BS-4452 Entrepreneurship & SmallBusinessManagement Bülent Şenver [email protected].

BS-4452Entrepreneurship

& SmallBusinessManagement

Bülent Ş[email protected]

What is an 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.

1 - 2Ch. 1: The Foundations of Entrepreneurship

Characteristics of Entrepreneurs

• Desire for responsibility• Preference for moderate levels of risk – risk

eliminators• Confidence in their ability to succeed• Determination• Desire for immediate feedback• High level of energy• Future orientation – opportunity, necessity, and

serial entrepreneurs• Skilled at organizing• Value achievement over money


Characteristics of Entrepreneurs

• Entrepreneurs tend to exhibit:►A high degree of commitment►Tolerance for ambiguity►Flexibility►A willingness to work hard►Tenacity


Benefits of EntrepreneurshipThe 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 incomeRisk of losing your entire investmentLong hours and hard workLower quality of life until the business gets

establishedHigh levels of stressComplete responsibilityDiscouragement


Avoiding the Pitfalls of Small Business Failure

• Know your business in depth• Develop a solid business plan• Manage financial resources• Understand financial statements• Learn to manage people effectively• Set your business apart from the competition• Maintain a positive attitude


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.


2 - 9Ch. 2: Inside the Entrepreneurial Mind

Creativity and Innovation

Creativity – the ability to develop new ideas and to discover new ways of looking at problems and opportunities; thinking new things

Innovation – the ability to apply creative solutions to problems or opportunities to enhance or to enrich people’s lives; doing new things.


Entrepreneurship

• Entrepreneurship – the result of a disciplined, systematic process of applying creativity and innovation to the needs and opportunities in the marketplace.

• Entrepreneurs connect their creative ideas with the purposeful action and structure of a business.


Failure: Part of the Creative Process!

• For every 3,000 new product ideas:►Four make it to the development stage►Two are actually launched►One becomes a success in the market

• On average, new products account for 40% of companies’ sales!!

• Creativity is an important source of building a competitive advantage.


Right-Brained, Creative Thinkers

• Always ask: “Is there a better way?”• Challenge custom, routine, and tradition.• Are reflective.• Are prolific thinkers.

• Play mental games.



• Realize that there may be more than one “right” answer.

• Know that mistakes are pit stops on the way to success.

• Recognize that problems are springboards for new ideas.



• Understand that failure is a natural part of the creative process.

• Relate seemingly unrelated ideas to a problem. • Have “helicopter skills.”


Left-Brained or Right-Brained?

Entrepreneurship requires both left-and right-brained thinking.

– Right-brained thinking draws on divergent reasoning, the ability to create a multitude of original, diverse ideas.

– Left-brained thinking counts on convergent reasoning, the ability to evaluate multiple ideas and to choose the best solution to a problem.


Barriers to Creativity

• Searching for the one “right” answer

• Focusing on “being logical”

• Blindly following the rules

• Constantly being practical

• Viewing play as frivolous


Barriers to Creativity

• Becoming overly specialized

• Avoiding ambiguity

• Fearing looking foolish

• Fearing mistakes and failure

• Believing that “I’m not creative”


Questions to Spur the Imagination

• Is there a new way to do it?• Can you borrow or adapt it?• Can you give it a new twist?• Do you merely need more of the same?• Do you need less of the same?



• Is there a substitute?• Can you rearrange the parts?• What if you do just the opposite?• Can you combine ideas?• Can you put it to other uses?

(continued)



• What else could you make from this?• Are there other markets for it?• Can you reverse it?• Can you eliminate it? • Can you put it to another use?• What idea seems impossible, but if executed,

would revolutionize your business?

(continued)


Tips for Enhancing Organizational Creativity

• Include creativity as a core company value• Embrace diversity• Expect creativity• Expect and tolerate failure • Create an organizational structure that

nourishes creativity



• Encourage curiosity• Create a change of scenery periodically• View problems as opportunities• Provide creativity training• Provide support• Develop a procedure for capturing ideas

(continued)



• Talk and interact with customers• Reward creativity• Model creative behavior • Monitor emerging trends and identify ways

your company can capitalize on them• Hire for creativity

Continued



• View problems as opportunities• Incorporate fun into the work environment• Design a work space that encourages creativity• Look for uses for your company’s products or

services in other markets

Continued


Tips for Enhancing Individual Creativity

• Allow yourself to be creative• Give your mind fresh input every day• Observe the products and services

of other companies, especially those in completely different markets

• Recognize the creative power of mistakes

• Notice what is missing



• Keep a journal to record your thoughts and ideas

• Listen to other people• Listen to customers• Talk to a child• Do something ordinary in an unusual way



• Keep a toy box in your office• Do not throw away seeming “bad” ideas• Take some time off• Be persistent



• Forget the “rules”• Take note of your “pain points”• Read books on stimulating creativity or take

a class on creativity• Travel - and observe• Watch a movie

Continued


The Creative Process

Preparation Investigation Transformation

Incubation Illumination Verification

Implementation





Implementation


PreparationGet your mind ready for creative thinking.

