provide incentives to:

A) Raise finance
B) Introduce new working practices
C) Introduce improvements to products
D) Attend business exhibitions

1.14 Short-Answer Type Questions:

1. Define Entrepreneur. What is the relationship between an entrepreneur, entrepreneurship
and an enterprise?
2. Define the following types of entrepreneurs:
i. Imitative Entrepreneur
ii. Drone Entrepreneur
iii. Fabian Entrepreneur
3. How an entrepreneur differs from an entrepreneur?
4. What are the three stages of entrepreneurship?
5. What is 3-S Model of entrepreneurship?

1.15 Long-Answer Type Questions:

1. Discuss the importance of entrepreneurship in economic development.

2. Explain the various functions of entrepreneur.
3. Can entrepreneurship qualities be acquired? Do you think an entrepreneur has inborn
quality? Discuss.
Case Study: 1-1 N.R. Narayana Murthy – A Risk taker Entrepreneur.

Nagavara Ramarao Narayana Murthy, popularly known as N.R. Narayana Murthy, Ex-
Chairman and CEO of Infosys Technologies Ltd. Comes from a middle-class background. He
is the son of a teacher, a member of a large family of eight children. Like an ordinary
middle-class boy, he studied well and qualified for the prestigious IIT. He could not afford it
and therefore, went to NIE, Mysore – a local college for a degree in electrical engineering.
Murthy completed his post-graduation in electrical engineering at IIT, Kanpur in 1969 and
took up a job. The only thing is, he did seemingly the very same things, but obviously
differently. He always took risks.
Murthy pursued a career in computer science when there were not too many jobs in this field.
He turned down attractive offers from very large companies like Telco, HMT and Air India
and joined IIM, Ahmedabad as a system programmer. Murthy was entrusted with the task of
installing a HP minicomputer at IIM. The thrill of such a pioneering job gave him a great
learning opportunity and was the main reason that Murthy joined the team at IIM. He
received a salary of Rs. 800/- a month. He recalls that it was the best decision of his life
Murthy also had received scholarships to pursue a Ph.D in U.S.A. and Israel. But, he did not
take these options. He instead went to Paris to learn other language i.e. French.
In 1974, he took up a job in Patni Computer Systems, a Mumbai based firm. There he headed
a software group and met some of the founder partners of Infosys. He quit the job and started
his software service firm along with his partners. All the partners were from a middle-class
backgrounds and pooled in Rs. 10000 capital borrowed from their better halves. In this way,
Infosys consultants was born in 1981.
The first ten years after 1981 were quite tough for Murthy and his team. It took one year to
get a telephone connection and two years to get a license to import a computer. His wife
sudha had to go and live with her parents for a year. In 1990, his partners thought of selling
the company. But Murthy differed and even offered to buy his partners out.
Murthy always took risks and it always seems to have paid off.

Based on the case above, answer the following questions:

1. List the entrepreneurial competencies of Murthy.
2. Give your views if Murthy’s various decisions were right or wrong. Ignore the pay offs of
his decisions.
3. Do you consider Murthy as a “born entrepreneur”? Give Reasons.