UNIT – I

Entrepreneurship

“Entrepreneurship is the act of being an entrepreneur, which can be defined as “one who
undertakes innovations, finance and business acumen in an effort to transform innovations into
economic goods.”

Entrepreneurship can create new organizations or develop a strategy to revitalize mature

organizations in response to a perceived opportunity.

The most obvious form of entrepreneurship is that of starting a new business also called As
“startup Company”. More recently, the term has evolved to include other types of
entrepreneurship such as:

• Social entrepreneurship that applies the “entrepreneurial principles to organize,

create and manage a venture to achieve social change” and
• Political entrepreneurship or “starting a new political project, group, or political
party.”

No society can exist without entrepreneurship. Every society depends on entrepreneurs.

Definition of 'Entrepreneur'

An individual who, rather than working as an employee, runs a small business and assumes all
the risk and reward of a given business venture, idea, or good or service offered for sale. The
entrepreneur is commonly seen as a business leader and innovator of new ideas and business
processes.

Who is an entrepreneur? What characteristics define an entrepreneur?

Dan Sullivan Says that:

“An entrepreneur is someone who does not expect compensation until he has created value for
someone else.”

Jean-Baptist Say, Says that:

“Entrepreneur is someone who takes resources from a lower level of productivity and raise them
to a higher level.”

What are the major obstacles in starting a company and becoming entrepreneur?

The life cycle of any business has four stages:

 1. Starting a business
2. Staying in business
3. Growing a business
4. Exiting a business

And at every stage, companies and entrepreneurs face numerous obstacles. Each stage has
different challenges. For example, a player who is new to a sport will have different challenges a
player with 10 years of experience.

In the startup stage, a company might be dealing with issue like funding, pricing a product, or
strategies for service delivery. In the growing stage, the business look for new entry points or
acquire a competitor to gain a bigger market share.

Whatever the obstacles are in the life of an entrepreneur and a company, it is important to
identify them. The last thing anyone wants is to fight an unseen enemy.

The next step is to create a plan of action to overcome each of the obstacles. The most important
step is execution.

The rule of thumb is: Prioritize all of the challenges ahead of time. Plan to attack each one
starting from the most important to the least important.

Personal and business obstacles are also part of the game. Just like wind or rain are part
of a football game, obstacles are part of our lives. Entrepreneurs must accept this as a fact and
learn how to overcome whatever life presents.
Characteristics of an Entrepreneur:
The characteristics of entrepreneurs are numerous? a successful entrepreneur possesses a
combination of traits that show both innovation and leadership qualities. Scholars from around
the world have worked tirelessly to discover just what characteristics make a good entrepreneur;
what exactly makes up a business founder's x-factor? While a lot of the findings are still pretty
much open to debate, there's no questioning that great entrepreneurs have the following traits:

Ambition

A good entrepreneur is driven to make something of himself. He knows what he wants,

and he sets a course to get it. His motivation to achieve something can sometimes be
overwhelming, and the urge to establish himself can be quite consuming. An entrepreneur's
ambition is often the key ingredient that gets him off of his chair and puts him into action,
turning his daydreams into reality.

Enthusiasm

Often coming hand-in-hand with ambition, enthusiasm plays a great role in the
entrepreneur's motivation. While ambition may be the key to the entrepreneur's ignition,
enthusiasm is the gas. Every successful entrepreneur has a positive outlook giving him the
energy to pursue his endeavors. Without enthusiasm, an entrepreneurial project will slowly
wither into inactivity and failure.

Creativity

When problems do arise, you can count on creativity to bail you out. Creativity is
probably what led you to envision your company in the first place, and it'll be creativity that will
help you realize the possible solutions to any hitches that might come your way. Successful
entrepreneurs find inspiration throughout the entire process, and often discover ways to turn
roadblocks into opportunities.

Decision-making

Entrepreneurs call all the necessary shots. While their creativity makes them men of
ideas, it's their ability to make decisions that will make them men of action. The decisions that
entrepreneurs make will determine the fate of the company, and it's only through decision-
making that things will actually happen. An entrepreneur with poor decision-making skills will
have his company caught in a state of inactivity and degradation; good decision-making skills,
on the other hand, will ensure that the best possible measures in putting up the business will be
enforced.

Perseverance

Perhaps the most important of all the characteristics of entrepreneurs is the ability to
withstand the troubles that come with starting a business. Beginning a new enterprise is an
immensely difficult task, and as an entrepreneur, you'll have to stick through the storms and
stress if you want your venture to be a success. It sometimes takes years for a good idea to start
making you money, but when it does, you'll be glad you stood strong in the face of adversity.

