ENTREPRENEURSHIP

UNIT I – ENTREPRENEURSHIP THEORY

MODULE 1 – THE ENTREPRENEURIAL MINDSET

The Nature and Growth of Entrepreneurship

Entrepreneurs are not born. They are made by their experience and changing market place that
they find themselves in.

You must be aware of the fact that earning is necessary for living. Your father, mother, brother,
and others may be engaged in activities through which they earn a livelihood for the family. How
do you plan to earn your livelihood?

Would you like to take up a job in an organization or would you like to start your own business?

The assumption of risk and responsibility in designing and implementing a business strategy or
starting a business is called entrepreneurship. A teacher teaches in a school, a worker works in a
factory, a doctor practices in a government hospital, a clerk serves in a bank, a manager works in
a business concern to earn his living. These are the examples of people who are employees and
earn money through salaries or wages given by their employers. This is known as wage-
employment.

On the other hand, a shopkeeper, a factory owner, a businessman, a doctor having his own clinic,
earn money by running their own concerns. These are the examples of people who are self -
employed.

However, there are several self-employed individuals who not only create jobs for themselves
but also generate jobs for many others. They may be termed as ‘entrepreneurs’.

Entrepreneurship

The word “Entrepreneurship” is derived from the French verb entreprendre which means “to
undertake”. The term entrepreneurship thus refers to the following:

• The process of identifying ​opportunities ​in

the ​ arket
m ​ lace,
p ​arranging the resources required to pursue these
opportunities and investing the resources to exploit the opportunities for long term gains.
It involves creating wealth by bringing together resources in new ways to start and
operate an enterprise.

• The processes through which ​individuals become aware of ​business

ownership then develop ideas for, and initiate a business.

• “The art of identifying viable business opportunities and mobilising resources to convert
those opportunities into a successful enterprise through creativity, innovation, risk taking
and progressive imagination” ...ILO Youth Entrepreneurship Manual, 2009.
 • Entrepreneurship can be defined as the ability to identify business opportunities which can
be transformed into successful businesses through creative and innovative process.

Entrepreneurship is a practise and a process that results in creativity, innovation and enterprise
development and growth. It refers to an individual’s ability to turn ideas into action involving
and engaging in socially-useful wealth creation through application of innovative thinking and
execution to meet consumer needs, using one’s own labour, time and ideas.

Engaging in entrepreneurship shifts people from being “job seekers” to “job creators”, which is
critical in countries that have high levels of unemployment. It requires a lot of creativity which is
the driving force behind innovation.

Definitions Of Entrepreneurship

Source Definition
Knight (1921) Profits from bearing uncertainty and risk
Schumpeter (1934) Carrying out of new combinations of firm organization—new
products, new services, new sources of raw material, new
methods of production, new markets, new forms of
organization
Hoselitz (1952) Uncertainty bearing...coordination of productive resources...
Introduction of innovations and the provision of capital
Cole (1959) Purposeful activity to initiate and develop a profit-oriented
business
McClelland (1961) Moderate risk taking
Casson (1982) Decisions and judgments about the coordination of scarce
resources
Gartner (1985) Creation of new organizations
Stevenson, Roberts, & Grousbeck The pursuit of opportunity without regard to resources
(1989); currently controlled
Shane & Venkataraman (2000) A field of business seeks to understand how opportunities
create something new…
Kuratko & Hodgetts (2004) A dynamic process of vision, change and creation…
Allen (2006) A mindset or way of thinking that is opportunity focused,
innovative and growth-oriented. Can be found in large
corporations and socially responsible not-for-profits…

Who is an Entrepreneur?

Entrepreneur-An entrepreneur is any person who creates and develops a business idea and takes
the risk of setting up an enterprise to produce a product or service which satisfies customer
needs.

Entrepreneur refers to the person and entrepreneurship defines the process. Both men and women
can be successful entrepreneurs; it has nothing to do with gender. All entrepreneurs are business
persons, but not all business persons are entrepreneurs.

Think of a person who sits by the roadside leading to your home and who has been selling the
same type of food, from the same size of saucepan or pot, from the same table top, and may not
have been able to change their standard of living to any appreciable extent. Such a person may
be a business person but not an entrepreneur.

An entrepreneur is therefore a business-minded person who always finds ways to improve and
grow in business.
 An entrepreneur can also be defined as a professional who discovers a business opportunity to
produce improved or new goods and services and identifies a way in which resources required
can be mobilised.

Finally, an entrepreneur is someone who constantly scans the environment looking for changes
that can provide opportunities for creating new growth-oriented businesses.

Entrepreneurs assume significant accountability for the risk and the outcomes of new enterprises,
ventures or business ideas. An effective and successful entrepreneur shows creativity and
innovation in business and is an example for other people.

An entrepreneur is an individual who:

• has the ability to identify and pursue a business opportunity;
• undertakes a business venture;
• raises the capital to finance it;
• gathers the necessary physical, financial and human resources needed to operate the
business venture;
• sets goals for him/herself and others;
• initiates appropriate action to ensure success; and
• Assumes all or a major portion of the risk!

An ​entrepreneur is a job-creator not a job-seeker. An ​entrepreneur is a person who:

• Has a dream.
• Has a vision.
• Is willing to take the risk
• Makes something out of nothing

An entrepreneur may also be defined as a person who identifies successful business

opportunities, risk time and money to start and operate the business, bringing resources together
with the intention of generating wealth.

Time table of the development of Entrepreneurship

• Eighteenth Century:
✓ (Early 1700s)- Richard Cantillon (economist) coined term entrepreneur (“go-
between” or “between-taker”).

✓ (late 1700s)- Entrepreneur bears risks and plans, supervises, organizes and
owns factors of Production.
• Nineteenth Century:

✓ (1803)- Jean Baptiste Say (economist) proposed that the profits of

entrepreneurship were separate from profits of capital ownership.

✓ (Late 1800s)- Distinction made between those who supplied funds and earned
interest and those who profited from entrepreneurial abilities.

• Twentieth Century:
✓ (1934)- Joseph Schumpeter (economist) described entrepreneur as someone
who is an innovator and someone who “creatively destructs”. That is,
 replacing old products, processes, ideas and businesses with better ones.

✓ (1964)- Peter Drucker (Management author) took this idea further, describing
the entrepreneur as someone who maximizes opportunity, actually searches for
change, responds to it, and exploits change as an opportunity. A quick look at
changes in communications—from typewriters to personal computers to the
Internet—illustrates these ideas.

• Twenty-first Century:
✓ (2004-2010)- As technology changes and global connectivity improves,
entrepreneurship means that the entrepreneur not only has to ensure profits for
all stakeholders, he has to fix problems, tap new markets, bring cutting edge
ideas to the table, and lead cross-cultural teams. Entrepreneurship has taken on
new meaning and greater challenges in the last decades. The real skill is
learning how to influence through commitment, loyalty and trust.

Definitions of Entrepreneurs

1734: Richard Cantillon Entrepreneurs are non-fixed income earners who pay known costs of
production but earn uncertain incomes
1803: Jean-Baptiste Say An entrepreneur is an economic agent who unites all means of
production- land of one, the labour of another and the capital of yet
another and thus produces a product. By selling the product in the
market he pays rent of land, wages to labour, interest on capital and
what remains is his profit. He shifts economic resources out of an
area of lower and into an area of higher productivity and greater
yield.
1934: Schumpeter Entrepreneurs are innovators who use a process of shattering the
status quo of the existing products and services, to set up new
products, new services.
1961: David McClelland An entrepreneur is a person with a high need for achievement. He is
energetic and a moderate risk taker.
1964: Peter Drucker An entrepreneur searches for change, responds to it and exploits
opportunities. Innovation is a specific tool of an entrepreneur hence
an effective entrepreneur converts a source into a resource.
1975: Howard H. Entrepreneurship is the pursuit of opportunity without regard to
Stevenson (HBS) resources currently controlled.
1975: Albert Shapero Entrepreneurs take initiative, accept risk of failure and have an
internal locus of control.
2013: Ronald May An Entrepreneur is someone who commercializes his or her
innovation.

Think like an entrepreneur Task 1

You have just completed high school overseas where you have obtain certification in Information
Technology. You return home to find that majority of the persons attending high school do not
have access to computers and lacks the knowledge of how to use and operate one. They have
express to you that they have School Based Assessments to complete.

1. Based on the above scenario identify the entrepreneur’s opportunity and resources
2. Explain what you would have done if faced with this situation.

Drivers of contemporary Entrepreneurship

These include:

a) Information and Communication Technology (ICT)-ICT is all technologies that combined

allow people and organizations to interact in the digital world. Its elements include cloud
computing, internet access, computer hardware and software, communications technology
eg. telephone and transactions.
The development and rapid growth in the availability and use of ICT has created many
opportunities for entrepreneurs. It began with the availability of personal computers and the
internet. Eg of businesses include Amazon, Travelocity, Yahoo, Google, Facebook etc.

With the help of modern business machines such as personal computers, laptops, fax machines,
copiers, color printers, answering machines, and voice mail, even one person working at home
can look like a big business. At one time, the high cost of technological wizardry made it
impossible for small businesses to compete with larger companies that could afford the
hardware.

Today, however, powerful computers and communication equipment are priced within the
budgets of even the smallest businesses. Although entrepreneurs may not be able to manufacturer
heavy equipment in their spare bedrooms, they can run a service, or information based company
from their home, or almost everywhere, very effectively and look like a Fortune 500 company to
customers and clients. Jimbo Wales, founder of Wikipedia says, “Wherever my laptop is, that’s
my office.”

b) Globalization- This is the worldwide movement toward economic, financial, trade, and
communications integration. The ‘global village’ is a phenomenon created by the speed of
modern travel and communication as well as by the level of integration in business,
governance and culture. We now live in a world of global brands, global personalities and
global businesses. Entrepreneurs are able to access more information, resources and markets
in today’s world than was previously possible. They have access to global markets but face
global competition. Construction, manufacturing, energy and food service businesses can be
found competing in countries far from their start-up locations. For example the development
of the Dell brand of personal computers quickly became a global competitor in the PC
market. Other brands include Samsung, Nike and McDonalds.

As globalization transforms entire industries, even experienced business owners and managers
must rethink the rules of competition on which they have relied for years. To thrive, they know
they must develop new business models and new models of competitive advantages. One survey
by management consulting firm Bain and Company reports that 75% of global executives
believe that they will have to revamp their core businesses to remain competitive, and 80% say
that the speed of global business has made maintaining a competitive edge more difficult.

c) Changing demands-The pace of life in today’s world is fast and markets are always
changing. Businesses must continuously adapt. Entrepreneurs can exploit opportunities that
arise from unanticipated and unsatisfied needs that result from changes in the social and
business environment. This is seen in the emergence of businesses such as Netflix and
ITunes.
Entrepreneurs must also be aware of changing market conditions. Man’s wants are unlimited and
therefore if an entrepreneur is to truly survive, they must keep up with changes in demand. It is
important that entrepreneurs engage in market research to gauge market conditions.
Entrepreneurs must also have an understanding of the theoretical basis of demand and supply and
how the price mechanism operates. For example, if demand increases, price usually increases
whereas if supply increases, price usually falls. Demand will therefore have an impact on pricing
strategies.
d) Changing demographics-There is change in the vital statistics of a population such as
gender, age, income level, education, location and ethnic composition. There are trends such
as rate of growth in population and change in ethnic statistics, perhaps due to the inward
migration of people. These statistics provide important information for entrepreneurs who are
pursuing opportunities for innovating and creating value.

Understanding the demographics of your target customers is critical for the success of your
business. Not only do you need to understand them in order to decide exactly what your product
and services mixes will include, but this information will also affect pricing, packaging,
promotion and place.

Let's talk about just one of these factors to see how demographics affects your choices. In order
to properly evaluate a community or neighborhood for the best location for your business, you
must know the demographic profile of your potential customers. To see if the community you're
considering offers a population with the demographic traits necessary to support your business,
look at the community's:

a) Purchasing power. Find out the degree of disposable income within the community.
b) Residences. Are homes rented or owned?
c) Means of transportation. Do prospective customers in the area own vehicles, ride buses
or bicycles, and so on?
d) Age ranges. Does the community consist primarily of young people still approaching
their prime earning years, young professionals, empty nesters or retirees?
e) Family status. Are there lots of families in the area or mostly singles?
f) Leisure activities. What type of hobbies and recreational activities do people in the
community participate in?

All of this information coming together gives the entrepreneur the insight as to how to offer or
position his/her goods/services in the market. Without this information your business can be
doomed from the start.

1. Unemployment-Changes in the local and global economy result in changing levels of

unemployment. Many entrepreneurial ventures are born out of the entrepreneur’s need for
income. These businesses are usually based on personal skills, work experience or a local
need for a product or service.

2. Institutional Support-Many governments have recognized that entrepreneurship adds

value to an economy. New businesses create new jobs and add to the country’s GDP. As a
result, there are initiatives and agencies set up to provide training and support to
entrepreneurs. This support increases the number of persons who are willing to take the
risk of starting their own businesses and often helps make it possible to find capital for
new ventures. Such support programmes include loan guarantee facilities and micro
finance companies.

3. Ease of entry in the informal sector- The informal sector or informal economy is that
part of an economy that is not taxed, monitored by any form of government or included
in any gross national product (GNP), unlike the formal economy.

Other terms used to refer to the informal sector can include the black market, the shadow
economy, the underground economy, the agora, and System D. Associated idioms include "under
the table", "off the books" and "working for cash". Due to the fact that there are hardly any
regulations governing this industry, it is easier to engage in and set up entrepreneurial ventures.
When an entrepreneur chooses to start a business, there may be challenges faced in entering that
particular sector or market. High barriers to entry markets such as those requiring high capital
costs example enterprises involving high level technologies, telecommunications and
manufacturing have higher profit margins. Entrepreneurs have a harder time in getting into these
markets. Intrapreneurship is more likely to exist there.

Emerging areas for enterprise development are:

• The creative and cultural industries

• Renewable energy
• Agro-preneurship
• ICT (Information and Communication Technology)

Theorists of Entrepreneurship

Richard Cantillon (1680-1734)

Richard Cantillon (1680s – May 1734) was an Irish economist and author of Essai Sur La Nature
Du Commerce En Général (Essay on the Nature of Trade in General), a book considered by
William Stanley Jevons to be the "cradle of political economy".

Although little information exists on Cantillon's life, it is known that he became a successful
banker and merchant at an early age. His success was largely derived from the political and
business connections he was able to acquire through his family and through an early employer,
James Brydges.

During the late 1710s and early 1720s, Cantillon speculated in, and later helped fund, John Law's
Mississippi Company, from which he acquired great wealth. His success, however, came at a cost
to his debtors, who pursued him with lawsuits, criminal charges, and even murder plots until his
death in 1734.

Credit for coining the term, generally, goes to the French economist Jean-Baptiste Say, but in fact
the Irish-French economist Richard Cantillon defined it first.

Entrepreneur is originally a French word - an individual who organizes or operates a business or

businesses. The word first appeared in the French dictionary entitled "Dictionnaire Universel de
Commerce" compiled by Jacques des Bruslons and published in 1723.
Cantillon defined the term as a person who pays a certain price for a product and resells it at an
uncertain price: "making decisions about obtaining and using the resources while consequently
admitting the risk of enterprise."

