The presentations presents results of the MBA project. It aims to show the decision-making process designed of IT entrepreneurs in Ukraine.

1. Decision-making tool for IT
entrepreneurs in Ukraine
MBA Research
Yuliia Smoilovska

2. Rationale and goal of the research
• Substantial interests to the IT entrepreneurship due to discernible wide
opportunities of the sector.
• Newly-made entrepreneurs are confused with amount of decisions at the
beginning of a venture.
• Underdeveloped entrepreneurship ecosystem leave entrepreneurs alone with
their entrepreneurial choices.
• Vulnerability of the environment may cause them to abstain from
entrepreneurship.
Goal: To propose a decision-making tool to help IT entrepreneurs to overcome
challenges and to make more effective decisions.

3. Proposed simplified decision-making process
Context of the decision Strategic Intent
Strategy formulation Strategy implementation
Strategic competiveness
Entrepreneur s heuristics and biases
StrategicinputsStrategicactionsOutcomes
Feedback
Detailed description is given in the further slides

4. Strategic inputs
• Characteristics of the decision maker and external environment
create a context for each strategic decision and result in recognition
that decision should be made (intent);
• IT entrepreneurs have different profile from regular entrepreneur,
especially it is different for Ukraine as entrepreneurs tend to be
younger and less experienced.
• Environment context is set by IT industry conditions overall and
particularly in Ukraine, institutional and regulatory environments,
health of the economy, demographics, etc

5. Strategic inputs. Environment context in Ukraine
Factors Positive influence Negative influence
Political IT industry is considered as priority due to
high level of export in GDP; Political
support by the EU and the USA;
Unstable political situation, lack of strategy for development; High
level of corruption and bureaucracy; State interventions into
business; Military conflict with Russia; No real support from the
state.
Economic Economic growth; Favorable taxation
conditions for small IT businesses; 5%
income tax for employees working as
contractors.
High interest rates, week banking system; Low disposable income
of consumers and business; Unstable exchange rates, unfavorable
exchange conditions; No capital markets
Social Significant number of IT specialists; High
level of English proficiency; Culturally
close to Western countries.
Low IT maturity of customers; Underdeveloped entrepreneurship
ecosystem; High salaries for IT specialists; High competition for IT
specialists; Lack of quality IT and business education; High
emigration rate.
Legal Not identified Lack of legal protection including IP; Lack of confidence in juridical
system; Complicated processes of doing business; Limited access
to external financing due to legal issues

6. Strategic actions
Strategic actions consist of:
Strategy formulation - a list of main areas where decision should be
made
Strategy implementation – approaches how decision can be done
Both are influenced by heuristics and entrepreneur’s biases that define
entrepreneur’s “picture of the world”

7. Strategic actions. Strategy formulation
Strategy formulation sets a list of main areas where decision should be made:
• Opportunity assessment define how founders identify, recognize and assess
potential entrepreneurial options based on human capital, perception of
environmental conditions and emotional respond to those opportunities.
• Entry decisions are based on entrepreneurs’ aspirations and attitudes,
opportunity costs, motivation, reliance on experience, decision-making
techniques.
• Decisions about exploiting opportunities define whether the concrete
opportunity will be realized, in what way it will be developed, financed, advertised
and sold.
• Exit decisions define how individuals choose to stop entrepreneurial activity
depending on the conditions founders face, their optimism, personal
circumstances, and in the timing of their decision

8. Strategic actions. Strategy implementation
Strategy implementation defines how decision can be done:
• Opportunity search and identification is the core role of entrepreneur
decision-making activities that is being built on the process of creativity,
invention and innovation
• Sales and marketing is one of the most challenging area for IT
entrepreneurs that include questions of positioning, pricing, promotion,
acquiring customers, etc.
• Financing represents different funding alternatives, which depend on
entrepreneur knowledge of these alternatives and influenced by attitudes
toward firm risk
• Networks are important structures that provide with information about
markets, opportunities, professional advice and opinion, often without
charge

