Chapter 4 Creativity and the Business Idea McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives To identify various sources of ideas for new venture To know the methods available for generating new venture ideas To discuss creativity and the techniques for creative problem solving To discuss the aspects of the product planning and development process

Definitions Entrepreneur: Entrepreneurship: Person whose goal is to create or capitalize on new economic opportunities through innovation People who own, operate, and take the risk of a business venture Entrepreneurship: Process through which entrepreneurs create and grow enterprises Instructions:   This slide is meant to ensure that everyone is using the same terms in the same way. This will have implications later in the presentation with the data focusing on the self-employed (‘proprietors’ or ‘non-employers’) and small businesses or micro-enterprises. Script: “The definition for ‘entrepreneur’ on this slide is commonly accepted, but we are going to expand this definition for the purposes of our discussion today. For our planning purposes, we will define ‘entrepreneurship’ broadly to include all types of self-employment and small businesses. Within the region, you might discover niches for serial entrepreneurs, lifestyle entrepreneurs, innovators, creatives, gazelles, and youth entrepreneurs. Until you have a clear idea of the best approach for your region, keeping all options open may be best. Before we begin a discussion on how to create an entrepreneurial development plan, providing some working definitions may be helpful. Entrepreneurs are people who create and grow enterprises. Entrepreneurship is the process through which entrepreneurs create and grow enterprises. Entrepreneurial communities are those where significant economic and social entrepreneurial activity exists and where an effective system of private and public support fosters entrepreneurship. Entrepreneurship development refers to the process of building an infrastructure of public and private policies and practices that foster entrepreneurship.” Time: 5 minutes Source: Dabson, B., & Wilcox, M. (2010). Module 1: Introduction to Creating Entrepreneurial Communities. Creating a Rural Entrepreneurial System in Tennessee, UT Extension Online Learning (extOL). Source: Based on Dabson and Wilcox (2012)

Why People Become Entrepreneurs Many entrepreneurs want to be their own bosses, and self-management is their motivation. Entrepreneurs are wealth creators. Many entrepreneurs start ventures with the specific goal of creating a profitable business to reap financial rewards. As large companies continue to layoff employees, entrepreneurs find job security in their own ventures. Finally, quality of life provides an attractive option for people to gain independence, freedom and control.

Who are entrepreneurs? Common traits: Original thinkers Risk takers Take responsibility for own actions Feel competent and capable Set high goals and enjoy working toward them Self employed parents Firstborns Between 30-50 years old Well educated – 80% have college degree and 1/3 have a graduate level degree

Characteristics of Entrepreneurs Key Personal Attributes Successful Entrepreneurs Strong Managerial Competencies Good Technical Skills

Key Personal Attributes Entrepreneurs are Made, Not Born! Many of these key attributes are developed early in life, with the family environment playing an important role Entrepreneurs tend to have had self employed parents who tend to support and encourage independence, achievement, and responsibility Firstborns tend to have more entrepreneurial attributes because they receive more attention, have to forge their own way, thus creating higher self-confidence

The Successful Entrepreneur Passion for the Business Product/customer focus Tenacity Despite Failure Execution Intelligence The Successful Entrepreneur

Entrepreneur Development Components of Success Networks, Mentoring and Coaching Training & Technical Assistance Youth Entrepreneurship Access to Capital Supportive Environment Instructions: Considering the components listed on the slide from a regional perspective is important. Each community does not need to have each component, but the region as a whole will be stronger if all components exist. Script: “A successful entrepreneurship development strategy generally includes the five main components shown in this diagram: Access to capital – Capital may be available, but the real question is accessibility. Capital, if it is available and accessible, should be in the form most useful for the stage of business development - debt, quasi-equity, and equity through commercial, community development financial institution (CDFI), and public sources (federal, state). Supportive environment – A supportive environment includes creating community and civic environments that celebrate and support entrepreneurs. Entrepreneur networks, mentoring and coaching – This can include facilitating informal gatherings of entrepreneurs to share experiences and information, connecting entrepreneurs with experienced mentors, or offering coaching expertise to help entrepreneurs through specific business phases. Training and technical assistance – This should include the creation of a system of advice, expertise and training appropriate to the needs of entrepreneurs. The source can be public, private, educational or nonprofit agencies. Youth entrepreneurship – Such programs excite young people in schools, community colleges and universities about the possibilities of creating their own businesses. This assists with building the pipeline of future entrepreneurs in your region.” Time: 5 minutes

Successful and Unsuccessful Entrepreneurs Creative and Innovative Position themselves in shifting or new markets Create new products Create new processes Create new delivery Unsuccessful Poor Managers Low work ethic Inefficient Failure to plan and prepare Poor money managers