Joseph Schumpeter (1883-1950)

According to Schumpeter, an entrepreneur is willing and able to convert a new idea

or invention into a successful innovation. Entrepreneurship employs what Schumpeter called
"the gale of creative destruction" to replace in whole or in part inferior offerings across markets
and industries, simultaneously creating new products and new business models.

Thus, creative destruction is largely responsible for long-term economic growth. An alternate
description by Israel Kirzner suggests that the majority of innovations may be incremental
improvements such as the replacement of paper with plastic in the construction of a drinking
straw that require no special qualities. ​

For Schumpeter, entrepreneurship resulted in new industries and in new combinations of

currently existing inputs. Schumpeter's initial example of this was the combination of a steam
engine and then current wagon making technologies to produce the horseless carriage. In this
case the innovation, the car, was transformational, but did not require the development of
dramatic new technology. It did not immediately replace the horse-drawn carriage, but in time,
incremental improvements reduced the cost and improved the technology, leading to the modern
auto industry.

Despite Schumpeter's early 20th-century contributions, traditional microeconomic theory did not
formally consider the entrepreneur in its theoretical frameworks. For Schumpeter, the
entrepreneur did not bear risk: the capitalist did. Schumpeter believed that the equilibrium ideal
was imperfect Schumpeter (1934) demonstrated that changing environment continuously
provides new information about the optimum allocation of resources to enhance profitability
some individuals acquire the new information before others, recombine the resources to gain an
entrepreneurial profit. Schumpeter was of the opinion that entrepreneurs shift the Production
Possibility Curve to a higher level using innovations.

Peter Drucker (1909-2005)

Author and teacher Peter F. Drucker, “the man who invented management,” called himself a
social ecologist. Created the foundations of modern management and influenced the thinking of
many leaders of the 20th century, from Margaret Thatcher to Alfred Sloan. Wrote 39 books
translated into more than 30 languages about business, centering on people, responsibility, and
society. Taught at Bennington College, New York University, and Claremont Graduate
University’s graduate school of management. Earned a doctorate from Frankfurt University.

According to Peter. P. Drucker, “Innovation is the specific tool of entrepreneurs, the means by
which they exploit chances as an opportunity for different business or a different service.

For Peter Drucker, entrepreneurship is about taking risk. The entrepreneur is willing to put his or
her career and financial security on the line and take risks in the name of an idea, spending time
as well as capital on an uncertain venture. Entrepreneurship is often associated with true
uncertainty, particularly when it involves something really novel, whose market did not already
exist. However, even if a related market already exists, nothing guarantees that room exists for a
particular new entry.

Jean Baptiste Say (1767-1832)

Jean-Baptiste Say, a French economist who first coined the word entrepreneur in about 1800,
said: “The entrepreneur shifts economic resources out of an area of lower and into an area of
higher productivity and greater yield.” One dictionary says an entrepreneur is “one who
undertakes an enterprise, especially a contractor acting as the intermediary between capital and
labour”.
Entrepreneurship is the special collection of skills possessed by an entrepreneur. They include a
propensity to take risks over and above the normal, and a desire to create wealth. Entrepreneurs
are people who find ways round business difficulties; they persevere with a business plan at
times when others run for the shelter of full-time employment elsewhere.

Factors which influence the rise of entrepreneurship inside and outside of Jamaica
Traditionally, entrepreneurial activities arose out of the need to survive. Persons who had limited
skills “tried their hands” by buying and selling items, or by creating and selling goods or services
in order to make a profit from which they meet their personal and/or family needs. Today, factors
other than mere survival are influencing the rise of the entrepreneurial spirit.

Some of the factors which influence entrepreneurship include:

• Economic changes-the economic downturns in the 1980s and 1990s caused many companies
to downsize and layoff numerous employees. This gave rise to many small businesses as
individuals took their redundancy pay and invested it into business ventures.
​ ​
• Globalization and increased competition-globalization by its very nature demand
entrepreneurial behaviour. This world is now one big marketplace and so, factors such as speed
and efficiency (doing/producing things faster, better and less expensively) are critical survival
factors.

The improvements and cost reductions in computer technology and the advent of the internet
have opened the way for small businesses to compete with larger companies. Many home-based
businesses have accessed the same technologies used by larger companies and have taken away
segments of the market.

• Advancing technology-as technology advances, new needs arise which are not being filled by
larger firms. It is entrepreneurs who identify these unattended needs and fill them to create a
market niche (small income-earning segment in an industry that other firms (larger) overlook or
ignore).

Question
• What are some of he needs that arose when cellular phones were introduced into Jamaica?
• Did small businesses emerged to meet these needs?

The impact of Entrepreneurship/its importance to economic development and employment

​
Entrepreneurial activities in Jamaica and throughout the world have made significant
contributions to the growth of the economies of those nations. Although it is difficult to quantify

the precise amount of contribution that entrepreneurship makes to Caribbean economies owing to
insufficient and incomplete data, it is generally accepted that entrepreneurship has benefitted
these economies in the following ways:

• Job creation- We know that job creation is vital to the overall long-term economic health
of communities, regions, ad nations. Entrepreneurial ventures play very important role in
it. Small business create more jobs than large business do. During economic recession,
when large companies are on their way to retrenchment of their work force, individuals
whose jobs are eliminated find employment with small business. The creation of jobs by
small businesses is expected to continue into the future as new firms start small and
grow.

• Innovation- Innovating is a process of creating, changing, experimenting, transforming

and revolutionizing. Innovation is one of the key distinguishing characteristics of
entrepreneurial activity. The passionate drive and intense hunger of entrepreneurs to
forge new directions products and processes and to take risks set in motion a series of
decisions that lead to the innovations that are important for economic vitality. Without
these new ideas, economic, technological, and social progress would be slow indeed. The
“creative destruction” process of innovating leads to technological changes and
employment growth. Entrepreneurial firms act as these “agents of change” by providing
an essential source of new and unique ideas that might otherwise go.

• Increase in Gross Domestic Product (the total value of goods and services produced in a
country within any given period).
 • Entrepreneurship Serve Small Markets With New Technology: Large firms, with their
crippling overheads, do not find it profitable to serve small populations. This is where
small entrepreneurial firms serve an invaluable role by providing specialized products to
niche customers. Entrepreneurial firms are usually faster to come to the market with
radical new technologies. Ultimately, this will lead to a better standard of living for the
whole society.

• Entrepreneurship in small businesses helps in distribution of products of large business.

They, thus, support the large business houses.

Many governments are now recognizing that entrepreneurial activities are important for the
building of a strong economy; without these activities a country could stagnate and die. It is the:

• Creativity
• Innovativeness; and leadership that entrepreneurs provide which allows countries to
effectively use their resources to produce goods and services.

A country that has alot of resources will produce very little if its people are not entrepreneurial
enough to put those resources to good use. This largely explains why some countries which have
little resources (eg. Singapore, which is approximately the size of St. Catherine) have been able
to produce more than other countries which have large quantities of resources. The entrepreneur,
therefore, makes a big difference to the wealth of a country. The entrepreneur does not wait
for things to happen, but make things happen.

Reasons why an entrepreneur wants to establish his or her own business

• Financial independence- the entrepreneur desires to make his/her own decisions in order
to create his/her own wealth; not having to depend on another for limited financial gains.

• Self-fulfilment-the belief that he/she will get more rewards as well as satisfying those
creative needs that would be stifled in a regular job; being able to take control instead of
being told what to do.

• Self actualization-this is the ultimate satisfaction of one’s needs to fulfil their potential;
for the entrepreneur this may mean taking the risk to create a business and see it become
the best in the industry.

• Poverty

• Desire for wealth-Desire is the first conception of wealth building. It is the desire for
wealth of Warren Buffett to become wealthy that he started earning and saving money at
young age.

It is also the same desire why Bill Gates dropped out from Harvard University. He wants
to be wealthy by establishing a software company which makes him the richest
American. Burning desire for wealth is the drive of one person to achieve his or her
financial goal in life. It is our burning desires that make us motivated, focused and
determined. Remember, without the desire, we will get easily bored and we procrastinate
when working on our goal.

According to Wikipedia, desire is a sense of longing for a person or object or hoping for
an outcome. When a person desires something or someone, their sense of longing is
 excited by the enjoyment or the thought of the item or person, and they want to take
actions to obtain their goal. Desire for wealth is important in realization of our dream or
attaining our goal. This gives us the drive and determination to move and act.

• Culture-Why are some parts of the world more active in entrepreneurship than others? A
lot of it has to do with the culture and whether it encourages risk-taking and innovation.
For instance, if a startup fails in the U.S. or Australia, the question is: What did you learn
and what will you do next? That’s in stark contrast to many European countries where the
entrepreneur is labelled a failure when a startup doesn’t succeed.

Characteristics/Qualities of an Entrepreneur

Common traits:

a. Innovative-developing a new idea, or making changes to an existing one; this might be

merely a change in the way it is delivered, or one feature.

The entrepreneurs are highly innovative and creative individuals with vision. An
entrepreneur can spot opportunities and act upon them. To be innovative means, you can
come up with new ideas and inventions to solve problems and not give up until you have
found an effective solution.

Within the constraints of available resources that society or a nation offers, entrepreneurs make
the best use of them. Entrepreneurs have a creative vision to recognise a business opportunity.
An entrepreneur should have creative thinking and be able to engage in the analysis of various
problems and situations in order to deal with them. An entrepreneur introduces new products,
new technologies and new economic activities. He creates new demands and new aspirations and
new methods to fulfil them. Entrepreneur should anticipate changes and must be able to study
various situations in which decisions may have to be made. Drucker Writes, “Entrepreneur create
something new, something different, they change or transmute values”.

b. Creative- Creativity is that quality which enables the entrepreneur to identify new and
better ways of doing things. It is the ability to develop novel ideas, or new ways of doing
things and satisfying needs; it does not have to be a new invention but can be simply
finding a different way to supply a product; also includes being open-minded, versatile,
resourceful and knowledgeable.

The entrepreneur gets ideas from:

• Things from people around him/her
• Problems that he/she and others encounter
• The news
• People etc

Entrepreneurs are always thinking of new ideas and new ways of making money or increasing
the size of their businesses. They are not afraid to put these ideas to use. Creativity drives the
development of new products, services or ways of doing business. We have to use our creative
minds to develop solutions that other people have not developed. Let’s look around us. What are
people doing?

c. Calculated risk takers-The best entrepreneurs tend to:

 • Set their own objectives where there is moderate risk of failure and take calculated risks
• Gain satisfaction from completing a job well
• Not be afraid of public opinion, scepticism
• Take responsibility for their own action
The successful entrepreneur takes calculated risks that is, he/she takes a chance and embarks on
an investment opportunity with the intention of realizing profits but not without an “awareness
of the likely consequences”. As an entrepreneur, you will be at the helm of your business and
you will be accountable for the success or failure of the business. The risk (financial, legal etc) of
doing business will be yours, and you must embrace and manoeuvre through these risks in order
to survive.

​Importance of risk taking

• Build self confidence
• Create a feeling of leadership
• Create a strong motivation to complete a job well

Although entrepreneurs are risk takers they are not likely to embark on a venture unless they
know the risks associated with the venture.

d. Systematic planner-framed realistic business plans and follows them rigorously to

achieve the objectives in a stipulated time limit.

e. Opportunity-seeking- an opportunity is a favourable set of circumstances that creates a

need for a new product, service or business. It includes access to credit, working
premises, education, trainings etc. An entrepreneur always seeks out and identifies
opportunities. He/she seizes an opportunity and converts it into a realistic and achievable
goal or plan.

f. Achievement oriented-A successful entrepreneur should have a strong motivation

towards the achievement of a task and must be able to exert considerable efforts in
getting things done by others. He has strong urge to achieve. He has a more aggressive
level of entrepreneurial venturing, and need achievement.

g. Persuasiveness-When you are persuasive, you have the ability to keep trying to convince
people to buy your products or services to become customers and always support and
follow you.

h. Committed-As an entrepreneur, to be successful requires commitment and determination

to do everything possible to make a success of his or her business. Family and friends
sometimes take second place until the entrepreneur has finished what he or she has set to
do. Are you sure you are willing to make this commitment?

i. Determination & Persistence- An entrepreneur is someone who does not give up, but
tries over and over again until they can solve a challenge. Entrepreneurs will even make
personal sacrifices like neglecting their families to be able to succeed. Entrepreneurs have
the persistence and the ability to bounce back after rough times. Entrepreneurs
demonstrate persistence through:
• Willingness to work until a job is done, no matter how long it takes
 • Firm commitment to their goals
• Strong determination to overcome any obstacle that they meet
• It is also noteworthy that successful entrepreneurs will stick to a task until it has
been completed, regardless of the challenges they face to complete the task.

j. Presseverance- Persistence and perseverance go hand in hand since when we persevere,

we refuse to give up until we have found a solution for any challenge. An entrepreneur,
who has perseverance, keeps his or her goals in sight and tries to reach such goals even if
he or she experiences obstacles along the way. Being a true entrepreneur means not giving
up and learning from previous mistakes and failures.

k. Information seeking-Successful entrepreneurs do not rely on guesswork and do not rely

on others for information. Instead, they spend time collecting information about their
customers, competitors, suppliers, relevant technology and markets. Gathering relevant
information is important to ensure that the entrepreneur makes well informed decisions.

l. Emotional Intelligence- Emotional intelligence is the skill of perceiving, understanding,

and effectively managing emotions like anger, happiness, anxiety, optimism, humor,
sadness, fear, shame, love.
In the words of Goleman (1995), emotional intelligence helps us to recognize our own feelings
and those of others, to motivate ourselves and to manage our emotions and also emotions in
our relationships with others. Bar-On (1997) mentioned that people with high emotional
intelligence can manage stress, survive uncertainty and can restore health and well-being. These
are the abilities required for a person to become a successful entrepreneur.

m. Self-confident-entrepreneurs have a great deal of confidence in their ability to succeed

in what they do. This confidence is backed by positive actions that are necessary for
enjoying success. They are also:
• Optimistic
• Usually quick to assume personal responsibility for the success or failures of their
ventures
• they will, therefore, work hard and persevere to achieve their goals, despite any
problems which they may encounter.

n. Achievement Oriented-Entrepreneurs are motivated to accomplish challenging goals;

they thrive on performance feedback.

o. Flexibility-entrepreneurs are willing to admit problems and errors, and are willing to
change a course of action when plans aren’t working.

p. Internal locus of control-entrepreneurs believe that they are in control of their own
destiny; they are self-directing and like autonomy.

q. Hardworking-entrepreneurs work long and hard to achieve success. A successful

entrepreneur needs the stamina that comes from good physical and mental health. To
maintain energy entrepreneurs must carefully balance their commitment to other aspects
of their lives, such as family and friends.
Types of Entrepreneurs
Nascent Entrepreneur Is an individual who is in the process of starting a new business. The
nascent entrepreneur can either be a novice or a habitual
entrepreneur.

Novice Entrepreneur Is an individual who has NO prior ownership experience as a business

founder; inheritor of a business or a purchaser of a business.

It is not similar to early starter; a novice can also be a 50 year old with
over 25 years of experience in the industry.

He is also someone who has just started to run his or her own business
or venture and is still learning new things to make it work successfully

Habitual Entrepreneur Is an individual who has PRIOR business ownership experience and as
a result have gained tremendous entrepreneurial experience and skills
from acquiring major or minor equity stake in two or more businesses.