Entrepreneurial traits
1. Passionate
Strong and barely controllable emotion
You need to be driven by a clear sense of purpose and passion. Typically, that passion comes
from one of two sources: the topic of the business, or the game of business-building itself.
Why do you need passion? Simply because you’re likely to be working too hard, for too long, for
too little pay with no guarantee that it’ll work out… so you need to be motivated by something
intrinsic and not money-related.
2. Resilient
If you’re going to build a startup, you’ll need a spirit of determination coupled with a
high pain tolerance. You’ll need to be willing and able to learn from your mistakes – to get
knocked down repeatedly, get up, dust yourself off, and move forward with renewed motivation.
People will constantly tell you your baby’s ugly, that your business won’t work. Now,
you should listen carefully and be open to constructive criticism. But after a while, having the
door slammed in your face repeatedly can be withering, and the best entrepreneurs learn to feed
off the negativity and actually gain strength from it.
3. Self-Possessed
You need a strong sense of self. You can’t be threatened by being surrounded by talented,
driven people. To truly succeed, you’ll need the self-confidence to surround yourself with people
“who don’t look like you”… that is, people with skills, background and domain knowledge that
complement your own. And check your ego at the door: you shouldn’t be too proud to make
coffee for the team, empty the waste baskets, or do the bank runs.
4. Decisive
You’ll need to develop a comfort-level with uncertainly and ambiguity. Entrepreneurs
gather as much information as they can in a short period of time, and then MOVE, MOVE,
MOVE!! The attitude is that it’s not going to be perfect… We only have 9% or so of the data
from which to base our decision… but if we wait to have all the information, we’ll never get
moving… and be mired in indecision. (Big organizations are really good at this – the mired thing
– saying, We don’t have enough information, so let’s continue to study… form a committee or a
task force)
5. Fearless
On the sliding scale from “risk-averse” to “risk-seeking,” it shouldn't surprise
anyone that entrepreneurs tend to be closer to the latter. But you don’t need to be a nut-
 case, the sort who bungee-jumps without a helmet. Smart entrepreneurs develop an
intuitive ability to sniff out and mitigate startup business risk. But you know you’re going
to fall down, and feel comfortable with that fact and that you’re going to learn from your
failures and adjust as you go.
6. Financially Prepared
You’ll need the right personal financial profile to make the leap. This doesn’t mean that
only the rich can be entrepreneurs. But unless and until you’ve got the personal financial
‘runway’ (ability to go without a steady paycheck and subsidized benefits) of at least 18 to 24
months (ideally longer), you might hold off on quitting your day job.
Consider launching the startup as a side-business if that’s possible, while continuing to
work the 8-to-5 shift to cover the bills. Or approach your boss about going part-time. Then, once
your business generating cash flow, you can dial back on your hours, or submit your resignation
and go full-time with your startup.
7. Flexible
I challenge you to find an entrepreneur running a startup four or more years old where
that business doesn’t differ dramatically from the vision sketched out in their original business
plan. The point is that the folks who stay on their feet are the ones who stay flexible and adjust to
new information and changing circumstances.
8. Zoom Lens-Equipped
You may not start out with a fool-proof gyroscope, but to survive as an entrepreneur,
you’ll need that strong sense of perspective. How to maintain simple, clear focus. How to be at
peace with, and learn from, a failure. Understanding that not all battles are worth winning, and
when to walk away. Knowing that most in your startup aren’t as entrepreneurial as you – that this
may be a very cool job for them, but it’s still a job. Knowing when to go home and give your
loved ones a hug. When to go for a run.
Can you ‘pan out’ to see a compelling big vision for your business, then ‘zoom in’ and
focus on near-term startup goals? Successful entrepreneurs can facilely move back and forth
between these two views. They’re able to articulate the big picture, while simultaneously
managing and executing to the ‘zoom-in’ picture.
9. Able to Sell
Whether you’re a born extrovert or introvert, as a founder/CEO, you’ll find yourself
always selling. You’ll be selling your vision to prospective partners and funding sources. You’ll
be selling prospective recruits on why they should quit their day jobs and join this startup they’ve
never heard of. You’ll be selling your products and services (yes, you’ll probably be personally
closing at least the first few sales). You’ll be selling your employees on why they should remain
calm and stay with the ship when the seas inevitably get rough.
10. Balanced
You may not start out with a fool-proof gyroscope, but to survive as an entrepreneur,
you’ll need that strong sense of perspective. How to maintain simple, clear focus. How to be at
peace with, and learn from, a failure. Understanding that not all battles are worth winning, and
when to walk away. Knowing that most in your startup aren’t as entrepreneurial as you – that this
may be a very cool job for them, but it’s still a job. Knowing when to go home and give your
loved ones a hug. When to go for a run.
Entrepreneur vs. manager:
The terms Entrepreneur and Manager are considered one and the same. But the two terms have
different meanings.
The following are some of the differences between a manager and an entrepreneur.

· The main reason for an entrepreneur to start a business enterprise is because he comprehends
the venture for his individual satisfaction and has personal stake in it where as a manager
provides his services in an enterprise established by someone.

· An entrepreneur and a manager differ in their standing, an entrepreneur is the owner of the
organization and he bears all the risk and uncertainties involved in running an organization
where as a manager is an employee and does not accept any risk.

