Entrepreneurship: Successfully Launching New Ventures, 2/e

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Entrepreneurship Successfully Launching New
Ventures, 2/e Bruce R. Barringer R. Duane Ireland
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Entrepreneurship Successfully Launching New
Ventures, 2/e Bruce R. Barringer R. Duane Ireland
Chapter 1
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Chapter Objectives (1 of 2)

1. Explain entrepreneurship and discuss its
   importance.
2. Describe corporate entrepreneurship and its use
   in established firms.
3. Discuss the three main reasons that people decide
   to become entrepreneurs.
4. Identify four main characteristics of successful
   entrepreneurs.
5. Explain the five common myths regarding
   entrepreneurship.

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Chapter Objectives(2 of 2)

• 6. Explain how entrepreneurial firms differ
  from salary-substitute and lifestyle firms.
• Discuss the changing demographics of
  entrepreneurs in the United States.
• Identify ways in which large firms benefit from
  the presence of smaller entrepreneurial firms.
• Explain the entrepreneurial process.

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Introduction to Entrepreneurship
According to the GEM 2005 study, about
330 million people, or 14 of the adults in the
35 countries surveyed, are involved in
forming new businesses
There is tremendous interest in entrepreneurship
around the world
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What is Entrepreneurship?(1 of 2)

• Origin of the Word Entrepreneur
• The word was originally used to describe people
  who take on the risk between buyers and sellers
  or undertake a task such as starting a new
  venture.
• Difference Between an Inventor and an
  Entrepreneur
• An inventor creates something new.
• An entrepreneur puts together all the resources
  neededthe money, the people, the strategy, and
  the risk-bearing ability to transform the
  invention into a viable business.

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Transforming Ideas into InnovationsSources

• Inventors
• One ten-year study found that inventors
  typically
• Have mastered the basic tools and operations of
  the field in which they invent, but they will
  have not specialized solely on that field.
• Are curious, and more interested in problems than
  solutions.
• Question the assumptions made in previous work in
  the field.
• Often have the sense that all knowledge is
  unified. They will seek global solutions rather
  than local solutions, and will be generalists by
  nature
• Such individuals may develop many new devices or
  processes but commercialize few.

Why do you think this is so?
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What is Entrepreneurship?(2 of 2)

• Entrepreneurship Defined
• Entrepreneurship is the process by which
  individuals pursue opportunities without regard
  to the resources they currently control.
• The essence of entrepreneurial behavior is
  identifying opportunities and putting useful
  ideas into practice.
• The set of tasks called for by this behavior can
  be accomplished by either an individual or a
  group and typically requires creativity, drive,
  and a willingness to take risks.

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Corporate Entrepreneurship(1 of 2)

• Corporate Entrepreneurship
• Is the conceptualization of entrepreneurship at
  the firm level.
• All firms fall along a conceptual continuum that
  ranges from highly conservative to highly
  entrepreneurial.
• The position of a firm on this continuum is
  referred to as its entrepreneurial intensity.

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Corporate Entrepreneurship(2 of 2)
Entrepreneurial Firms
Conservative Firms

• Proactive
• Innovative
• Risk taking

• Take a more wait and see
• posture
• Less innovative
• Risk adverse

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Corporate Entrepreneurship

• Venture Team (skunk works)
• A small team that operates as a semiautonomous
  unit to create and develop a new idea. May be
  from different organizations.

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Why Become an Entrepreneur?
There are three primary reasons that people
become entrepreneurs and start their own firms
Desire to be their own boss
Desire to pursue their own ideas
Financial rewards
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Characteristics of Successful Entrepreneurs(1 of
3)
Four Primary Characteristics of Successful
Entrepreneurs
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Characteristics of Successful Entrepreneurs(2 of
3)

• Passion for the Business
• The number one characteristic shared by
  successful entrepreneurs is a passion for the
  business.
• This passion typically stems from the
  entrepreneurs belief that the business will
  positively influence peoples lives.
• Product/Customer Focus
• A second defining characteristic of successful
  entrepreneurs is a product/customer focus.
• An entrepreneurs keen focus on products and
  customers typically stems from the fact that most
  entrepreneurs are, at heart, craftspeople.

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Characteristics of Successful Entrepreneurs(3 of
3)

• Tenacity Despite Failure
• Because entrepreneurs are typically trying
  something new, the failure rate is naturally
  high.
• A defining characteristic for successful
  entrepreneurs is their ability to persevere
  through setbacks and failures.
• Execution Intelligence
• The ability to fashion a solid business idea into
  a viable business is a key characteristic of
  successful entrepreneurs.
• The ability to translate thought, creativity, and
  imagination into action and measurable results is
  the essence of execution intelligence.

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Characteristics of Successful Entrepreneurs(3 of
3)

• Tenacity Despite Failure
• Because entrepreneurs are typically trying
  something new, the failure rate is naturally
  high.
• A defining characteristic for successful
  entrepreneurs is their ability to persevere
  through setbacks and failures.

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Common Myths About Entrepreneurs(1 of 5)

• Myth 1 Entrepreneurs Are Born Not Made
• This myth is based on the mistaken belief that
  some people are genetically predisposed to be
  entrepreneurs.
• The consensus of many studies is that no one is
  born to be an entrepreneur everyone has the
  potential to become one.
• Whether someone does or doesnt become an
  entrepreneur is a function of the environment,
  life experiences, and personal choices.