Serial Entrepreneur Is an individual who has sold or closed an original business,

established another new business, sold or closed that business &
continue this cycle. They are experienced entrepreneurs as they own
several businesses but one at a time.

Portfolio Entrepreneur Is an individual who retains an original business and builds a portfolio
of additional business through inheriting, establishing or purchasing
them.

Serial Entrepreneur and Portfolio entrepreneur are also referred to as

Habitual Entrepreneurs.

Entrepreneurship and Intrapreneurship (Corporate Entrepreneurship)

Why are entrepreneurs and intrapreneurs suddenly more important today than before? An
explanation to this question would be that the world is changing nowadays more rapidly under
the influence of new technologies. The increasing competition hinders our work. It does not
suffice anymore to stand before our competitors simply driven by our will of competing; we have
to bring something new to the market. Entrepreneurs and intrapreneurs play a decisive role as
they help the company (newly established or existing) to engage in new business and enter new
markets. The concept of entrepreneurship is seen as the process of uncovering and
developing an opportunity to create value through innovation and seizing that opportunity
without regard to either resources (human and capital) or the location of the entrepreneur – in a
new or existing company(Churchill, 1992).

Intrapreneurship represent the initiation and implementation of innovative systems and

practices within an organization, by some of its staff under the supervision of a manager who
takes the role of an intrapreneur, in order to improve the economical performance of the
organization, by using a part of its resources, namely those that previously have not been used in
an appropriate manner. Intrapreneurship improves the economical and financial performance of
the company, by applying a more efficient use of the resources and by using a suitable
motivational system for its employees (Istocescu, 2003).

Unlike the entrepreneur, the intrapreneur acts within an existing organization. The intrapreneur is
the revolutionary inside the organization, who fights for change and renewal from within the
system. This may give rise to conflicts within the organization, so respect is the necessary key in
order to channel these conflicts and transform them into positive aspects for the organization.
Even though intrapreneurs benefit from using the resources of the organization for the
implementation of the emerging opportunities, there are several motives why innovation is more
difficult to implement in an existing organization.

Entrepreneur vs. Intrapreneur

Entrepreneur Intrapreneur
He operates outside the organizational He operates within the organizational
environment environment
He sees a business opportunity, obtains the He transforms an idea into reality by
necessary inputs and starts a business focussing on innovation and creativity in the
operation organizational environment.
He brings an organization into existence He brings about change in the existing state
of equilibrium of organization’s operations.
He starts a small business and grows it to a Once the business enters stagnation (not
large business house moving), he re-energizes entrepreneurship
within large organizations.
An entrepreneur begins his business with a An intrapreneur sets up his enterprise after
newly set up enterprise. working someone else’s organization
As an entrepreneur establishes new business, An intrapreneur establishes his business after
so he does not possess any experience over gathering experiences through working in the
the business. other organizations.
An entrepreneur himself raises funds Funds are not raised by the Intrapreneur.
required for the enterprise.
Entrepreneur bears the risk involved in the An intraprenuer does not fully bear the risk
business. involved in the enterprise.
An entrepreneur is independent in his An intraprenuer is dependent on the
operations entrepreneur, i.e. the owner.

Both the entrepreneur and intrapreneur are innovators and both perform the function of the
organisation and management. But the contexts within which the two operate and the degree of
risk they bear are different.

While companies admire an intrapreneur who is an independent thinker, being too independent
could cause problems. The biggest difference between intrapreneurship and entrepreneurship,
according to Pinchot, is that an intrapreneur has to deal with authority figures. Intrapreneurship
(entrepreneurship within an existing business structure) can also bridge the gap between science
and the marketplace.

Existing businesses have the financial resources, business skills, and frequently the marketing
and distribution systems to commercialize innovation successfully. Yet, too often the
bureaucratic structure, the emphasis on short-term profits, and a highly structured organization
inhibit creativity and prevent new products and businesses from being developed.

Corporations recognizing these inhibiting factors and the need for creativity and innovation have
attempted to establish an intrapreneurial spirit in their organizations. In the present era of hyper
competition, the need for new products and the intrapreneurial spirit have become so great that
more and more companies are developing an intrapreneurial environment, often in the form of
strategic business units (SBU).

Difference between Entrepreneurship and Small Business Management

A small business is “One which is independently owned and operated and not dominant in its
field of operation.” The term entrepreneur and small business owner sometimes are used
interchangeably. Although some situations encompass both terms, it is important to know their
differences. Small businesses are:
 • Independently owned and operated
• Not dominant in their fields
• Usually do not engage in many new or innovative practises
• They may never grow large and the owners may prefer a more stable and less aggressive
approach to running these businesses. In other words, they manage their businesses by
expecting stable sales, profits and growth.

On the other hand entrepreneurial ventures are those for which the entrepreneur’s principal
objectives are innovation, profitability and growth. Thus, the business is characterized by
innovative strategic practices, and sustainable growth. Entrepreneurs and their financial backers
are usually seeking rapid growth and immediate profits. They may even seek the sale of their
businesses if there is the potential for large capital gains. Thus, entrepreneurs may be viewed as
having a different perspective from small business owners on the development of their firms.

Difference between an Entrepreneur and Small business owner

• The majority of small business owners do not innovate or seek out change in a continuous
or purposeful way. Most small businesses are founded on existing ideas and practises.
They do not necessarily attempt to innovate or seek out change but base their businesses
on hopes of increased consumption of the same products or services also on offer
elsewhere.

• Many small firms lack the creative spirit as majority of start-ups are based on established
industries. There seems to be a natural tendency to play safe, staying with known
business areas when considering a new business.

• Once established, small firms can lack innovation. Owner-managers are invariably close to
the day-to-day problems of their businesses as they grow –often too close to see the
opportunities or the need for change.

SMALL BUSINESS ENTREPRENEURSHIP

A small business can be defined as one An entrepreneurial venture is characterized
that is ‘independently owned, operated and as an organization engaged in pursuing
financed.’ opportunities.
The small business is characterized as having The entrepreneurial venture pursues growth
less than 100 employees (U.S.). and profit.
The small business is not oriented towards new The entrepreneurial activity is motivated by
or innovative practice; new start- ups; and job innovation and seeks out new opportunities in
creation.. the environment.
Small businesses are not dominant players in The venture is characterized by new start-ups
the industry. where ideas propel the new business.
Owners may tend to prefer stability Entrepreneurial ventures have greater
therefore the small business is less likely to potential for becoming big employers based on
grow. growth and profit motives.

Don’t confuse entrepreneurship with running a business. Every person launching a business is
not an entrepreneur. A businessman’s son taking over his established family business or starting
another factory in neighbouring town is no entrepreneur because he is well trained in matters of
that business by virtue of constant exposure since childhood. He has support of family and
friends in terms of finance and advice should going gets tough. With his training, professional
and personal contacts and financial backing, risk element and uncertainty are almost missing in
such business. Whereas, a farmer’s son, venturing to open a grocery or even ‘pan shop’ is an
entrepreneur because he is stepping into an uncharted territory of which he has little/no training
and therefore bears considerable risk.

Entrepreneurs are people that notice opportunities and take the initiative to mobilize resources
to make new goods and services.

Intrapreneurs ( also called corporate entrepreneurs)also notice opportunities and take initiative
to mobilize resources, however they work in large companies and contribute to the innovation of
the firm. Intrapreneurs often become entrepreneurs.

Entrepreneurs are the dynamic forces behind the planning and launching of new business
enterprises. They may be involved in all aspects of a company throughout its life span, beginning
with the raw startup stage, when the venture is little more than an idea. They handle issues
ranging from the company's product design to determining the most efficient production methods
and even finding the company's first customers.

A small-business manager is someone who operates a company that has survived the startup
stage. His goal is to keep the company growing and operating efficiently. In some cases the
founder/entrepreneur may bring in a skilled small-business manager to build the company into a
larger entity. He may recognize that his creative vision can take the company only so far, and
having an experienced manager on board to direct day-to-day operations will allow the business
to continue to grow.

CHARACTERISTIC ENTREPRENEUR INTRAPRENEUR TRADITIONAL

S MANAGER
PRIMARY Wants freedom, goal Wants freedom and access Wants promotion
MOTIVES oriented, self reliant, to and
and corporate resources, goal other traditional
self motivated oriented and self corporate rewards
motivated, but power
also responds to corporate motivated,
rewards and recognition.
TIME Uses and goals of 5 to End goals of 3 to 15 Responds to quotes
ORIENTATION 10 years, depending on the and
year growth of the type of budgets ; to weekly,
business venture; urgency to meet monthly, quarterly,
as guides; takes action self and
how imposed and corporate annual planning
to next step along the time horizons; and to the
way tables next
promotion or
transfer,
TENDENCY TO Gets hand dirty; may Gets hands dirty; may Delegates action;
ACTION upset know supervising and
employee by suddenly how to delegate but when reporting
doing their work, necessary, does what takes most energy,
needs to
be done,
SKILLS Knows business Professional management Professional
intimately; more ; management
business often business school ; often business
acumen than trained; school trained; uses
managerial or uses abstract analytical abstract analytical
political skills; often tools, tools, people-
technically trained if people-management and management and
in political skills, political skills,
technical business;
may
have had profit and
loss
responsibility in the
company,
ATTITUDE Self confident, Sees others being in Self confident and
TOWARDS optimistic charge of courageous; many
COURAGE AND and courageous, his or her destiny; can be are cynical about the
DESTINY forceful and ambitious but system but
may be fearful of others optimistic about
ability to do him or her in, their ability to
outwit it.

FOCUS OF Primarily on Both inside and outside; Primarily on events

ATTENTION technology sells inside corporation,
and marketplace, insiders on needs of
venture and market place
but also focuses on
customers.
ATTITUDE Likes moderate risk; Like moderate risks; Cautions,
TOWARDS RISK invests heavily but generally
expects not afraid of being fired,
to succeed, so sees
little personal risk,

USE OF Creates needs; creates Does own market Has market studies
MARKET products that often research and done
RESEARCH cannot initiative market to discover needs
be tested with market evaluation, and
research; potential like the entrepreneur. guide product
customers do not yet conceptualization,
understand them;
talks to
customers and forms
own
opinion.

Types of Entrepreneurship ​

1. Lifestyle Entrepreneurship

Lifestyle entrepreneurs are known for organizing their work and business activities around their
own lifestyle goals. These goals often including flexible hours, fulfilling work, spending time
with family and friends, hobbies, charity work, or creative pursuits. For example tour guides or
dance instructors. The central characteristic of lifestyle entrepreneur is the attempt to create
profit from personal passion. If for example, an individual has a passion for the internet he/she
may start a site from which shoppers can shop online.
Making money is still important to lifestyle entrepreneurs (because they are still business
professionals) but "enough" money is often more important than the more traditional capitalist
pursuit of wealth.
A lifestyle entrepreneur places passion before profit when launching a business in order to
combine personal interest and talent with the ability to earn a living. Many entrepreneurs maybe
primarily motivated by the intention to make their business profitable in order to sell to
shareholders. In contrast, a lifestyle entrepreneur intentionally chooses a business model
intended to develop and grow their business in order to make a long term, sustainable and viable
living working in a field where they have a particular interest, passion, talent, knowledge or high
degree of expertise. A lifestyle entrepreneur may decide to become self-employed in order to
achieve greater personal freedom, more family time and more time working on projects or
business goals that inspire them.
Lifestyle entrepreneurs are becoming increasing popular as technology provides small business
owners with the digital platform needed to reach a large global market. Younger lifestyle
entrepreneurs, typically those between 25 and 40 years old are sometimes referred to as treps.
Features of Lifestyle Entrepreneurship:

Characteristics of lifestyle entrepreneurship include:

- An entrepreneurial process motivated by quality of life rather than growth. The main
reason for existence is lifestyle with limited growth focus.
- The undertaking of a lifestyle entrepreneurship orientation may result in the
underutilization of resources.
- Management activities in lifestyle entrepreneurship may be characterized as irrational.
- There is a lack of focus on marketing and product development.
- There is a failure to capitalize on information and communication technology opportunities
in the market. The lifestyle entrepreneur may be unprepared for external threats.
- According to Komppula (2004), lifestyle entrepreneurship is motivated by survival and the
need to maintain the way of life.
- Examples of lifestyle entrepreneurship ventures include: ‘mom and pop stores’, gas
stations, small retail stores and mini marts.
- Investment in fixed assets is modest.
- Owners tend to invest long hours of work in the venture.
- Lifestyle ventures tend to have a high risk of failure and profits from reselling the business
tends to be low

2. Survival Entrepreneurship

The process of starting businesses to supply or supplement income. The basic goal of this
venture activity is to survive and meet the venture’s financial obligations. Many startup ventures
engage in survival entrepreneurship where their long term goal is to stay in business.

Survival entrepreneurship is characterized by:

- Cutting costs
- Laying off employees
- Employment freeze
- A mindset of preservation of the present state of affairs
- A fear of committing to future plans
3. Dynamic Growth Entrepreneurship

The process of being motivated to create jobs and wealth. This is the type of entrepreneurship
where the business is intended to generate significant sales and rapid growth. The entrepreneur’s
vision is to build a large business or even an empire. This involves lots of planning and the
development of detailed plans.
Characteristics of Dynamic Growth Entrepreneurship:

▪ Goal is maximum profit and growth.

▪ Concentrated on pushing envelope and growing as large as possible.
▪ Focus on innovation
4. Speculative Entrepreneurship
Ludwig von Mises saw entrepreneurship as speculative uncertainty-bearing. Mises stated that all
action by definition is entrepreneurial in the sense that it aims to achieve ends in an uncertain
future. Actions are future-oriented and uncertain, are subject to profits/losses, and the risk of
losing capital. They therefore include an entrepreneurial element.
​ ​
Speculative Entrepreneurs –these are entrepreneurs those who seek to exploit fleeting market
opportunities.

Somewhere in the world right now there are hundreds of entrepreneurs furiously working on a
new spin on Pokemon Go, the runaway success app from Nintendo that skyrocketed their stock
24% overnight, attracting more users than Tinder in a single day.

Speculative entrepreneurs push their chips towards big opportunities that they have little control
over, but seem to be aligned with macro trends and cultural interest. They are inclined to follow
and exploit herd-like behavior, promising new technologies, or up and coming fads.
These entrepreneurs are perfectly fine not having control over the market. They typically operate
on a much, much shorter timeframe—they think in months versus years. They usually do not
want to build a self-sustaining business; instead, they are seeking to dive head first into an
opportunity, reap the reward, and get out and onto the “next big thing” quickly.
Investment decisions based on the hope and expectation there will be a profit, but no firm
evidence that this will be the case. As a general rule, the more speculative the venture, the
greater the reward should be, commensurate with the risk taken.

Entrepreneurs may also be categorized as:

• Opportunity-based entrepreneur- this is a person who spots and seizes an opportunity to

achieve profit.
• Necessity-based entrepreneur- this is an individual who is left with no viable option to
earn a living. There is no choice but to seek the entrepreneurial route. It is also referred to
as the self employed entrepreneur.

Cultural diversity of Entrepreneurship

Diversity refers to groups of individuals of varied race, culture, gender, ethnicity, sexual
orientation, social background, age, disability, political beliefs and other traits.