· An entrepreneur and a manager differ in their objectives. Entrepreneur’s objective is to innovate

and create and he acts as a change agent where as a manager’s objective is to supervise and
create routines. He implements the entrepreneur’s plans and ideas.

· An entrepreneur is faced with more income uncertainties as his income is contingent on the
performance of the firm where as a manager’s compensation is less dependent on the
performance of the organization.

Intrapreneur vs. Entrepreneurs

Meaning of Intrapreneur:

“A person within a large corporation who takes direct responsibility for turning an idea into a
profitable finished product through assertive risk-taking and innovation”

• Entrepreneurs provide the spark. Intrapreneur keep the flame going.

• Entrepreneurs are found anywhere their vision takes them. Intrapreneur work within the
confines of an organization.
• Entrepreneurs face many hurdles, and are sometimes ridiculed and riddled with setbacks.
Intrapreneurs may sometimes have to deal with conflict within the organization.
 • Entrepreneurs may find it difficult to get resources. Intrapreneurs have their resources
readily available to them.
• Entrepreneurs may lose everything when they fail. Intrapreneurs still have a paycheck to
look forward to (at least for now) if they fail.
• Entrepreneurs know the business on a macro scale. Intrapreneurs are highly skilled and
specialized.

Entrepreneurial Decision Process:

• Entrepreneurial Decision Process is about deciding to become an entrepreneur by

leaving present activity i.e. a movement from the present lifestyle to forming a new
enterprise. The decision to start a new company occurs when an individual perceives
that forming a new enterprise is both desirable and possible.

The decision to become an entrepreneur to start a new business consist of several

sequential steps-

1. The decision to leave a present career or lifestyle (Pushing and pulling influences
active in the decision to leave a present career or lifestyle
2.The decision about desirability of new venture formation i.e. the aspects of a situation
that make it desirable to start a new venture and this relates to culture, subculture,
family, teachers and peers.
3. The decision about possibility of new venture formation i.e. factors making it possible
to create a new venture like government, background, marketing, financial, role models.

Desirability of New Venture Formation :- (Aspects of a situation that make it

desirable to start a new company)

1. The perception that starting a new company is desirable results from an individual’s
culture, subculture, family, teachers and peers.

On the other hand in some countries making money is not as valued and failure may be a
disgrace. The rate of business formation in these countries is not as high.

2. Many subcultures that shape value systems operate within a cultural framework.
These subcultures support and even promote entrepreneurship.

3. Studies indicate that a high percentage of founders of companies had fathers and/or
mothers who valued independence.

4. Encouragement to form a company is also gained from teachers, who can

significantly influence individuals.

5. An area having a strong educational base is also a requirement for entrepreneurial

activity.
 6. Peers are important, also, as is an area with an entrepreneurial pool and peer-meeting
place.

Possibility of New Venture Formation : - (Factors making it possible to create a new

venture)

Although the desire of new venture formation derived from the individual’s culture,
subculture, family, teachers and peers needs to be present before any action is taken, the
second feature necessary centers around this question “What makes it possible to form a
new company?”
o He government contributes by providing the infrastructure to help a new venture.
o The India has the necessary roads, communication and transportation systems,
utilities, and Economic stability

Formal education and previous business experience give a potential entrepreneur the
skills needed to form and manage a new enterprise.

Although educational systems are important in providing the needed business
knowledge, individual will tend to be more successful in forming in fields in which they
have worked.

The market must be large enough and the entrepreneur must have the marketing know-
how to put together the entire package.

The entrepreneur must have the marketing know-how to put together the entire
package.

A role model can powerfully influence the perception of venture possibility.

Finally, financial resources must be readily available.
o Although most start-up money comes from personal savings, credit, and friends,
but there is often a need for additional capital.

Risk-capital availability plays an essential role in the development and growth of
entrepreneurial activity.

Role of Entrepreneurship in economic development

The entrepreneur who is a business leader looks for ideas and puts them into
effect in fostering economic growth and development. Entrepreneurship is one of the
most important input in the economic development of a country. The entrepreneur acts as
a trigger head to give spark to economic activities by his entrepreneurial decisions. He
plays a pivotal role not only in the development of industrial sector of a country but also
in the development of farm and service sector. The major roles played by an entrepreneur
in the economic development of an economy are discussed in a systematic and orderly
manner as follows.

(1) Promotes Capital Formation:

Entrepreneurs promote capital formation by mobilizing the idle savings of public.

They employ their own as well as borrowed resources for setting up their enterprises.
Such types of entrepreneurial activities lead to value addition and creation of wealth,
which is very essential for the industrial and economic development of the country.

(2) Creates Large-Scale Employment Opportunities:

Entrepreneurs provide immediate large-scale employment to the unemployed

which is a chronic problem of underdeveloped nations. With the setting up.of more and
more units by entrepreneurs, both on small and large-scale numerous job opportunities
are created for others. As time passes, these enterprises grow, providing direct and
indirect employment opportunities to many more. In this way, entrepreneurs play an
effective role in reducing the problem of unemployment in the country which in turn
clears the path towards economic development of the nation.

