The Foundations of Entrepreneurship

Course : New Venture Creation
Effective Period : 2021
The Foundations of
Entrepreneurship
Session 01
Acknowledgement
These slides have been adapted from:
Allen, K. R. (2020). Launching new ventures: An

entrepreneurial approach. Nelson Education.
Scarborough, N. M., & Cornwall, J. R. (2019). Essentials of

entrepreneurship and small business management.
Learning Outcomes
• LO 1: Explain Entrepreneurship and Opportunity in

Business
What is an Entrepreneur?
• Entrepreneur:
‒ One who creates a new business in the face of risk and
uncertainty for the purpose of achieving profit and
growth by identifying opportunities and assembling the
necessary resources to capitalize on them.
Copyright © 2019, 2016, 2014 Pearson Education Ltd. All Rights Reserved.
WHAT IS ENTREPRENEURSHIP?
“The process by which individuals—either on their own or

inside organizations—pursue opportunities without regard
to the resources they currently control.”
– Howard Stevenson
• Entrepreneurship is more than simply starting a

business; it also encompasses a mindset or way of
thinking and a set of behaviors.
• That way of thinking is usually opportunity-focused, risk taking,
innovative, and growth-oriented.
© 2020 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Characteristics of Entrepreneurs (1 of 2)
• Desire for responsibility • Desire for immediate
• Preference for moderate feedback
levels of risk • High level of energy
• Willingness to break the • Competitive
rules • Future orientation
• Self-reliance – Opportunity
• Confidence in their ability entrepreneurs
to succeed – Necessity
• Determination entrepreneurs
– Serial entrepreneurs
Characteristics of Entrepreneurs (2 of 2)
• Skilled at organizing • Flexibility
• Value achievement over • Resourcefulness
money • Willingness to work hard
• High degree of • Tenacity
commitment
• Tolerance for ambiguity
• Creativity
Figure 1.3 Most Important Qualities of an
Entrepreneur
Source: Ryan Westwood, “What Traits Do We Need to Succeed as Entrepreneurs?” Forbes, September 4, 2015,
www.forbes.com/sites/ryanwestwood/2015/09/04/what-traits-do-we-need-tosucceed-as-entrepreneurs/#4d7f537f8ff4 .
Entrepreneurship
• One characteristic of entrepreneurs stands out: diversity!
• Anyone – regardless of age, race, gender, color, national
origin, or any other characteristic – can become an
entrepreneur (although not everyone should).
Benefits of Entrepreneurship
• The opportunity to:
– Create your own destiny.
– Make a difference.
– Reach your full potential.
– Reap impressive profits.
– Contribute to society and to be recognized for your
efforts.
– Do what you enjoy and to have fun at it.
Drawbacks of Entrepreneurship
• Uncertainty of income
• Risk of losing your entire investment
• Long hours and hard work
• Lower quality of life until the business gets established
• High levels of stress
• Discouragement
Figure 1.1 Entrepreneurial Activity across the
Globe
Source: Based on data from Donna Kelley, Slavica Singer, and Mike Herrington, Global
Entrepreneurship Monitor 2016/17 Global Report, Global Entrepreneurship Monitor, 2017, pp. 39–102.
The World of the Entrepreneur
• Global Entrepreneurship Monitor (GEM) study:
– 12.6% of the U.S. population aged 18 to 64 is engaged
in entrepreneurial activity.
– 68% of working adults around the world perceive
entrepreneurs as having high status.
Table 1.1 Entrepreneurship-Friendly Nations
Which nations provide the best environment for cultivating entrepreneurship? A recent study ranked 137
countries on the quality of the entrepreneurial ecosystem in each nation using the Global
Entrepreneurship and Development Index (GEDI), an index that includes a variety of factors that range
from the availability of capital and workforce quality to attitudes toward entrepreneurs and technology
available. The maximum GEDI score is 100.
GEDI Score, Top Ten Countries GEDI Score, Bottom Ten Countries
1. United States 83.4 128. Venezuela 13.0
2. Switzerland 78.0 129. Nicaragua 12.7
3. Canada 75.6 130. Malawi 125
4. Sweden 75.5 131. Guinea 12.1
5. Denmark 74.1 132. Burkina Faso 11.9
6. Iceland 73.5 133. Bangladesh 11.8
7. Australia 72.5 134. Mauritania 11.6
8. United Kingdom 71.3 135. Sierra Leone 11.4
9. Ireland 71.0 136. Burundi 11.4
10. Netherlands 67.8 137. Chad 8.8
Source: Global Entrepreneurship Index, The Global Entrepreneurship and Development Institute, 2017,
https://thegedi.org/global-entrepreneurship-and-development-index/.
THE ROLE OF ENTREPRENEURSHIP
1.1
IN THE ECONOMY (slide 1 of 3)
• The entrepreneurial process is not a linear
process but rather something more like a
dynamic system with complex moving parts.
• Phase 1
• Entrepreneurs initially work to find a significant problem or
need in a market or an industry.
• Then they do preliminary research to understand the
industry, the potential market, and any issues they might
face in the areas of intellectual property, regulation, or in
product development in the case of a technology solution.
• They then develop hypotheses from what they’ve learned.
1.1
• Phase 2
• Entrepreneurs focus on validating the hypotheses they
have made about the customer, the solution, and the
proposed business model.
• The results will ultimately provide important information
about potential sources of revenue and major drivers of
cost.
• Phase 3
• When the activities in Phases 1 and 2 give entrepreneurs
sufficient confidence that their business is feasible, it’s time
to consider the design of the business and to create a plan
for its execution.
• This means having the right team and partners in place as
well as choosing the best time to launch the business.
1.1
• The successful execution of the entrepreneurial
process results in a new venture.
• However, the process of testing and validation continues as
the new business responds to a dynamic environment that
includes all the variables external to the business that can
impact its growth, including:
• The economic environment.
• Competition.
• New laws and regulations.
• Labor supply.
• Sources of capital.
1.1a Entrepreneurs Spur Economic Growth
• Early economists recognized that technology is the