9. Opportunity search and identification
Buy a business
Start a new business
Acquire a franchise
Service
Means-oriented
Goal-oriented
Duplication Financial feasibility
Invention
Product Organizational feasibility
Industry/market feasibility
Product or service feasibility
All Yes End
Start
No
Extension
Synthesis
The simplified process of opportunity search, identification, and feasibility
research designates main points where decision should be made

10. Decision on form of entrepreneurship
Alternatives Advantages Disadvantages Implementation options
Buy a business The difficult start-up work has already been
done;
Established brand;
Instant customer access;
Established network of contacts;
Trained employees in place;
Market for the product or service is already
established
Require to invest a large amount up front;
Feasibility study might be very expensive;
Technological gaps difficult to assess;
Lack of public information in Ukraine
increases risks.
Staff morale may be low.
The less risky approach is to buy business
where entrepreneur was employed or
has other insights. 3 research responders
bought business they were working as
employees.
Start a new business Flexibility on idea selection, allows
innovation and creativity;
Independence;
Possible low-cost entering;
Personal achievement.
The highest risk and failure rate among
three options;
Time commitment;
Delayed profitability;
More responsibility;
Requires knowledge from different
domains.
The largest room for implementation.
The approach may depend also on
relationship between creativity and
opportunity perception varying from
stagnator and copier (low creativity) to
struggler (low entrepreneurship) and
innovator
Acquire a franchise Support of a big business network;
Less risky and higher rate of success than
start-up businesses;
May cost less than start own business of the
same type;
Less knowledge and expertise might be
required;
Established brand.
Formal agreement with franchisor that
dictate how to run the business;
No freedom in product line;
Sharing profit with franchisor;
There are usually restrictions on way of
operation, products to sell and markets
to enter;
Dependency on franchisor and other
franchisees reputation.
Entrepreneur may partner with existing
vendor, for example, Microsoft,
Salesforce, etc. selling products or
services on known for entrepreneur
market or differentiate to specific niche.

11. Basis for taking action
• goal-oriented assumes that goals are defined first, for example idea
for a new product, they determine actions;
• means-oriented assumes that decision is made based of available
means for example knowledge, experience or resources.
There is now preferable or more effective approach, however goal-
oriented approach is more popular across IT entrepreneurs.

12. Decision on product or service
Alternatives Advantages Disadvantages Implementation options
Product High possible return;
More attractive for external investments;
High scalability;
Allows creativity and innovativeness;
Require less human resources;
Profit is not linearly dependent on
number of people;
May look more prestigious
High risk;
Difficult to identify an idea;
Hard to make feasibility study;
May require significant investments and long time-to-break-
even;
Difficult to acquire customers for new product;
Requires user empathy to understand demand and
feedback;
Entrance barrier is higher;
Innovative skills required
Product development may
be started in parallel with
regular employment to
reduce personal financial
opportunity cost.
Service Requires less initial investments;
Short time-to-break-even and profit;
Requires less technical knowledge;
Easier to adjust an idea based on
feedback from customers;
Lower risk.
Work cannot be started without a contract with concrete
customer;
Difficult to acquire customers without previous references;
Necessity to ensure constant sale and involvement of new
clients;
Human resource dependent;
Lower scalability;
Lower ability to differentiate;
High competition
Usually starts form signing a
contract with one major
customer based on personal
networking.

13. Types and Forms of innovation
Alternatives Description Implementation examples
Product innovation A good or service that is new or significantly
improved
Adoption of disruptive innovations. For example, some trends in recent
years include: Big Data, The Quantified Self, Collaborative Commerce,
Context Awareness, Cloud Computing, Internet of Things, Blockchain.
Process innovation New or significantly improved production or
delivery method.
Agile process became innovation for software development in early
2000.
Marketing innovation A new marketing method involving significant
changes in product design, product placement,
product promotion or pricing.
Involvement of social media in advertisement;
Involvement of growth hackers
Organisational innovation A new organisational method in business practices,
workplace organisation or external relations.
Innovation in working places arrangement promoted by Google and
Facebook
Types of innovation applied in IT:
• Duplication - creative replication of an existing concept (38%);
• Extension - new use of existing product or service (38%);
• Invention – totally new product, service, or process (8%);
• Synthesis – combination of existing concepts and factors into a new formulation or use (15%).

