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MGT 6500MGT 6500The Entrepreneurial ChallengeThe Entrepreneurial Challenge
Mark T. Schenkel, Ph.D.Mark T. Schenkel, Ph.D.Assistant Professor in Assistant Professor in EntrepreneurshipEntrepreneurship
Getting AcquaintedGetting Acquainted
IntroductionsIntroductions
Your initial thoughts about the Your initial thoughts about the course?course?
Your course goals & objectives?Your course goals & objectives?
Learning Objectives for TermLearning Objectives for TermUnderstanding Opportunities Understanding Opportunities
Entrepreneurial ProcessEntrepreneurial Process
Entrepreneurial StrategiesEntrepreneurial Strategies
Entrepreneurial FinanceEntrepreneurial Finance
Business PlanningBusiness Planning
Ethics and valuesEthics and values
Growth Strategy & ManagementGrowth Strategy & Management
Entrepreneurship in Larger Entrepreneurship in Larger OrganizationsOrganizations
Contact InformationContact Information
Office: BMH 436Office: BMH 436
Office Phone: 460-5474Office Phone: 460-5474
e-mail: e-mail: [email protected]
Course RequirementsCourse RequirementsAttendanceAttendance
– Required: see syllabus for detailsRequired: see syllabus for details
ContributionContribution
– Critical to meeting learning objectivesCritical to meeting learning objectives
TextText
– Integrated into discussions & exercisesIntegrated into discussions & exercises
– Integrated into your papersIntegrated into your papers
Course RequirementsCourse Requirements
Case AnalysesCase Analyses
– Individual: case memosIndividual: case memos
– Group: teach caseGroup: teach case
Major Class ProjectMajor Class Project
– Entrepreneurial Venture AnalysisEntrepreneurial Venture Analysis
ENTREPRENEURSHIP
What is it? Why does it matter?
Entrepreneurship
What is it? Some examples . . . – McDonald’s (New Venture / Franchising)– Polaroid (Technology)– FedEx (Business model)– Sam Adams (Emerging segment in “mature”
industry)
Entrepreneurship: What is it NOT?
Some myths . . . – Entrepreneurs have more freedom in life (i.e., “I won’t have
anyone looking over my shoulder”)– Money is the main reason to be an entrepreneur– Entrepreneurs have the ability to control things– Going public with my company some day will be an easy
way to make a lot of money.– Entrepreneurs are gamblers.– Entrepreneurs don’t have to worry about numbers.– All you need is money to be an entrepreneur.
Defining Entrepreneurship
“Entrepreneurship is no longer a job title. It is the state of mind of people who want to change the future.” – Guy Kawasaki
“Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach [emphasis added], and leadership balanced” (Timmons, 1999: 27).
Strategic entrepreneurship involves “. . . the integration of entrepreneurial (i.e., opportunity-seeking actions) and strategic (i.e., advantage-seeking actions) perspectives to design and implement entrepreneurial strategies that create wealth.” (Hitt et. al, 2002)
The Entrepreneurial Process (Timmons, 2000)
Opportunity Resources
Team
Communication
Business PlanFits and Gaps
Creativity Leadership
Capital Market ForcesUncertainty
Ambiguity Exogenous Forces
Founder
Key concepts
Opportunity– Where knowledge, skills, abilities and motivations
meet favorable market characteristics
Risk– Absolute . . . “sinking the boat”– Relative . . . “missing the boat”
Resources & Capability Process, not person: Balance is key . . .
Entrepreneurship
Why does it matter?
What History Tells Us . . .
Entrepreneurship as a means of hope for prosperity and an increase in living standard– The last great period when entrepreneurs transformed
the American economy was in the late 1800’s In fact, most of the 1997 Fortune 200 were already among
the largest corporations in 1917 197 of the 200 largest companies in America were started by
entrepreneurs Many of these entrepreneurs were first generation Americans
Government Market Forces
The Early 1900s Reflected a Free Market Approach
What History Tells Us . . .
Mid 1940s – Mid 1970s – Rise of mass production
– Conglomerate Integration
– Rise of corporate economy and corporate society
– Industrial/Governmental alliance
Government Market Forces
Late 1900s Reflect an Increasingly Activist Approach
Mid 1970s – Mid 1990s
Period of economic transition
Stagnation and decline Crisis of confidence Change in focus emerged
in business education– My experience in mid
1980s– My experience in the
1990s
Demarcation Point: The Decline of “Brontosaurous Capitalism”
The large corporations formed in the last great entrepreneurial era in America are no longer creating new jobs in significant numbers
Total employment by the Fortune 500 companies has dropped from 20% of US workforce in 1980, to about 7% in the late 1990s (Carlsson, 1992 and 1999)
Fortune 500 actually lost over 5 million jobs during the past 20 years
Emergence of the New Entrepreneurial Economy
23 million small business today in US economy
Make up 50% of GDP New business formation
has grown from about 200,000 per year in mid 1900’s to over 3.5 million per year today
Survival rates are now over 50%
Entrepreneurship and Employment
Over 50% of workforce now is employed in small businesses
45% of total payroll comes from small businesses
99% of employers are small businesses
Entrepreneurs and small business owners are responsible for 77% of new jobs created in past twenty years
Entrepreneurship and Innovation
Small businesses create 67% of all new innovations in the US
95% of all radical innovations over the past 60 years have come from small businesses
Create 14 times the number of patents per employee than large patenting firms
Entrepreneurship in America
Two demographic groups are most active in this economic transition:
Baby Boomers (Entre-Boomers)
Entrepreneurial Generation
The Entrepreneurial Generation
They are those born between 1977 and 2002
50% of today’s college students have business ownership as a primary career goal
They are more financially savvy – 37% of today’s college students already thinking and planning for retirement.
