A brief introduction to the Entrepreneurial Mindset and how it is different from the traditional mindset taught to students of traditional business or management programs. I deliver regular courses based on these concepts, and regularly help aspiring and experienced entrepreneurs to put these principles to use in the process of creating new ventures.
Organizational Structure Running A Successful Business
The Entrepreneurial Mindset (Part I)
1. What is the “Entrepreneurial
Mindset”?
Entrepreneurship and Small Business Management
Christopher Zobrist, MBA
Adapted from “The Entrepreneurial Method”
by S.D. Sarasvathy, 2006
2. Theories of Entrepreneurship
Personality/Trait Theory
“Crystal Ball” or Lone Visionary
Opportunity Recognition
Right Place, RIght Time
Entrepreneurial Thought Process
Managerial vs Entrepreneurial
3. Facts About Entrepreneurs
65% did not start businesses as children
or students, and did not have parents who
were entrepreneurs
75% learned skills they used in starting
their business after age 21
Source: Inc 500 Founders’ Survey (1996)
4. Facts About Entrepreneurs
65% developed their idea by talking to or
working with customers or partners
70% did not have a vision for a “venture-
scale” business, they just wanted to start
something
Source: Inc 500 Founders’ Survey (1996)
5. Case Study: Bill Gates
The Myth
Bill Gates was a visionary who saw the future that all PCs
would run Windows
Built Microsoft into the bigest software company in the
world by himself because of his vision and talent
6. Case Study: Bill Gates
The Facts
Bill’s family was very wealthy, and Bill went to a gifted high
school for children of rich families
Bill learned how to program a computer in high school (in
the late 1960s, computers were very rare)
Bill did not “drop out” of Harvard, but rather took a “leave
of absence” and could come back at any time
Bill’s mother introduced Bill’s new company, Micro-Soft, to
the CEO of IBM
A few weeks after the introduction, IBM signed a deal with
Bill for MS-DOS, allowing Bill to retain the IP
Source: Leap, by Rick Smith
7. Case Study: Mark Zuckerberg
The Myth
Mark was a visionary who saw online social networks as
the future of online media
Mark built Facebook by himself from the beginning based
on his vision and talent
Through his strong vision and character, was able to raise
millions of dollars easily for Facebook
8. Case Study: Mark Zuckerberg
The Facts
Learned how to write computer programs since he was 10
years old
Worked on many “projects” including Facemash and The
Facebook, many of which failed early, but he learned from
them
Started The Facebook with just $2000
Had a strong core team who helped him grow Facebook
before getting external funding
Met Sean Parker who helped him raise money to grow the
business
Source: The Facebook Effect, by David Kirkpatrick
10. Case Study: Japan – SONY
Co-founded by Ibuka
First innovation (electric rice
cooker) failed
Stayed in business by
repairing short-wave radios
Ibuka envisioned a pocket
radio, but was initially
denied the license by the
Japanese government
11. Case Study: Japan - SONY
Bell Labs developed
transitors, but didn’t think
they could be used in a
pocket radio
Ibuka licensed the
technology and pushed his
engineers for 3 years to
develop the first transitor
radio
Sold 1.5 million units, and
Sony became a
technology leader
12. Class Discussion:
Vietnam – FPT
Who started FPT?
How?
Why?
What was FPT’s original business?
Were they successful in this business?
How did FPT’s business evolve over time?
Are they successful? Why or why not?
13. What is the Entrepreneurial
Mindset?
Entrepreneurial vs Managerial
Effectual vs Causal
14. Learning Objectives
How do entrepreneurs think when starting a
new business?
How is this different from how Managers
think when managing an established
business?
16. Causal - If we can accurately predict the
future, then we can control it.
Predictive: Start with Goals
Analysis Before Action
Goals drive stakeholder and resource acquisition
Control is achieved by being one step ahead of the
competition
Avoid failure at all costs
17. Effectual - If we can control the future, we
don’t need to predict it.