14. Opportunity evaluation
Product or service feasibility
Industry/market feasibility
Organizational feasibility
Financial feasibility
In case opportunity is not feasible in one or more areas, idea should be
either dropped or rethought.

15. Sales and marketing. Positioning
Alternatives Advantages Disadvantages Implementation options
Cost leadership May lead to increased market share;
More sustainable business position;
Can be the only available strategy to
engage with some customers (for
example, government)
Requires large volumes of sales because
margins are slim;
Requires access to low cost (human)
resources;
Requires large volumes of supply;
Limited ability to reinvest in R&D;
May create perception of low quality
Strategy is well-observed in the ITO industry;
Can be applied based on business model
innovation, for example, when the consumer is
not charged for service or product and profit is
made from advertisement.
Differentiation Allows higher margins;
Does not required huge numbers of
customers;
Buyer loyalty may be created;
More attractive for external capital
investments;
May be felt more attractive for
innovative and creative entrepreneurs;
Hinders market entry
Difficult to sustain competitive advantage;
Difficult to achieve in service-oriented IT
businesses;
Requires continued innovation and quality
improvement
Sustainable differentiation approach is platform
strategy that involves using a common base of
components or technology for divers tasks.
Platform may have network effects that leads to
more users adopting the platform, which in turn
leads to more users and complementors creating
bandwagon effects.
Focus / niche Very high prices can be charged;
Firms can develop tremendous
expertise that is difficult to compete
with;
Less competition;
Brand loyalty.
Limited demand;
The niche size may be over-estimated;
Disturbances in niche market will affect the
firm;
Focus market may dissipate;
Market can be taken over by larger
competitors;
Expansion to other markets requires
developing a new set of skills.
Application of existing solutions to new
problems, markets, or customer segments, for
example ERP systems for specific industry in
specific country;
Localization of software to some market
(language, legacy and regulatory requirements,
etc), for example accounting systems.

16. Sales and marketing. Strategic direction
Alternatives Advantages Disadvantages Implementation options
Market penetration Less risk;
More market information;
Educated customers;
Market may be not saturated and
favourable for all competitors
Increased competition;
Clear positioning should be defined
based on competitors analysis;
Risk to face market maturity.
Replicate existing solution in the same
market in case competitors don’t take
all market share. For example, ITO
services.
Market development Low initial competition;
Freedom of positioning;
Successful strategy can be copied from
other markets;
Best practices from other markets may be
applied;
Entrepreneur may possess higher
knowledge in market
Customers might be not educated in
service or product;
Competitors from other market may
enter.
Replicate existing solution in new
market. For example, franchise with
provider that doesn’t have
representation and competitors in local
market
Diversification Increased sales and revenue;
Increase in market share
High risk;
Hard to acquire customers;
Requires significant market research
Develop new product or service

17. Financing (1)
Alternatives Advantages Disadvantages Implementation options
External sources
Loans Retain equity;
Guaranteed money for the whole
term
Fixed monthly payments;
Aren’t flexible;
Very high interest rates in Ukraine (>30%);
No practice to finance start-ups.
De-facto unavailable
Loans can be taken in other
countries in case of foreign firm
registration
Crowdfunding Еasier than traditional applications
and relatively cheap;
Serves as a marketing tool;
Provides consumer feedback;
Introduces prospective loyal
customers;
Provides Legitimacy and exposure;
Provides the opportunity of pre-
selling
Is not applicable for all businesses (ex. B2B or service oriented
firms);
Usually not big raise of money and high failure rate;
Significant resources may be required to build up customers’
interest;
Difficult to generate enough brand credibility with investors;
Risk of stealing of an idea if not protected by a patent or
copyright;
Risk to reputation in case of failure;
If target is not reached finance usually is returned to investors.
Donation-based funding: ex.
Kickstarter, RocketHub, Crowdrise;
Investment crowdfunding:
crowdfunder, AngelList
Venture capital Bring relevant experience and
knowledge to the business;
Connections;
Positive significant treatment effect
on the growth of employment and
sales of IT venture
Loss of control (equity financing);
Requires skills to communicate an idea in a way people would
like to invest;
Start-ups managed by unexperienced entrepreneurs or not
involving new technology have a lower percentage of financing;
Low investor protection in Ukraine.
Horizon2020– equity free, for
innovation

