EntrepreneursEntrepreneursChallenging The UnknownChallenging The Unknown

Zelimir William Todorovic Ph.DZelimir William Todorovic Ph.D..

Doermer School of Business and management StudiesDoermer School of Business and management StudiesIndiana University – Purdue University, Fort WayneIndiana University – Purdue University, Fort Wayne

Entrepreneurship - The Introduction

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Entrepreneur Entrepreneur Is it all a Myth Is it all a Myth

Entrepreneurship - The Introduction

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Etrepreneurship in the PastEtrepreneurship in the Past

• “ “ If you are a small businessman, you may be If you are a small businessman, you may be as extinct as the village blacksmith”as extinct as the village blacksmith”

• ““Small business is as dead as the dodo”Small business is as dead as the dodo”

Entrepreneurship - The Introduction

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Entrepreneurship TodayEntrepreneurship Today

• 70% of economic activity70% of economic activity

• Between 60% and 80% of new jobsBetween 60% and 80% of new jobs

• Driven by passion and purposeDriven by passion and purpose

• U.S. standard of living (4 times better than U.S. standard of living (4 times better than former USSR) ascribed to entrepreneurshipformer USSR) ascribed to entrepreneurship

Entrepreneurship - The Introduction

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Demographics Personality Behaviour- 88% are married - Are innovative

and dynamic- 53% are insufficiently activewith sports/exercise

- 87% have children - Are very focusedand orientedtowards success

- Work an average of 50 to 70hours a week

- Average age is 47 - 40% took less than (or equalto ) 7 days vacation last year (of which 70% remained intouch with the company)

- Nearly half have auniversity degree

- 60% usually work Saturdayand / or Sunday

- 16% have amaster’s degree

Entrepreneurship - The Introduction

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The Evolution of EntrepreneurshipThe Evolution of Entrepreneurship

• Entrepreneur is derived from the French Entrepreneur is derived from the French entreprendre, meaning “to undertake”.entreprendre, meaning “to undertake”.

• No single definition of entrepreneur :No single definition of entrepreneur :1.1. Small BusinessSmall Business

2.2. Leadership StyleLeadership Style

Who Are Entrepreneurs?Who Are Entrepreneurs?

Entrepreneurs, driven by an intense Entrepreneurs, driven by an intense commitment and determined perseverance, commitment and determined perseverance,

work very hard. They are optimists who see work very hard. They are optimists who see the cup as half full rather than half empty. the cup as half full rather than half empty.

They strive for integrity. They burn with the They strive for integrity. They burn with the competitive desire to excel.competitive desire to excel.

Common Characteristics Associated with Common Characteristics Associated with EntrepreneursEntrepreneurs

• Commitment, Commitment, Determination, and Determination, and PerseverancePerseverance

• Drive to AchieveDrive to Achieve• Opportunity OrientationOpportunity Orientation• Initiative and Initiative and

ResponsibilityResponsibility• Persistent Problem SolvingPersistent Problem Solving• Seeking FeedbackSeeking Feedback• Internal Locus of ControlInternal Locus of Control

• Tolerance for AmbiguityTolerance for Ambiguity• Calculated Risk TakingCalculated Risk Taking• Integrity and ReliabilityIntegrity and Reliability• Tolerance for FailureTolerance for Failure• High Energy LevelHigh Energy Level• Creativity and Creativity and

InnovativenessInnovativeness• Self-confidence and Self-confidence and

OptimismOptimism• IndependenceIndependence• Team BuildingTeam Building

Defining The ConceptDefining The Concept

Recent research has defined corporate Recent research has defined corporate entrepreneurship as a process whereby entrepreneurship as a process whereby an individual or a group of individuals, an individual or a group of individuals,

in association with an existing in association with an existing organization, creates a new organization organization, creates a new organization

or instigates renewal or innovation or instigates renewal or innovation within the organization.within the organization.

Entrepreneurial OrientationEntrepreneurial Orientation

Autonomy

Innovativeness

Proactiveness

Competitive aggressiveness

Risk-Taking

Entrepreneurial OrientationEntrepreneurial Orientation

Dimension Definition

Autonomy Independent action by an individual or team aimed at bringing forth a business concept or vision and carrying it through to completion.

Innovativeness A willingness to introduce novelty through experimentation and creative processes aimed at developing new products and services as well as new processes.

Proactiveness A forward-looking perspective characteristic of a marketplace leader that has the foresight to seize opportunities in anticipation of future demand.

Source: J. G. Covin and D. P. Sleving, “A conceptual Model of Entrepreneurship As Firm Behavior,” Entrepreneurship Theory & Practice, Fall 1991, pp. 7-25; G. T. Lumpkin and G. G. Dess, “Clarifying the Entrepreneurial Orientation Construct and Linking It to Performance,” Academy of Management Review 21, no. 1 (1996), pp. 135-72; D. Miller, “The Correlates of Entrepreneurship in Three Types of Firms,” Management Science 29 (1983), pp. 770-91.

Adapted from Exhibit 12.3 Dimensions of Entrepreneurial Orientation

Entrepreneurial OrientationEntrepreneurial Orientation

Dimension Definition

Source: J. G. Covin and D. P. Sleving, “A conceptual Model of Entrepreneurship As Firm Behavior,” Entrepreneurship Theory & Practice, Fall 1991, pp. 7-25; G. T. Lumpkin and G. G. Dess, “Clarifying the Entrepreneurial Orientation Construct and Linking It to Performance,” Academy of Management Review 21, no. 1 (1996), pp. 135-72; D. Miller, “The Correlates of Entrepreneurship in Three Types of Firms,” Management Science 29 (1983), pp. 770-91.

