Chapter 1 Entrepreneurship and the Entrepreneurial MindSet Hisrich

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Chapter 1 Entrepreneurship and the Entrepreneurial Mind-Set Hisrich Peters Mc. Graw-Hill/Irwin Copyright © 2010

Chapter 1 Entrepreneurship and the Entrepreneurial Mind-Set Hisrich Peters Mc. Graw-Hill/Irwin Copyright © 2010 by The Mc. Graw-Hill Companies, Inc. All rights reserved. Shepherd

Nature and Development of Entrepreneurship § Entrepreneur – An individual who takes initiative to

Nature and Development of Entrepreneurship § Entrepreneur – An individual who takes initiative to bundle resources in innovative ways and is willing to bear the risk and/or uncertainty to act. § Being an entrepreneur today: § § Involves creation process. Requires devotion of time and effort. Involves rewards of being an entrepreneur. Requires assumption of necessary risks. 1 -2

Nature and Development of Entrepreneurship (cont. ) § Entrepreneurial action - Behavior in response

Nature and Development of Entrepreneurship (cont. ) § Entrepreneurial action - Behavior in response to a judgmental decision under uncertainty about a possible opportunity for profit. 1 -3

The Entrepreneurial Process § Four distinct phases: § Identify and evaluate the opportunity. §

The Entrepreneurial Process § Four distinct phases: § Identify and evaluate the opportunity. § Window of opportunity. § Develop a business plan. § Determine the resource requirement. § Manage the resulting enterprise. 1 -4

Table 1. 1 - Aspects of the Entrepreneurial Process 1 -5

Table 1. 1 - Aspects of the Entrepreneurial Process 1 -5

How Entrepreneurs Think § Entrepreneurs in particular situations may think differently when faced with

How Entrepreneurs Think § Entrepreneurs in particular situations may think differently when faced with a different task or decision environment. § Given the nature of their decision-making environment, entrepreneurs need to sometimes: § Effectuate. § Be cognitively adaptable. § Learn from failure. 1 -6

How Entrepreneurs Think (cont. ) § Causal process § Starts with a desired outcome.

How Entrepreneurs Think (cont. ) § Causal process § Starts with a desired outcome. § Focuses on the means to generate that outcome. § Effectuation process § Starts with what one has (who they are, what they know, and whom they know). § Selects among possible outcomes. 1 -7

The Causation Process (1 of 3) § The causation process has been typified by

The Causation Process (1 of 3) § The causation process has been typified by and embodied in the procedures used by Philip Kotler’s Marketing Management. § Market: “Consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want” (1991: 63). 1 -8

The Causation Process (2 of 3) § Given a product or a service, Kotler

The Causation Process (2 of 3) § Given a product or a service, Kotler suggests a procedure for bringing the product/service to market: § § § § Analyze long-run opportunities in the market. Research and select target markets. Identify segmentation variables and segment the market. Develop profiles of resulting segments. Evaluate the attractiveness of each segment. Select the target segment(s). Identify possible positioning concepts for each target segment. 1 -9

The Causation Process (3 of 3) § Given a product or a service, Kotler

The Causation Process (3 of 3) § Given a product or a service, Kotler suggests a procedure for bringing the product/service to market: § Select, develop, and communicate the chosen positioning concept. § Design marketing strategies. § Plan marketing programs. § Organize, implement, and control marketing effort. § This process is called the STP (segmentation, targeting, and positioning) process. 1 -10

Principles of Effectuation (1 of 2) § Implications of effectuation for the entrepreneur are

Principles of Effectuation (1 of 2) § Implications of effectuation for the entrepreneur are explained in terms of five basic principles: § Patchwork quilt: means-driven action, emphasizes creation of something new with existing means rather than discovering new ways to achieve given goals. § Affordable loss: prescribes committing in advance to what one is willing to lose rather than investing in calculations about expected returns to the project. § Bird-in-hand: involves negotiating with any and all stakeholders who are willing to make actual commitments to the project; determines the goals of the enterprise. 1 -11

Principles of Effectuation (2 of 2) § Lemonade: prescribes leveraging surprises for benefits rather

Principles of Effectuation (2 of 2) § Lemonade: prescribes leveraging surprises for benefits rather than trying to avoid them, overcome them, or adapt to them. § Pilot-in-the-Plane: urges relying on and working with people as the prime driver of opportunity and not limiting entrepreneurial efforts to exploiting factors external to the individual. 1 -12

How Entrepreneurs Think (cont. ) § Achieving cognitive adaptability § Comprehension questions – Aids

How Entrepreneurs Think (cont. ) § Achieving cognitive adaptability § Comprehension questions – Aids understanding of the nature of the environment before addressing an entrepreneurial challenge. § Connection tasks – Stimulates thinking about the current situation in terms of similarities and differences with situations previously faced and solved. § Strategic tasks – Stimulates thoughts about which strategies are appropriate for solving the problem (and why) or pursuing the opportunity (and how). § Reflection tasks – Stimulates thinking about their understanding and feelings as they progress through the entrepreneurial process. 1 -13

Role of Entrepreneurship in Economic Development § Innovation is depicted as a key to

Role of Entrepreneurship in Economic Development § Innovation is depicted as a key to economic development. § Product-evolution process - Process through which innovation is developed and commercialized. § Iterative synthesis - The intersection of knowledge and social need that starts the product development process. 1 -14

Product Evolution Need Recognition Initiate Innovation Industrial Development Press to Invent 1 -15

Product Evolution Need Recognition Initiate Innovation Industrial Development Press to Invent 1 -15

Figure 1. 1 - Product Evolution 1 -16

Figure 1. 1 - Product Evolution 1 -16

Role of Entrepreneurship in Economic Development (cont. ) § Three types of innovation: §

Role of Entrepreneurship in Economic Development (cont. ) § Three types of innovation: § Ordinary - New products with little technological change. § Technological – New products with significant technological advancement. § Breakthrough – New products with some technological change. 1 -17

Future § § Entrepreneurial education. Increase in academic research. Societal support (media coverage). Corporate

Future § § Entrepreneurial education. Increase in academic research. Societal support (media coverage). Corporate entrepreneurship. 1 -18