ENTREP REVIEWER

Introduction

As organizations, industries, and consumers become more dynamic, effective entrepreneurial

management becomes more important. While entrepreneurship has traditionally been viewed as a
private sector phenomenon, corporate, government and social entrepreneurship have developed in a
number of different domains such as not-for-profits, for-profits, and public sector organizations.
Entrepreneurship is a universal concept and can be applied in small and medium-sized enterprises
(SMEs), large national and multinational organizations, as well as in social ventures, enterprises,
communities, and governments. Entrepreneurship is not limited to a select group of people; any per-son
with the right mindset, drive, and motivation can develop an entrepreneurial perspective. This
perspective identifies a need and transforms this need it from a creative and innovative idea into reality.

This chapter develops an understanding of effective entrepreneurial management and the historical
perspectives on entrepreneurship by analyzing the concept of private entrepreneurship, government
entrepreneurship (governpreneurship) corporate entrepreneurship, and social entrepreneurship. The
nature of the entrepreneurial process is then explored along with how it applies within established
organizations. Entrepreneurship is a unifying framework for successful effective entrepreneurial
management that can be achieved by combining the key activities of managers and entrepreneurs.

Overview of Entrepreneurship

The word entrepreneur is French and, literally translated, means “between-taker” or “go-between.”

Entrepreneur and Entrepreneurship An early definition and example of an entrepreneur as a go-

between is Marco Polo, who attempted to establish trade routes to the Far East. In the Middle Ages, the
term entrepreneur was used to describe both an actor and a person who managed large production
projects.

In the seventeenth century, an entrepreneur was a person who entered into a contractual arrangement
with the government to perform a service or to supply stipulated products. For example, John Law, a
Frenchman, was allowed to establish a royal bank. Richard Cantillon, in the 1700s, developed one of the
early theories of the entrepreneur describing the entrepreneur as a risk taker and a rational decision
maker who assumed the risk and provided management for the firm.

In the eighteenth century, the entrepreneur was distinguished from the capital provider. Many of the
inventions developed during this time were reactions to the needs of the changing world, as was the
case with the inventions of Eli Whitney (cotton gin) and Thomas Edison (light bulb).

In the late nineteenth and early twentieth centuries, entrepreneurs were frequently not distinguished
from managers and were viewed mostly from an economic perspective. Some believed that the key
factor in distinguishing a manager from an entrepreneur was the bearing of risk.

The concept of innovation and newness became an integral part of entrepreneurship in the mid-
twentieth century. Innovation, the act of introducing something new and relevant, is one of the most
difficult tasks for the entrepreneur. It takes not only the ability to create and conceptualize, but also the
ability to understand all the forces at work in the environment.

The term entrepreneurship has historically referred to the efforts of an individual who takes on the odds
in translating a vision into a successful business enterprise.

To an economist, an entrepreneur is one who brings resources, labor, vision, materials, and other assets
into combinations that increase product or service value and introduce and implement change,
innovation, and a new order.

To a psychologist, such a person is typically driven by certain forces—the need to attain something, to
experiment, to accomplish, or perhaps to escape authority.

To one businessperson, an entrepreneur may appear as a threat, an aggressive competitor, whereas to

another businessperson the same entrepreneur may be an ally, a supplier, a customer, or a creator of
wealth.

Entrepreneurship is the dynamic process of creating incremental wealth and stimulating the surrounding
environment

To include all types of entrepreneurial behavior, there is a need for an all-inclusive definition:
Entrepreneurship is the process of creating something new with value by devoting the necessary time
and effort assuming the accompanying financial, psychic, and social risks and uncertainties; and
receiving the resulting rewards of monetary and personal satisfaction.

Corporate Entrepreneurship, which is sometimes referred to as intrapreneurship or corporate

venturing, is the process by which individuals inside organizations pursue opportunities independent of
the resources they currently control; this involves doing new things and pursuing new opportunities.

Public sector organizations are often large, hierarchical entities facing captive demand, enjoying
somewhat guaranteed sources and levels of financing, and having some distance from the influences of
voters, stake-holders and political institution.

Public sector entrepreneurship is an individual or group of individuals undertaking activities to initiate

change by adapting, innovating and assuming risk, and recognizing that personal goals and objectives
are less important than generating results for the organization.