They are independent thinkers
They embrace change – and they view entrepreneurship as a career path that will allow them to use the changes that are occurring in our current world to their advantage
The Entrepreneurial Generation
Work is important They seek high levels of
achievement 40-50% of our students arrive with profitable businesses already operating.
They want their work to make a difference and have meaning.
But, they do not want it to become all consuming –they seek the ability to create balance through business ownership
An E-generation Thought . . .
“My generation is really focused on keeping family first, even before career. Some say that this is because we watched so many baby boomers screw this whole family thing up. My take on it is that because the baby boomers sometimes grew up wanting, they determined in their minds that their families would want for nothing. Unfortunately, my generation has all they want, but grew up with workaholic parents who were absent in their lives. I believe we're searching to find that balance between family and career.”
The Entrepreneurial Generation
They do not trust large institutions – be it corporations or government
They are politically independent, but leaning toward a more libertarian philosophy
They are concerned about our culture, our society and our economy – and they view entrepreneurship as a way to make things better
A Third Approach . . .
Favored by many in the entrepreneurial generation
Recognizes that markets are morally neutral Without a sense of responsibility, markets can
alienate society Culture can provide a moral framework
Government Market Forces
Values-based Approach
Culture
Why study entrepreneurship?
Entrepreneurial activity is now the driving force (e.g., “hyper-competition) of the US and World economy (Bettis & Hitt, 1995; Friedman, 2005)
Even if you do not want to be a business owner, increasingly entrepreneurs are becoming…. – your customers – your competitors– your employers
OK, But Can Entrepreneurship Actually Be Taught?
Research suggests learning is key element of the process . . . – Opportunity identification is positively
associated with general and specific knowledge– Success rates increase to 80-90% with
education and training– Success rate is positively associated with start
up experience over time
ENTREPRENEURSHIP IS A WAY OF THINKING, REASONING AND ACTING THAT IS OPPORTUNITY OBSESSED, HOLISTIC IN APPROACH [EMPHASIS ADDED], AND LEADERSHIP BALANCED” (TIMMONS, 1999: 27).
The Entrepreneurial Process
Defining Entrepreneurship
“Strategic entrepreneurship involves “. . . the
integration of entrepreneurial (i.e., opportunity-seeking actions) and strategic (i.e., advantage-seeking actions) perspectives to design and implement entrepreneurial strategies that create wealth.” (Hitt et. al, 2002)
The Entrepreneurial Process (Timmons, 2000)
Opportunity Resources
Team
Communication
Business PlanFits and Gaps
Creativity Leadership
Capital Market ForcesUncertainty
Ambiguity Exogenous Forces
Founder
Pre
-laun
ch
Star
t-up
Gro
wth
Tran
sitio
n
Exit/
Succ
essi
on
Life Cycle of a Business Venture
Pre-launch: Opportunity IdentificationDoes the Idea = an Opportunity?
Market Margin Mission
(session 1)
The Right Team?The Necessary Resources?
The Start-up Process
Filling the GapsThe Business Plan
Executive Summary Market Analysis and Marketing Plan Operating Plan and Team Financial Plan
Growing the Business
CASH FLOW MANAGEMENTBuilding a CultureMarketingStaffingBuilding Management & Administrative
Systems
Exit or Succession?
Course Theme: Strategic Entrepreneurship
Why is there a need to study it?– There are many forms of “entrepreneurial strategy,”
yet each is achieved through a common means of acquiring and applying resources to create value by capitalizing on “personal theory” about the true value of a resource bundle. Goals are to understand the primary interface of creation-performance and sustainability-performance.
Course Theme: Strategic Entrepreneurship
Helps us make “good” or “better” decisions?– Highlights role of operational effectiveness as
“necessary but not sufficient” for assessing and exploiting opportunity (Porter, 1985)
***Avoid the seductiveness***
– Focuses us on “unique activities,” and “strategic intent” (Prahalad & Hamel, 1995)
– Highlights the need to make tradeoffs to achieve sustainability (Barney, 1991)
– Emphasizes the importance of activity “fit” over any one activity, or subset of activities