Entrepreneurship
and Innovation
Running the place … creating profits … having
fun ...
Course Direction
Hot and
Cold
Industries
Making
Money
Real-Life
Business
Reviews
Creating
Profits
(several…)
International
Opportunities
Becoming
Independent
Toolbox
for
starting up
Improve
Job Chances
Review
Of
Current News
Custom
Topic
Opportunities
Logistics
• Class Sessions
– Handout materials in binder or prior to class
– If you want files sent by e-mail, send me e-mail address
• Contact
– [email protected]
– Text/SMS: 021 516 326
• Material Covered/Tested
– All class material including discussions
– All assigned reading materials
– All handouts and supplementary materials
Assessments
•
Individual Article Review Anonymous
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Individual Class Assessment (424 only) Anonymous
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You pick the article.
Apply class material. Identify issues. Write crisply.
Do not ramble - conclude firmly
Combination of multiple-choice, short fact and essay questions
Group Project Anonymous
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Last Day
Identify how entrepreneurial a business acts
Can be start-up or existing firm
Act as entrepreneurship consultant
Entrepreneurship
• Background
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Introduction, Parties
Entrepreneurship
Steps to a Business
Business Strategy
• Preparation
• Operation
Entrepreneurship
• Background
• Preparation
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Market Evaluation
Franchising
Goal Setting
Marketing & Market Research
• Operation
Entrepreneurship
• Background
• Preparation
• Operation
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Legal Framework
Corporate Governance
Financing
Multinational Business
E-Commerce
Business Plans
Parties to a Business
• Inside
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Owners
Employees
Investors
Managers
Outside
 Customers
 Owners/Invest.
 Legislators
 Public Interests
 Finance Sources
 Competition
 Past/Future
Employees
What is
worth the
risk?
Who makes Money?
• Employees
• Government/Taxation
• Fixed Cost Supplier
– Rent
– Leases
• Variable Cost Suppliers
• Government Taxation
• Owners
Environmental Requirements
• Free markets
• Permission to hold personal ownership
stake
• Failure as a true risk
Stakeholders
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Collective or individuals?
Ability to influence business?
With whom are their interests aligned?
Experience as stakeholders?
Ability to take their case public?
Extent of alliances with other
stakeholders?
Why do parties become involved?
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Employment
Tradition
Financial Opportunity
Independence
Mandate
Environmental Changes
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Industrial Revolution
Communication
Transportation Systems
Wars and Internal Conflicts
Innovation
Sustainability
How predictable is our environment?
Resources
• Protected Resources
– Unique
– Patented/License
• Non-Protected Resources
– Generally available
– For sale
Where do people come in?
Resources
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Unique
Rare
Exclusively under contract
Intangible
Valuable
Types of Resources
• Financial
– Funds/Assets
– Access to Credit
– Internal Return
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Physical
People
Technology
Goodwill
Types of Resources
• Financial
• Physical
– Input of materials
• People
– Past/current/future employees
– Education
– Strength of bond
• Technology
• Goodwill
Types of Resources
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Financial
Physical
People
Technology
– Know How
– Intellectual Capital
• Goodwill
– Reputation
– Trademarks
Theories to Value Resources
• Neoclassical
– Everyone can access all needed resources
– The best combiner/organizer wins
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Industrial Organization
Schumpeter
Chicago School
Resource-Based
Transaction Cost
Theories to Value Resources
• Neoclassical
• Industrial Organization
– Big firms create open of non-disclosed
monopolies
• Schumpeter
– Entrepreneurship is a valuable resource
• Chicago School
• Resource-Based
• Transaction Cost
Theories to Value Resources
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Neoclassical
Industrial Organization
Schumpeter
Chicago School
– Competition creates efficiencies
• Resource-Based
– With unique resources come protected longterm profits
• Transaction Cost
Theories to Value Resources
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Neoclassical
Industrial Organization
Schumpeter
Chicago School
Resource-Based
Transaction Cost
– By reducing friction cost between all
business elements, profits are created
Are Entrepreneurs Born?
• No
• Match required of:
– External opportunities
– Internal resources
– Timing
Entrepreneurship Forms
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Self employed
Internal entrepreneurs
Inventors
Pattern multipliers
Economy of scale operators
Acquirers
Speculators
Are all rich people smart?
• Are all smart people rich?
• What does it take to rich from work?
• Are there different definitions for
“getting rich”?