Cultural diversity refers to the existence of a variety of cultural or ethnic groups within a

society. Diversity is nothing more than a difference from the majority. In any culture there is a
majority and many minorities. Culture is a set of norms that set standards for a society of what is
acceptable behaviour

Anyone male or female, young or old or in between, of any race, creed or class has the potential
to become an entrepreneur. Cultural diversity has increased significantly leading to a greater
variety among participants in the entrepreneurial sector.

Elements of cultural diversity that must be taken into consideration when doing business
are:

• Youth & Entrepreneurship-Barrington and Ireland (2012) indicate that although there is a
drop in new entrepreneurial activity for a particular age bracket, there is still a number of
young people who remain strongly interested in entrepreneurship. Statistics produced
identified a significant growth in entrepreneurship from the level of interest shown from
starting a business to entrepreneurial education in school. The entrepreneurship of young
people is particularly valuable for their willingness to think innovatively and take advantage
of the possibilities inherent in ICT.

One potential way of integrating young people into the labour market is to increase youth
entrepreneurship. Becoming an entrepreneur potentially offers benefits to the young person
through deepening their human capital attributes (self-reliance, skill development) and increasing
their levels of happiness. It also provides societal benefits. Entrepreneurs create jobs, increase
innovation, raise competition and are responsive to changing economic opportunities and trends.
Entrepreneurship offers other positive externalities. A young person setting up a new business
may provide ‘demonstration’ or learning externalities in that they may act as a role model for
other young people. This may be particularly advantageous in deprived communities because
setting up a new business – especially if it goes on to be successful – may signal that
entrepreneurship is a mechanism for helping disadvantaged people break out of social exclusion.
Indeed, one of the reasons why youth entrepreneurship is so attractive is that it offers an
indigenous solution to economic disadvantage. Youth entrepreneurship is also attractive to policy
makers because of the high rates of latent entrepreneurship amongst young people. The
entrepreneurial outcomes of youth entrepreneurs are often explained by the presence of market
failures, push and pull factors and a lack of human, social and financial capital.

• Gender and Entrepreneurship- When we talk about masculine or feminine cultures, we are
not talking about diversity issues. It is about how society views traits that are considered
masculine or feminine. This value dimension refers to how a culture ranks on traditionally
perceived “masculine” values: assertiveness, materialism, and less concern for others. In
masculine-oriented cultures, gender roles are usually crisply defined. Men tend to be more
focused on performance, ambition, and material success. They cut through an independent
persona, while women cultivate modesty and quality of life. Cultures in Japan and Latin
American are examples of masculine-oriented cultures.

In contrast, feminine cultures are thought to emphasize “feminine” values: concern for all, an
emphasis on the quality of life, and an emphasis on relationships. In feminine-oriented cultures,
both gender swap roles, with the focus on the quality of life, service, and independence. The
Scandinavian cultures rank as feminine cultures, as does cultures in Switzerland and New
Zealand. The United States is actually more moderate, and its score is ranked in the middle
between masculine and feminine classifications. For all these factors, it is important to remember
that cultures do not necessarily fall neatly into one camp or the other.

Women play a major role in entrepreneurship, although feminine entrepreneurship is lower than
masculine entrepreneurship. However, the distance between both entrepreneurship rates (male–
female) varies across countries because of the influence of different roles and stereotypes on
entrepreneurial behaviour.
• Family and Entrepreneurship-These ventures make huge contributions to the economy of
small states through job creation, innovation and embedding of family values in their
operations. They are the immediate source of funds, advice and encouragement for young
entrepreneurs who are often following in the footsteps of their parents or grandparents.
Family businesses are an integral part of our economy. 90 percent of U.S businesses are
family owned.

• Ethnicity and Entrepreneurship- Entrepreneurship is not only about the job creation, but
also about enhancing upward mobility, developing social leadership, increasing
individuals’ self-confidence by enabling them to become active agents of their own
destiny, increasing the social cohesion of ethnic communities, and revitalising streets and
 neighbourhoods through innovation of social and cultural life. Ethnic entrepreneurship
has not played a role in the strategy of cities to support the employment and societal
integration of immigrants into local communities.

The ethnic and socio-cultural make-up of many advanced economies have significantly changed
as flows of long-distance migration from ever more locations increased in the second half of the
twentieth century. Immigrants from both developed and less-developed countries moved to
advanced economies, embodying the complex process of globalisation in a very palpable sense.
These two highly visible aspects of globalisation – the international mobility of capital and
labour – are often directly related as immigrants themselves introduce their products and services
to far-off places. They start businesses in their countries of settlement and become ‘self-
employed’, ‘new entrepreneurs’, ‘immigrant entrepreneurs’ or ‘ethnic entrepreneurs’.

Importance of ethnic entrepreneurship

The self-employment of immigrants is (or can be) important for several reasons. This is first of
all related to the fact that they play a different role from immigrant workers.

• By starting their own business, ethnic entrepreneurs create their own jobs. This enables
them to circumvent some of the barriers they may encounter in looking for a job.
Immigrants from less-developed countries were particularly likely to come up against
these obstacles. They may lack or be felt to lack educational qualifications; they may not
have sufficient access to relevant social networks for transmitting information on
vacancies, or local employers may simply discriminate against them. Becoming self-
employed does not mean all these barriers have become irrelevant, but entrepreneurs
seem to be less vulnerable.

• If they are successful, ethnic entrepreneurs can create jobs for others as well. This can
benefit relatives, friends and acquaintances and, more generally, co-ethnics, as social
networks are often interfaced for information on the recruitment of new workers in small
firms. Creating jobs – even poor jobs – helps alleviate unemployment among immigrants.
The same holds for providing apprenticeships, which in some countries is seen as an
important vehicle for a labour market career. This does not exclude, of course, the
creation of jobs for people from other ethnic groups, including the native mainstream.

Ethnic entrepreneurs can also contribute different forms of social capital to ethnic immigrant
communities. Because of their links to suppliers and customers, ethnic entrepreneurs can be
useful in constructing bridges to other networks outside the inner circle, thus improving chances
of upward mobility.

• Religion and Entrepreneurship Religious economy refers to religious persons and

organizations interacting within a market framework of competing groups and ideologies.
An economy makes it possible for religious suppliers to meet the demands of different
religious consumers. By offering an array of religions and religious products, a
competitive religious economy stimulates such activity in a market-type setting. The idea
of religious economy frames religion as a product and as those who practice or identify
with any particular religion as a consumer. However, when the idea of belief is brought
into the equation, this definition expands, and ideology affects the "product" and who
"consumes" it. When examining depictions of religious identity in a global world, it is
easy to see how ideology affects the religious economy.77

Religion impacts many different areas of a person’s life, such as the family; politics, and gender
roles. Though a few strong perspectives have emerged in the area of work and religion, this
relationship has been marginalized by sociologists. Work is something that plays a central role in
the everyday lives of people. Entrepreneurial behaviour as a particular kind of work has
increased and can be seen as the driving force behind the capitalist system. Entrepreneurs,
articulate a relationship in which their faith frames their entrepreneurial activity. The
entrepreneurs described a tension that existed between their previous jobs and their faith due to
conflicting values. In setting up their own businesses, they strove to create a work environment
which focused on reflecting and incorporating these values. The entrepreneurial activity is
shaped by the need for these entrepreneurs to reinterpret their work in religious terms, ending the
tension between them between faith and work

Mistakes of Entrepreneurs
• Human Resource (HR)/Management failures-this includes lack of leadership, lack of
training and expertise of employees, lack of judgement and knowledge, lack of experience as
well as improper allocation of human resources within the organization

• Marketing failure-Marketing challenges include locating the right market, marketing the
firm’s products and services effectively, and pricing the product or service appropriately. It
also includes weak marketing strategy; uncontrolled growth; poor location; incorrect pricing.

• Poor operations management – The manager lacks the ability to operate a small business. In
order to be effective the entrepreneur must possess good management skills in such areas as
planning, organizing and directing the day-to-day operations of the business.

• Lack of experience – Many owners start businesses in industries in which they have no
experience.

• Poor financial management/financial failures – Many owners start with too little money
and with little or no understanding of financial spreadsheet applications. A business that has
poor accounting systems or problems in the area of purchasing and inventory control will
soon run into financial problems. It is essential to manage the company’s cash flow and keep
track of the money that flows in and out of the business.

• Over-investing in fixed assets – Owners who over-invest in fixed assets may find themselves
with no access to funds for working capital or expansion.

• Poor credit practices – Owners often sell on credit to meet (or beat) the competition and find
that they lack the additional working capital required or the ability to collect on accounts.

• Failure to plan – The lack of a strategic plan to guide the business in the long run.

• Unplanned and uncontrolled growth – Growth is natural and healthy, but unplanned growth
can be fatal to a business.

• Inappropriate location – Owners who choose a business location without proper analysis,
investigation, and planning often fail. Too often, owners seek “cheap” sites and locate
themselves straight into failure.

• Lack of inventory control – Although inventory is typically the largest investment for the
owner, inventory control is one of the most neglected duties.
• Inability to make the “Entrepreneurial Transition” – Can we learn to empower others to
make decisions and act independently?

• Failure as a natural part of the entrepreneurial process

Factors that Contribute to the Success of Entrepreneurs

The following are ways in which an entrepreneur could safeguard his/her success:

• Know your business in depth-this entails knowing exactly what your business is about. Know
the market, industry in which you will operate etc. As an entrepreneur you will be playing
various roles and to enhance your chances of success a clear and definitive knowledge of
what your business is about will assist you in achieving that.

• Develop a solid business plan-a comprehensive business plan is crucial for a startup business.
It defines the entrepreneur’s vision and serves as the firm’s resume. While there are various
reasons for writing a business plan such as to attract investors and get financing, attract
employees etc. a business plan can help an entrepreneur to allocate resources, handle
unexpected problems and make good business decisions.

• Manage financial resources-it is imperative for entrepreneurs to manage their financial

resources as they need to be aware of money coming in and out of the business. The
entrepreneur will also need to allocate these resources to various areas of the business and
thus, without good management will not be able to properly position the company in order to
capitalize on certain opportunities that may present themselves or come about when he or she
least expect them. Also improper management of finances can lead to failure to pay
suppliers, employees and the company’s bills on time which can affect the entire running of
the business.

• Understand financial statements-financial statements are used to inform both internal

(employees) and external users (suppliers, investors etc) of how well the business is
performing. If the entrepreneur does not understand the financial statements then he or she
will be in a position where mistakes can be made as well as negatively affect his inability to
obtain additional funding or attract investors as they will not invest in a company where a
manager or owner cannot state or explain what each figure mean or its impact on the
cashflow of the business. This can discourage potential investors from investing in the
business.

• Manage people effectively-Without excellent management skills the entrepreneur will have
the uphill battle of getting employees to do what they need to get done to keep the company
up and running.

• Know your strengths and weaknesses-this is also vital to the success of a business. By being
aware of your strengths and weaknesses you will be able to decide where you need help and
either seek assistance or hire personnel (experts) in that area.
 TRUE FALSE
1. To be a successful entrepreneur, all you really need is a
good idea.

2. Successful entrepreneurs takes the necessary action to

make their dreams come true by limiting the amount of
risk in their lives, and by not tolerating mistakes.
3. Successful entrepreneurs develop their companies by
precisely defining their product, resources and market as
well as the objectives of their activities.
4. Successful entrepreneurs write their business plans and
stick to them. Change is dangerous to a growing
company.
5. Successful entrepreneurs concentrate on completing small
tasks first, leaving them more time to concentrate on
large matters.

6. Successful entrepreneurs spend very little time talking to

other entrepreneurs. They keep information to
themselves.
7. Successful entrepreneurs look ahead to determine what
their next move will be.
8. The successful entrepreneur doesn’t have time to meet
people for breakfast or lunch, and makes it a rule never
to mix business with pleasure.
9. Successful entrepreneurs employ people who contribute
directly to achieving the objectives of the company.
10. The entrepreneur’s positive attitude is an important
success factor.

Drawbacks of Entrepreneurship
- Uncertainty of income
- Risk of losing your entire investment
- Long hours and hard work
- Lower quality of life until the business gets established
- High levels of stress
- Complete responsibility
- Discouragement

Myths/Misconceptions of Entrepreneurship

• Entrepreneurship is Easy.

Entrepreneurship is not easy! It takes commitment, determination, and hard work. And even
if you have these qualities, it still isn’t effortless! Entrepreneurs often encounter difficulties
and setbacks, but the successful entrepreneurs are those who push on in spite of the
difficulties.
• All entrepreneurs are rich

Even though you do have some entrepreneurs who are rich you also have some who are not.

• Entrepreneurs are born not made

According to this long prevalent myth, the characteristics of entrepreneurs cannot be taught
or learned, they are innate traits with which a person must be born. Today, however, the
recognition of entrepreneurship as a discipline is helping to dispel this myth. Like all
disciplines, entrepreneurship has models, processes and case studies that allow the topic to be
studied and the traits acquired by training and development.

• All you need is money to start

It is true that the venture needs capital to survive, it is also true that a large number of
business failure occur because of lack of adequate financing. Yet having money is not the
only bulwark against failure. Failure due to lack of proper financing is often an indicator of
other problems; managerial incompetence, lack of financial understanding, poor investment,
poor planning etc.

• Successful entrepreneurship needs only a great idea

A great idea may stay just that if it is not backed by adequate finance, demand for product
and most importantly, good management. Venture capitalists say bad management is the main
cause of failures among small businesses. ‘The quality of management will determine the
success/failure of the venture’.

• All you need is luck to be an entrepreneur

“being at the right place at the right time” is always an advantage but “luck happens when
preparation meets opportunity” is equally an appropriate adage. Prepared entrepreneurs who
seize an opportunity when it arises often appears to be “lucky”. They are in fact simply better
prepared to deal with situations and turn them into successes. What happens to be luck is
really a combination of preparation, determination, desire, knowledge and innovativeness.

• Entrepreneurs are extreme risk takers

Although it may appear that an entrepreneur is “gambling” on a wild chance, the

entrepreneur is usually working on a moderate or ‘calculated’ risk. Most successful
entrepreneurs work hard –through planning and preparation to minimize the risk involved
and better control the destiny of their vision.
• Entrepreneurs are doers, not thinkers

Although it is true that entrepreneurs tend towards action, they are also thinkers. Indeed they
are often very methodical people who plan their moves carefully. The emphasis today on the
creation of clear and complete business plans is an indication that “thinking” entrepreneurs
are as important as “doing” entrepreneurs.

• Successful Entrepreneurship Needs Only a Great Idea.

Having a great idea is only part of the equation for successful entrepreneurship. Understanding
the demands of the different phases of the entrepreneurial process, taking an organized approach
to developing the entrepreneurial venture, and coping with the challenges of managing the
entrepreneurial venture are also key ingredients to successful entrepreneurship.

• Entrepreneurship is a Risky Gamble.

Although entrepreneurs aren’t afraid to take risks, entrepreneurship involves calculated risks, not
unnecessary ones. In fact, there are times when successful entrepreneurship means avoiding or
minimizing risks.

• Entrepreneurship is Found Only in Small Businesses.

Many people have the mistaken idea that entrepreneurship is associated only with small
organizations. The truth is that entrepreneurship can be found in any size organization. On the
other hand, just because an organization is small doesn’t automatically make it entrepreneurial.

• Entrepreneurs are academic and social misfits

This myth results from people who have started successful enterprises after dropping out of
school or quitting a job. Long time ago, educational and social organizations did not recognize
the entrepreneur.