(3) Promotes Balanced Regional Development:

Entrepreneurs help to remove regional disparities through setting up of industries

in less developed and backward areas. The growth of industries and business in these
areas lead to a large number of public benefits like road transport, health, education,
entertainment, etc. Setting up of more industries lead to more development of backward
regions and thereby promotes balanced regional development.

(4) Reduces Concentration of Economic Power:

Economic power is the natural outcome of industrial and business activity.

Industrial developments normally lead to concentration of economic power in the hands
of a few individuals which results in the growth of monopolies. In order to redress this
problem a large number of entrepreneurs need to be developed, which will help reduce
the concentration of economic power amongst the population.

(5) Wealth Creation and Distribution:

It stimulates equitable redistribution of wealth and income in the interest of the

country to more people and geographic areas, thus giving benefit to larger sections of the
society. Entrepreneurial activities also generate more activities and give a multiplier
effect in the economy.

(6) Increasing Gross National Product and Per Capita Income:

Entrepreneurs are always on the look out for opportunities. They explore and
exploit opportunities,, encourage effective resource mobilization of capital and skill,
bring in new products and services and develops markets for growth of the economy. In
this way, they help increasing gross national product as well as per capita income of the
people in a country. Increase in gross national product and per capita income of the
people in a country, is a sign of economic growth.
ETHICS AND SOCIAL RESPONSIBILITY OF ENTREPRENEUR:
A. The entrepreneur must establish a balance between ethical exigencies, economic expediency,
and social responsibility.
i. A manager’s attitudes concerning corporate responsibility tend to be supportive of laws
and professional codes of ethics.
ii. Entrepreneurs have few reference persons, role models, and developed internal ethics
codes.
iii. Entrepreneurs are particularly sensitive to peer pressure and social norms in the
community as well as pressures from their competitors.
iv. Internationally, U.S. managers have more individualistic and less communitarian values
than managers in European countries.
B. While ethics refers to the “study of whatever is right and good for humans,” business ethics
concerns itself with the investigation of business practices in light of human values.
i. “Business ethics” has emerged as an important topic.
ii. The word “ethics” stems from the Greek êthos, meaning custom and usage.
C. Development of Our Ethical Concepts.

i. Socrates, Plato, and Aristotle provide the earliest writings dealing with ethical
conceptions; earlier writings involving moral codes can be found in both Judaism and
Hinduism.
ii. American attitudes on ethics result from three principle influences:
a. Judeo-Christian heritage.
b. Belief in individualism.
c. Opportunities based on ability rather than social status.
D. Research on business ethics can be broken down into four broad classifications:
a. Pedagogically-oriented inquiry.
b. Theory-building without empirical testing.
c. Empirical research, measuring the attitudes and ethical beliefs of students and
academic faculty.
d. Empirical research within business environments.

Opportunities for entrepreneurs in India and abroad

There is certainly no formula to become a successful entrepreneur. Some may succeed
and make good profits, others sink along the way. Which are the most lucrative sectors for
entrepreneurs? Here's a list of 20 good opportunities entrepreneurs can look at...

1. Tourism

Tourism is a booming industry in India. With the number of domestic and international
tourists rising every year, this is one hot sector entrepreneurs must focus on. India with its
diverse culture and rich heritage has a lot to offer to foreign tourists. Beaches, hill stations,
heritage sites, wildlife and rural life, India has everything tourists are looking for.
 But this sector is not well organized. India lacks trained professionals in the tourism and
hospitality sectors. Any business in this sector will thrive in the long run as the demand contuse
to grow every year. Foreign tourist arrivals during January-March were 15.63 lakh with a growth
rate of 12.8 percent, compared to 13.86 lakh during the first three months last year.

2. Automobile

India is now a hot spot for automobiles and auto-components. A cost-effective hub for
auto components sourcing for global auto makers, the automotive sector is potential sector for
entrepreneurs. The automobile industry recorded a 26 per cent growth in domestic sales in 2009-
10.

The strong sales have made India the second fastest growing market after China. India
being one of the world's largest manufacturers of small cars with a strong engineering base and
expertise, there are many segments that entrepreneurs can focus on in India's automobile and
auto components sector.

3. Textiles

India is famous for its textiles. Each state has its unique style in terms of apparels. India
can grow as a preferred location for manufacturing textiles taking into account the huge demand
for garments. Places like Tripura and Ludhiana are now export hubs for textiles. A better
understanding of the markets and customers' needs can boost growth in this sector.

4. Social ventures
Many entrepreneurs are taking up social entrepreneurship. Helping the less privileged get
into employment and make a viable business is quite a challenge. There are many who have
succeeded in setting up social ventures. With a growing young population in rural areas who
have the drive and enthusiasm to work, entrepreneurs can focus on this segment.