– Adopt the attitude of a lifelong student.

– Read … a lot … and not just in your field of expertise.

– Clip articles of interest to you and save them.

– Develop your listening skills.


Preparation

Get your mind ready for creative thinking.– Join professional or trade associations and

attend their meetings.

– Eliminate creative distractions.

– Take time to discuss your ideas with other people.





Implementation





Implementation


Transformation• Involves viewing both the similarities and the

differences among the information collected.

• Two types of thinking are required:

►Convergent – the ability to see the similarities and the connections among various and often diverse data and events.

►Divergent – the ability to see the differences among various data and events.


Transformation• How can you transform information into

purposeful ideas? – Grasp the “big picture” by looking for patterns

that emerge.– Rearrange the elements of the situation.– Use synectics, taking two seeming nonsensical

ideas and combining them. – Remember that several approaches can be

successful. If one fails, jump to another.





Implementation


Incubation Allow your subconscious to reflect on the

information collected.– Walk away from the situation.

– Take the time to daydream.

– Relax – and play – regularly.

– Dream about the problem or opportunity.

– Work on the problem in a different environment.





Implementation





Implementation


Verification Validate the idea as accurate and useful.

– Is it really a better solution?– Will it work?– Is there a need for it?– If so, what is the best application of this idea in the

marketplace?– Does this product or service fit into our core

competencies?– How much will it cost to produce or to provide? – Can we sell it at a reasonable price that will

produce a profit?





Implementation


Techniques for Improving the Creative Process

Brainstorming:

The goal is to create a large quantity of novel and imaginative ideas.


Brainstorming Guidelines

• Keep the group small – “Two pizza rule.”• Make the group as diverse as possible.• Emphasize that company rank is irrelevant.• Have a well-defined problem, but don’t reveal it

ahead of time.• Limit the session to 40 to 60 minutes.• Take a field trip.



• Throw logic out the window.• Encourage all ideas from the team.• Shoot for quantity of ideas over quality of ideas. • Forbid criticism.• Encourage idea “hitch-hiking.” • Dare to imagine the unreasonable.• Appoint a recorder.



• Get people focused on the issue by inviting participants to submit at least three ideas by email before the session takes place.

• Encourage aerobic exercise before the session.• Use a seating pattern that encourages

interaction.



• Brainstorming– The goal is to create a large quantity of novel and

imaginative ideas.

• Mind-mapping– A graphical technique that encourages thinking on

both sides of the brain, visually displays relationships among ideas, and improves the ability to see a problem from many sides.

The Mind-Mapping Process

• Start by writing down or sketching a picture symbolizing the problem or area of focus in the center of a blank page.

• Work as quickly as possible and write down every idea that comes into your mind for 20 minutes, connecting each to the central picture or words with a line.

• Don’t try to force creativity.• After a brief rest, begin to integrate the ideas into

a mind map.




Force Field Analysis A useful technique for evaluating the forces

that support and oppose a proposed change. Three columns:

Center: Problem to be addressed Left: Driving forces Right: Restraining forces

Score each force (-1 to +4) and add them.


Sample Force Field Analysis


Protecting Your Ideas

• Patent – a grant from the Patent and Trademark Office to the inventor of product, giving the exclusive right to make, use, or sell the invention for 20 years from the date of filing the patent application.


The Six Steps to a Patent

1. Establish the invention’s novelty

2. Document the device

3. Search existing patents

5. Complete the patent application

6. File the patent application

4. Study search results



• Trademark – any distinctive word, symbol, design, name, logo, slogan, or trade dress a company uses to identify the origin of a product or to distinguish it from other goods on the market.

• Servicemark – the same as a trademark except that it identifies the source of a service rather than a product.



• Copyright – an exclusive right that protects the creators of original works of authorship such as literary, dramatic, musical, and artistic works.

• Copyrighted material is denoted by the symbol ©.

Protecting Intellectual Property

• The primary weapon an entrepreneur has to protect patents, trademarks, and copyrights is the legal system.

• Before engaging in a legal battle consider:►Can the opponent afford to pay if you win?►Do you expect to win enough to cover your legal

costs?►Can you afford the loss of time, money, and

privacy involved?