Reality: The entrepreneur is now viewed as a highly educated professional, who is well versed
and sociable with excellent communication skills, and strives in economic development of the
community & the country.

Factors Feeding the Entrepreneurship Fire

• Entrepreneurs as heroes
• Entrepreneurial education
• Demographic and economic factors
• Shift to a service economy
 • Technology advancements
• Independent lifestyles
• E-commerce and the Internet
• International opportunities

Benefits/importance of entrepreneurship

• Entrepreneurship allows one to undertake different forms of self-employment. ​

• Entrepreneurs are their ​own bosses giving them an opportunity to get more ​job
satisfaction and flexibility of the work force.

• Encouragement ​of the ​processing of ​local materials into finished goods for
domestic consumption as well as for export
• Healthy competition encourages higher quality products in the market thereby making more
goods and services available to consumers.

• Development of new markets

​
• Promotion of the use of modern technology in small-scale manufacturing to enhance higher
productivity.

• Freedom from dependency on the jobs offered by others

​
• Possibility of achieving great accomplishments
​
• There may be tax advantages

There is also the opportunity to: ​

• Create your own destiny
• Make a difference
• Reach your full potential
• Reap impressive profits
• Contribute to society and to be recognized for your efforts
• Do what you enjoy and to have fun at it
​
Pitfalls of Entrepreneurship
• Know your business in depth
• Develop a solid business plan
• Manage financial resources
• Understand financial statements
• Learn to manage people effectively
• Set your business apart from the competition
• Maintain a positive attitude

Putting Failure into Perspective

• Entrepreneurs don’t fail—the venture fails.
 • There are no such things as failures, only results.
• Always look to turn a negative situation into a positive opportunity.
• Have no fear of failure and be sure to have a contingency plan.
• The only people who never fail are those who never do anything or never attempt
anything new.
• The successful entrepreneur understands the meaning of these clichés and knows how to
deal with adversity in a proactive and positive manner.

ETHICS & SOCIAL RESPONSIBILITY OF ENTREPRENEURS

Business Ethics - The study of behaviour and morals in a business situation. Entrepreneurship is
not an easy lifestyle. The daily stressful situations you must develop a balance between ethical
issues and social responsibility. Entrepreneurs tend to depend on their own personal value
system because they do not have a support group.

The increase of internationally orientated business has impacted ethics in dealing with different
cultures. Individual morality and behavioural habits are related and identified as an essential
quality of existence. The central question is, “For whose benefit and at what expense should the
firm be managed?” If resource deployment is not fair then a stakeholder in the firm may be
exploited. Think of the entrepreneurial process as a tool to achieve outcomes for the benefits of
others rather than to the detriment of others.

Noted Regional Entrepreneurs

Entrepreneur Venture
Butch Stewart Air Jamaica, Appliance Traders Limited,
Sandals Hotel Chain and Breezes
The Issas Super Club, Hedonism I, II & III
Danny Melville Tropical Battery
The Matalons Mechala Group-Shoppers Fair Supermarket,
WICHON
Wayne Chen Superplus
Audrey Marks Paymaster
Mark Zuckerberg Facebook

Others:

Chris Blackwell, Marley Family, Eddie Grant, Arthur Lok Jack, Thalia Lyn, Vincent
Hosang, Audrey Marks, Joan Duncan, Aleem Mohammed, Anthony Sabga, Richard
Branson, Bill Gates, Reno Gajadhar, Jay Z, Oprah Winfrey, Steve Jobs, Hubert and helen
Bhagwansing, James Husbands, Allen Chastanet, Adrian Augier, Ronald Ramjattan,
Edward Beharry, Sir Charles Williams and Yesu Persaud
 MODULE 2 – THE ENTREPRENEURIAL PROCESS

The Entrepreneurial Process

The process of pursuing a new venture, whether it is new products into existing markets, existing
products into new markets, and/or the creation of a new organization.

Steps in the Entrepreneurial Process includes:

 1. Idea Generation
2. Opportunity Identification/ Recognition
3. Business Concept
4. Resources
5. Implementing and Managing the venture
6. Harvesting

1. IDEA GENERATION

(a) Idea generation is the process of generating, developing and communicating new ideas.
The following though cycle can be used as a guide; innovation, development and
actualization. Even with a wide variety of sources available, coming up with an idea as the
basis for a new venture can still be a difficult problem. The entrepreneur can use several
methods to help generate and test new ideas. Some methods of generating ideas are:

Method Description Advantages Disadvantages

Brainstorming Encouraging as many One person’s idea can The process can be
options/alternatives as stimulate other ideas chaotic and it maybe
possible. necessary to lay
Results in an array of ground rules
No criticisms of the ideas
alternatives/options are
allowed

All ideas are recorded

for further discussion
and analysis

The issue must be

stated and understood
by all participants
Focus Group A structured grouping Provides a good way One person can
to screen ideas dominate discussion if
The group of 8 to 14 the moderator is not
participants is More structured than experienced in
simulated by comments brainstorming handling group
from other team participation
members in creatively
conceptualizing and Moderator can May not be the ideal
developing new encourage technique in dealing
product ideas to fulfil a participation with sensitive issues
market need. Group interaction can
generate more ideas
Individuals provide and discussion
information on
products

A moderator informs
on what is to be
examined by the group
Checklist methods Developing a new idea Can be used in Proper record keeping
through a list of related collaboration with is necessary
issues brainstorming
Can be closed ended
Series of questions Comprehensively
with a focal point deals with the issue
through a series of
The checklist should questions
meet the needs of the
 situation
Problem Inventory Uses individuals in a Useful in testing a new The idea generated
Analysis manner that is product idea may not reflect an
analogous (similar) to entrepreneurial
focus groups on Often effective since it opportunity
generating new product is easier to relate
ideas. However, known products to
instead of generating suggest problems and
new ideas themselves, arrive at a new product
consumers are idea than to generate
provided with a list of an entirely new idea
problems in a general by itself
product category. They
are then asked to The group maybe able
identify and discuss to generate new ideas
products in this based on existing
category that have the products and problems
particular problem.
Scenario Thinking A strategic planning Provides alternative Some scenarios may
tool for making long views of the future lack scope
term plans
Can be creative yet Scenario planners
Different scenarios structured should be well
allow us to explore experienced
how to deal with a Encourages
variety of situations in knowledge exchange
the future in understanding the
future
The Notebook Ideas are generated by All members can Time consuming
Method group members who participate
regularly record the Can lead to too many
findings Can be adapted for use ideas to assess
on a computer

Team members build

on each other’s ideas
Reverse A group that focuses on Generate ways to Should not be used if
Brainstorming the negatives eg overcome potential individuals are not
finding problems or problems through able to conceptually
faults with a particular discussion reverse the problem
suggestion or idea.
Extends the use of
Similar to brainstorming to bring
brainstorming, but out more ideas.
criticism is allowed
and encouraged as a
way to bring out
possible problems with
the ideas

Identify what is wrong

with the idea
Delphi Methodology Method used to explore Used to move group Difficulty in
an issue with a group toward consensus developing an
of people usually accurate questionnaire
experts in the field Benefits from the to initiate the process
ideas of individuals in
the group
Gordon Method Method of developing Can result in many Dependent on the
new ideas when new ideas being competencies of the
individuals are presented group
unaware of the
problem
 The general concept is
presented and the
group responds with a
number of ideas.
Free Association Developing a new idea Useful with other Need proper
through a chain of methods such as management to avoid
word associations brainstorming being time consuming
or lacking in focus

METHODS OF GENERATING BUSINESS IDEA INCLUDE:

• Brainstorming
• Focus Group
• Problem Inventory Analysis

METHODS OF SOLVING PROBLEMS ARE:

• Brainstorming
• Reverse brainstorming
• Gordon Method
• Checklist Method

Screening ideas and selecting among options/alternatives

It is important to assess whether the idea will meet one’s aspirations as an entrepreneur. He/she
needs to evaluate whether the goals will be achieved through the option or idea that is chosen.

Screening ideas is an important process for a number of reasons. It is necessary to consider the
following:

• Will the idea meets the goals that the entrepreneur is trying to meet?
• Each idea will be screened against its strengths and weaknesses and compared to that of
the other options
• Can the idea be realized with the existing level of technology and resources available to
the entrepreneur?
• Screening the idea helps to reduce the level of risk and uncertainty associated with the
idea.
• Entrepreneurs should consider the returns to be gained from that idea.

Evaluating ideas

Areas for consideration when evaluating ideas:

• Personal issues-capabilities, drive, passion; acceptance of failure; realistic; persistent;

knowledge about financial issues
• Market place issues-potential customers; competitive advantage; marketing mix issues;
competition
 • Feasibility study-a structured and systematic analysis of he idea
• Rate ideas-eg a scale of 0-5 on areas such as personal fit, risk level, funding short-term
potential, competition

After screening the idea, the entrepreneur can develop a short list of remaining ideas for deeper
evaluation and selection.

(a) How are ideas linked to opportunity

According to Coulter (2003, an opportunity is an optimistic possibility or positive trend. It can

also be a change that provides a distinct possibility for value creation. An idea is “a plan or
thought formed in the mind”. Consequently at the core of every opportunity there is a potential
idea. Ideas need to be screened and evaluated since not all ideas generated will be valuable.

How an idea is born out of an opportunity?

• Opportunity identification-eg. Social changes where there is an increase number of

women entering the workforce
• Idea generation process-need for makers of women clothing; need for retailers of women
working suits and accessories; niche market for plus size or petit; day care facilities.
• Decision to start a new business venture

2. OPPORTUNITY IDENTIFICATION

The stage in which the entrepreneur look for needs, wants, problem and challenges that are
not yet being met or dealt with effectively.

Difference between a business opportunity and opportunity recognition

A business opportunity is the possibility for new profit either through; the founding and
formation of a new venture or the significant improvement of an existing venture. Opportunity
recognition can be considered as an activity that can occur both prior to establishment of a firm
and also after establishing of a firm (that is throughout the life of the firm and throughout the life
of the entrepreneur).

An entrepreneur in seeking a business opportunity needs to take the following factors into
consideration; changing demographics, emerging markets, new technologies and social changes.

• Changing demographics-demographics is the study and categorization of people based on

factors such as income level, education, gender, race, age and employment. In business
demographics is important because they help a company better target a market for its
products and thus, better utilize its marketing expenditures. For example, if a company is
using direct mail to market luxury products it will use demographic studies to find
neighbourhoods containing individuals with high incomes etc.

In the Caribbean, incomes are rising, literacy rates are increasing, more women are entering the
workforce and the population is generally getting older. With these wide and varied changes,
there are increasing opportunities for entrepreneurial ventures in the areas of education, women-
related businesses, childcare and child-support services, health and health care services
especially for older patients. Health and lifestyle services based on the growth in fitness and
nutritional needs.
• Emerging markets-the pace at which the business world is changing has offered
entrepreneurs opportunities in many non-traditional areas.

• New technologies-the introduction of computers and the internet has seen an exponential
explosion in entrepreneurial opportunities. Hardly any aspect of our lives in the modern
world has been untouched by the impact of new technologies: cable television,
communication technology and smart phones are just a few of the many areas of our lives in
which a vast number of entrepreneurial ideas have been created. These technologies continue
to open the door to new opportunities and continued technological developments.

• Social Changes-Social change is defined as “the changes people make to their behaviour that,
when taken collectively, benefit society”. Examples of social changes include more people
voting, recycling or donating to charity, reduced domestic violence, lower student drop-out
rates and increased entrepreneurship and social inclusion of the poor.

Opportunity Evaluation

The criteria for evaluating opportunities are:

1. Market issues-identifying a market niche for a product or service that meets an important
need for the customer. Market structure (number of sellers, differentiation in the product
or service, conditions of entry and exit, number of buyers etc.

2. Economic issues-capital requirement, time to breakeven and positive cashflow, profit to

be earned after tax.

3. Competitive advantage issues-variable and fixed costs (potential for being lowest cost
producer, entry barriers (product innovation, regulatory advantage etc)

4. Management issues-entrepreneurial team, industry and technical expertise, integrity etc.

A business idea A business idea are thoughts or concepts that come from creative thinking.
It is also a concept that can be used to make money. Usually it is centered on a product or service
that can be offered for money. An idea is the first milestone in the process of founding a
business. Every successful business started as someone’s idea.

Although a business idea has the potential to make money, it has no commercial value initially.
In fact, most business ideas exist in abstract form; usually in the mind of its creator or investor
and not all business ideas, no matter how brilliant they may seem, would end up being
profitable.

A business opportunity

An opportunity is a possibility that arise from existing conditions. It is also is a favorable set of
circumstances that creates a need for a new product, service, or business.

An opportunity has four essential qualities these are:

✓ Attractive
✓ Timely
✓ Durable
✓ Anchored in a product, service or business that creates or adds value for its buyer or end
 user.

For an entrepreneur to capitalize on an opportunity, its window of opportunity must be open.

a) The term “window of opportunity” is a metaphor describing the time period in which a
firm can realistically enter a new market.

a) Once the market for a new product is established, its window of opportunity opens, and
new entrants flow in.

b) At some point, the market matures, and the window of opportunity (for new entrants)
closes.

It is important to understand that there is a difference between an opportunity and an idea.

a) An idea is a thought, impression, or notion

b) May or may not meet the criteria of an opportunity.

c) Many businesses fail not because the entrepreneurs that started them didn’t work hard,
but because there was no real opportunity to begin with.

IDENTIFYING AND RECOGNIZING OPPORTUNITIES

a) Observing trends

The first approach to identifying opportunities is to observe trends and study how they create
opportunities for entrepreneurs to pursue. This includes taking the following into
consideration:

✓ Economic forces
These affect consumers’ level of disposable income. Individual sectors of the economy have
a direct impact on consumer buying patterns. For example, a drop in interest rates typically leads
to an increase in new home construction and furniture sales etc.

✓ Social forces
An understanding of the impact of social forces on trends and how they affect new product,
service, and business ideas is a fundamental piece of the opportunity recognition puzzle.

Some of the recent social trends that allow for new opportunities are the following:

✓ Family and work patterns

✓ The aging of the population
✓ The increasing diversity of the workforce
✓ The globalization of industry
 ✓ The increasing focus on health care and fitness
✓ The proliferation of computers and the Internet
✓ The continual increase in the number of cell phone users

Technological Advances

✓ Given the rapid pace of technological change, it is vital for entrepreneurs to remain on
top of how new technologies affect current and future opportunities. Once a technology
is created, products emerge to advance it. For example Real Networks are created to add
video capabilities to the Internet.

✓ Advances in technology frequently dovetail with economic and social changes to create
opportunities. For example creation of cell phones is a technological achievement, but
was motivated by an increasingly mobile population.

Political Action and Regulatory Changes

✓ Political action and regulatory changes also provide the basis for opportunities For
example: new laws create opportunities for entrepreneurs to start firms to help companies
comply with these laws.

b) Solving a problem

Sometimes identifying opportunities simply involves noticing a problem and finding a way to
solve it.These problems can be pinpointed through observing trends and through more simple
means, such as intuition, serendipity, or chance. Some business ideas are clearly gleaned
from the recognition of problems in emerging trends. Examples include:

✓ Symantec Corp. created Norton antivirus software to rid computers of viruses

✓ Process is sometimes less deliberate: individual may set out to solve a practical problem
and realize that the solution may have broader appeal

✓ At still other times, someone may simply notice a problem that others are having and
think that the solution might represent an opportunity.