5. Software

India's software and services exports are likely to rise with export revenue growth projected at 13
to 15 percent to hit about $57 billion by March 2011.

With one of the largest pool of software engineers, Indian entrepreneurs can set higher targets in
hardware and software development.

The information technology enabled services have contributed substantially to the economy.
With more companies outsourcing contracts to India, business to business solutions and services
would be required. Entrepreneurs can cash in on the rise in demand for these services with
innovative and cost effective solutions.
6. Engineering goods
India continues to be one of the fastest growing exporters of engineering goods, growing
at a rate of 30.1 per cent. The government has set a target of $110 billion by 2014 for total
engineering exports. Entrepreneurs must capitalize on the booming demand for products from
the engineering industry.

Woman as Entrepreneur

“Entrepreneurship is the act of being an entrepreneur, which can be defined as “one who
undertakes innovations, finance and business acumen in an effort to transform innovations into
economic goods.”

Entrepreneurship can create new organizations or develop a strategy to revitalize mature

organizations in response to a perceived opportunity.

The most obvious form of entrepreneurship is that of starting a new business also called As
“startup Company”. More recently, the term has evolved to include other types of
entrepreneurship such as:

• Social entrepreneurship that applies the “entrepreneurial principles to organize,

create and manage a venture to achieve social change” and
• Political entrepreneurship or “starting a new political project, group, or political
party.”

No society can exist without entrepreneurship. Every society depends on entrepreneurs.

CREATING AND STARTING THE VENTURE

LEARNING OBJECTIVES

1. To identify information needs and sources for business planning.

2. To enhance awareness of the ability of the Internet as an information resource and
marketing tool
3. To present helpful questions for the entrepreneur at each stage of the planning process.
4. To understand how to monitor the business Plan

INFORMATION NEEDS

Before preparing a business plan, the entrepreneur should do a quick feasibility study to see if
there are possible barriers to success. The entrepreneur should clearly define the venture’s goals,
which provide a framework for the business plan. The business plan must reflect reasonable
goals.
Market Information

It is important to know the market potential for the product or service. The first step is to
 define the market. A well-defined target market makes it easier to project market size and market
goals. To assess the total market potential, the entrepreneur can use trade associations,
government reports, and published studies.

Operations Information Needs

The entrepreneur may need information on:

Location
Manufacturing operations
Raw materials
Equipment
Labor skills
Space
Overhead

LEARNING OBJECTIVES

A. To define what the business plan is who prepares it, who reads it, and how it
is evaluated.
B. To understand the scope and value of the business plan to investors, lenders,
employees, suppliers, and customers.

PLANNING AS PART OF THE BUSINESS OPERATION

Planning is a process that never ends. In the early stages, the entrepreneur should
prepare a preliminary plan. The plan will be finalized as the enterprise develops. Many
different types of plans may be part of any business operation-financial, marketing,
production, and sales plans. Plans may be short term or long term, or they may be strategic or
operational. All of these plans have one purpose: to provide guidance and structure to
management in a rapidly changing market environment.

What Is the Business Plan?

A business plan is a written document prepared by the entrepreneur that describes all
the relevant external and internal elements involved in starting a new venture. It addresses
both short- and long-term decision making. The business plan is like a road map for the
business’ development. The Internet also provides outlines for business planning.
Entrepreneurs can also hire or offer equity to another person to provide expertise in preparing
the business plan. In developing the business plan the entrepreneur can determine how much
money will be needed from new and existing sources.

WHO SHOULD WRITE THE PLAN

The business plan should be prepared by the entrepreneur; however, he or she may
consult many sources. Lawyers, accountants, marketing consultants, and engineers are useful
supplemental sources. Other resources are the Small Business Administration, Service Core
of Retired Executives, Small Business Development Centers, universities, friends, and
relatives. To help determine whether to hire a consultant, the entrepreneur needs to make an
objective assessment of his or her own skills.
HOW DO POTENTIAL LENDERS AND INVESTORS EVALUATE THE PLAN

Because the business plan should address the needs of all the potential evaluators,
software packages and Internet samples should be used only to assist in preparation. As the
entrepreneur becomes aware of who will read the plan, changes will be necessary. Suppliers
may want to see a business plan before signing a contract to supply products or services.
Customers may also want to review the plan before buying the product. The business plan
should consider the needs of these constituencies. Potential suppliers of capital will vary in
their needs and requirements in the business plan. Lenders are primarily interested in the
ability of the new venture to pay back the debt and focus on the four C’s of credit:

The entrepreneur’s credit history or character.

Their ability to meet debt and interest payments (cash flow.)

The collateral or tangible assets being secured.

PRESENTING THE PLAN

It is often necessary for an entrepreneur to orally present the business plan to investors.
Typically the Entrepreneur provides a short (20-30 minutes) presentation of the business
plan. The entrepreneur must sell their business concept in a short time period. A venture
capitalist or angel group may also ask the entrepreneur to present the plan to their partners
before making a final decision.
Sources of New Ideas
There are mainly 5 Ways for Sources of New Ideas:

 Consumers

 Existing Companies

 Distribution Channels

 Government

 Research & Development.

