Download Quiz 1 Content Slides

Quiz 1 Content Slides
Foundations of Entrepreneurship
January 29, 2013
1
Entrepreneurial opportunities
Attractive, timely, durable, provide
value
Defined
• Situations in which new goods, services, raw
materials, and organizing methods can be
introduced and sold at a price that is greater
than their cost of production (Casson, 1982)
• An opportunity that is attractive, durable,
timely, and grounded in a product or service
that delivers value to a customer (Armstrong)
Run a prison!
•
•
•
•
Timely?
Durable?
Attractive?
Grounded in a
product or service
that delivers value to
a customer?
Pet rocks!
•
•
•
•
Timely?
Durable?
Attractive?
Grounded in a
product or service
that delivers value to
a customer?
Type writer repair!
•
•
•
•
Timely?
Durable?
Attractive?
Grounded in a
product or service
that delivers value to
a customer?
“Handheld electronic device”
•
•
•
•
Timely?
Durable?
Attractive?
Grounded in a
product or service
that delivers value to
a customer?
Apple Newton Message Pad, 1993-1998
Apple Newton’s Message Pad
Newton MessagePad
• Newton MessagePad, a tablet-PDA hybrid
with handwriting recognition.
• There was nothing else like it, but its
ungainly size, , and hard-to-read screen
relegated it to technology-cult status.
• But its innovations lived on, with its
handwriting recognition still used in the
Mac OS X's Ink control panel that appears
when a pen tablet is connected and that
helped form the gesture technology used
in the iPhone.
• The Newton also inspired 1996's Palm
Pilot, which used many of the Newton's
ideas in a size that made it easy to carry
around.
Takeaways
• You must meet all criteria (attractive, timely,
durable, provides value) to ensure quality of
opportunity
• Experiment, prototype, and protect
intellectual property (see Apple Newton
example)
• Prepare for imitators – what is unique about
your offering?
The institutional context of
entrepreneurship
11
Entrepreneurship Defined:
Entrepreneur: someone who perceives an opportunity and builds an organization to pursue
that opportunity.
Entrepreneurship involves all the functions, activities, and actions associated with perceiving
opportunities and creating organizations to pursue them. These include:
–Market and Customer Research
–Service and Product Innovation
–Team Building
–Finding & Managing Resources
–Leadership
–Etc…
13
Basic requirements
•
•
•
•
Institutions
Infrastructure
Macroeconomic stability
Health and primary education
14
Efficiency enhancers
•
•
•
•
•
•
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Technological readiness
Market size
15
Innovation and entrepreneurship
•
•
•
•
•
•
•
•
•
Entrepreneurial financing
Government policy
Government entrepreneurship programs
Entrepreneurship education
R&D transfer
Market openness
Physical infrastructure for entrepreneurship
Commercial, legal infrastructure…
Social and cultural norms
16
Entrepreneurship profile
• Attitudes
– Perceived opportunities and capabilities
– Fear of failure
– Social status of entrepreneurship
• Activity
– Opportunity- / necessity-driven
– Early stage, established, exit
• Aspirations
– Growth, innovations, international orientation
17
Factors Influencing the
Decision to Start a Company
Personal
Attributes
•Higher Internal Locus of Control
•Desire for Financial Success
•Desire to Achieve Self-Realization
•Desire for Recognition
•Joy of Innovation
•Risk Tolerance
Environmental
Factors
•Local, Regional, or National attitudes
towards entrepreneurship
•Social and cultural pressures for or against
risk taking and entrepreneurship
•Access to entrepreneurial role models
•Responsibilities to family and community
Remember: No single type of person is best suited for entrepreneurship!
Entrepreneurs come from all walks of life, backgrounds, etc!
Entrepreneurship process
Compare to Moore’s Model:
19
A model of the entrepreneurial process
PERSONAL
PERSONAL
SOCIOLOGICAL
PERSONAL
ORGANIZATIONAL
Achievement
Locus of Control
Ambiguity Tolerance
Risk Taking
Networks
Entrepreneur
Job Dissatisfaction
Job Loss
Teams
Parents
Leader
Education
Age
Gender
Family
Commitment
Team
Strategy
Structure
Culture
Products
Role Models
Vision
Risk Taking
Personal Values
Education
Experience
Opportunity recognition
INNOVATION
Manager
Advisors
Commitment
Resources
TRIGGERING EVENT
IMPLEMENTATION
GROWTH
ENVIRONMENT
ENVIRONMENT
ENVIRONMENT
Opportunities
Role Models
Creativity
Economy
Competition
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy
Resources
Incubator
Government policy
Economy
Based on Carol Moore's Model (Moore 1986)
20
The Timmons Model for Entrepreneurial Success:
Uncertainty
Opportunity
Entrepreneur
Fits & Gaps
Business plan
Uncertainty
Uncertainty
Resources
The Tenets of the Timmons Model:
1) The Opportunity
–Is there a clear customer need for the proposed product or service?