Characteristics of Patents, Trademarks, and Copyrights

Conclusion• The creative process is a tenant of the

entrepreneurial experience. • Success, and even survival itself, requires

entrepreneurs to tap their creativity. • The seven steps of the creative process transform an

idea into a business reality. • Creativity results in value, and value provides a

competitive advantage. • Entrepreneurs protect their creative ideas with

patents, trademarks, servicemarks, and copyrights to sustain a competitive edge.


3 - 58Ch. 3: Business Model and Strategic Plan

A Major Shift . . .

From financial capital to intellectual capital

– Human– Structural– Customer


Strategic Management

• Is crucial to building a successful business.

• Involves developing a game plan to guide a company as it strives to accomplish its mission, goals, and objectives, and to keep it on its desired course.


Strategic Management and Competitive Advantage

• Developing a strategic plan is crucial to creating a sustainable competitive advantage, the aggregation of factors that sets a company apart from its competitors and gives it a unique position in the market that is superior to its competition.

• Example: Whole Foods


Building a Competitive Advantage

• Consider five aspects of a small company:

1. Products they sell

2. Service they provide

3. Pricing they offer

4. Way they sell

5. Values to which they are committed


Key: Core Competencies

• Unique set of capabilities a company develops in key areas, such as superior quality, customer service, innovation, team-building, flexibility, responsiveness, and others that allow it to vault past competitors. – They are what a company does best. – Best to rely on a natural advantage (often linked

to a company’s “smallness”). • Example: Pizza Fusion


Building a Sustainable Competitive Advantage

Superior value for customers

Sustainable competitive advantage

Capabilities

Core competencies

Skills

Lessons learned


Strategic Management Process

Step 1 Develop a vision and translate it into a mission statement

Step 2 Assess strengths and weaknessesStep 3 Scan environment for opportunities

and threatsStep 4 Identify key success factors


Strategic Management Process

Step 5 Analyze competition Step 6 Create goals & objectives Step 7 Formulate strategies Step 8 Translate plans into actions Step 9 Establish accurate controls

(continued)


Step 1: Develop a Vision and Create a Mission Statement

• Vision – the result of an entrepreneur’s dream of something that does not exist yet and the ability to paint a compelling picture of that dream for everyone to see.

• A clearly defined vision:►Provides direction►Determines decisions►Inspires people►Allows for perseverance in the face of adversity



• Addresses question: “What business are we in?”

• The mission is a written expression of how the company will reflect an entrepreneur’s values, beliefs, and vision – more

than just “making money.”• Serves as a “strategic compass.” • Examples: Chick-fil-A, Google



• Elements of a mission statement:– Purpose of the company: What are we in

business to accomplish?– Business we are in: How are we going to

accomplish that purpose?– Values of the company: What principles and

beliefs form the foundation of the way we do business?


Step 2: Assess Company Strengths and Weaknesses

• Strengths– Positive internal factors a company can draw

on to accomplish its mission, goals, and objectives.

• Weaknesses– Negative internal factors that inhibit a

company’s ability to accomplish its mission, goals, and objectives.


Step 3: Scan for Opportunities and Threats

• Opportunities– Positive external factors the company can

exploit to accomplish its mission, goals, and objectives.

• Threats– Negative external factors that inhibit the

firm's ability to accomplish its mission, goals, and objectives.


The Power of External Market Forces

Competitive

Economic

Political and Regulatory

Technological

Social and Demographic

Identifying and Managing Threats



Step 4: Identify Key Success Factors

Key success factors (KSFs): factors that determine the relative success of market participants.

The keys to unlocking the secrets of competing successfully in a particular market

segment. Example: Five Guys Burgers and Fries


Identifying Key Success FactorsList the skills, characteristics, and core competencies that

your business must possess to be successful in its market segment.

Key Success Factor How Your Company Rates

1. Low 1 2 3 4 5 6 7 8 9 10 High

2. Low 1 2 3 4 5 6 7 8 9 10 High

3. Low 1 2 3 4 5 6 7 8 9 10 High

4. Low 1 2 3 4 5 6 7 8 9 10 High

5. Low 1 2 3 4 5 6 7 8 9 10 High

Conclusions:


Step 5: Analyze Competitors

• NFIB study: Small business owners believe they operate in a highly competitive environment and the level of competition is increasing.

• Yet, 97 percent of all U.S. businesses do not systematically track the progress of their key competitors.