1. Consumers– the potential consumer should be the final focal point of ideas for the
entrepreneurs. The attention to inputs from potential consumers can take the form of
informally monitoring potential ideas or needs or formally arranging for consumers to
have an opportunity to express their concerns. Care needs to be taken to ensure that the
new idea or the needs represents a large enough market to support a new venture.

2. Existing Companies– with the help of an established formal methods potential

entrepreneurs and intrapreneurs can evaluate competitive products & services on the
market which may result in new and more market appealing products and services.

3. Distribution channels– members of the distribution channels are familiar with the
needs of the market and hence can prove to be excellent sources of new ideas. Not only
do the channel members help in finding out unmet or partially met demands leading to
new products and services, they also help in marketing the offerings so developed.
 4. Government– it can be a source of new product ideas in two ways firstly, the patent
office files contain numerous product possibilities that can assist entrepreneurs in
obtaining specific product information, and secondly, response to government regulations
can come in the form of new product ideas.

5. Research & development– Entrepreneur’s own R&D is the largest source of new
idea. A formal and well-equipped research and development department enables the
entrepreneur to conceive and develop successful new product ideas.

Methods of generating new ideas for entrepreneurs

The following are some of the key methods to help generate end test new ideas:

1. Focus Groups – these are the groups of individuals providing information in a structural
format. A moderator leads a group of people through an open, in-depth discussion rather than
simply asking questions to solicit participant response. Such groups form comments in open-end
in-depth discussions for a new product area that can result in market success. In addition to
generating new ideas, the focus group is an excellent source for initially screening ideas and
concept.

2. Brainstorming – it is a group method for obtaining new ideas and solutions. It is based on the
fact that people can be stimulated to greater creativity by meeting with others and participating in
organized group experiences. The characteristics of this method are keeping criticism away;
freewheeling of idea, high quantity of ideas, combinations and improvements of ideas. Such type
of session should be fun with no scope for domination and inhibition. Brainstorming has a
greater probability of success when the effort focuses on specific product or market area.

3. Problem inventory analysis– it is a method for obtaining new ideas and solutions by focusing
on problems. This analysis uses individuals in a manner that is analogous to focus groups to
generate new product areas. However, instead of generating new ideas, the consumers are
provided with list of problems and then asked to have discussion over it and it ultimately results
in an entirely new product idea.

Creative Problem Solving

Creative Problem Solving is a way of thinking and behaving. The following definitions allow
for a common understanding of some terms that are used as the foundation for this workbook.

Therefore, CREATIVE PROBLEM SOLVING or CPS is a process, method, or system

for approaching a problem in an imaginative way and resulting in effective action.
The Creative Problem Solving process presented in this workbook is known as the Osborn-
 Parnes problem-solving model. This particular model uses the following steps:
1. Mess finding an effort to identify a situation that presents a challenge.

2. Data finding an effort to identify all known facts related to the situation; to
seek and identify information that is not known but essential to
the situation is identified and sought.

3. Problem Finding an effort to identify all the possible problem statements and
then to isolate the most important or underlying problem.

4. Idea finding an effort to identify as many solutions to the problem

statement as possible.

5. Solution finding using a list of selected criteria to choose the best solution(s)
for action.
6. Acceptance making every effort to gain acceptance for the solution, determine
Finding a plan of action, and implement the solution.

Although CPS can be applied individually, problems are often most effectively solved in a team,
where brainstorming allows for more ideas to be generated. Thinking of many ideas is critical to
effective problem solving using the Osborn-Parnes model.
 Whole Brain Approach to Problem Solving
Situation and/or Objective

Da
ta
Findi
ng

Divergent
Thinking

Proble
m
Findi
ng

Id
ea
Findi
ng

Soluti
on
Findi
ng

Convergent
Thinking

Acceptan
ce
Findi
ng

Plan of Action Follow Through

 Mess Finding
State the Situation:

The first step in taking action is to identify a situation which presents a challenge… an
opportunity… or is a concern that you want to do something about or is an objective you
desire to attain.

When you recognize a messy situation, it is helpful to write a brief abstract that captures
the essence of what is happening right now--or what is not occurring that should be.

Write your concerns, thoughts, and the changes you would like to see in your situation.
LET YOUR THOUGHTS FLOW. Describe the situation in a three sentence overview.

Data Finding
List all the key facts associated with your situation or your desired objective as
you perceive them. Ask yourself:
Who is involved?
What is involved?
What are some examples of the problem?
What causes the problem?
When will it happen?
Where does it or will it happen?
How does it or will it happen?
Why does it happen?
Are there any more problems caused by the situation?