Adapted from Exhibit 12.3 Dimensions of Entrepreneurial Orientation

Competitive An intense effort to outperform industry rivals. It is characterized by a combative posture or an aggressive response aimed at improving position or overcoming a threat in a competitive marketplace.

aggressiveness

Risk taking Making decisions and taking action without certain knowledge of probable outcomes; some undertakings may also involve making substantial resource commitments in the process of venturing forward.

Entrepreneurial OrientationEntrepreneurial Orientation

Innovation

Risk Taking

Pro-activenes

s

Continuum of Radical and Continuum of Radical and Incremental InnovationsIncremental Innovations

Exhibit 12.1 Continuum of Radical and Incremental Innovations

Innovation ChallengesInnovation Challenges

• Seeds versus Weeds Seeds versus Weeds

• Experience versus initiativeExperience versus initiative

• Internal versus external staffingInternal versus external staffing

• Building capabilities versus collaboratingBuilding capabilities versus collaborating

• Incremental versus preemptive launchIncremental versus preemptive launch

Managing InnovationManaging Innovation

• Firms need to regulate the pace of innovationFirms need to regulate the pace of innovation– Incremental innovation Incremental innovation (six months to two years)(six months to two years)

– Radical innovation Radical innovation (Typically 10 years or more)(Typically 10 years or more)

• Innovation often requires collaborating with others Innovation often requires collaborating with others who possess complementary knowledge and skillswho possess complementary knowledge and skills

• Innovation requires the knowledge of the marketInnovation requires the knowledge of the market

Market Knowledge needed for Market Knowledge needed for InnovationInnovation

• ConsumersConsumers

• CompetitorsCompetitors

Market Knowledge needed for Market Knowledge needed for InnovationInnovation

• ConsumersConsumers– Decide on your target consumersDecide on your target consumers– Understand your target consumersUnderstand your target consumers– Common mistakes:Common mistakes:

• Knowing the size of the market does not mean you know Knowing the size of the market does not mean you know your target consumersyour target consumers

• Selecting a specific target segment does not mean you are Selecting a specific target segment does not mean you are going to reject consumers from other segments. On the other going to reject consumers from other segments. On the other hand, providing services and products to consumers from hand, providing services and products to consumers from different segments does not mean you are targeting on different segments does not mean you are targeting on everybody.everybody.

CompetitorsCompetitors

• The size of industryThe size of industry

• The number of competitors/substitutesThe number of competitors/substitutes

• The competitive advantage for each The competitive advantage for each competitorscompetitors

• What is your niche market?What is your niche market?

The Age of GazellesThe Age of Gazelles

• A “gazelle” is a business A “gazelle” is a business establishment with at least 20% establishment with at least 20% sales growth every year (for five sales growth every year (for five years), starting with a base of at least years), starting with a base of at least $100,000.$100,000.

Gazelles - InnovationGazelles - Innovation

• Gazelles are leaders in Gazelles are leaders in innovation.innovation.

• Gazelles produce twice as many Gazelles produce twice as many product innovations per product innovations per employee as do larger firms.employee as do larger firms.

Entrepreneurial Assessment ApproachEntrepreneurial Assessment Approach

TypeTypeofof

VentureVenture

TypeTypeofof

EntrepreneurEntrepreneur

TypeTypeofof

EnvironmentEnvironment

Qualitative,Qualitative,Quantitative,Quantitative,Strategic, andStrategic, and

EthicalEthical

ASSESSMENTSASSESSMENTS

Do the Results of the Assessments Make Sense Given:Do the Results of the Assessments Make Sense Given:

Prior ExperiencePrior Experienceand Educationand Education

EarlyEarlyCareerCareer

MidMidCareerCareer

LateLateCareerCareer

Stage of Entrepreneurial CareerStage of Entrepreneurial Career

3M’s Innovation Rules3M’s Innovation Rules

• Don’t kill a projectDon’t kill a project

• Tolerate failureTolerate failure

• Keep divisions smallKeep divisions small

• Motivate the championsMotivate the champions

• Stay close to the customerStay close to the customer

• Share the wealthShare the wealth

““Corporate Entrepreneurship Corporate Entrepreneurship Assessment InstrumentAssessment Instrument(measured key entrepreneurial climate factors)(measured key entrepreneurial climate factors)

• Management SupportManagement Support

• Autonomy/Work DiscretionAutonomy/Work Discretion

• Rewards/ReinforcementRewards/Reinforcement

• Time AvailabilityTime Availability

• Organizational BoundaryOrganizational Boundary

The Entrepreneurial The Entrepreneurial PerspectivePerspectiveAlthough certainly not an exact Although certainly not an exact

science, this perspective provides an science, this perspective provides an interesting look at the interesting look at the

entrepreneurial potential within entrepreneurial potential within every individual.every individual.

Figure 2Interrelationship of Entrepreneurs and Managers - Modified

ENTREPRENEUR

MANAGER

Entrepreneurial Skills Required

Managerial Skills Required

Entrepreneurial and Managerial Skills Required

Open Systems Model

Rational Goal Model

Internal Process Model

Human Relations Model

ApproximateAGT need

ApproximateEntrepreneur’s

capability

A

B

C

D

Business IncubatorsBusiness Incubators

• Business incubators are designed to “hatch” new Business incubators are designed to “hatch” new businessesbusinesses

• Incubators provide some a number of resources to a Incubators provide some a number of resources to a new venturenew venture

Business Networking Time (Months)

EMPHASIS

Growth

Cost Minimization

InfrastructureFortifying

Coaching/ Business Support

Dominant Progression

Time (Months)

Growth

Cost Minimization

InfrastructureFortifying

Coaching/Business Support

Incubator as a Growth Tool

Incubator as a Subsidy Tool