Non-predictive: Start with Means
Actions and interactions with stakeholders drive the
process
Goals are set by stakeholders who invest only what
they are willing to lose
Control is achieved by action; transforming current
reality into new and unforeseen possibilities
Fail small and early and LEARN from it
20. Elements of the Effectual
Entrepreneur
Process
Principles
Logic
21. Effectual Process
Begin with who you are, what you know, and
whom you know
Take action and interact with other people
Focus on what you can do and do it
People you interact with self- select into the
process by making commitments to the venture
Each commitment results in new means and new
goals for the venture
22. Effectual Process
Expanding Cycle of Resources New Means
Possible Goals
and Actions
Who I am Obtain
Interact with
What I know What I can do Stakeholder
other people
Whom I know Committment
Means
Available
Converging Cycle of Interests
New Goals
New Markets
New Opportunities
New Ventures
23. Effectual Principles
Means-driven (as opposed to goal-driven) action
Affordable loss, stakeholders only invest what they
are willing to lose
Negotiate with any and all stakeholders who are
willing to make actual commitments to the project
Be flexible by leveraging surprises rather than trying
to avoid them
Work with potential customers as the prime driver of
opportunity
24. Effectual Logic
See the world as open, still in the making
Very rarely see opportunities as given or
outside of their control
Have an instrumental view of firms and
markets
Do not seek to avoid failure because it is
part of the learning process
25. Class Activity and Discussion
Read “Venturing” Case Excise Problem 1
Based on your new knowledge of Effectuation,
work in teams to provide answers to the questions
in Problem 1
After you have finished answering the questions,
choose a partner and compare your answers.
Be prepared to discuss your answers with the
class.
26. Venturing Problem 1
1. Who could be your potential customers for this
product?
2. Who could be your potential competitors for this
product?
3. What information would you seek about potential
customers and competitors—list questions you would
want answered.
4. How will you find out this information—what kind of
market research would you do?
5. What do you think are the growth possibilities for this
company?
Hinweis der Redaktion
Contingent (depends on) the situation Causal – Better for stable and mature companies, when goals are clear and efficient execution is most important. Effectual – Better for new firms or markets where goals are not yet clear and flexibility is most important.
Experienced Entrepreneurs begin with who they are, what they know, and whom they know, and immediately start taking action and interacting with other people. They focus on what they can do and do it, without worrying much about what they should do. Some of the people they interact with self- select into the process by making commitments to the venture. Each commitment results in new means and new goals for the venture. As resources accumulate in the growing network, constraints begin to appear. The constraints reduce possible changes in future goals and restrict who may or may not be admitted into the stakeholder network. Assuming the stakeholder accumulation process does not fail, goals and networks concurrently converge into a new market and a new firm.
Means-driven (as opposed to goal-driven) action. The emphasis here is on creating something new with existing means rather than discovering new ways to achieve given goals. Commit in advance only what one is willing to lose rather than investing in calculations about expected returns to the project. Negotiate with any and all stakeholders who are willing to make actual commitments to the project, without worrying about opportunity costs, or carrying out elaborate competitive analyses. Be flexible by leveraging surprises rather than trying to avoid them, overcome them, or adapt to them. Work with potential customers as the prime driver of opportunity rather than limiting entrepreneurial efforts to exploiting factors such as technological trajectories and socioeconomic trends.
Effectuators see the world as open, still in the making. They see a genuine role for human action. In fact, they see both firms and markets as human-made artifacts. Effectuators very rarely see opportunities as given or outside of their control. For the most part, they work to create as well as recognize and discover opportunities. Effectuators often have an instrumental view of firms and markets. They do not act as though they were the agents of the firm or as suppliers catering to demand―firms are a way for them to create something new for themselves and/or for the world; markets are more likely made than found; and they are made through an expanding network of self-selected stakeholders. Effectuators do not seek to avoid failure; they seek to achieve success. They recognize that failing is an integral part of becoming an experienced entrepreneur.