primary force behind rising standards of living and that
technological innovation would determine the success
of nations in the future.
• Technological change happens when an entrepreneur
identifies:
• New customer segments that appear to be emerging.
• New customer needs.
• Existing customer needs that have not been satisfied.
• New ways of manufacturing and distributing products and
services.
Entrepreneurship and
FIGURE 1.2
Technological Change
1.1b Entrepreneurs Create New Industries
• An industry is simply the people and

companies that engage in a category of
business activity.
• New industries are born when technological
change produces a novel opportunity that
enterprising entrepreneurs seize.
• Industries don’t last forever.
• Much like humans, they have life cycles—they’re
born, they grow, they decline, and they die.
FIGURE 1.3 The Industry Life Cycle
1.1c Entrepreneurs Create Jobs (slide 1 of 3)
• The U.S. Small Business Administration (S B A)

defines a small business as one with fewer than 500
employees.
• In all, 62 percent of net new jobs come from small
businesses; small businesses comprise 99.9 percent
of all businesses.
• The vast majority of net new jobs created by the small
business sector are created by a few rapidly young firms
called gazelles or high-impact businesses.
• These young businesses generally have sales that double over a
four-year period with employment growth of two or more times
over the same period.
• The annual Global Entrepreneurship Monitor divides
countries into three groups based on terms of growth
and early-stage entrepreneurial activity:
1. Factor-driven economies.
• These economies rely on unskilled labor and the extraction of
natural resources for growth.
• Businesses are normally created out of necessity and so these
countries tend to have very high entrepreneurial activity rates
relative to other types of economies.
2. Efficiency-driven economies.
• These economies are growing and in need of improving their
production processes and quality of goods produced.
3. Innovation-driven economies.
• These economies are the most advanced and where businesses
compete based on innovation and entrepreneurship.
• One consistent finding is that across all types

of economies, there are more people in the
25- to 34-year-old age group with intentions to
start a business and entrepreneurship is a
highly regarded activity and career path.
THE NATURE OF ENTREPRENEURIAL
1.2
STARTUPS (slide 1 of 2)
• Entrepreneurial ventures and small businesses are
related, but they are not the same in most respects.
• Both are important economically, but each provides different
benefits and outcomes.
• Entrepreneurs have been described as equilibrium disrupters
who introduce new products and processes that change the way
we do things, while small-business owners typically operate a
business to a make a living.
• Small businesses, such as small shops, restaurants, and
professional service businesses, form what has been called the
economic core.
THE NATURE OF ENTREPRENEURIAL
1.2
STARTUPS (slide 2 of 2)
• In general, high-impact entrepreneurial
ventures have three primary characteristics:
1. Innovative.
• The venture brings something new to the marketplace.
2. Value-creating.
• The venture creates new jobs that don’t draw from existing
businesses and serve customer needs that are currently
unserved.
3. Growth-oriented.
• The entrepreneur sees the business growing to a regional,
national, or global level.
1.2a Risk and the Entrepreneurial Venture
(slide 1 of 2)
• Risk is an inherent part of the entire

entrepreneurial process.
• Much of new venture risk occurs early in the
creation process.
• The period of time prior to launch and startup is
called the fuzzy front end, which simply means that
the activities undertaken at this point are often
unclear and subject to change as more information
is obtained.
1.2a Risk and the Entrepreneurial Venture
(slide 2 of 2)
• Nascent entrepreneurs use the time spent in

the fuzzy front end to calculate:
• The probability of success as an entrepreneur.
• What that success will mean in terms of return on
his or her investment of time, money, and effort.
• What the risk or cost of failure might be.
• Because these risk estimates are highly
subjective, it’s important for entrepreneurs to
gather sufficient information and test the
business model to reduce that risk as much as
possible.
1.2b New Business Failure (slide 1 of 4)
• The S B A reports that about half of all new

businesses will survive five years or more, and
approximately one-third will survive 10 years or
more.
• Statistic Brain, a research institute, found that
50 percent of all U.S. companies fail after five
years and 70 percent after 10 years.
• There are several reasons for new business failure:

• Entrepreneurs often start businesses with a solution looking
for a problem.
• In other words, they haven’t identified a real need in the market
with customers willing to pay for a solution.
• The solution is not necessarily unique or compelling.
• In other words, it is often a “me-too” solution that does not offer
anything different from what is already in the market.
• Entrepreneurs often do not communicate the value proposition
effectively to the customer.
• Entrepreneurs often haven’t identified and tested a business
model that actually works.
• Young firms have a higher chance of failure

because they have to divert their scarce
resources away from the critical operations of
the company in order to train employees,
develop systems and controls, and establish
strategic partnerships.
• Failure is a fact of life that must be dealt with.

• What matters is that the entrepreneur minimizes the
cost of failure and has a plan to recover quickly.
Putting Failure into Perspective
• Entrepreneurs are not paralyzed by the prospect of failure.
• Failure: a natural part of the creative process.
• Successful entrepreneurs learn to fail intelligently.
Avoiding the Pitfalls of Small Business
Failure (1 of 2)
• Know your business in-depth
• Build a viable business model – and test it
• Use lean start-up principles
• Know when to pivot
• Develop a solid business plan
• Understand financial statements
Avoiding the Pitfalls of Small Business
Failure (2 of 2)
• Manage financial resources
• Understand financial statements
• Build the right team
• Learn to manage people effectively
• Set your business apart from the competition
• Maintain a positive attitude
CURRENT ENTREPRENEURIAL
1.4
TRENDS
• In the previous edition of this book (2016), major
trends were:
• Digital anonymity.
• Domestic manufacturing.
• Big data.
• The lean startup movement.
• Those trends continue; but for 2018 and beyond,
research firms like Gartner, Forrester, and Deloitte see
some key technology trends that will be the foundation
for the next generation of entrepreneurial businesses,
which are summarized on the following slides.
1.4a Intelligent Technology
• Artificial intelligence (A I) is arguably the

most important platform technology today.
• A I is about machine-learning solutions targeted
toward completing a specific task such as driving a
self-driving car in a controlled environment.
• In general, A I augments human decision making
and enables us to take advantage of skills like facial
recognition, diagnostics, and many other tasks that
can be automated and executed faster and more
reliably than a human could do.
1.4b Digital
• The digital world will see increased capabilities in

areas such as:
• Immersive experiences.
• Mixed realities that include augmented reality and virtual reality
allow users to interact with objects in both the digital and real
world.
• Immersive experiences are already found in such things as video
games, medical training, and military simulations.
• Digital twins.
• A digital twin is a digital replica of a human or real-world entity.
• Using connected sensors and endpoints, advanced simulations,
operations, and analysis can now be conducted via a digital twin.
1.4c Disruption
• Advances in synthetic biology and genomics are

being made.
• Technologies like C R I S P R enables editing of and making
changes to the genome of living cells.
• This may allow to correct for genes that give someone a higher
chance for a certain disease, such as Alzheimer’s disease.
• Another area of disruption that will lead to new
opportunities is quantum computers.
• These are enormously powerful machines that process
information differently from everyday computers.
• They can untangle complex structures and potentially enable
us to discover new medicines and materials.
Developing Career Skills
• Critical thinking and problem solving
• Written and oral communication
• Teamwork and collaboration
• Leadership
• Creativity
• Ethics and social responsibility
Conclusion
• Entrepreneurs:
– Are an important part of the free enterprise system
– Are a diverse and talented group of people
– Represent a cross-section of society as a whole
– Are able to enhance the profitability of their businesses
through acquiring additional knowledge and experience
References
• Allen, K. R. (2020). Launching new ventures: An
entrepreneurial approach. Nelson Education.
• Scarborough, N. M., & Cornwall, J. R.
(2019). Essentials of entrepreneurship and
small business management.

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The Foundations of Entrepreneurship

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Course : New Venture Creation

Effective Period : 2021

These slides have been adapted from:

Allen, K. R. (2020). Launching new ventures: An

Scarborough, N. M., & Cornwall, J. R. (2019). Essentials of

• LO 1: Explain Entrepreneurship and Opportunity in

“The process by which individuals—either on their own or

• Entrepreneurship is more than simply starting a

• Early economists recognized that technology is the

• An industry is simply the people and

• The U.S. Small Business Administration (S B A)

• One consistent finding is that across all types

• Risk is an inherent part of the entire

• Nascent entrepreneurs use the time spent in

• The S B A reports that about half of all new

• There are several reasons for new business failure:

• Young firms have a higher chance of failure

• Failure is a fact of life that must be dealt with.

• Artificial intelligence (A I) is arguably the

• The digital world will see increased capabilities in

• Advances in synthetic biology and genomics are

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