✓ A “serendipitous discovery” is a chance discovery made by someone with a prepared

mind.

c) Finding Gaps in the Marketplace

✓ The third approach to identifying opportunities is to recognize a need that consumers

have that is not being satisfied—by either large, established firms or entrepreneurial
ventures. For Example, large retailers compete primarily on price by serving large groups
of customers with similar needs. They do this by offering the most popular items targeted
toward mainstream consumers. While this approach allows the large retailers
 to achieve economies of scale, it leaves gaps in the marketplace.

This is the reason that small clothing boutiques and specialty shops exist. The small
boutiques which often sell designer clothes or clothes for hard to fit people, are willing to
carry merchandise that doesn’t sell in large enough quantities for Wal‐Mart or JC
Penney to carry.

✓ There are also gaps in the marketplace that represent consumer needs that aren’t being
met by anyone.

3. BUSINESS CONCEPTS DEVELOPMENT

At this stage the entrepreneur develops a business plan which is a detailed proposal
describing the business idea.

a) Description of a business concept

The first move every entrepreneur takes in starting a new business should be in defining that
business concept so that it can be clearly understood and pursued. Starting a business may begin
with an idea; but it must expand into a concept that can be understood by potential investors and
future customers.
A business concept is a bridge between an idea and a business plan. It focuses one's thinking so
that the entrepreneur can identify the specifics of his/her proposed venture.

A clear business concept also allows the entrepreneur/founder to describe the specific nature of the
business to suppliers, customers, lenders, and resource team members. When describing his/her business
idea, the entrepreneur should answer the following questions:

a. What is my product/service?
b. What does my product/service do?
c. How is it different or better than other products/services?
d. Who will buy the product/service?
e. Why will they buy the product/service?
f. How will the product/service be promoted and sold/offered?
g. Who are my competitors?

Once the entrepreneur defines the business concept statement, the more detailed work of business
planning and implementation may begin.

A business concept may involve a new product or simply a novel approach to marketing or
delivering an existing product. Once a concept is developed, it is incorporated into a business
plan.

Sources of business concepts

Business ideas are all within you and within your environment. Some of these business ideas
emanate from analysis of market and consumer needs, while others emanate from a long research
process.

But the truth still remains that business opportunities abound. So if you are interested in starting
a business, but you do not know what product or service to sell, then below are sources of small
business concepts.

1. New Products (Invent a new product or service) –providing a new tangible product to a
niche market, a complimentary good to an existing product.
2. New Services-e.g. providing a unique activity /set of activities or experience

3. New Processes (Add value to an already existing product)- New processes include
enhanced processing techniques, new method of producing a good/service via specialized
machinery or activities. The uniqueness between raw wood and finished lumber is a nice
instance of putting a product through an additional process which maximizes its value, but
additional processes are not the only way that value can be added. You may as well add
services or combine the product with other related products.

4. New organizational Structures-e.g. virtual structure or flexible form

5. New sales or distribution channels-producers acting as intermediaries to push their

products; using online as well as physical setting to sell and distribute products.

6. New markets-eg. Sourcing new geographical area via online technology; introducing
product to new markets.

7. New development paradigm-e.g. creating new standards, new models new ways of doing
business such as shopping via websites and facilitating delivery to any part of the world.

4. RESOURCES
The stage in which the entrepreneur identifies and acquires the financial, human, and
capital resources needed for the venture startup, etc

a) Determine the required resources for a venture

The entrepreneur must determine the resources needed for addressing the opportunity. This
process starts with an appraisal of the entrepreneur’s present resources. Any resources that are
critical need to be differentiated from those that are just helpful. Care must be taken not to
underestimate the amount and variety of resources needed. The entrepreneur should also assess
the downside risks associated with insufficient or inappropriate resources.

The type of resources needed by an entrepreneur can be classified as; financial, physical or
human. These resources include:

✓ skilled employees
✓ general management expertise
 ✓ marketing and sales expertise
✓ technical expertise
✓ financing, distribution channels
✓ sources of supply
✓ production facilities
✓ licences, patent and legal protection.

Identifying and Acquiring Sources of Required Resources for a Venture

Financing is needed to start a business and ramp it up to profitability. There are several sources
to consider when looking for start-up financing. But first you need to consider how much money
you need and when you will need it.

The financial needs of a business will vary according to the type and size of the business. For
example, processing businesses are usually capital intensive, requiring large amounts of capital.
Retail businesses usually require less capital.

Major sources of financing:

Internal

Internal sources are those that one would acquire through personal resources or close relations.
They include:

• Equity: An ownership interest in a business. Equity financing-involves assigning part of

the equity of the new venture to the source of funding; these people or organizations become
part-owners of the new venture.

• It is also the process of raising capital through the sale of shares in an enterprise. Equity
financing essentially refers to the sale of an ownership interest to raise funds for business
purposes.

Sources of Equity financing

• Personal savings
• Family and friends
• Angels
• Initial public offering

Advantages of equity financing

• Equity financing doesn't have to be repaid. Plus, you share the risks and liabilities of company
ownership with the new investors. Since you don't have to make debt payments, you can use
the cash flow generated to further grow the company or to diversify into other areas.
Maintaining a low debt-to-equity ratio also puts you in a better position to get a loan in the
future when needed.
Disadvantages of equity financing
• By taking on equity investment, you give up partial ownership and, in turn, some level of
decision-making authority over your business. Large equity investors often insist on placing
representatives on company boards or in executive positions. If your business takes off, you
have to share a portion of your earnings with the equity investor. Over time, distribution of
profits to other owners may exceed what you would have repaid on a loan.

• Family & Friends These people believe in the entrepreneur, and they are the second easiest
source of funds to access. They do not usually require the paperwork that other lenders
require. However, these funds should be documented and treated like loans. Neither part
ownership nor a decision-making position should be given to these lenders, unless they have
expertise to provide. The main disadvantage of these funds is that, if the business fails and
money goes lost, a valuable relationship may be jeopardized.

External

External resources are secured through independent sources, could be individuals or

organizations. They include:

• Debt financing-involves a financial obligation to return the capital provided plus a schedule
amount of interest. Examples of debt financing include loans from bank or any other
financial institution.

• Venture Capitalists- people who work for organizations that raise money from large
institutional investors such as university endowments and company pension funds, and then
invest those funds in new firms. VCs are like bankers, but since they aren’t subject to strict
regulations as bankers, they take greater risks in making investments – organized as formal
businesses, they expect to reap 25– 30% annually and get more actively involved in the
ventures than bankers do. Venture capital firms are generally structured as limited
partnerships in which a fund is established for a fixed period of time, usually ten (10) years.

• Angel funding (An angel investor or angel (also known as a business angel or informal
investor or angel funder) is an affluent individual who provides capital for a business start-
up, usually in exchange for convertible debt or ownership equity).They act as advisers to
founders.

Angel investors are typically experienced professionals who can offer wisdom and guidance
to the entrepreneur and have the patience to wait for normal company maturation. Angels can
facilitate new business connections that help start-ups grow, and they can offer insights based
on deep knowledge of an industry. They provide support and motivation to entrepreneurs to
persevere when launching and growing a business inevitably becomes very challenging.

Angel investors are different from venture capitalists (VCs) in that VCs invest other people’s
money. Motivations are another important distinction between the two; angels are typically
interested in more than just receiving a financial return. Personal interest, the desire to give
back, and the thrill of being involved with an innovative company are just a few of the
reasons why people decide to become angel investors.

• Joint ventures -legal entity created by two or more businesses joining together to conduct a
specific business enterprise with both parties sharing profits and losses.
• Partnership A partnership consists of two or more people who share the assets, liabilities, and
profits of a business. The greatest advantage comes from shared responsibilities. Partnerships
also benefit by having more investors and a greater range of knowledge and skills.

There are two main kinds of partnerships, general partnerships and limited partnerships. In a
general partnership, all partners are liable for the acts of all other partners. All also have
unlimited personal liability for business debts.

In contrast, a limited partnership has at least one general partner who is fully liable plus one or
more limited partners who are liable only for the amount of money they invest in the partnership.

• Supplier financing (Outsourcing)- Outsourcing is a practice used by different companies to

reduce costs by transferring portions of work to outside suppliers rather than completing it
internally.

• Leasing-A lease is a contract outlining the terms under which one party agrees to rent
property owned by another party. It guarantees the lessee, the tenant, use of an asset and
guarantees the lessor, the property owner or landlord, regular payments from the lessee for a
specified number of months or years. Both the lessee and the lessor face consequences if they
fail to uphold the terms of the contract.

• Crowd funding- the practice of funding a project or venture by raising money from a large
number of people who each contribute a relatively small amount, typically via the Internet.

Various agencies have been established to offer credit to small businesses in Jamaica. These
include:

• Self-Start Fund (SSF) • National Development Foundation of Jamaica (NDFJ) • Enterprise

Development Trust (EDT) • Credit Organization for Pre-Micro Enterprises (COPE) • Agency for
the Selection and Support of Individuals Starting (ASSIST) • Credit Unions

New ventures tend to be financed by equity for two reasons:

1. Until ventures generate positive cashflow (profit) they are unable to make schedule
interest payments.

​
2. Debt financing at a fixed rate of interest encourages people to take risky actions because
if the risk don’t succeed the entrepreneur cannot lose any more of the funds he or she
originally put in the venture. As a result, downside loss is the same regardless of how
much risk he or she takes. However, because the entrepreneur pays the same amount of
interest on debt regardless of how well her venture does, she keeps all the returns from
the success.

• Government grants to finance certain aspects of a business may be an option. Also,

incentives may be available to locate in certain communities and/or encourage activities
in particular industries, barter, gifts, joint venture, partnership, supplier financing.
 • In Jamaica small businesses can access loan through JN Small Business Loan Ltd
(JNSBL) believes fully in the spirit and innovativeness of Jamaicans and is committed to
delivering affordable credit in a timely manner to assist entrepreneurs who have limited
access to credit from traditional banking sources to achieve their potential.

Human Resources

New ventures face serious obstacles with respect to attracting outstanding employees. As new
companies they are relatively unknown to potential employees and cannot offer the legitimacy or
security of established firms. Thus, they enter the market for human resources with
disadvantages. These can be overcome through the use of social networks that is hiring persons
they know either directly, from personal contact or indirectly through recommendation from
people they know and trust.

By hiring people they know (family members, friends, or individuals with whom they went to
school or worked in the past) entrepreneurs are able to acquire human resources quickly, without
the necessity for long and costly searches. Secondly, because they know the people they hire
either directly or indirectly, entrepreneurs can more easily convince these individuals of the value
of the opportunity they are pursuing. Other methods of acquiring human resources are, the
outsourcing of jobs, temporary staffing or contract employees.

Physical Resources

The planning of physical resources for a new business concept might include:

• acquiring appropriate location, identifying space requirements for the short and medium
term and finding suitable premises.
• Production plant and machinery, office furniture, telecoms and IT equipment, fixtures and
fittings etc.
• Storage facilities, vehicles needed for sales activities (delivery of goods)

Finding the right location for the business is very important. Apart from the internet-based
businesses and mail order companies which have no face-to-face contact with customers.
Businesses need to interact with the markets they serve, and so their location must be selected to
meet the needs of the market or community.

The type, size and location of premises required will be determined primarily by the nature of the
business activities that it will be used for. Some sole trader businesses may need no permanent
premises, for example, a mobile hairdresser or therapist who either visit clients in their homes or
may be able to work from home with just a small space for storage or a self-employed
professional consultant may also be able to from home, perhaps by converting a spare room into
an office, although in the longer term a small office in a commercial location might create a
better image in the eyes of the clients.

An engineering or manufacturing process would almost certainly be looking for premises with
panning consent for light industrial use, particularly if the production process involves noisy
machinery or creates dust or dirt.

A wholesaler would need to be in a fairly central location from which the customers could be
supplied and ideally with easy access to road networks, although the premises themselves could
be in a low-cost location. However, for a retail business, the location of the premises will be key
factor as the business will need either to be in a place where the customers already go, such as
shopping mall or in a place where it is easy and convenient for customers to get to.
It is also important for the location to be appropriate to the product or service being offered and
for the premises themselves to reflect the image that the business wants to project to its
customers. In addition to marketing factors that might require business to be located in a specific
area for easy access by customers and to create the appropriate image that the business needs,
there are a number of other practical and legal factors that can influence the choice of location
and type of premises. The nature of the business operations might necessitate a very specific
physical environment. For example, the need for hygiene, easy-to-clean and vermin-proof areas
for food preparation, specific temperatures for food storage or humidity controls for storing dry
goods.

​Legal Framework
An entrepreneur should be aware of various legal aspects for setting up and running of a small
business. The knowledge about the legal framework helps an entrepreneur in running business
successfully. Some of the legal considerations are as follows:

1. Intellectual Property: Any resource which gives a trade a commercial advantage is

called Intellectual
Property. The resources may be a formula, data, compounds, new processes, compiled
information, list of customers etc.

The Intellectual Property laws cover the following:

A. Trademark: A trademark is a distinguishing word, figure, symbol, design, numeral or a

combination of these that identify particular goods or services. The trademark gives the
proprietor the exclusive right to use the trademark in relation to the goods or services for
which it was registered. Trademarks can also be transferred with or without transmitting the
goodwill of the business. The trademarks can be established in the market through brand
building activities.

B. Copyright: The copyright laws protect the legal rights of a person for his or her work of
writing or authorship. This law prevents others from reproducing the work in any other way.
The intellectual property under copy right include:

• Literary work (books, articles, manuscripts etc.)

• Dramatic work (drama, dance choreography, costumes etc.)
• Musical work (lyrics, music, graphical notations etc.)
• Artistic work (drawing, painting, sculpture, photographs etc.)
• Cinematographic work (recoding, sound tracks, sound effects etc.)
• Computer work (programmes, tables, databases etc.)

C. Patents: A patent gives protection to the inventor of a new product/ process/ design to solely
use the copying/ selling/ using of the invention for a limited period of time. This right acts as
an incentive for the inventors who have worked hard and created something innovative. The
term ‘invention’ is defined as ‘a new product involving an innovative step and having
industrial application’.

Anything, for which a patent is desired, should be:

• New: patents are not granted for things already well known and well established.
• Useful: inventions should be beneficial for people and should be capable of industrial
applications.
 D. Licensing: Licensing may be defined as a contractual agreement between two parties where
one party having some proprietary rights agrees to transfer its rights to another party by
charging some kind of fee or royalty in a proper mode. Licensing has acquired great
importance in today’s global world. There are many examples where a company owning the
intellectual property of a product, manufactures it in its country and gives license to other
businessmen in other countries to manufacture the same product.

E. Contract: A contract is a written document that is enforceable legally. Generally an

entrepreneur starting a business gets into discussions with landlord, suppliers, service
providers, buyers and sellers, government authorities, etc. After finalisation of the
discussions, contacts will take place which binds the two parties legally. Broadly, a contract
document will contain the following things:

• Name of parties involved in the contract and their roles.

• Detailed description of transaction taking place between the two parties.
• Specification of contract value in terms of price and charges.
• Signature of competent persons from each of the organization who are party to the
contract.