Problem Finding
Considering the data you have gathered about your situation during Fact Finding,
determine what you want to accomplish in more specific terms. Ask yourself the
following questions:
What is the real problem? What is my objective?
What do I want to accomplish? What are my concerns?
What is my challenge?
What wish would I like to fulfill?

This step involves DIVERGENT THINKING, so record as many different problem

statements as you can. Begin each statement with the phrase "In What Ways Might
we…" (IWWMW) or "How Might I…" (HMI...).
Idea Finding
Try to answer your problem statement with many ideas in as many different ways
as possible.

DIVERGENT THINKING, combined with deferred judgment, is critical in this step.

Your goal is to generate lots of ideas. It is often helpful to set a number goal before you
start listing ideas. Try for
50-75 ideas before you discuss each and become selective.

The essence of the deferred judgment principle is to allow a period of time for listing all
the ideas that come to mind without judging them. Quantity of ideas and complete
freedom of expression without any evaluation are key concepts. S-T-R-E-T-C-H your
mind to break old habits of thinking.

Feel free to combine or modify any ideas to produce additional ideas. Divergent behavior
must prevail.
Let your ideas flow freely without internal or external criticism. If time permits,
incubate--let the problem and ideas rest in your subconscious for a time--to generate
additional ideas.

Let your divergent process create ideas. Start listing them below--continue on additional
sheets of paper. RECORD ALL IDEAS.

Preliminary Judgment : Using your convergent skills, review all your ideas and circle
six to eight that seem to have the greatest potential.

Solution Finding
You must now decide what criteria, standards, or "Yardsticks" should be applied
to weigh the worth of your selected ideas. These criteria will be used to determine the
best solution(s) to your problem.

Your ideas affect cost, time, reliability, quality, morale, customers, legality, safety,
company practices and approvals, feasibility, timeliness, and ease of implementation.
Any or all of these, as well as others, can be considerations for criteria.

Let your DIVERGENT THINKING create a preliminary list of factors or criteria

that will be used to evaluate your ideas. Write the list below.
Selection of Criteria

Using your CONVERGENT THINKING, review your criteria listed above and
circles the five or six which you feel to be the most critical for evaluating your ideas.

Now, use a 10-point scale to weight your selected criteria (10 is high).

When you are satisfied with your criteria, record them on one axis of the decision
matrix on the following sheet. Then record your selected ideas on the other axis.

You are now ready to develop your plan of action. To ensure successful
implementation of your best idea(s), it is necessary to has little value until it is put to use

Acceptance Finding
You are now ready to develop your plan of action. To ensure successful
implementation of your best idea(s), it is necessary to has little value until it is put to use
gain maximum acceptance. Remember, an i.

Consider the following--How should you alter or modify your idea so it will be as
acceptable as possible to those it will affect and to those who will pass judgment on it?
Ask yourself the following questions along with others that are relevant.

Whom will my idea affect?

How might I gain their acceptance?
What resources are needed to implement my idea?
How might I best develop a return on investment?
What major obstacles will I confront?
How might I overcome any obstacles?
What might go wrong?
Why would something go wrong?
What can I do to prevent problems?
What opportunities might present themselves?
How might I best gain support for my idea?
How might I best present and sell my proposal?
What should I not do?

Product Planning and development Process:

New products are a vital part of a firm’s competitive growth strategy. Leaders of
successful firms know that it is not enough to develop new products on sporadic basis.
What a count is a climate of a products development that leads to one triumph after
another. It is Commonplace for major companies to have 50percent or more of their
current sales In Products introduced within the last 10 years.

Some Additional facts about new products are:

Many new products are failures. Estimates of new product failures range from
33%- 90%, depending on industry.

New product sales grow far more rapidly than sales of current products,
potentially providing a surprisingly large boost to a company’s growth rate;

Companies vary widely in the effectiveness of their new products programs;

A major obstacle to effectively predicting new product demand is limited vision;

Common elements appear in the management practices that generally distinguish
the Relative degree of efficiency and success between companies.

In one recent year, almost 22 000 products were introduced in supermarkets, drugstores,
Mass merchandisers and health food stores.
Idea generation
Idea screening
Project planning
Product development
Test marketing
Commercialization

Idea Generation
Every product starts as an idea. But all new product aides do not equal merit or
potential for economic or commercial success. Some estimates indicate that as many as
60-70 ideas are necessary to yield one successful product. To develop a new product the
following step must be realized:

Idea screening
The primary function of the idea screening process is twofold: first, to eliminate
ideas for New products that could not be profitably marketed by the firm, and second, to
expand Viable ideas into full product concepts. New product ideas may be eliminated
either because They are outside the fields of the firm’s interest or because the firm does
not have the Necessary resources or technology to produce the product at a profit.