Entrepreneurs
• Inside, buffered
• Outside, on its own
Entrepreneurs change things
• Change of an existing business
structure
Creation of an Organization
• Organizations contribute:
– Economically
– Intellectually
– Goodwill
– Creativity
Economic Organization
• Use resources to create output which
exceeds input
• Where does this leave not-for-profits,
churches, governments, military, etc.?
Entrepreneurial Threshholds
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New products or services?
New approach to production/delivery?
New markets created or targeted?
Involvement of new parties in the
organization?
Entrepreneurship
and Innovation
Running the place … creating profits … having
fun ...
Peter Drucker
To attract and hold entrepreneurial
people and to promote innovation,
companies will have to create new
structures with new relationships and
new policies and supplemental
management compensation, benefits
and rewards with those appropriate
to the very different realities of
entrepreneurialism.
The Frontiers of Management, 1986
Vijay Sathe
Rather than cling to the myth of
“entrepreneurial personality”, it may
be useful to view entrepreneurship as
a result of the interaction between
the individual, the organization, and
the external environment.
Fostering entrepreneurship in the large diversified firm,
1989
The Starting Point
• Research
– Industry
– People
– Technology
– Opportunities
Idea
Establishment
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Organization/Planning
Funding
People
Business Plan
Operation
Variance Analysis
• Check performance against plan
• Identify causes for variance
• Correct performance
Manage
Budgeting
• Anticipate changes
(internal/external)
• Quantify changes and build model
• Tweak model to meet minimum
performance requirements
Plan
National Compliance
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Reporting
Taxation
Companies Office/Registration
Government Intervention/Support
Share Trading Regulations
Patents
Rules
International Compliance
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Market Acceptance
Political/Economic Risks
Logistics
Legal System
Cultural Norms
Partnering
Profit Repatriation
A Look Outside
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Market Shifts
Population Changes
Social Trends
Competitive Quicksand
Seasonal/Product Life Cycles
Buying Power Changes
Use of Technology
Build or Buy?
Invent or Copy?
Improve or Use as is?
Sustainable/Affordabl
e?
• First Mover
advantages?
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Barriers of Entry
• Why is no one else doing what you are
planning to do?
• Who will care if you do it?
• Structural Barriers:
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Economies of scale
Excess capacity
Product similarity
Capital needs/availability
Access to channels
Conversion/switching costs
Barriers of Entry
A
B
E
b
D
C
G
F
H I
Barrier
a
New opportunities
of Entry
d
c
New competitors
•
e
f
Direct Barriers
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Zoning
Licensing
Registration
Patents
Trade-/ Servicemarks
Barriers of Entry
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Inertia of existing business powers
Capital needs
Business plan uniqueness
Low-tech/low-investment versus
high-tech/high-risk
Competitive Reaction
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PR
Pricing Power
Quality
Feature Matching
• Example: Kiwi Air
Manfred F.R. Kets De Vries
Successful entrepreneurs soon make
the transition from a tactical to a
strategic orientation so that they can
begin to build crucial capabilities and
resources.
The Dark Side of Entrepreneurship, 1985
Strategy Levels
• Enterprise Level Strategy
– Relationship between the firm and
society/environment at large.
• Corporate Strategy
– Business Management
– Diversification
– Competition
• Functional/Subfunctional
Strategy
– Departmental activities
Resource-Based Strategies
• Ricardian Rent
– Owning/controlling scarce, valuable
resources.
• Monopoly Rent
– Government protection
– Patent/license
– High entry barriers
• Entrepreneurial Rent
– Risk-Taking
– Unique strategies
Basic Strategy Review
• Resource Inventory
– Type, strength/weakness, availability, etc.
• Capabilities Review
– Identification, classification
– New firms usually have advantage over
existing firms
• Competitive Strengths
• Develop Resulting Business Strategy
• Review, Probe, Criticize, Act
Why Strategy?
• Focus on Matching Resources with
Goals
• Identify Pathways to Goals
• Identify Obstructions on Pathways
• Cost of Obstruction Removal?
• Remaining Viability of Firm
• Resulting Operational Strategies
A Special Person
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Achievement
Control
Assumption of the Risk
Management Style
A Special Environment?
• Self-employment as a desire or
necessity?
• Opportunity to begin something new
• Tales from the rich side
The Right Situation?
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Knowledge
Money
Support
Attitude
Survive Discrimination
Mentor Availability