18. Financing (2)
Alternatives Advantages Disadvantages Implementation options
External sources
Grants Loyal conditions;
Project validation;
No loss of an equity
Difficult to apply;
Applicable to specific domain or goal;
Project should be partially self-funded;
Limited flexibility.
World bank, EBRD etc. (support of
concrete projects, for example clean
energy projects)
Ukrainian examples: Lviv Young Project,
Microsoft Seed Fund, Global
Technology Foundation, TechPeaks.
Accelerators Expands a network;
Provide advice;
Accelerator’s brand recognition, it is a sign
for venture capitals that it is less risky than
a random venture;
Discounted services
Loss of control (equity financing);
Aligning business needs with incubator needs.
Ukrainian examples: GrowthUp, Carrot,
Sikorsky Challenge.
Incubators Provides services such as management
training;
Share premises;
Expand a network
Loss of control (equity financing);
Difference in performance between incubated and
unincubated businesses is marginal (Zimmerman 2015)
Ukrainian examples: iНub, WannaBiz,
Polyteco, Happy Farm, Founder
Institute.
Informal
investors
(Angels)
More inclined to invest in a new product
because they usually have personal
relations with founder;
Investment decisions can be made quickly
Provide experience and connections;
Loss of control (equity financing);
Not suitable for small or big investments;
Takes longer to find a suitable angel investor;
Less structural support available than from an investing
company
Ukrainian examples: Uangel, UAban

19. Networks
Alternatives Description Implementation
Social relationships with other firms based on strong
personal relationships
Important at the critical stage of pre-foundation when entrepreneurs
assemble their very first resources.
Shouldn’t be in focus on later stages
Reputational relationships with market leaders, or highly
regarded firms or individuals
Important all the time from the start, to shorter time-to-break-even, remain
positively associated with firm development
Marketing information relationships that allow for the flow of market
information through distinct relationships
with other individuals / firms;
Important all the time as it is proved that external and informal marketing
information scanning is more effective than more formal marketing approach
for young firms
Co-opetition relationships with direct competitors; Important after the start-up phase to increase the entrepreneurial firm's
flexibility and to promote sales growth
Co-operative technology technology alliances involving joint
technology development or innovation
projects.
Not recommended at early stages as technology networks may delay
achieving break-even.
Early technology partnering might therefore be an indicator that firms are not
yet ready to exploit business opportunities or not attractive enough to enter
into more value-adding partnerships
Entrepreneurship
network
Relationships with other entrepreneurs or
financing organizations
Important all the time from the start. Provides important information on
running start-up business, experience of problem solving, fills gaps in
knowledge. May have a form of informal (meetups, discussion clubs and
networking events) of formal networking (technological parks, incubators and
accelerators).

20. Strategic decision-making process (full)
Environmental context
Characteristics of the
entrepreneurial decision maker
Strategic Intent
1. Opportunity assessment decisions Opportunity search and identification
Strategic competiveness
2. Entrepreneur entry decisions
3. Opportunity exploitation decisions
4. Entrepreneur exit decisions
Strategy implementation
Networks
Innovation
Strategy formulation
Heuristics and biases in the decision-making
process
StrategicinputsStrategicactionsOutcomes
Feedback
Sales and marketing
Financing