Transcript MGT 6500 Entrepreneurial Challenge

MGT 6500
The Entrepreneurial Challenge
Mark T. Schenkel, Ph.D.
Assistant Professor in
Entrepreneurship
Getting Acquainted
Introductions
Your initial thoughts about the
course?
Your course goals & objectives?
Learning Objectives for Term
Understanding Opportunities
Entrepreneurial Process
Entrepreneurial Strategies
Entrepreneurial Finance
Business Planning
Ethics and values
Growth Strategy & Management
Entrepreneurship in Larger
Organizations
Contact Information
Office: BMH 436
Office Phone: 460-5474
e-mail:
[email protected]
Course Requirements
Attendance
– Required: see syllabus for details
Contribution
– Critical to meeting learning objectives
Text
– Integrated into discussions & exercises
– Integrated into your papers
Course Requirements
Case Analyses
– Individual: case memos
– Group: teach case
Major Class Project
– Entrepreneurial Venture Analysis
ENTREPRENEURSHIP
What is it? Why does
it matter?
Entrepreneurship
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What is it? Some examples . . .
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McDonald’s (New Venture / Franchising)
Polaroid (Technology)
FedEx (Business model)
Sam Adams (Emerging segment in “mature”
industry)
Entrepreneurship: What is it NOT?
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Some myths . . .
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Entrepreneurs have more freedom in life (i.e., “I won’t have
anyone looking over my shoulder”)
Money is the main reason to be an entrepreneur
Entrepreneurs have the ability to control things
Going public with my company some day will be an easy
way to make a lot of money.
Entrepreneurs are gamblers.
Entrepreneurs don’t have to worry about numbers.
All you need is money to be an entrepreneur.
Defining Entrepreneurship
“Entrepreneurship is no longer a job title. It is the state of
mind of people who want to change the future.” – Guy
Kawasaki
“Entrepreneurship is a way of thinking, reasoning and
acting that is opportunity obsessed, holistic in
approach [emphasis added], and leadership balanced”
(Timmons, 1999: 27).
Strategic entrepreneurship involves “. . . the integration of
entrepreneurial (i.e., opportunity-seeking actions) and
strategic (i.e., advantage-seeking actions) perspectives
to design and implement entrepreneurial strategies that
create wealth.” (Hitt et. al, 2002)
The Entrepreneurial Process
(Timmons, 2000)
Communication
Opportunity
Ambiguity
Resources
Business Plan
Fits and Gaps
Exogenous Forces
Creativity
Team
Uncertainty
Leadership
Capital Market Forces
Founder
Key concepts
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Opportunity
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Risk
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Where knowledge, skills, abilities and motivations
meet favorable market characteristics
Absolute . . . “sinking the boat”
Relative . . . “missing the boat”
Resources & Capability
Process, not person: Balance is key . . .
Entrepreneurship
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Why does it matter?
What History Tells Us . . .
Entrepreneurship as a means of hope for
prosperity and an increase in living standard
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The last great period when entrepreneurs
transformed the American economy was in the
late 1800’s
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In fact, most of the 1997 Fortune 200 were already
among the largest corporations in 1917
197 of the 200 largest companies in America were
started by entrepreneurs
Many of these entrepreneurs were first generation
Americans
The Early 1900s Reflected a Free
Market Approach
Government
Market Forces
What History Tells Us . . .
Mid 1940s – Mid 1970s
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Rise of mass production
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Conglomerate Integration
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Rise of corporate economy and corporate society
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Industrial/Governmental alliance
Late 1900s Reflect an
Increasingly Activist Approach
Government
Market Forces
Mid 1970s – Mid 1990s
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Period of economic
transition
Stagnation and decline
Crisis of confidence
Change in focus emerged
in business education
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My experience in mid
1980s
My experience in the 1990s
Demarcation Point: The Decline of
“Brontosaurous Capitalism”
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The large corporations formed in the
last great entrepreneurial era in
America are no longer creating new
jobs in significant numbers
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Total employment by the Fortune
500 companies has dropped from
20% of US workforce in 1980, to
about 7% in the late 1990s (Carlsson,
1992 and 1999)
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Fortune 500 actually lost over 5
million jobs during the past 20 years
Emergence of the New
Entrepreneurial Economy
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23 million small business
today in US economy
Make up 50% of GDP
New business formation
has grown from about
200,000 per year in mid
1900’s to over 3.5 million
per year today
Survival rates are now
over 50%
Entrepreneurship and
Employment
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Over 50% of workforce
now is employed in small
businesses
45% of total payroll
comes from small
businesses
99% of employers are
small businesses
Entrepreneurs and small
business owners are
responsible for 77% of
new jobs created in past
twenty years
Entrepreneurship and
Innovation
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Small businesses create
67% of all new
innovations in the US
95% of all radical
innovations over the past
60 years have come from
small businesses
Create 14 times the
number of patents per
employee than large
patenting firms
Entrepreneurship in America
Two demographic
groups are most
active in this
economic transition:
 Baby Boomers
(Entre-Boomers)
 Entrepreneurial
Generation
The Entrepreneurial Generation
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They are independent
thinkers
They embrace
change – and they
view entrepreneurship
as a career path that
will allow them to use
the changes that are
occurring in our
current world to their
advantage
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They are those born
between 1977 and 2002
50% of today’s college
students have business
ownership as a primary
career goal
They are more financially
savvy – 37% of today’s
college students already
thinking and planning for
retirement.
