introduction to entrepreneurship

1. Introduction to Entrepreneurship
Lecture 1 13.12.2012
© Aleksei Efimov 13.12.2012 1

2. 13.12.2012
• The entrepreneur is a factor in microeconomics,
and the study of entrepreneurship reaches back
to the work of Richard Cantillon and Adam
Smith in the late 17th and early 18th centuries,
but was largely ignored theoretically until the
late 19th and early 20th centuries and
empirically until a profound resurgence in
business and economics in the last 40 years.
History 2

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• What is Entrepreneurship?
1. The act of being an entrepreneur or "one who
undertakes innovations, finance and business
acumen in an effort to transform innovations into
economic goods“ (Shane, Scott, 2003)
2. The pursuit of opportunity without regard to
h i f i ih d
resources currently controlled.(Stevenson, 1983)
3.It’s neither a science nor a an art. It is a practice.
(Peter Drucker 1985)
Drucker,
Introduction 3

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• What is Entrepreneurship?
4. A independent activity, performed at one's
An i d d t ti it f d t '
own risk, aimed at systematically deriving a
profit f
fit from th use of th property, th sale of
the f the t the l f
commodities, the performance of work or the
rendering of services b th persons, registered
d i f i by the i t d
in this capacity in conformity with the law-
established procedure (The Civil Code Of The Russian
t bli h d d
Federation).
Introduction 4

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Attitude towards entrepreneurship in Russia, 2011, % 5

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Assessments of conditions for opening a business, 2011, % 6

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Dynamics of entrepreneurial intensions in Russia, % 7

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Dynamics of entrepreneurial activity in Russia, % 8

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• What is Entrepreneurship?
What’s the difference between doing Business and
Entrepreneurship?
What’s the difference bet een Businessman and
between
Entrepreneur?
Introduction 9

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• Y
Your b i
business will only achieve i true potential when
ill l hi its i l h
you begin to "think business."
• By adopting the right entrepreneurial mindset, you can
improve your chances for success and avoid suffering a
similar fate as that of most of new small firms.
What is Entrepreneurial Mindset? 10

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1. Check Your Ego at the Door
• Have you ever heard yourself say, "This is my business;
I'll do whatever I want with it!”
d h t t ith
• You may be brilliant, but you need to realize that you do
not know everything; in fact, no one does. Hence you
fact does Hence,
may need collaboration and inputs from other people,
which you can only maximize if y set y
y y you your ego aside.
g
• In entrepreneurial mode, you also have to stop thinking
in black or white. You need to learn how to explore every
option in bbetween, including every imaginable exception.
l d bl
The Entrepreneurial Mindset: some rules 11

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2. Create Curiosity
• Curiosity is the driving force behind business thinking.
Curiosity
C i it provides you th motivation t seek out new
id the ti ti to k t
options, opens your minds and creates an atmosphere of
asking "what if questions that get to the heart of the
what if"
matter.
• What you currently know sometimes g in the way of
y y gets y
what you need to know, but don't know.
• For your creativity to produce outstanding results, you
need to f
d first l learn as much as possible outside your own
h bl d
knowledge and expertise. Be a sponge for information
and use it to refresh your experience and knowledge
rather than allowing yourself to feel as if new
information puts y at risk.
p you
The Entrepreneurial Mindset: some rules 12

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3. Move Off the Solution
Don't
D ' prematurely fl focus on the solution i lf and fi d
h l i itself d find
"quick fixes" to your problems.
A solution is worthless unless and until it creates value,
prevents a problem or invents a new result the business
needs.
The Entrepreneurial Mindset: some rules 13

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4. Get Evidence
• T clarify the problem, you need to ask the f ll i
To l if h bl d k h following
questions: What proves you have a problem? What?
How? When? Where? Who? Then start searching
searching,
digging and looking for evidence.
• Some of the best businesspeople ask the obvious
questions, the answers to, which are almost never
obvious. In fact, it's the obvious questions or the
politically sensitive questions that many are afraid to
ask.
ask Collect soft evidence and then turn it into hard
evidence that the business can measure.
The Entrepreneurial Mindset: some rules 14

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5. Calculate the Impact
• Y need to abide b i to weigh every i
You d bid by is i h investment
against its return. What is the impact, financially or
strategically,
strategically of this decision on your business?
• You must never let cash out the door that doesn't strictly
ultimately bring more cash back. Any expense - whether
y g y p
technology, training, equipment, advertising - should be
eliminated if it will not contribute either to increasing
revenue or d decreasing costs.
• You also need to identify benchmarks to help you
determine and measure your success
success.
The Entrepreneurial Mindset: some rules 15