Business and entrepreneurial development organisations:

• Caribbean Group of Youth Business Trusts (Jamaica, Barbados, Guyana, Trinidad and
Tobago, St. Lucia, St. Vincent and the Grenadines, Dominica, Belize, and Antigua and
Barbuda)
• Jamaica Business Development Corporation (JBDC)
• HEART Trust/NTA
• Institute of Private Enterprise Development (IPED)
• National Entrepreneurship Development Company Limited (NEDCO)
• Micro, Small and Medium Sized Enterprises (MSME) Alliance
• Caribbean Association of Small and Medium Enterprises (CASME)
• DFLSA Incorporated (Guyana and Suriname).
​

5. IMPLEMENTING AND MANAGING THE VENTURE

The stage in which the entrepreneur operates the business and utilizes resources to achieve
its goals/objectives. This stage involves:

a) Implementation of Concept

For entrepreneurs, it is often easier to come up with a variety of ideas for new businesses and
more difficult to actually implement those concepts.

An entrepreneur must be able to set up the operation so as to deliver the product or service to the
right customer at the right time, cost and quality – in other words to build the operation to create
value. For this it is essential that you gather the right kind of resources to begin with.

Value is created when you can build competencies and capabilities using particular kinds of
resources:
o Resources that are not easily copied
 o Resources that are scarce (other people don’t have them)
o Resources that are in demand (people have a use for them)

b) Monitoring of Performance

The innovative entrepreneur sees the importance in monitoring the performance of the new
business ideas to discover if s/he is delivering benefits. To accomplish this task, the
entrepreneur must:

1. Set specific goals and targets: In most cases, new ideas or innovations originate to
address specific needs or issues. Thus, they should either improve or enhance an existing
product, process or service, or be completely new because of the research and
development the entrepreneur has undertaken around a new trend or opportunity. Great
investors make sure their targets are SMART - specific, measurable, achievable, realistic
and time-bound.

2. Measure the performance of new ideas: No matter how the idea derived, it is essential
to measure how well it is performing once implemented. The choice of doing this will
depend on the nature of the innovation and one’s own organization. However, there are
some simple calculations to facilitate the process, including:

• Research & Development expenditure as a percentage of revenue

• The cost of non-financial resources (including time and people)

• New product sales (less than 2 years) as a percentage of sales
• The percentage of profits from the new products/services
• The number of months to develop and launch a product (speed to market)
• Staff satisfaction and performance
• Customer feedback and satisfaction with your business.

3. Benchmark your business: the entrepreneur may find it useful to benchmark his/her
business against other similar businesses in the industry or sector, to try to understand the
impact and benefits of the innovation. Benchmarking against rivals could help the
investor identify whether there are any goals and targets his/her competitors’ use that
could similarly benefit the business.

4. Act on goals and targets: When the goals and targets are achieved, the entrepreneur
should consider additional or improved targets to help get the most out of his/her idea.
However, when the goals and targets are not achieved, the entrepreneur should review
and solve any specific issues which may be hampering the success, or consider whether
his/her initial targets were unrealistic and should be revised.

The investor/entrepreneur should also explore the longer-term benefits of innovation, as well as
the effect it can have in the short term. Since innovations can take the time to make a positive
impact on your business operations, entrepreneurs are advised to include innovation as part of
the business planning. Having a business plan will help the entrepreneur to develop new ideas
that meet the strategy and vision for the business.

c) Payback Resources Providers

The definition of a provider is an individual person, organization or business that offers a good or
service. Moreover, a resource provider is an individual, organization or business that offers
services or good to the entrepreneur for a successful venture. Starting a business can seem like an
overwhelming task. In fact, it is. Research indicates many businesses that open each year, fail to
last as long since there is no guarantee for success. An entrepreneur who has properly prepared
may have an advantage on the competition.
 In addition to a strong business plan, the entrepreneur should consider five resources that
contribute to the success of a new enterprise:

a. Financial Resources: The most important element in starting a business is funding. Even
the most basic business incurs several start-up costs, including registering a business
name, obtaining a business telephone line and printing business cards. Financial
resources can be obtained from multiple sources, the easiest being from the personal
accounts of the business founder.

Additionally, loans and lines of credit may be granted from financial institutions, friends
and relatives, private investors and even the state government. Furthermore, many grants
are offered from private and public sources to entrepreneurs/small business owners of all
demographics and personal situations.

b. .Human Resources: The success of an organization is profoundly dependent on the talent

and strength of its employees. The hiring of experienced professionals with records of
excellence in their field of expertise safeguards that the mission and goals of the company
will be executed and achieved. Strong team members can be recruited using several
methods such as staffing agencies and executive search firms as well as referrals from
individuals.

c. Educational Resources: Conceivably the paramount thing an entrepreneur can do when

establishing a new business is to gain as much education possible. By understanding the
competition and gaining an in-depth knowledge of the industry, s/he will be better
prepared to make smarter decisions regarding the direction of the firm. Educational
resources can be acquired through professional trade associations geared toward the
industry, the local chamber of commerce as well as the Small Business Association and
Administration.

d. Physical Resources: Whether a small business or a retail operation with multiple

locations, every organization must have the appropriate physical resources to survive.
This comprises a proper workspace, working telephone line, adequate information
systems, and effective marketing materials. Since this aspect of business planning can be
one of the costliest, it is important for an entrepreneur to assess his needs before making
any purchases.

e. Emotional Resources: Starting a business venture can be a stressful undertaking for an

entrepreneur. To maintain sanity as well as stay motivated, it is important that the
entrepreneur has a support team that can provide inspirations and guidance as necessary.
This team may entail friends and family as well as a mentor or professional group.

If your resource providers did not lay out repayment terms up front, it is likely that they are
"friends and family" rather than investors or venture capitalists. Consider ways in which you can
create win-win for everyone involved in the success of the venture. The entrepreneur may
consider fringe benefits and other offers for the human resources, negotiate loans and repayment
terms conditions as well as offer shares in the business for major investors. Consulting with a
professional consultant before making major decisions on paybacks to resource providers is
advisable.

d) Reinvestment in the Business

Without a doubt, the most successful investors/entrepreneurs recognize the value of reinvesting
at an early stage. When a business begins to generate profits, owners face two primary decisions:
they can either distribute profits back to the owners or reinvest those profits back into the
business to improve the company or expand operations. The decision of whether to reinvest
 profits or distribute it to the owners depends on several factors. However, there are some specific
advantages to reinvesting profits.

• Reinvesting is the paramount way to build wealth.

• Reinvesting is crucial to your company’s continued growth and success. Additionally, it is

worth keeping in mind that investing is not just about a sudden inflow of cash; your time
and experience is also valuable.

If you can apply your time, knowledge and experience in a way that profits your company in the
long term, you will be making a valuable investment. Some form of reinvestment is necessary
for any business to grow. It does not have to be all of the entrepreneur’s profits, but a significant
amount of resources, when effectively managed can dramatically increase your bottom line.

e) Expansion of the business

The entrepreneur is the endless challenge seeker who recognizes that once the business is
profitable, growth is the next exciting challenge. Exciting, but at the same time growth can make
good business sense, such as better brand recognition, building value in the business for
employees and customers, offering a wider range of products and services to a larger
geographical market, and creating "economies of scale." As a result, rationalizing the rewards of
a larger business could mean updating your business plan. The entrepreneur will need to update
those spreadsheets, strategize the marketing plan and strategies an expansion implementation
plan. Also, s/he will need to weigh the risks and rewards for growth.

Ways to Expand: From Local to Global

• Increase your sales and products in existing markets. This is the easiest and most risk-free
way to expand. It may require a bigger location, different pricing strategies, as well as
new/improved marketing techniques. However, it will be in a customer group with whom
the entrepreneur already has a relationship.

• Introduce a New Product. You have a successful product/service that you have been
offering for some time and have been gathering data, customer feedback and doing the
fiddling on your newest product. This is a normal fruition in business, not just an
expansion scheme. When placed as adding value and being responsive to customer needs,
this can be a reasonably risk-free way to expand.

• Develop a New Market Segment or Move into New Geography. These areas require cost
expenditures and doubt. Moving the products into new categories/demographic segments
requires market research and new marketing strategies. This activity may absorb
significant time and attention. However, while the risks are more, the payoffs are large.
Therefore, for most businesses looking to expand, these two methods of expansion are
inevitable.

• Start a Chain. A service business that is easily reproduced and can be run from a distance
is suitable to launch a chain. However, the entrepreneur must be cognizant of what made
the first location a success, i.e. was it the location, the staff or you? If it is just you, then
replication is only possible through meticulous operations plans and sharing staff
between locations. The entrepreneur will need to duplicate the plan of the first location
while satisfying increased customer demands.

• Franchise / License. Although it is a quick way to grow, a franchise agreement can be

 costly to prepare. You will need to be a good teacher, be able to prepare the training
manuals, be very organized and willing to travel. While licensing can carry less risk, it
demands giving up a certain amount of control. Licensing a patent, trademark or
industrial design means that you sell manufacturing, distribution or production rights.

• Join Forces / Strategic Alliance. A merger or acquisition combines two companies,

expands your customer base, increases intellectual capital and delivers operational
efficiencies. The hoax is locating the right partner.

• Go Global. The business owner can decide to go global in a number of ways. These may
include but not limited to growing markets, rising consumer spending, or improved
business climate. In addition, sometimes the only place to find these things is overseas.
Conducting international business can take the form of exporting, licensing, a joint
venture or manufacturing, but whatever forms the entrepreneur chose, the basic business
rules apply. These involve assess customer demand, gain legal and accounting assistance, protect
intellectual property and obey regulations.

f) Achievement of performance goals

Performance management (PM) includes exercises that ensure the aims are consistently being
met in an effective and efficient manner. In other words, performance management involves the
way managers assess employees, how employees evaluate their managers and fellow employees,
and how individual workers appraise themselves.

The ultimate goal of performance management is to improve the quality of work in the most
proficient manner possible. The performance management process is a means by which
organizations align their resources, systems, and employees to strategic objectives and priorities.

Effective managers seek to provide feedback to and receive feedback from employees
incessantly, rather than rely on infrequent appraisals. This allows a manager to determine what
inspires employees to work hard, evaluate what impediments are making it difficult for
employees to do their jobs effectively, and adjust employee workloads as necessary.

Managers must identify which approach works best according to the situation and organizational
culture. Managers have to ensure that employees are governed according to a company’s
policies, but must also ensure that cultural norms are taken into account.

Managing performance is essential to the relationship between managers and employees. It can
be a key element of good communication and nurture the growth of trust and personal
development.

Managing performance is vital to how well your employees will be engaged in their work and
how well they will complete given tasks. It is important to note that, an engaged employee is
someone who:

• Takes pride in their job and shows loyalty towards their line manager, team or organization and
• Goes the extra mile – mainly in areas like customer service, or where employees need to be
creative, responsive or adaptable.

Good performance management can contribute significantly to all drivers. Moreover, there are
three aspects to planning an individual’s performance, which include:

Objectives which the employee is expected to achieve

a. Competencies or behaviours – the way in which employees work towards their objectives.
b. Personal development – the development employees need in order to achieve objectives and
realize their potential.
 The ‘SMART’ acronym is a useful way of getting the objectives right. Objectives should be:

a. Specific – objectives should state the desired outcome. What does the employee need to
achieve?
b. Measurable – how will you and the employee know when an objective has been achieved?
How should employee performance be planned?
c. Achievable – is the objective something the employee is capable of achieving but also
challenging?
d. Relevant – do objectives relate to those of the team/department/business?
e. Time bound – when does the objective need to be achieved?

5. HARVESTING

The stage in which the entrepreneur decides on venture’s future growth, development, or
demise.

• Harvesting is the final phase in the entrepreneurial value creation process, which includes
building, growing, and harvesting. Harvesting is the process entrepreneurs and investors
use to exit a business and liquidate their investment in a firm.

Strategies for harvesting a venture

Harvesting or ‘exiting’ is the method that owners and investors use to get out of a business and
ideally reap the value of their investment in the firm. Many entrepreneurs successfully grow their
business but fail to develop effective harvest plans. As a result, they are unable to capture the full
value of the business they have worked so hard to create.

Method of harvesting a business

1. Absorption of new concept into mainstream options:

This occurs when an area/activity of the venture is reduced or removed to recover funds to invest
in a new concept or expansion of the product line. It is dependent on the financial feasibility of
the project.

2. Licensing of Rights:
The entrepreneur may choose to sell the business rights. Permission is granted to an individual or
company to manufacture, patent, copyright and trademark products using the licensing
agreement. The agreement is legal, and can be customized based on the access the licensors
(entrepreneur) chooses to give the licensee.

3. Selling the Firm-This could be done in the following ways:

a) Sales to Strategic Buyers

Strategic buyers look for a business that can be combined with another related business (merger).
Critical issue in the sale is the fit with the other firm and the buyer’s other business interests

b) Sales to Financial Buyers

These buyers look for stand-alone, cash-generating potential

c) Leveraged buyout (LBO) – a purchased heavily financed with debt, where the future cash
flows of the target company are expected to be sufficient to meet debt repayments.

d) Bust-up LBO – a leveraged buyout involving the purchase of a company with the intent of
selling off its assets

e) Build-up LBO- a leveraged buyout involving the purchase of a group of similar companies
with the intent of making the firms into one larger company for eventual sale.

f) Management buyout (MBO) – a leveraged buyout in which the firm’s top managers become
significant shareholders in the acquired firm.

g) Sales To Employees

h) Employee Stock Ownership Plans (ESOP)

A method by which a firm is sold either in part or in total to its employees. It is common for
an owner to start an ESOP by selling only a portion of the company. But even if the owner
sells all of his or her stock, he or she can still retain control of the business. This method also
allow entrepreneurs to reward employees for their commitment to the venture by allowing
them to become the ventures new owners. Employee ownership used to create an incentive
for employees to work harder.

i) Seller financing – Financing in which the seller accepts a note from a buyer in lieu of cash in
partial payment for a business.

4. IPO (Initial Public Offering)

The initial public offering refers to a strategy of making available the stock of a privately-
owned company to any interested investor. The primary purpose of an IPO is to raise
additional equity capital to finance company growth, but it can also serve as an additional
strategy for harvesting the investment of owners. Once the company’s stock is publicly
traded, the pre-offering owners can cash out eventually by selling their stock on the market.

5. Family Succession

The entrepreneur/founder of the business may consider retirement or from being actively
involved in the business and may choose a family member to be a successor.

Initially, family members can be given employment with the company. This provides the
opportunity for the founder to mentor and guided participation of the successor in the
business for a smooth transition when he takes over.

A written document succession plan should be created to address the new roles of
management and structure of the organizations for all parties involved.
6. Liquidate (Shut down)

Liquidation is the process of winding up of a business by selling up its assets to pay off the
liabilities. The secured creditors are paid first then the remaining amount is distributed
among the shareholders in proportion to their shareholdings.

7. Mergers and Acquisitions:

An entrepreneur or corporate organization may decide to purchase the majority or all shares
of another business. The organization may choose to merge as a strategy for expansion and

growth.

Developing an Effective Harvest Plan

✓ Provide advice on developing an effective harvest plan.

✓ Anticipate the Harvest
✓ Must be planned or may distract from day-to-day affairs causing loss of managerial focus
and momentum
✓ Uncertainties may lower employee morale
✓ Investors always concerned about how to exit
✓ IPO had requirements not required of a privately held firm
✓ Expect Conflict—Emotional and Cultural
✓ Buying a company and selling a company are very different
✓ Buyer can be unemotional and detached
✓ Seller likely to be more concerned about nonfinancial considerations

What’s Next?