Small Business Success Index


Competitor Analysis• Direct competitors

– Offer the same products and services– Customers often compare prices, features and deals among

these competitors when they shop

• Significant competitors– Offer some of the same or similar products or services– Product or service lines overlap but not completely

• Indirect competitors– Offer same or similar products in only a small number of

areas




Analyzing key competitors allows an entrepreneur to:►Avoid surprises from existing competitors’ new

strategies and tactics.►Identify potential new competitors and the threats

they pose.►Improve reaction time to competitors’ actions.►Anticipate rivals’ next strategic moves.


Step 5: Analyze CompetitorsTechniques do not require unethical behavior:

►Monitor industry and trade publications.►Talk to customers and suppliers.►Debrief employees, especially sales representatives and

purchasing agents.►Attend trade shows and conferences and study

competitors’ sales literature.►Watch for competitor’s employment ads.►Conduct patent searches for patents competitors have

filed. ►Get EPA reports for the factories of competing

manufacturers.►Monitor direct competitors via social media



Techniques do not require unethical behavior:►Learn about the kinds of equipment and raw materials

competitors are importing from the Journal of Commerce Port Import Export Reporting Service.

►Buy competitors’ products and “benchmark” them. ►Get competitors’ credit reports.►Check out the reports publicly-held competitors must file

with the SEC. ► Investigate UCC reports. ►Check out the resources in your local library.►Use the Internet to learn more about competitors.►Visit competing businesses to observe their operations.

(continued)


Competitive Profile Matrix


Is Setting Goals & ObjectivesReally Important?

“Would you tell me, please, which way I ought to go from here?” said Alice.

“That depends a good deal on where you want to get to,” said the Cheshire cat.

“I don’t much care where.…” said Alice.‘Then it doesn’t matter which way you go,” said the

cat.- Lewis Carroll’s Alice in Wonderland


Step 6: Create Company Goalsand Objectives

• Goals: Broad, long-range attributes to be accomplished.

• “BHAGs”• Objectives: More detailed, specific targets of

performance that are:►Specific►Measurable►Assignable►Realistic (yet challenging)►Timely►Written down

What Makes an Effective BHAG?



Step 7: Formulate Strategies

Strategy - a road map of the actions an entrepreneur draws up to achieve a company’s mission, goals, and objectives. It is the company’s game plan for gaining a competitive advantage.


Step 7: Formulate Strategies

Three basic strategies:

Strategy?

Cost Leadership

Differentiation

Focus

Three Strategic Options



Cost Leadership

• Goal: to be the low-cost producer in the industry (or market segment).

• Low-cost leaders have advantages:►Reaching buyers who buy on the basis of price

►The power to set the industry’s price floor.


Cost Leadership

• Cost Leadership works well when:►Buyers are sensitive to price changes.

►Competing firms sell the same commodity products.

►A company can benefit from economies of scale.

• Example: Dollar General


Differentiation• Company seeks to build customer loyalty by

positioning its goods or services in a unique or different fashion.

• Idea is to be special at something customers value.• Key: Build basis for differentiation on a distinctive

competence, something that the small company is uniquely good at doing in comparison to its competitors.

• Examples: Vosges-Haut Chocolate, Ice Hotel, and Indigenous Designs


Focus• Company selects one or more customer segments in

a market, identifies customers’ special needs, wants, or interests, and then targets them with a product or service designed specifically for them.

• Strategy builds on the differences among market segments.

• Rather than try to serve the total market, the company focuses on serving a niche (or several niches) within that market.

• Example: Batteries Plus


Step 8: Translate Strategies into Action Plans

Survey of senior executives: Companies achieved only 63% of the results in their strategic plans.

Create projects by defining:►Purpose►Scope►Contribution►Resource requirements►Timing


Step 9: Establish Accurate Controls

• Plan establishes the standards against which actual performance is measured.

• Entrepreneur must:►Identify and track key performance

indicators.►Take corrective action.


Balanced Scorecards

• A set of measurements unique to a company that includes both financial and operational measures.

• Gives managers a quick, yet comprehensive, picture of a company’s overall performance.


Balanced Scorecards

Five Perspectives:1. Customer: How do customers see us?2. Internal Business: At what must we excel?3. Innovation and Learning: Can we continue to

improve and create value?4. Financial: How do we look to shareholders?5. Corporate Citizenship: Do we meet our

responsibility to society as a whole, the environment, the community, and other external stakeholders?

Balanced Scorecard



Conclusion

The strategic planning process:

►Begins with the nine steps.

►Becomes more efficient each time.

►Teaches entrepreneurial discipline for a higher chance of survival.

Date post:	25-Dec-2015
Category:	Documents
Upload:	baldwin-hines
View:	216 times
Download:	1 times

BS-4452 Entrepreneurship & SmallBusinessManagement Bülent Şenver [email protected].

Documents