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6. Explore the Ripple Effect
More than calculating the fi
M h l l i h financial i
i l impact of a b i
f business
decision, you must always ask yourself, "Who else will be
affected by my decision?"
decision?
You may want to know how the current problem or the
opportunity under consideration could affect your life,
your family, or your employees.
The Entrepreneurial Mindset: some rules 16

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7. Slow Down For Yellow Lights
If the problem or opportunity i so bi ask what h
h bl i is big, k h has
stopped you in the past from doing something about it,
and what could stop you in the future
future.
Watch out for possible obstacles. If you get a yellow light
early, take your best shot at resolving it. Even if you fail
and get to a red light, you'll have saved time and money
at the very least.
The Entrepreneurial Mindset: some rules 17

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8. Find the Cause
Simply ki
Si l asking why will give you the tools to di f the
h ill i h l dig for h
underlying reason for the problems, and to make sure
you re
you're treating the source, rather than the effects
source effects.
Having proof you need a solution (the effects), and
knowing what solution y need are two different things.
g you g
You need to understand the underlying truths. Ask
yourself the questions: Why is this happening? Are these
symptoms or causes?
The Entrepreneurial Mindset: some rules 18

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• Is this 8 rules about entrepreneurial mindset?
behavior?
• Or just business thinking?
• What is inside a head of an entrepreneur?
• Is this a way of your behavior or a part of your
personality?
The Entrepreneurial Mindset: some rules 19

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1. They are comfortable “living in a fog.”
Living in 40/70 zone –
making decisions with at least 4
g 40% but usually no
y
more than 70% of the data normally required
for action.
62% of entrepreneurs in the USA claim “innate
innate
drive” as the number one motivator in starting
their business.
Portrait of an Entrepreneur 20

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2. They assemble a team of people to work with
them.
If an entrepreneur’s vision cannot convince at
p
least one other person to join him or her, then
p
perhaps the vision is not so fantastic.
p
All ideas must be chiseled away at in order to
make them viable.
Portrait of an Entrepreneur 21

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3. They show persistence and determination.
Persistence should not, however, be confused with
stubbornness.
Stubbornness is a failing.
Entrepreneurs are always listening for and using
the data they receive to tweak their ideas until
an idea morphs into something fundable,
something that gains traction.
Portrait of an Entrepreneur 22

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4. They have conviction.
True entrepreneurs are good at paying attention
to trends and adjusting their thought p
j g g processes
accordingly.
An entrepreneur is a bit like a sculptor at work;
they start with a slab of marble which, over
time, with skill, passion and hard work is
shaped into a beautiful thing.
Portrait of an Entrepreneur 23

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5. They have passion.
Entrepreneurs have a passion for an idea and are
not put off by the p p
p y prospect of hard work.
Without true passion, an entrepreneur would give
up at the first obstacle. Passion motivates the
entrepreneur.
Portrait of an Entrepreneur 24

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Internal Factors:
• Desire to do something new.
• Educational background.
• Occupational background or experience.
p g p
External Factors:
• Government assistance and support
support.
• Availability of labour and raw material.
• Encouragement from big business houses
houses.
• Promising demand for the product.
Factors motivating people to be Entrepreneurs 25

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Factors Intrinsic to Entrepreneurs
• Enterprising attitude.
• Training /education in such type of production.
• Previous experience in the same or related line.
p
Factors Extrinsic to Entrepreneur
• Shortage of demand for product
product.
• Govt. and institutional assistance.
• Advice of business friends
friends.
• Profit earned by friends in same concern.
• C t t with others.
Contact ith th
• Unsound unit available at cheap price.
Intrinsic and Extrinsic factors 26

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• Devotion of organisational skills to areas other than
business e.g. politics
• C t
Customs and traditions of th l lit either restricting
d t diti f the locality ith t i ti
business or prohibiting it.
• Poor response to monetary incentives
incentives.
• Low status given to businessmen in the society.
• Lack of adequate infrastructure facilities.
• High cost of production.
• High risk involved in new enterprises.
g p
• Imperfect conditions prevailing in the market which
discourage prospective entrepreneurs to organise new
business ventures.
• Frequent changes in govt. policies and laws being
administered quite arbitrarily.
d i i t d it bit il
Barriers inhibiting entrepreneurship 27