Social entrepreneurship can be more narrowly defined as the application of business expertise and
market skills in the for-profit, nonprofit, or public sector when these organizations develop more
innovative approaches in business activities. Common across all definitions of social entrepreneurship is
that its core objective is to create social value rather than personal and stakeholder wealth

Entrepreneur Versus Manager

There is some confusion about the nature of an entrepreneur versus a manager. Although the
entrepreneur is different from the traditional manager, entrepreneurship represents a mode of
management. Management involves achieving the objectives of an organization while reducing
variability to increase stable processes. It involves accomplishing work through people. To manage
effectively means to forecast, plan, organize, coordinate, communicate, lead, facilitate, motivate, and
control. Management is the transformation of inputs into outputs through conceptual, human, and
technical skills. Managers are required to efficiently and effectively utilize resources to achieve optimum
results in line with organizational goals and objectives. An entrepreneur is future orientated, seeking
opportunities and identifying innovations to fill these opportunities. An entrepreneur has a preference
for creative activity, manifested by some innovative combination of resources, for achieving financial,
economic, or social wealth. Entrepreneurs are creative in obtaining resources, overcoming obstacles,
and implementing ideas. While there is considerable overlap between managers and entrepreneurs, the
concepts are not the same; entrepreneurs can be managers and managers can be entrepreneurs by
consciously.

The entrepreneurial process, however, involves more than just problem solving.

The entrepreneurial process has four distinct phases:

(1) identification and evaluation of the opportunity,

(2) development of the business plan,

(3) determination and evaluation of resource requirements, and (

4) implementation and management of the resulting enterprise.

Entrepreneurial Business Planning 2

Introduction

Effective entrepreneurial management requires each entrepreneur to take the time to plan the future
activities of their business. There can be many forms of planning in both the short and long term and
provides a road map for implementing the 18 2 Entrepreneurial Business Planning strategy for the
success of the venture. Strategy involves developing a plan for creating and operating a new and/or
growing enterprise profitably through the obtainment and development of external and internal
resources being able to align with the environment. A key aspect of developing a strategy at each level
(the enterprise level, the corporate level, the business level, the functional level, and the sub-functional
level) is establishing goals and objectives. Goals need to be challenging and yet obtainable with effort.
They need to be measurable so that the results can be evaluated and performance appraised. In order
to accomplish the goals established and implement the strategy, a business plan is often created as it is
an effective tool for providing the direction to the entrepreneur.

Writing the Business Plan

Creating and building a successful enterprise requires effective planning (Trusts & Estates, 2013).
Although indeed the process of developing the necessary strategies is important, the process and the
discipline required in putting this in writing makes the thinking process more effective giving the venture
a better opportunity for success

Purpose of the Plan

• Obtain Finances
• Determine Resources Needed

• Establish Direction for Firm

• Evaluate Results of Firms –

• Obtain a Joint Venture Partner

Benefits of a Business Plan

Determining the amount and timing of resources needed.

Establishing the direction of the firm

Guiding and evaluating.

Elements of a Business plan

Section 1 contains the title (cover) page, table of contents, and executive summary. The title (cover)
page is an important part of every business plan because it has:

• The company name, address, telephone, fax, e-mail address, and website

• Name and position of each identified member of the management team

Section 2

Description of the Business In this section, the nature of the venture is described to provide an
understanding on the operation of the venture and its delivering the products/services to solve the
problem identified. Information on the products/services should be in enough detail to be easily
understood;

Description of Industry This section discusses the type and size of the industry, the industry trends for
the last 3–5 years, future outlook and growth rate, and a thorough analysis of competition presently
fulfilling the same need that the new idea fills

The technology plan describes the state of the technology presently available and how the new
technology revolutionizes the way things are done

Marketing Plan

the market segment and target market for the product/service (Lavinsky, 2013). It defines, usually
through using one or more segmentation techniques, the most appropriate market and its size.

Elements of the marketing plan

• Product/Services

– Quality – Assortment

– Guarantee – Servicing (if needed)

– Package

• Price
– Price/consumer reactions relationships

– Price/cost relationships

– Price/competitive reactions relationships

• Distribution mix Distribution channels:

• Retailers

• Wholesalers

• Representative

Physical Distribution:

• Storage

• Inventory

• Transportation

• Promotion

– Advertising

– Personal selling

– Publicity

– Sales promotion

– Social media

FINACIAL PLAN

The financial information contained in the financial plan consists primarily of these 12 financial
statements.

Financial statements in the business plan

• Sources and Uses of Funds Statement

– Pro forma income statement—5-year summary

– Pro forma income statement—first year by month

– Pro forma income statement—second year by quarter

– Pro forma income statement—third year by quarter

– Pro forma cash flow statement—5-year summary

– Pro forma cash flow statement—first year by month

– Pro forma cash flow statement—second year by quarter

– Pro forma cash flow statement—third year by quarter

– Pro forma balance sheet—year 1

Pro forma balance sheet—year 2

– Pro forma balance sheet—year3

Production (Outsourcing) Plan

Each individual cost needs to be specified to provide an understanding of the actual costs involved in the
final offering and how much this can be reduced through economies of scale.