These three risk categories are:

1. Strategic risk – strategic risk involves the risk of not matching the role or purpose of a
new product with a specific strategic need or issue of the organization;
2. Market risk – market risk is the risk that a new product won’t meet a market need; As
Products are being developed, customer requirements change and new technologies
Evolve;
3. Internal risk – internal risk is the risk that a new product won’t be developed within
The desired time and budget;

Project planning

This stage of the process involves several steps. It is here that the new product
proposal is evaluated further and responsibility for the project is assigned to a project
team. The proposal is analyzed in terms of production, marketing, financial and
competitive factors. A development budget is established and some preliminary
marketing and technical research is undertaken. Alternative product features and
component specifications are outlined. Finally, a project plan is written up, which
includes estimates of future development, production and marketing costs along with
capital requirements and manpower needs. Project proposal is given to top management
for a go or no-go decision.
Various alternatives exist for creating and managing the project team. A key
component contributing to the success of many companies’ product development efforts
relates to the emphasis placed on creating cross-functional teams early in the
development process. Frequently, marketing and sales personnel are called in to lead the
teams.

Product development
At this juncture, the product idea has been evaluated from the standpoint of
engineering, Manufacturing, finance and marketing. If it has met all expectation, it is
considered a Candidate for further research and testing. A development report to
management is prepared That spells out in fine detail:

1. Results of the studies;

2. Required plan design;
3. Production facilities design;
4. Tooling requirements;
5. Marketing test plan;
6. Financial program survey and
7. estimated release data.
Test Marketing

Up until mow the product has been a company secret. Now

management goes outside the Company and submits the product candidate
for customers approval. Test marketing is a Controlled experiment in a
limited geographic area to test the new product or in some cases Certain
aspects of the marketing strategy, such as packaging or advertising.
The main goal of a test market is to evaluate and adjust the general
marketing strategy to be used and the appropriate marketing mix.
Throughout the test market process, findings are being analyzed and
forecasts of volume developed. Upon completion of a successful test market
phase, the marketing plan can be finalized and the product prepared for
launch.

Commercialization

This is the launching step in which the firm commits to introducing

the product into the marketplace. During this stage, heavy emphasis is
placed on the organization structure and management talent needed to
implement the marketing strategy. Emphasis is also given to following up on
such things as bugs in the design, production costs, quality control, and
inventory requirements.

Importance of time

Over the course of the last five years, companies have placed an increasing
emphasis on shortening their products’ time to market. Time to market can be defined as
the elapsed time between product definition and product availability. It has been well
documented that companies that are first in bringing their products to market enjoy a
competitive advantage both in terms of profits and market share.

Quality level

Consumers consider that the level of product quality when making purchase decisions is
both new and existing products. At minimum, buyers want product that will perform the
functions they are supposed to and do so reasonably well. Some customers are willing to
accept lower quality if product use is not demanding and the price is lower.
In designing new products, marketers must consider what criteria potential customer use
to
Determine their perceptions of quality. Eight general criteria are given below:

1. Performance – How well does the product do what it is supposed to do?

2. Features – Does the product have any unique features that are desirable?
3. Reliability – Is the product likely to function well and not break down over a
Reasonable time period
4. Conformance – Does the product conform to established standards for such things as
Safety?
5. Durability – How long will the product last before it will be worn out and have to be
Replaced?
6. Serviceability – How quickly and easily can any problems be corrected?
7. Overall evaluation – Considering everything about the product, including its physical
Characteristics, manufacturer, brand image, packaging and price, how good is this
Product?

Product design
Many well-designed products are easy to use as intended and pleasing to the
senses. Designing new products with both ease of use and aesthetic appeal can be
difficult, but it can clearly differentiate a new product from competitors. Good design can
add great value to a new product.

Product safety
Clearly, new products must have a reasonable level of safety. Safety is both an
ethical and practical issue. Ethically, customers should not be harmed by using a product
as intended.
The practical issue is that when users get harmed by a product, they may stop
buying, tell Others about their experience, or sue the company.

Causes of New Product Failure

Many new products with satisfactory potential have failed to make the grade. Here is a
brief list of some of the more important causes of new product failures after the products
have been carefully screened, developed and marketed:
1. No competitive point of difference, unexpected reactions from competitors;
2. Poor positioning;
3. Poor quality of product;
4. Non-delivery of promised benefits of product;
5. Too little marketing support;
6. Poor perceived price/quality value;
7. Faulty estimates of market potential and other marketing research mistake;
8. Faulty estimates of production and marketing costs;
9. Improper channels of distribution and marketing costs;
10. Rapid change in the market after the product was introduced.

Need for research

The keystone activity of any new product planning system is research – nut just
marketing research, but technical research as well. This need will be more clearly
understood if some of the specific questions commonly raised in evaluating product ideas
are examined:

1. What is the anticipated market demand over time? Are the potential applications for
the product restricted?
2. Can the item be patented? Are there any antitrust problems?
3. Can the product be sold through present channels and sales force?
4. At different volume levels, what will be the unit of manufacturing costs?
5. What is the most appropriate package to use in terms of color, material, design and so
Forth?
6. What is the estimated return on investment?
7. What is the appropriate pricing strategy?