The Entrepreneurial Generation
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Work is important
They seek high levels of
achievement 40-50% of
our students arrive with
profitable businesses
already operating.
They want their work to
make a difference and
have meaning.
But, they do not want it to
become all consuming –
they seek the ability to
create balance through
business ownership
An E-generation Thought . . .
“My generation is really focused on keeping family
first, even before career. Some say that this is
because we watched so many baby boomers
screw this whole family thing up. My take on it is
that because the baby boomers sometimes grew
up wanting, they determined in their minds that
their families would want for nothing.
Unfortunately, my generation has all they want,
but grew up with workaholic parents who were
absent in their lives. I believe we're searching to
find that balance between family and career.”
The Entrepreneurial Generation
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They do not trust large institutions – be it corporations
or government
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They are politically independent, but leaning toward a
more libertarian philosophy
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They are concerned about our culture, our society and
our economy – and they view entrepreneurship as a
way to make things better
A Third Approach . . .
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Favored by many in the entrepreneurial
generation
Recognizes that markets are morally neutral
Without a sense of responsibility, markets can
alienate society
Culture can provide a moral framework
Values-based Approach
Culture
Government
Market Forces
Why study entrepreneurship?
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Entrepreneurial activity is now the driving force
(e.g., “hyper-competition) of the US and World
economy (Bettis & Hitt, 1995; Friedman, 2005)
Even if you do not want to be a business owner,
increasingly entrepreneurs are becoming….
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your customers
your competitors
your employers
OK, But Can Entrepreneurship
Actually Be Taught?
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Research suggests learning is key
element of the process . . .
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Opportunity identification is positively
associated with general and specific
knowledge
Success rates increase to 80-90% with
education and training
Success rate is positively associated with
start up experience over time
The Entrepreneurial Process
ENTREPRENEURSHIP IS A WAY OF
THINKING, REASONING AND ACTING
THAT IS OPPORTUNITY OBSESSED,
HOLISTIC IN APPROACH [EMPHASIS
ADDED], AND LEADERSHIP
BALANCED” (TIMMONS, 1999: 27).
Defining Entrepreneurship
“
Strategic entrepreneurship involves “. . . the integration
of entrepreneurial (i.e., opportunity-seeking actions)
and strategic (i.e., advantage-seeking actions)
perspectives to design and implement entrepreneurial
strategies that create wealth.” (Hitt et. al, 2002)
The Entrepreneurial Process
(Timmons, 2000)
Communication
Opportunity
Ambiguity
Resources
Business Plan
Fits and Gaps
Exogenous Forces
Creativity
Team
Uncertainty
Leadership
Capital Market Forces
Founder
Exit/Succession
Transition
Grow th
Start-up
Pre-launch
Life Cycle of a Business Venture
Pre-launch: Opportunity
Identification
 Does the Idea = an Opportunity?
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Market
Margin
Mission
(session 1)
 The Right Team?
 The Necessary Resources?
The Start-up Process
 Filling the Gaps
 The Business Plan
 Executive Summary
 Market Analysis and Marketing Plan
 Operating Plan and Team
 Financial Plan
Growing the Business
 CASH FLOW MANAGEMENT
 Building a Culture
 Marketing
 Staffing
 Building Management & Administrative Systems
Exit or
Succession?
Course Theme: Strategic
Entrepreneurship
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Why is there a need to study it?
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There are many forms of “entrepreneurial strategy,”
yet each is achieved through a common means of
acquiring and applying resources to create value by
capitalizing on “personal theory” about the true value
of a resource bundle. Goals are to understand the
primary interface of creation-performance and
sustainability-performance.
Course Theme: Strategic
Entrepreneurship
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Helps us make “good” or “better” decisions?
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Highlights role of operational effectiveness as
“necessary but not sufficient” for assessing and
exploiting opportunity (Porter, 1985)
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***Avoid the seductiveness***
Focuses us on “unique activities,” and “strategic
intent” (Prahalad & Hamel, 1995)
Highlights the need to make tradeoffs to achieve
sustainability (Barney, 1991)
Emphasizes the importance of activity “fit” over any
one activity, or subset of activities