LAUNCHING NEW ventures – AN ENTREPRENEURIAL APPROACH, 7e Kathleen R. Allen LAUNCHING NEW ventures – AN ENTREPRENEURIAL APPROACH, 7e © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Understanding Entrepreneurship Chapter 1 © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Chapter Objectives Define entrepreneurship. Explain the role of entrepreneurship in economic growth. Distinguish entrepreneurial ventures from small businesses in terms of their purpose and goals. Describe the evolution of entrepreneurship. Identify today’s broad trends in entrepreneurship. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Definition of Entrepreneurship “The process by which individuals—either on their own or in organizations—pursue opportunities without regard to the resources they currently control.” ~ Stevenson Entrepreneurship is a mindset that is: Opportunity-focused Risk taking Innovative Growth-oriented © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.1 The Role of Entrepreneurship in the Economy Not a linear process: Phase 1: Find a problem in a market or industry; research to understand the industry, potential market, and any issues the entrepreneur might face. Phase 2: Validate the hypotheses the entrepreneur has made about the customer, solution and proposed business model. Phase 3: Business design, planning & execution. Affected by external variables: Economic environment, competition, new laws and regulations, labor supply, sources of capital, and more © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Figure 1.1- The Entrepreneurial Process © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Technological innovation is critical. 1.1a Economic Growth Technological innovation is critical. The entrepreneur identifies new customer segments or needs, existing needs not satisfied, or new ways of manufacturing and producing. Technology lowers the cost of information and transportation. Globalization means goods and services can be traded anywhere in the world. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Figure 1.2- Entrepreneurship and Technological Change Opportunity Resources New Venture Customer Needs Emerging segments Unsatisfied needs New methods of manufacture & distribution Economic Growth Technological Change © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.1b New Industry Formation New industries are born when technological change produces a novel opportunity that an enterprising entrepreneur seizes. Industry life cycles: birth, growth, decline © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Figure 1.3- The Industry Life Cycle © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.1c Job Creation U.S. Small Business Administration (SBA) defines a small business as one with fewer than 500 employees. Small businesses represent 99.7 percent of all employers and pay more than 45 percent of the total U.S. private payroll. Small businesses have generated 65 percent of net new jobs over the past 15 years. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Table 1.1- Number of Employer Firms by Startups & Non-Startups © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Economic development in three categories of countries: 1.1c Job Creation Economic development in three categories of countries: Factor-driven economies Created out of necessity and rely on unskilled labor and extraction of natural resources Efficiency-driven economies Growing and in need of improving their production processes and quality of goods produced Innovation-driven economies The most advanced and where business compete based on innovation and entrepreneurship © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.2 The Nature of Entrepreneurial Startups An entrepreneurial venture brings something new to the marketplace. Three primary characteristics: Innovative Value-creating Growth-oriented © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.2a Risk and the Entrepreneurial Venture Risk is an inherent part of the entrepreneurial process. What changes over time with more information and validation from the market is the impact of that risk. The fuzzy front end occurs prior to launch. The entrepreneur must gather information about the industry and market, test the business model, and determine the conditions under which she will move forward. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Figure 1.4- Risk and Impact in Startups © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.2a Risk and the Entrepreneurial Venture It is not clear what prompts someone to become a budding entrepreneur. Push – the mechanism that drives someone to become a nascent entrepreneur because all other opportunities for income appear tor be absent or unsatisfactory. Pull – the mechanism that attracts an individual to an opportunity and creates a “burning desire” to launch a business and capture a market. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.2a Risk and the Entrepreneurial Venture Many entrepreneurs drop out of the process as they move from intention to preparation and execution. Many also give up before the new business makes the transition to an established firm. The SBA reports that about half of new business will survive 5 years or more, and 1/3 will survive 10 years or more. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Sometimes the business model is not tested. 1.2b New Business Failure One reason for failure is that entrepreneurs come up with a solution looking for a problem; they have not identified a real need in the market. Sometimes the solution does not differ from what is already in the market. Sometimes the business model is not tested. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Failure is a fact of life which must be dealt with. 1.2b New Business Failure The firms most likely to survive over the long term are those that display superior levels of reliability & accountability in performance, processes and structure. Failure is a fact of life which must be dealt with. The vital issue for an entrepreneur is to minimize the cost of possible failure to recover quickly. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.3 Brief History of the Entrepreneurial Revolution United States was founded on the principle of free enterprise. The term entrepreneur didn’t come into popular use until the 1980s. © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.3a The Decades of Entrepreneurship 1960’s – bigger was better 1970’s – three trends that would forever change the face of business Macroeconomic turmoil, international competition & technical revolution 1980’s – business in terrible shape 1990’s – The Information Age 2000’s – The Knowledge Economy © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Figure 1.5- The Decades of Entrepreneurship © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

1.4 Current Entrepreneurial Trends Digital Anonymity Return to Domestic Manufacturing & Craft Big Data The Lean Startup Movement © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Part One: Entrepreneurship & Opportunity 1.5 Looking Ahead Part One: Entrepreneurship & Opportunity Chapter 1: Understanding Entrepreneurship Chapter 2: Preparing for the Entrepreneurial Journey Chapter 3: Recognizing and Shaping an Opportunity Part Two: Feasibility Analysis (Ch 4-9) Part Three: Business Design (Ch 10-15) Part Four: Planning for Growth and Change (Ch 16-17) © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

New Venture Action Plan Read broadly about entrepreneurs and new ventures to get ideas for what makes a successful venture Interview an entrepreneur to better understand the entrepreneurial mindset Research new trends, particularly in an industry in which you’re interested © 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.