How Entrepreneurs Can Succeed Plan and manage effectively Assemble an expert team to execute the business concept Test the opportunity in the marketplace Recognize opportunity 11

Business Ideas Are a ‘dime a dozen’ Don’t fall in love with your own idea Don’t hide it under a tarp in the back yard Look before you leap (critically evaluate the potential for the business before starting) You have to screen from 100 to 1,000 different ideas before you find a true opportunity that fits you in this place and at this time. Avoid the service industry in a declining economy Avoid the retail industry in a declining economy Seek value-added, export-oriented businesses selling into growing markets

Generating New Business Ideas Techniques include: Group brainstorming/lateral thinking exercises Research – observation, enquiry, play, prototype, experiment Focus groups Surveys Analysis of and reflection on trends: Economy Society – social trends Technology Science Political and regulatory changes There is opportunity in change, chaos, complacency and even boredom.

Mental Locks/Barriers to Creativity Focus on the right answer That’s not logical Follow the rules Be practical Avoid ambiguity To err is wrong Play is frivolous That’s not my area Don’t be foolish I’m not creative

Idea versus Opportunity Ideas are “a dime a dozen” Opportunities are business ideas that offer the potential for a return on invested capital that more than offsets the costs of that capital on a risk-adjusted basis.

The Ideal Opportunity (Heaven) A motivated and large market of customers prepared to pay any price for the product or service you offer Repeated purchases are necessary for customers to satisfy their demand Significant barriers of entry for any potential competitors preserving your market dominance for a long period of time Little or no capital investment required High profit margin (Selling price less cost to produce) Few employees and little demand on your time

Little Opportunity (Business Hell) Few customers, no repeat purchases, sporadic and unpredictable demand Few barriers of entry for any potential competitors making it easy for anyone to enter the market to compete with you if you manage to develop the market Large initial and on-going capital investment required Low profit margin per unit (Selling price less cost to produce)

The Long Road to Success Ideas  opportunities  feasibility  business plan  implementation  evaluation  modification  manage Ideas Feasibility Screening (Proof of concept followed By Financial viability screening) Implementation (financing, resourcing) Opportunities Business Plan Evaluation

The Process Brainstorming New Product Innovations Screening Those Ideas Business Plan Implementation

The Process - is like a funnel! Creative / Soft-Thinking (Right Brain) - brainstorm new product innovations Logical / Hard-Thinking (Left Brain) - formal business planning (opportunity screening, market forecasts, financial forecasts)

Figure 4.6 - The Product Planning and Development Process

…..will be discussed in the next session….. A Good Business Plan is... Complete Short Integrated Prepared for the audience Organized …..will be discussed in the next session…..

Generate Your Business Idea and Build Your Business Team Business idea must be feasible and marketable Business can be liquidated at the end of this semester Legal product only Avoid food and beverage No just resale/packaging

Organization CEO (1 student) Manager (1 student for each): Staff : Product (ion) Marketing Human Resource Finance Staff : 5-7 for production and marketing dept. 1-2 for human resource and finance dept.

Let’s Do: Make your (tentative) organization! Generate your business idea! Determine your company’s name, vision, mission (s), logo, tag line! Presented next session!

Drafting Your Action Plan “Good plans shape good decisions. That's why good planning helps to make elusive dreams come true.” Lester Robert Bittel Instructions: Use Handout Six: Regional Entrepreneurship Action Plan to guide the team in putting together everything they have learned in this module. Script: “An action plan is exactly what the name suggests. It is a detailed list of actions that need to be taken to get you to your desired outcome. An action plan can be customized in many ways, but there are a minimum of four questions which must be answered: What is the action being completed? What are the resources needed to complete the action? Who will be responsible for completing the action? By when will the action be complete? The action should be specific and small enough that it can be completed within 2-3 weeks. Resources required should include any special data needs, the time required, any specialized knowledge/training, tools, and supplies. The ‘who’ should be specific – names of individuals rather than a more generic reference to a committee. The goal here is have someone be responsible. If there is no name, the action should be removed from the plan. The ‘when’ should be equally specific – a couple weeks, for example, is not an acceptable response, but May 12, 2012, is a very acceptable response. Using Handout Six: Regional Entrepreneurship Action Plan, your group should complete the plan together, and each member should have a copy for reference. As some actions are completed, new actions should be added when necessary. When the desired outcome is achieved, it is time for a new action plan. As milestones are achieved, don’t forget the power of celebration!” Handout Six: Regional Entrepreneurship Action Plan Time: 30 Minutes