Organizational Plan

The organizational plan discusses primarily two aspects of the venture: the form of ownership and lines
of authority and responsibility.

Individual legal entities:

• Proprietorship

• Partnership Organization legal entities:

• LLC

• SC

• C-Corporation

• Professional Corporation

• Not-for-Profit Corporation

• Hybrid Corporation

Operational Plan

An important aspect discussed here is the exit strategy by which investors will get their equity and a
return on equity hopefully in a 5–7 year period of time from the initial investment. Summary

Section 2 concludes with a brief summary that completes this section of the business plan

Section 3 contains all the backup material to support areas in Section 2. This includes secondary support
data, any research data, contracts or leases, the patent document, and most notably the resumes of the
entrepreneur and any known members of the management team. Nothing new should be introduced in
this section

Creativity, Innovation and Entrepreneurial

Manager 3
 Creativity is a core building block of innovation.
 Creativity encompasses the process leading to the generation of new, and sometimes valuable
ideas. Without creativity, there would be no innovation, as creativity is the foundation on which
innovation emerges, develops and grows.
 Creativity is about developing ideas, processes, or concepts, while innovation is the practical
application of these.
 Creativity can lead to commercialized innovation, but to be successful, the creativity and
innovation
 Creativity, Innovation and Entrepreneurial Manager must create new value for customers and
generate return. Twitter, launched in March 2006, as an online social networking and
microblogging service that allows users to send and read tweets. This innovative service has
gained popularity in a large market with over 700 million users
different types of creativity include:
• Creativity that develops new ideas, processes, or concepts
• Creativity that modifies existing ideas, processes, or concepts. See these examples:
– Creates a new, improved version that is more efficient and effective
– Adds additional features and functions
– Performs in a different setting –
Targets a new audience
• Creativity that combines things that were previously unrelated
Three key aspects of organizational creativity
Knowledge of the course of action is required for opportunity identification, problem solving,
and decision making.
Drive refers to the passion, desire, and motivation to do something new and novel with the
confidence to proceed as a first mover.
Ability refers to the ways in which an individual seeks to identify a solution to a problem by
adopting diverse and creative techniques in order to accurately assess and evaluate the
situation and identify the best, viable course of action.
The five components that are the essential aspects of the creative process:
Preparation is the background, experience, and knowledge that an individual brings to the
opportunity recognition process.
incubation is the stage where an individual considers an idea or thinks about a problem. Time
and space are reflected in the solution or considerations that may not be immediately
forthcoming.
illumination stage involves coming up with an outline of an answer to the question or problem.
Validation The individual selects the best choice with a calculated level of risk and uncertainty.
The ultimate success of the chosen alternative depends on whether it can be translated into
action.
Implementation This is the transformation of the creative idea into reality
TRENDS
A trend often provides a great opportunity for starting a new venture particularly when the
entrepreneur can be at the start of a trend that will last a considerable period of time.

Wearable Trend As the cost and size of microprocessors continues to shrink, the
ability of computers to monitor and record activity and display relevant information
is now a reality.
Green sector continues to provide of wealth of inspiration for entrepreneurs around the world.
Payments Trend Money, and the way we manage and exchange it, continues to be an industry
undergoing a massive transformation.
Maker Trend dedicated to independent inventors,
Mobile Trend-continues to revolutionize the way we consumer content, make purchases and
interact with each other.
Health Trend Health maintenance and concerns about health care provisions together are one
of the biggest trends today
The Internet of Things Trend-everything we interact with to be connected to the Internet
Methods of Generating Ideas
coming up with an idea to serve as the basis for a new venture can still pose a problem,
particularly since the idea is the basis for the business.
METHOD OF GENERATING IDEAS
Focus Groups-, a moderator leads a group of people through an open, in-depth discussion rather
than simply asking questions to solicit participant response.
Brainstorming-stimulates people to be creative by meeting with others and participating in
organized group experience
Four rules need to be followed:
• No criticism is allowed by anyone in the group—no negative comments.
• Freewheeling is encouraged—the wilder the idea, the better.
• Quantity of ideas is desired—the greater the number of ideas, the greater the
likelihood of the emergence of useful ideas.
• Combinations and improvements of ideas are encouraged; ideas of others can be
used to produce still another new idea.
Brainwriting is a form of written brainstorming
Problem Inventory analysis uses individuals in a manner analogous to focus groups
to generate new product ideas
Reverse Brainstorming is similar to brainstorming, except that criticism is allowed.
Method Gordon, unlike many other creative problem-solving techniques, begins with group
members not knowing the exact nature of the problem.
checklist method, a new idea is developed through a list of related issues or suggestions
free association. This technique is helpful in developing an entirely new slant to a problem.
Forced relationships, as the name implies, is the process of forcing relationships
among some product combinations.