–Is the timing right: is the team ready, is the market ready?
–Ideas are a dime a dozen – it’s the combination of the factors above and the
the business plan that makes an idea an opportunity.
execution of
2) The Lead Entrepreneur and Management Team
–Experience within the proposed industry can be essential to success.
–Investors and other backers prefer to see a track record of driving growth and profits.
–An ‘A’ team with a ‘B’ idea is almost always better than the opposite.
3) The Resources
–Resources include capital, technology, equipment, and most importantly – people.
–The entrepreneur’s mantra is one of Low Overhead, High Productivity, and Controlling
but not Owning resources.
–The best entrepreneurs are incredibly creative at finding ways to get things done
inexpensively and effectively. You can always find ways to do things faster, cheaper, or
better!
23
Decision making, emotions, and
entrepreneurship
Ivey 908M58
Key questions
1. What’s new about emotional intelligence in
our understanding of human behavior?
2. Is EI really as “touchy-feely” as it’s been
portrayed in popular media?
3. How can you use dimensions of EI?
4. Why have some managers / individuals
persisted in discounting emotional
intelligence?
Emotions and feelings…
•
•
•
•
•
Reduce rationality
Contribute to poor decision making
Weak
Incompetent
Inappropriate
Decision making > intellect alone
• Feelings play a fundamental role in the way
we make decisions
• Lack of emotion reduces our ability to make
good decisions
• People with damage in the “emotion”
neighborhood of their brains tend to make
inappropriate or bad decisions
Logic + feelings = good decisions
Feelings help us to:
• Direct our attention to highly important things
• Make choices between competing options
• Be flexible, maintain options, and widen our
points of view
• Be creative and aware of opportunities that
surround us
Positive v. negative feelings
• Positive feelings associated with increased
creativity, integrative thinking, inductive
reasoning
• Negative feelings associated with greater
attention to detail, detection of errors,
problem solving and detailed information
processing
Moods and emotions
• Are expressions of feelings or “affect”
• Moods are low-level, non-specific feeling that
we may not even be conscious of
• Emotions tend to be sharp, short-lived specific
responses to specific events
• Moods and emotions are differentiated by
their level of energy
Describing moods and emotions
Mood
Positive
Negative
Emotion
Content, serene, Alert, excited,
relaxed, calm
enthusiastic,
elated, happy
Sad, Depressed, Tense, nervous,
Lethargic,
stressed, upset,
Fatigued
angry
How moods affect our decisions
• We tend to store information that is consistent
with our mood
• We tend to recall information that is
consistent with our mood
• When decision making we tend to selectively
remember information that does not provide
a balanced assessment of the situation
Positive = good, negative = bad, right?
• Good moods increase susceptibility to
decision making biases like planning fallacy,
optimistic bias, greater belief in likelihood of
positive outcomes, and lower likelihood of
negative outcomes
• Negative emotions can refocus a leader’s
attention, alert us to focus on issues that we’d
otherwise ignore (attention to detail)
Emotional intelligence
• “The ability to effectively join emotions and
reasoning, using emotions to facilitate
reasoning and reasoning intelligently about
emotions”
• EI provides insights into organizational
behavior
• EI can mitigate decision making biases caused
by emotions
Importance of EI
1. EI is twice as important as both technical
skills and IQ in terms of performance
2. EI is more important at higher levels within
an organization, accounting for 90% of
difference between average and high
performers
3. Teams with critical mass of EI significantly
outperform teams without EI critical mass
The emotionally intelligent
entrepreneur
Self-awareness
Self-regulation
EI
Entrepreneur
Motivation
Empathy
Social skill
Goleman’s model of emotional
intelligence
Dimension
Definition
Hallmarks
Self-awareness
Ability to
recognize and
understand your
moods,
emotions, and
drives, as well
as their effect on
others
Self-confidence,
realistic selfassessment, selfdeprecating
sense of humor
Goleman’s model of emotional
intelligence
Dimension
Definition
Hallmarks
Self-regulation
Ability to
control or
redirect
disruptive
impulses and
moods; to think
before acting
Trustworthiness,
integrity,
comfort with
ambiguity,
openness to
change
Goleman’s model of emotional
intelligence
Dimension
Definition
Hallmarks
Motivation
Passion for
work for reasons
that go beyond
money or status;
propensity to
pursue goals
with energy &
persistence
Strong desire to
achieve,
optimism in the
