Entrepreneurs and opportunities The four constructs of entrepreneurship Attributes of entrepreneurs Attributes of opportunities

Definitions of entrepreneurship “A process of identifying and starting a business venture, sourcing and organizing the required resources and taking both the risks and rewards associated with the venture.” “The pursuit of opportunity without regard to resources currently controlled.”

Why is it important? "Entrepreneurship" leads to the creation of new organizations or the revitalization of mature organizations in response to a perceived business opportunity Most 21st century workers will spend a large part of their careers engaging in entrepreneurial activities, either in established companies or in startups

What are the attributes of entrepreneurship? Entrepreneurship is multi-functional in terms of the skill sets needed to create a new venture Entrepreneurship is an iterative, multi-phase process for creating a new venture The entrepreneurial process occurs at and is affected by several levels: individual, sociological, environmental, and organizational

Functions of entrepreneurship Entrepreneurship involves all the functions, activities, and actions associated with perceiving opportunities and creating organizations to pursue them. These include: Market and Customer Research Service and Product Innovation (features, value) Differentiating offer from competitors’ offerings Team Building Finding & Managing Resources (people, capital, equipment) Leadership

Entrepreneurship is an iterative, multi-stage process The term “iterative” means that you are constantly testing and refining your concept of the opportunity until you find the right offering and right target market The term “multi-stage process” means that you must engage in several steps (see next two slides) in order to realize a reward for your entrepreneurial pursuits

Taken together… Experience and related knowledge “Fit” analysis Marshal resources Opportunity recognition or creation Opportunity evaluation Opportunity exploitation Growth and profit Creativity Market valuation Logistics

Adding the environment…

Definition of the entrepreneur Schumpeter An entrepreneur is the person who destroys the existing economic order by introducing new products and services, by introducing new methods of production, by creating new forms of organization, or by exploiting new raw materials. Simpler An entrepreneur is a person who perceives an opportunity and creates an organization to pursue it.* * Note that in order to be an entrepreneur, having an idea is necessary, but not sufficient. One must act upon the opportunity

The Four Constructs of Entrepreneurship

The four constructs of entrepreneurship 1) The Opportunity Clear customer need for the proposed product or service? Is it attractive (a good fit for the entrepreneur), durable (enduring long enough to earn a desirable return on investment), timely (the market is ready to accept this solution), and grounded in a product or service that deliver value to a customer group? Key question: How is your solution to the opportunity different from what your customers are currently using? 2) The Lead Entrepreneur and Management Team Experience within the proposed industry can be essential to success. Investors and other backers prefer to see a track record of driving growth and profits. An ‘A’ team with a ‘B’ idea is almost always better than the opposite (though I doubt anyone knew the founders of Googles and Facebooks were proven “A” team players). An entrepreneur’s insights into an opportunity are based on her/his experience, education, and cognitive abilities

The four constructs of entrepreneurship 3) Resources Resources include capital ($), technology, equipment, property, and people (advice, hands-on workers, advocates, etc.) The entrepreneur’s mantra is one of Low Overhead, High Productivity, and Controlling but not Owning resources The best entrepreneurs are incredibly creative at finding ways to get things done inexpensively and effectively. They always find ways to do things faster, cheaper, or better 4) Uncertainty Unlike risk, uncertainty does not have a distribution curve; you cannot predict what will happen under uncertainty; entrepreneurs “act” in small or large resource commitments to reduce uncertainty. You can think of uncertainty as a type of “pollution” that keeps other people from seeing the opportunity or prevents them from pursuing it.

What are opportunities? An opportunity is a situation in which something can be improved, usually when value can be created for a constituency and captured by the creator An idea is simply a conception of how to make the improvement Both are subjective to the extent that they are non-obvious (e.g., how Tivo could improve television: nobody knew they needed it)

What are entrepreneurial opportunities? Situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at a price that is greater than their cost of production (Casson, 1982) A situation in which an individual identifies a venture that is attractive, durable, timely, and grounded in a product or service that delivers value to a customer (Armstrong)

Sources of opportunities Technological innovations Regulatory changes Discovery of new uses for “old” materials Changes in industry or market structure Demographics Changes in perception, mood, or meaning New knowledge, both scientific and nonscientific

Sources of opportunities Technological innovations Commercialization of the World Wide Web led to development of the Netscape Navigator browser in 1994 with the tag line “the web is for everyone” Introduction of smart phones led to widespread development of mobile “apps” that replaced the need for computers

Sources of opportunities Regulatory changes In 1992, new OSHA and EPA regulations dealing with chemical process safety led to new technologies and consulting opportunities

Sources of opportunities Regulatory changes Today, changes in the regulation of drones by the U.S. FAA could revolutionize the way packages, medicines, etc., could be delivered to customers

Sources of opportunities New uses for old materials A 275-gallon storage drum becomes a hunting blind The walls of the “Lucy House” in Hale County are made of discarded carpeting tiles

Sources of opportunities Changes in industry or market structure A company’s profitability depends in part on the industry in which it competes and the markets into which it sells its product Nucor changed the structure of the U.S. steel industry by creating “mini-mills” to make smaller, cheaper batches of steel

Processes for identifying and evaluating opportunities Opportunity identification: the process by which an individual comes up with an opportunity for a new venture The opportunity can be identified by using input from consumers, business associates, channel members, or “technical people” Entrepreneur must understand the cause of the opportunity – is it technological change, market shift, government regulation, or competition?

