ENTREPRENEURSHIP I Babs Bailey Carryer Fall 2002

8/28/022 Goals of course To distinguish between an idea and a business opportunity –Inventor vs. entrepreneur To understand the value of and know how to conduct market research to help identify a market opportunity –Marketplace advantage(s)

8/28/023 Entrepreneurship Why do we care? –Creation of jobs »5% of young and fast growing companies create 77% of new jobs »15% of them account for 94% of all these new jobs »Fortune 500 employed 1 in 5 in 1980; now 1 in 14

8/28/024 Entrepreneurship continued 70% of companies that are hiring ≤ 4 years old 70-80% of jobs are with companies ≤ 20 people > 95% of the wealth in America has been created by entrepreneurs since 1980 Millionaires are self-made : > 80% accumulated their wealth in 1 generation

8/28/025 PA entrepreneurship PA: > 200K businesses –98% = small (< 500) + Almost 400K self employed Women owned businesses increasing at 65% – 78% nationwide

8/28/026 Large companies Small businesses

8/28/027 New venture creation

8/28/028 Small businesses Only 3% of US businesses > $10 million Responsible for half of all innovation in the U.S. Small businesses create 75%of all net new jobs Very small (< 20) = 50% of this growth Represent over 99% employers; 52% of workers

8/28/029 Small businesses continued Provide 52% of private sector output Represent 96% of all exporters of goods Receive 28% of all federal contract $ 53% are home based 3% are franchises

8/28/0210 Business dissolution rates

8/28/0211 Survival rates

8/28/0212 Entrepreneurship What is it?

8/28/0213 Entrepreneurship = Way of thinking Spotting opportunity Taking initiative Implementation driven Resource utilization Acceptance of risk/failure

8/28/0214 Entrepreneur One who brings resources, labor, material and other assets into combinations that make their value greater than before. An entrepreneur is also one who introduces changes, innovations and a new order. Thinkers who do.

8/28/0215 Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume the major risks in terms of equity, time and /or career commitment providing value for a product or service. The product or service may or may not be new or unique but value must somehow be infused by the entrepreneur.

8/28/0216 Examples Nolan Bushnell - in 1972 founded Atari (electronic games) on $500. In 1976 he sold it to Warner Communications for $28 m Ross Perot started EDS with $1K Michael Dell started selling computer parts by mail order while a Freshman at the University of Texas

8/28/0217 The right time to start a business Time Market Size

8/28/0218 Characteristics Focus Drive Energy Self confidence Don’t start by wanting to get rich but to do something extremely well Not seeking the trappings of success, but success itself

8/28/0219 Characteristics continued Most have history of entrepreneurship Sports Expulsion or fired 2/3 are 1st children 40% were raised by self-employed parents (vs. 18% of general population) Entrepreneurial test

8/28/0220 Entrepreneurs do Seldom invent and market unique products but build ventures around incremental innovations and modifications Enter industries in their growth phase, not infancy Find fulfillment in their work Start more than one company

8/28/0221 Entrepreneurial know-how Resource utilization - entrepreneurs know how to do more with less Selling ability Recognize business opportunities: –Markets in flux –Industries with low capital requirements –Customers will pay for customization –Unit sale can support direct sales effort

8/28/0222 Risk tolerance Entrepreneurs pick a relatively low level of risk and then come up with suggestions as to how to increase returns at the given level of risk Bankers pick a return that they aspire to and then come up with ideas to reduce the risk involved at that level

8/28/0223 Innovation Entrepreneurs don’t have common personalities but a commitment to innovation Entrepreneurship refers not to an enterprise’s size or age, but to a certain kind of activity Innovation is the effort to create purposeful, focused change in an enterprise’s economic or social potential

8/28/0224 How innovation occurs 1. Unexpected occurrences –IBM –Ford and Edsel 2. Incongruities –Alcon –Steel –Shipping

8/28/0225 Innovation continued 3. Process needs –Media - Linotype and modern advertising 4. Industry and market changes –Galt 5. Demographic changes –Woolworths vs Walmart 6. Changes in perception –Obsession with health in spite of improvements

8/28/ New knowledge Computer –Binary arithmetic –Calculating machine in early 19th C –Punch card for the U.S. census of 1890 –Audion tube, invented in 1906 –Symbolic logic, created between –Programming/feedback concepts from WWI efforts to develop anti-aircraft guns –The knowledge was available by 1918, but the 1st computer appeared in 1946

8/28/0227 Effective innovations start small. They are not grandiose. They try to do one specific thing. It may be the elementary idea of putting the same number of matches in a matchbox. This simple notion gave the Swedes a world monopoly on matches for half a century. Peter Drucker

8/28/0228 We succeeded (in the Normandy Invasion) because we didn’t know it was impossible. Winston Churchill