face of failure,
organizational
commitment
Goleman’s model of emotional
intelligence
Dimension
Definition
Hallmarks
Empathy
Ability to
understand
emotional
makeup of
others; skill in
treating people
according to
their emotional
reactions
Expertise in
building and
retaining talent,
cross-cultural
sensitivity,
service to clients
and customers
Goleman’s model of emotional
intelligence
Dimension
Definition
Hallmarks
Social skill
Proficiency in
managing
relationships
and building
networks, ability
to find common
ground & build
rapport
Effectiveness in
leading change,
persuasiveness,
expertise in
building and
leading teams
Hallmarks of EI entrepreneur
Self-awareness
Self-regulation
Self-confidence, realistic selfassessment, self-deprecating sense of
humor
Trustworthy, open to change
Motivation
Achievers, optimists, committed
Empathy
Building & retaining talent, service
Social skill
Change leaders, persuasive, team
builders
How entrepreneurs think
Foundations of Entrepreneurship
43
How entrepreneurs think
• Causal processes – a process that starts with a
desired outcome and focuses on the means to
generate the outcome
• Effectuation processes - a process that starts
with what one has (who they are; what they
know; and whom they know) and selects
among possible outcomes
44
Example – The chef in the kitchen
Causation
• Chef picks out menu
• Chef identifies
ingredients, shops for
them, and cooks meals
• Customers presumably
will pay to eat what’s on
menu
Effectuation
• Chef looks through
cupboard to see what’s
there
• Imagines possible
menus based on
ingredients and utensils
• Prepares the meal
45
5 principles of effectuation
46
5 principles of effectuation
• Patchwork quilt: create something new with what
you have on hand
• Affordable loss: commit in advance to what
you’re willing to lose instead of calculating
expected returns
• Bird-in-hand: negotiate with stakeholders to
commit resources to project
• Lemonade: use surprises to create benefits
instead of problems
• Pilot-in-the-plane: use people as prime driver of
opportunity, not resources external to individual
47
These 5 principles…
• Put entrepreneurs in control of their new
ventures (instead of pre-programmed plans)
to shape environment and exploit unexpected
events
• Help entrepreneurs think in an environment of
high uncertainty – environments are complex,
dynamic, and characterized by rapid,
substantial, and discontinuous change
48
Entrepreneurial mindset
• The ability to rapidly sense, act, and mobilize,
even under highly uncertain conditions
• Individuals attempt to (1) make sense of
opportunities in the context of constantly
changing goals, (2) constantly questions one’s
“dominant logic,” and (3) revisit deceptively
simple questions about what we believe to be
true about markets and the firm
• Requires “cognitive adaptability”…
49
Cognitive adaptability
• “The extent to which entrepreneurs are dynamic,
flexible, self-regulating, and engaged in the process
of generating multiple decision frameworks focused
on sensing and processing changes in their
environments and acting on them.”
• More simply: “an individual’s ability to reflect upon,
understand, and control one’s thinking and
learning”*
• Requires us to “think about our thinking” to reflect,
be strategic, plan, have a plan in mind, know what to
do, and to self-monitor
* Schraw & Dennison, 1994
50
Survey
51
Cognitive adaptability
Arises by asking ourselves questions related to:
1. Comprehension questions to increase
understanding of environment before
addressing an entrepreneurial challenge
2. Connection tasks in which entrepreneurs
think about current situation in terms of
similarities and differences with previously
face/solved situations
52
Cognitive adaptability
Arises by asking ourselves questions related to:
3. Strategic tasks to stimulate entrepreneurs to
think about which strategies are appropriate
for solving the problem
4. Reflection tasks to stimulate entrepreneurs
to think about their understanding and
feelings as they progress through the
entrepreneurial process
53
A model of the entrepreneurial process
PERSONAL
PERSONAL
SOCIOLOGICAL
PERSONAL
ORGANIZATIONAL
Achievement
Locus of Control
Ambiguity Tolerance
Risk Taking
Networks
Entrepreneur
Job Dissatisfaction
Job Loss
Teams
Parents
Leader
Education
Age
Gender
Family
Commitment
Team
Strategy
Structure
Culture
Products
Role Models
Vision
Risk Taking
Personal Values
Education
Experience
Opportunity recognition
INNOVATION
Manager
Advisors
Commitment
Resources
TRIGGERING EVENT
IMPLEMENTATION
GROWTH
ENVIRONMENT
ENVIRONMENT
ENVIRONMENT
Opportunities
Role Models
Creativity
Economy
Competition
Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy
Resources
Incubator
Government policy
Economy
Based on Carol Moore's Model (Moore 1986)
54