IB2170 Starting a Business Lecture 2

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IB2170 Starting a Business
Lecture 2

• Entrepreneurial Behaviour and Process

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This Session will also

• Discuss what is commonly meant by
  entrepreneurship
• Consider entrepreneurial motivations and values
• Ask Is it for me?

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The Three Ps of Entrepreneurship

• People
• Process
• Planning

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Growth of Small Firms
Strategy i.e. After Start up
The Entrepreneur i.e. Before Start up
The Firm i.e. At Start up
Source David Storey
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Factors Influencing Growth in Small Firms
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DIAGNOSTIC
Who are you ? Who are we? TEAM
RELATIONAL
PROGRESSION
RELEASE
VISION
MOTIVATIONAL
RESOURCES
What are we ? Where shall we do it ? How will we
do it ? IDEA AND STRATEGY
TERRITORIAL
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Comparison

• RELATIONAL
• MOTIVATIONAL
• TERRITORIAL
• RESOURCES
• PROGRESSION
• FRAGMENTATION
• Source Nigel Sykes

• EVALUATE OPPORTUNITY
• DEVELOP BUSINESS CONCEPT
• ASSESS REQUIRED RESOURCES
• ACQUIRE NEEDED RESOURCES
• MANAGE AND HARVEST
• Source Stevenson, Roberts Grousebeck

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DIAGNOSTIC
Who are you ? Who are we? TEAM
RELATIONAL
VISION
MOTIVATIONAL
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What is the Entrepreneur?

• Entrepreneurs exist in all walks of life
• The entrepreneur is like a party host!
• The entrepreneur is opportunistic

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A Taxonomy of Entrepreneurial Theories

• Throughout intellectual history as we know it,
  the entrepreneur has worn
• many faces and played many roles. Neither
  economic theory nor
• economic history has fully defined his visage.
  Our survey identified at
• least twelve distinct themes that reside within
  economic literature
• Herbert Link, 1998 The Entrepreneur

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What is the Entrepreneur? (A Taxonomy of
Entrepreneurial Theories contd) The
entrepreneur has been variously described as

• The entrepreneur is the person who assumes the
  risk associated with uncertainty
• The entrepreneur is the person who supplies
  financial capital
• The entrepreneur is an innovator
• The entrepreneur is a decision maker
• The entrepreneur is an industrial leader
• The entrepreneur is a manager or superintendent
• The entrepreneur is an organiser and co-ordinator
  of economic resources
• The entrepreneur is an employer of factors of
  production
• The entrepreneur is a contractor
• The entrepreneur is an arbitrageur
• The entrepreneur is an allocator
• The entrepreneur is the owner of an enterprise
• It is the last of these that we are chiefly
  interested in today

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Some Definitions

• The organising of a venture especially one who
  organises, owns, manages and assumes the risk of
  business
• Entrepreneurs are men or women who have failed in
  the traditional and highly structured roles
  available in society
• What is unique about them is that they have found
  an outlet for their creativity by making out an
  undifferentiated mass of circumstances, a
  creation uniquely their own a business firm

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Entrepreneurial or Enterprising AttributesA.A.
Gibb Enterprise Culture - Its Meaning and
Implications for Education and Training 1987

• Initiative
• Strong persuasive powers
• Moderate rather than high risk-taking
• Flexibility
• Creativity
• Independence/autonomy
• Problem-solving ability
• Need for achievement
• Imagination
• High belief in control of ones own destiny
• Leadership
• Hard work

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Summary of approaches for describing
Entrepreneurship Bridge, ONeill, Cromie,
Understanding Entrepreneurship, 1998
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What it Takes ?

• Product
• not necessarily unique, but sufficient innovation
  to differentiate
• Customers
• keep close, flexibility and adaptability, learn
  from mistakes
• Management Style
• power based, high expectations of staff,
  obsessive detail only later delegating and
  learning team skills
• Personal Qualities
• stamina, dedication, confidence, ability to
  bounce back, vision

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What is the Entrepreneur ? Am I the right
person to succeed in my own business?

• Who are you?
• What do you want?
• What will it be like?

• Why will you succeed?
• Why might you fail?
• How big a business
• What are your skills?

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Alignment of the JET ENGINE
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Entrepreneurial Management Styleafter Stevenson
et al 1989

• Promoter Entrepreneurial Domain
• Strategic Orientation - opportunity driven
• Commitment to opportunity - revolutionary - of
  short duration
• Commitment of resources - multi-staged with
  minimal commitment to each stage
• Control of resource - episodic use or rent of
  required resources
• Management Structure - flat with multiple
  informal networks
• Reward Philosophy - value driven, performance
  based, team orientated

• Trustee Administrative Domain
• Resource driven
• Evolutionary
• Single staged with complete commitment upon
  decision
• Ownership or employment of required resources
• Formalises hierarchy
• Security driven, resource based, promotion
  orientated

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Characteristics of Entrepreneurial
ApproachSource Stevenson, Roberts Grousebeck

• Strategic orientation
• Commitment to opportunity
• Commitment of resources
• Control of resources
• Management structure
• Reward policy

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The Three Ps of Entrepreneurship

• People
• Process

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The Entrepreneurial Process Source Stevenson,
Roberts Grousebeck

• Evaluate the opportunity
• Develop the business concept
• Assess the required resources
• Acquire the needed resources
• Manage and harvest

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Analytical Framework A. PRELIMINARY EVALUATION
UNKNOWN RISK
2. IDEA
1. PEOPLE
MATCH ?
3.
FAVOURABLE ENVIRONMENT MARKET COMPETITION ENTRY
NEEDS VIABILITY
OBJECTIVES MOTIVATION SKILLS PERSONALITY
RESOURCES CIRCUMSTANCES
REASONABLE PROSPECTS
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Analytical Framework
B. DETAILED EVALUATION
REASONABLE PROSPECTS

• OBJECTIVES
• ENVIRONMENT
• COMPETITION
• RESOURCES
  (physical, people, money)
• CONTROLS
• CASH FLOW
• FINANCIAL
• STRUCTURE
• MANAGEMENT

4. BUSINESS PLAN
MEASURED ACCEPTABLE RISK
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DIAGNOSTIC
RELATIONAL
PROGRESSION
RELEASE
VISION
MOTIVATIONAL
RESOURCES
TERRITORIAL
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The Three Ps of Entrepreneurship

• People
• Process
• Planning