Entrepreneurship profile Attitudes Perceived opportunities and capabilities Fear of failure Social status of entrepreneurship Activity Opportunity- / necessity-driven Early stage, established, exit Aspirations Growth, innovations, international orientation

Factors Influencing the Decision to Start a Company Personal Attributes Environmental Factors Higher Internal Locus of Control Desire for Financial Success Desire to Achieve Self-Realization Desire for Recognition Joy of Innovation Risk Tolerance Local, Regional, or National attitudes towards entrepreneurship Social and cultural pressures for or against risk taking and entrepreneurship Access to entrepreneurial role models Responsibilities to family and community No single type of person is best suited for entrepreneurship! Entrepreneurs come from all walks of life

Recall the attributes of an entrepreneurial opportunity… Attractive: You could easily see yourself pursuing this opportunity because of your experience with and passion for it Timely Durable Grounded in a product or service that delivers value to a customer

Example: Run a prison! Attractive? Timely? Durable? Grounded in a product or service that delivers value to a customer? Do you see yourself thriving in an environment of being an entrepreneur in the prison industry?

Recall the attributes of an entrepreneurial opportunity… Attractive Timely: current technology, market demographics and demands, and other timing issues make now the time for this opportunity. Durable Grounded in a product or service that delivers value to a customer

Example: Type writer repair! Attractive? Timely? Durable? Grounded in a product or service that delivers value to a customer?

Customer list for type writer repair Then Everyone Now NYPD desk cops Stubborn “hangers-on” Urban retro hipsters The timing for this opportunity has come and is now long gone… See also: http://hellotypewriter.tumblr.com/

Recall the attributes of an entrepreneurial opportunity… Attractive Timely Durable: The opportunity will persist for long enough to allow you to recover your startup and fixed costs and make a profit over time Grounded in a product or service that delivers value to a customer

Example: Product Fads A fad is any form of behavior that develops among a large population and is collectively followed enthusiastically for a period of time, generally as a result of the behavior being perceived as popular by one's peers or being deemed "cool” A fad “catches on" when the number of people adopting it begins to increase rapidly (it goes “viral”) The behavior will normally fade quickly once the perception of novelty is gone

Example: Pet rocks! Attractive Timely? Durable? Grounded in a product or service that delivers value to a customer? Pet Rocks were a 1970s collectible conceived in Los Gatos, California by advertising executive Gary Dahl. In April 1975, Dahl was in a bar (which is now Beauregard Vineyards Tasting room in Bonny Doon) listening to his friends complain about theirpets. This gave him the idea for the perfect "pet": a rock.[1] A rock would not need to be fed, walked, bathed, groomed and would not die, become sick, or be disobedient. He said they were to be the perfect pets, and joked about it with his friends.[2] However, he eventually took the idea seriously, and drafted an "instruction manual" for a pet rock. It was full of puns, gags and plays on words that referred to the rock as an actual pet. The original had no eyes. The first Pet Rocks were ordinary gray stones bought at a builder's supply store. They were marketed like live pets, in custom cardboard boxes, complete with straw and breathing holes for the "animal."[1] The fad lasted about six months, ending after a short increase in sales during the Christmas season of December 1975. Although by February 1976 they were discounted due to lower sales, Dahl sold 1.5 million Pet Rocks and became a millionaire. The Pet Rock burst onto the scene in 1975, sold a million units, and quickly faded into memory as the ultimate "get rich quick" scheme. Despite all that, the popular fad still holds a special place in history.

Gary Dahl (inventor) and pet rocks Apr 1975 Hears friends complain about their pets Jun 1975 Creates “perfect pet!” Sales spike up to Christmas Dec 1975 Discounted due to decrease in sales Feb 1976 Fad ends; Dahl sells 1.5M rocks, becomes millionaire Mar 1976

Features of Pet Rock Holes in box to let rock breathe Nesting material to make rock comfortable Multi-page manual for care and feeding of rock

More product fads The Chia Pet, 1982 Rubik’s Cube, 1980 Furby, 1998

Recall the attributes of an entrepreneurial opportunity… Attractive Timely Durable Grounded in a product or service that delivers value to a customer – this is called the value proposition in the language of the business model canvas

Value Propositions The Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer Segment The Value Proposition is the reason why customers turn to one company over another.

Examples of Value Propositions Newness Performance Customization “Getting the job done” Design Brand/status Price The value proposition has attributes that delight the customer and create product or service loyalty The value proposition is also what makes your offering different from competitors