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• It is a process through which a new venture is
created by an entrepreneur.
• The entrepreneurial p
p process consist of 4 Phases:
I. Identification and evaluation of opportunity.
II. Develop business plan.
III.
III Resources required
required.
IV. Manage the enterprise.
Entrepreneurial process 28

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1.Identify and evaluate the opportunity
• Assessment of opportunity.
• Creation and length of opportunity.
g pp y
• Real and perceived value of opportunity.
• Risk and returns of opportunity
opportunity.
• Opportunity vs. personal skills and goals.
• Competitive environment
environment.
Entrepreneurial process 29

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2.Develop
2 Develop business plan
• Title page
• Table of content
content.
• Executive summary.
• Major sections:
▫ description of business, industry
▫ technology p
gy plan
▫ marketing plan
▫ financial plan
▫ production plan
▫ organizational plan
▫ operational plan
▫ summary.
• E hibi
Exhibits.
Entrepreneurial process 30

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3.Resources required
• Determine resources needed.
• Determine existing resources.
g
• Identify resources gap and available suppliers.
• Develop access to needed resources
resources.
Entrepreneurial process 31

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4.Manage the enterprises
• Develop management style.
• Understand key variables for success.
y
• Identify problems and potential problems.
• Implement control system
system.
• Develop growth strategy.
Entrepreneurial process 32

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• Primary motive : Independence , opportunity to create
and money.
• Ti
Time orientation : S i l and achieving 5-10 years
i t ti Survival d hi i 10
growth of business.
• Activity :Direct involvement of the entrepreneur
entrepreneur.
• Risk : they are moderate risk takers.
• Status : They are not concerned about status symbols.
• Failure :They deals with mistakes and failures.
• Decisions: Follow dreams with decisions.
• Who serves: Self and customers.
• Family history : Entrepreneurial small business ,
professional or farm background.
• Relationship with others : Transactions and deal
making as basic relationship.
ki b i l i hi
Entrepreneurial Culture 33

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• Why should an entrepreneur change something
around us?
• And want is Innovation?
• Innovation is a specific tool of entrepreneurs,
the means by which they exploit change as an
opportunity for a different business or a
different service. (Peter Drucker, 1985)
Innovation And Entrepreneurship 34

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• Everyone who can face up to decision making
can learn to bean entrepreneur and to behave
entrepreneurially.
• Entrepreneurship is behavior rather than
p
personality trait.
y
Look around the room.
What do you see?
What will see an entrepreneur as an innovator?
Innovation And Entrepreneurship 35

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• What is the main difference between two
businesses? Between two entrepreneurs?
• And what is very hard to copy?
• Finance?
• Idea?
• People?
• Place?
• Product?
• Price?
• Something else?
Improvisation, Intuition and Inspiration 36

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Improvisation
• is a performer’s greatest creative act
• something that is improvised in particular a piece
improvised,
of music, drama, etc. created spontaneously or
without preparation
Intuition
• the ability to understand something instinctively,
without the need for conscious reasoning
Inspiration
• the process of being mentally stimulated to do or
feel something especially to do something creative
something,
Improvisation, Intuition and Inspiration 37

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1. Wh d I want to start a business? OR Why am I i
Why do tt t t b i ? Wh in
business?
2. Specifically
2 Specifically, what kind of business do I want to start (or am
I in)?
3. Why do I believe I can make this type of business work?
4. Why do I believe this type of business is sustainable?
5
5. What education, skill or experience do I have in this
, p
industry?
6. What is my true purpose and/or the goal I hope to
accomplish with this b
l h h h business?
7. What is the financial goal I am seeking to achieve?
8.
8 If I will need financing, do I have th resources and credit
ill d fi i d h the d dit
worthiness necessary to be eligible? [High credit score plus
assets,
assets collateral and good financial history.]
history ]
Are You Ready To Be In Business? 38

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9. Wh t are my strengths?
What t th ?
10. What are my weaknesses?
11.
11 What is my physical, mental and emotional health and
physical
stamina?
12.
12 What knowledge and skills do I have to start and control
the day-to-day operations of a business?
13. Do I know and understand the technology necessary to be
3 gy y
competitive in this business?
14. Do I have good judgment in people and ideas?
15. What sacrifices and Risks am I willing to take to be
successful?
16. Wh t will it take for me to balance personal lif and
6 What ill t k f t b l l life d
business demands?
Are You Ready To Be In Business? 39