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Common Myths About Entrepreneurs(2 of 5)
Although no one is born to be an entrepreneur,
there are common personality traits and
characteristics of successful entrepreneurs

• Achievement motivated
• Alert to opportunities
• Creative
• Decisive
• Energetic
• Has a strong work ethic
• Is a moderate risk taker
• Lengthy attention span

• Optimistic disposition
• Persuasive
• Promoter
• Resource assembler
• Self-confident
• Tenacious
• Tolerant of ambiguity
• Visionary

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Common Myths About Entrepreneurs(3 of 5)

• Myth 2 Entrepreneurs Are Gamblers
• A second myth about entrepreneurs is that they
  are gamblers and take big risks. The truth is,
  most entrepreneurs are moderate risk takers.
• The idea that entrepreneurs are gamblers
  originates from two sources
• Entrepreneurs typically have jobs that are less
  structured, and so they face a more uncertain set
  of possibilities than people in traditional jobs.
• Many entrepreneurs have a strong need to achieve
  and set challenging goals, a behavior that is
  often equated with risk taking.

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Common Myths About Entrepreneurs(4 of 5)

• Myth 3 Entrepreneurs Are Motivated Primarily by
  Money
• While it is naïve to think that entrepreneurs
  dont seek financial rewards, money is rarely the
  reason entrepreneurs start new firms.
• In fact, some entrepreneurs warn that the pursuit
  of money can be distracting.
• It can be very distracting - Intelledex

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Common Myths About Entrepreneurs(5 of 5)

• Myth 4 Entrepreneurs Should Be Young And
  Energetic
• The most vibrant age range for early stage
  entrepreneurial activity is 25 to 34 years old.
• While it is important to be energetic, investors
  often cite the strength of the entrepreneur as
  their most important criteria in making
  investment decisions.
• What makes an entrepreneur strong in the eyes
  of an investor is experience, maturity, a solid
  reputation, and a track record of success.
• These criteria often favor older rather than
  younger entrepreneurs.

The 1 criteria for VC is often the management
team.
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Types of Start-Up Firms
Types of Start-up Firms
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Changing Demographics of Entrepreneurial Firms(1
of 3)

• Women Entrepreneurs
• There were 6.5 million women-owned businesses in
  2002, the most recent year the U.S. Census Bureau
  collected business ownership data. That number
  is up 20 from 1997.
• Minority Entrepreneurs
• The number of minority-owned businesses has also
  risen sharply.
• There were 1.2 million African-American owned
  businesses in 2002, up 45 from 1997.
• There were 1.1 million Asian-owned businesses in
  2002, up 24 from 1997.
• There were 206,125 Native American-owned
  businesses in 2002, up 24 from 1997.

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Changing Demographics of Entrepreneurial Firms(2
of 3)

• Senior Entrepreneurs
• Although the Census Bureau does not collect data
  on senior entrepreneurs (people 55 years old and
  older), there is strong evidence to suggest that
  the number of older people starting their own
  businesses is rapidly growing.
• The dramatic increase in the number of senior
  entrepreneurs is attributed to a number of
  factors, including
• Corporate downsizing.
• An increasing desire among older workers for more
  personal fulfillment in their lives.
• Growing worries among seniors that they need to
  earn additional income to pay for future health
  care services and other expenses.

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Changing Demographics of Entrepreneurial Firms(3
of 3)

• Young Entrepreneurs
• Interest in entrepreneurship among young people
  is also growing.
• At the high school level, a Gallup study revealed
  that 7 out of 10 high school students want to
  start their own companies.
• Interest in entrepreneurship on college campuses
  is growing. According to a recent study, 1,992
  two- and four-years colleges and universities now
  offer at least one course in entrepreneurship, up
  from 300 in the 1984-1985 school year.
• Although the bulk of entrepreneurship education
  takes place within business schools, many other
  colleges and departments are offering
  entrepreneurship courses as well, including
  engineering, agriculture, theater, dance,
  education, law, and nursing.

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Economic Impact of Entrepreneurial Firms(1 of 2)

• Innovation
• Is the process of creating something new, which
  is central to the entrepreneurial process.
• Small entrepreneurial firms are responsible for
  55 of all innovations in the U.S.
• Job Creation
• In the past two decades, economic activity has
  moved in the direction of smaller entrepreneurial
  firms, which may be due to their unique ability
  to innovate and focus on specialized tasks.

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Some Definitions

• Idea - Something imagined or pictured in the
  mind.
• Innovation - The practical implementation of an
  idea
• Creativity The process of generating and
  converting an idea into an innovation.
• For the purpose of this course we will consider
  innovation to be a noun defined by Merriam
  Webster as a new method or device.

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Economic Impact of Entrepreneurial Firms(2 of 2)

• Globalization
• Today, over 97 of all U.S. exporters are small
  businesses with fewer than 500 employees.
• Export markets are vital to the U.S. economy and
  provide outlets for the sale of U.S. produced
  products and services.

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Entrepreneurial Firms Impact on Society and
Larger Firms

• Impact on Society
• The innovations of entrepreneurial firms have a
  dramatic impact on society.
• Think of all the new products and services that
  make our lives easier, enhance our productivity
  at work, improve our health, and entertain us in
  new ways.
• Impact on Larger Firms
• Many entrepreneurial firms have built their
  entire business models around producing products
  and services that help larger firms become more
  efficient and effective.

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The Entrepreneurial Process
The Entrepreneurial Process Consists of Four
Steps Step 1 Decision to become an
entrepreneur Step 2 Developing successful
business ideas Step 3 Moving from an idea to
an entrepreneurial firm Step 4 Managing and
growing an entrepreneurial firm
We will cover the first 3 steps.
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Steps in the Entrepreneurial Process(1 of 2)
Step 1
Step 2
Developing Successful Business Ideas
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Steps in the Entrepreneurial Process (2 of 2)
Step 3
Step 4
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Business Mentor Project

• Start thinking of idea for a business.

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Entrepreneurship Successfully Launching New
Ventures, 2/e Bruce R. Barringer R. Duane Ireland
End Chapter 1