✓ Since entrepreneurs are purpose-driven, it is important that they find meaning in life
following exit.
✓ For many, giving back to the community and charitable causes may bring meaning and
purpose to post-exit life.

Answer the following questions

1. Explain what is meant by the term harvesting.

2. Why should an owner of a company plan for eventually harvesting his or her
company?

3. Explain the term leveraged buyout. How is a leveraged buyout different from a
management buyout?
 MODULE 3-CREATIVITY & INNOVATION

What is creativity? ​
• Stern-berg and Lubart (1999) define creativity as “the ability to produce work that is both
novel (i.e., original, unexpected) and appropriate (i.e., useful, adaptive concerning task
constraints)”

• Creativity is an act, an idea, or product that changes an existing domain, or that

transforms an existing domain into a new one, and creative person is whose thoughts or
actions bring these changes. (Csikszentmihalyi)

• Creativity leads to innovation

• “Innovation is the specific instrument of entrepreneurship. The act endows resources with
a new capacity to create wealth. Innovation, indeed, creates a resource.” (Drucker)
• Entrepreneurship is all about innovation
• Innovation is economic or social, rather than a technical term
Creativity may also be defined as the ability to bring something new into existence.

Process of creativity: ​

The creative process can be said to consist of FIVE distinct phases:

1. Preparation
The problem is defined, analysed and many sources of information and inspiration are explored.

2. Incubation
Space where you allow your mind to wander and let your subconscious do some problem-
solving. It involves “mulling things over”. It is the part of the process that occurs when a person
is thinking about a problem or considering an idea. Discussions of the incubation phase often
make reference to a specific problem that someone is trying to solve. This “subconscious” aspect
of incubation highlights the importance of intuition to the creative process.

Incubation refers to that part of the opportunity recognition process in which an entrepreneur is
contemplating an idea or a specific problem. It does not, however, refer to conscious problem-
solving or systematic analysis. Instead, it is typically an intuitive, non-linear, non intentional
style of considering possibilities or options. Incubation, because it involves the intermingling of
ideas in an unstructured fashion, is the stage of the process in which the “new combinations” that
Schumpeter (1942) emphasized might emerge.

3. Illumination/Insight-refers to the “eureka” experience where the pieces of the puzzle

suddenly fits together ie, creative breakthrough, the ‘aha’ moment. It is the point at which
the whole answer or core solution springs into awareness suddenly and spontaneously.

The experience, however, is not necessarily one that pushes the process forward, but instead may
feed back to the incubation and preparation stages for further consideration, i.e., thinking about
an idea unconsciously and drawing on past experience to understand it

4. Verification/Evaluation
The phase in the process when insights are analysed for their viability. The solution is then tested
against the original problem. It involves research into whether a concept is workable, whether the
creator has the skills necessary to accomplish it, and whether it is truly novel enough to pursue. It
is this aspect of creativity that Csikszentmihalyi (1996) suggests may be the most challenging
because it requires the creative person to be brutally honest about the prospects for his/her new
insight.
In the context of launching new ventures, evaluation involves feasibility analysis. Prior research
has emphasized that what seems to be a good entrepreneurial idea may not, in fact, be a bonafide
business opportunity (Timmons, 1994). In this phase of the process, ideas are put to the test via
various forms of investigation such as preliminary market testing, financial viability analysis
and/or feedback from business associates and others in one’s social network. The basic question
is, “Is the business concept sufficiently valuable and worthwhile to pursue?” This is often the
phase that tests an entrepreneur’s commitment and willingness to commit to a business launch
(Campbell, 1985). Yet, neglecting this type of analysis is one of the frequently cited reasons for
new venture start-up failures (Vesper, 1996).
It should be noted that at the evaluation stage, the process usually ceases to be primarily an
individual and personal process and the opportunity is subject to consideration by others. The
entrepreneur needs feedback from both knowledge experts and the marketplace regarding the
viability of the business concept. By some standards, it could be argued that the OR process ends
with evaluation because it either leads to elaboration or proves to be infeasible. Even so, we have
included elaboration because it constitutes the next step in the entrepreneurial start-up sequence.

5. Elaboration/Exploitation
Elaboration is the stage in which the creative insight is actualized, that is, put into a form that is
ready for final presentation.
In the case of an entrepreneurial business opportunity, elaboration represents the process of
business planning. Assuming that a business idea has survived the evaluation stage and is still
regarded as viable, this is the stage when many details are worked out. In that process, as small
problems become apparent or impediments arise, the details of elaboration will also feed back to
earlier stages of the creative process in terms of better preparation, more incubation, and further
evaluation. Although both scholars and entrepreneurs often note that entrepreneurship involves
risk taking, some researchers have argued that the better entrepreneurs endeavor to understand a
new venture well enough before launching it that they do not perceive a high level of risk
(Timmons, 1994). The process of elaboration is where the skilled entrepreneur engages in
planning activities to reduce uncertainty.

Q: What does creativity has to do with entrepreneurship?

A: Everything! Creativity enables entrepreneurs to differentiate their businesses from
competitors so that customers will notice them. Creativity is the basis for invention, which is
discovering something that did not exist previously, and , innovation which is finding a new way
to do something, or improving upon an existing product or service. Creativity is also
fundamental to problem-solving. Today entrepreneurs face a rapidly changing environment
brought about in large part by the speed of technological change and economic uncertainty. The
combination of rapid change and the resulting uncertainty about what the future holds present a
fertile ground for new opportunities. Creativity therefore is a critical skill for recognizing or
creating opportunity in a dynamic environment and for problem solving which is necessary to
satisfy customers’ needs.
Innovation and Entrepreneurship
If creativity is the seed that inspires entrepreneurship, innovation is the process of
entrepreneurship. This was Schumpeter’s conclusion when he wrote about the economic
foundations of free enterprise and entrepreneurship. According to him innovation does not
happen as a random event. Central to the process is the entrepreneur. It is they who introduce and
then exploit the new innovations. For Schumpeter, ‘the entrepreneur initiates change and
generates new opportunities. Until imitators force prices and costs into conformity, the innovator
is able to reap profits and disturb equilibrium’. Sometimes innovation involves generating
something from nothing. However, innovation is more likely to result from elaborating on the
present, from putting old things together in new ways, or from taking something away to create
something simpler or better. Peter Drucker believes that innovation is the specific tool of
entrepreneurs, the means by which they exploit change as an opportunity for a different business
or a different service. It is capable of being presented as a discipline, capable of being learned
and capable of being practiced. Entrepreneurs need to search purposefully for the sources of
innovation, the changes and their symptoms that indicate opportunities for successful innovation.
And they need to know and to apply the principles of successful innovation.

Drucker, therefore, believes innovation can be practiced systematically. Firms that practice
innovation systematically search for change then carefully evaluate its potential for an economic
or social return. Change provides the opportunity for innovation to make an economic return.

Mintzberg (1983) defines innovation as ‘the means to break away from established patterns’, in
other words doing things really differently. Therefore, simply introducing a new product or
service that has customer’s willing to buy it, is not necessarily innovation. Innovations have to
break the mould of how things are done. To really innovate Mintzberg says that ‘one engages in
divergent thinking aimed at innovation; the other is convergent thinking aimed at perfection’.

The innovation can, of course, be of varying degrees of uniqueness. Most innovations introduced
to the market are ordinary innovations, that is, with little uniqueness or technology. As expected,
there are fewer technological innovations and breakthrough innovations with the number of
actual innovations decreasing as the technology involved increases. Regardless of its level of
uniqueness or technology, each innovation (particularly the latter two types) evolves into and
develops toward commercialization through one of three mechanisms: the government,
intrapreneurship, or entrepreneurship. Innovation means “doing new things or the doing of things
that is already being done in a new way.” It includes new processes of production, introduction
of new products, and creation of new markets, discovery of a new and better form of industrial
organization. Earlier, we defined innovation as the process of doing new things. It is important to
recognize the innovation more focus on action not conceiving new ideas only. When people have
passed through the Realization and Validation stages of creativity process, they may have
become inventors, but they are not yet innovators.

What is Innovation?
Every organization needs to innovate. Innovation is as relevant to a hospital, movie theatre, or
press office as it is to a manufacturing plant or product design department. Innovation is the
process of making changes to something established by introducing something new that adds
value to the customer. Innovation is not to be confused with invention.

However, innovation is about “a process of developing and implementing a new idea” (Van de
Ven& Angle, 1989, p. 12). They go on to write that “innovation refers to the process of bringing
any new problem solving idea into use...it is the generation, acceptance, and implementation of
new ideas, processes, products, or services”

Innovation- is the process of making changes, large and small, radical and incremental, to
products, processes, and services that results in the introduction of something new for the
organization that adds value to customers and contributes to the knowledge store of the
organization.

Innovation-the process of translating ideas into useful-and used new products, processes and
services.

DIFFERENCE BETWEEN INNOVATION & INVENTION

Invention-coming up with a new idea or creating something new that has never existed before.

Creating Results in new

something new Knowledge
Creativity

The
transformation of
Results in new
an idea and
products, services,
Innovation resources into processes and market
actual useful way
places

INNOVATION AND CREATIVITY

Creativity is regarded as a key building block for innovation (Rosenfeld & Servo, 1991) and is
an inherent capability in all human beings. Creativity is a mental process that results in the
production of novel ideas and concepts that are appropriate, useful, and actionable. The creative
process can be said to consist of four distinct phases: preparation, incubation, illumination, and
verification (Wallas, 1926). Later revisions of this process have added a final phase, elaboration
(Kao, 1989), in which the idea is structured and finalized in a form that can be readily
communicated to others. Creativity entails a level of originality and novelty that is essential for
innovation. Although creativity is a fundamental part of innovation, it is wrong to interchange
the terms. Innovation encourages the further processing of the output of the creative process (the
idea) so as to allow the exploitation of its potential value through development.
INNOVATION AND ENTREPRENEURSHIP

The terms entrepreneurship and innovation are often used inter-changeably, but this is
misleading. Innovation is often the basis on which an entrepreneurial business is built because of
the competitive advantage it provides. On the other hand, the act of entrepreneurship is only one
way of bringing an innovation to the marketplace. Technology entrepreneurs often choose to
build a startup company around a technological innovation. This will provide financial and skill-
based resources that will exploit the opportunity to develop and commercialize the innovation.
Once the entrepreneur has established an organization, the focus shifts toward its sustainability,
and the best way that this can be achieved is through organizational innovation. However,
innovation can be brought to market by means other than entrepreneurial startups; it can also be
exploited through established organizations and strategic alliances between organizations.

CATEGORIES OF INNOVATION

The term innovation is often associated with products. When we think about innovation we think
about a physical product: a television, car, or digital music player. However, innovation can also
occur in processes that make products, services that deliver products, and services that provide
intangible products. Many services don’t involve physical products at all. For example, a hospital
or government department offers a range of services without producing products.

Innovation can take many forms but it can be reduced to four dimensions (the 4Ps of innovation).

• Product innovation-changes in the things (product/services) which an organization `offers,

change in what is offered to the end user; develop a new product; improved
versions of existing products e.g. mobile phones, computers; new products e.g. mp3
player; aims to increase revenue. For example a car with an automatic transmission
compared to “conventional” one.

• Process innovation-changes in the ways in which things (products/services) are created

and delivered. For example, automobile produced by robots compared to that produced
by human workers.

• Position innovation -changes in the context in which products/services are introduced.

repositioning products e.g. mobile phones are now available to the overall market; budget
airlines for persons who prefer affordability rather than comfort; change in the context in
which the product is framed and communicated

• Paradigm innovation-changes in the underlying mental models which frame what the
organization does. This is somewhat specific innovation category. It concerns the change
(sometimes radical) in the way something is done in the organization. It could be
anything. For the bakery it may be in the way the products are sold, from off the counter,
to catering system, or to selling on the Internet. On-line bakery, can you imagine! Again,
to be an innovation, it has to be profitable. Radical changes don’t necessarily mean better
business. Shifting your product selection to vegetarian diet wouldn’t work well in the
neighborhood full of meat eaters.

For example, a new design of car, a new insurance package for accident prone babies and a new
home entertainment system would all be examples of product innovation. Product innovation is
about making beneficial changes to physical products. Related terms that are often used
interchangeably include product design, research and development, and new product
development(NPD).

Changes in the manufacturing methods and equipment used to produce the car or home
entertainment system, or in the office procedures and sequencing in the insurance case would be
examples of process innovation.

Innovation can also takes place by repositioning the perception of an established product or
process in a particular user-context. For eg. An old established product in the UK is Lucozade,
originally developed as a glucose-based drink to help children and invalids in convalescence.
These associations with sickness were abandoned by the brand owners. When they relaunched
the product as an health drink aimed at the growing fitness market where it is now presented as a
performance-enhancing aid to healthy exercise. This shift is a good example to position
innovation.

The shift to low-cost airlines, the provision of online insurance and other financial services and
the repositioning of drinks such as coffee and fruit juice as premium ‘designer’ products are
examples of Paradigm innovation. Paradigm innovation can be triggered by many different
things for example new technologies, the emergence of new markets with different value
expectations, new legal rules of the game, new environmental conditions (climate change, energy
crisis) and so on. For example, the emergence of internet technologies made possible a complete
reframing of how we carry out many businesses.

Service Innovation

Making changes to products that cannot be touched or seen (intangible products). Services are
often associated with work, play and recreation. Examples of this type of service include
banking, recreation, hospital, government, entertainment, retail stores and education.

Dimensions of Innovation (Core innovation concepts)

• Incremental innovation-small improvements to existing products, services or process-

‘doing what we do but better’. Incremental innovation is all about doing what you have to
do in order to keep a product up to date... enhancing products so as to be more effective
or improving operability, reducing costs, improving quality, etc. By making incremental
improvements to your product that keep your customers engaged. The vast majority of
innovations today are incremental that is, they are built on existing technology

For examples:

• The Apple iPad was a huge improvement over previous tablets but was actually an
extension of the very popular iPhone. A number of important technologies had to be
invented and available before Apple could develop either the iPad or the iPhone.

• The evolution of common CD to double CD, capable of storing twice as many tracks

• Delivering an offline service over the internet such as distance learning is an example of
incremental innovation on a distribution channel.

• Modular innovation- an innovation that changes a core design concept without changing
the product's architecture. Modular innovations will require new knowledge for one or
more components, but the architectural knowledge remains unchanged. Around the 1980s
most hard disk manufacturers substituted the ferrite read/write heads with thin-metal
 heads; this is a clear example of modular innovation or the replacement of analog with
digital telephones or adding gel-filled material to a bicycle seat.

• Discontinuous(Disruptive)innovation-radical innovations that change the ‘rules of the

game’ and open up a new game in which new players are often at an advantage. For you
to move to the latest technology would result in you significantly changing your
behaviour.
One question often asked is that if we have to change our behaviour then why would we want to
use such a new technology and the answer is that the new technology creates substantial new
benefits for its users. To move tracks on an LP record you would have to lift the stylus and
physically move it to the next track.
Then came cassette tapes where you could now press a button on the player to move forward to
the next track but it wasn't always easy to know when the next track started.
Then came CD players, where you could select exactly which track you want or even let the
player choose tracks at random for you.
The latest technology is the MP3 player, which as well as having excellent track selection
features they also enable you to keep your entire music collection all on one device or sort / file
your music by genre and other categories. Examples include disposable diapers, Kodak film,
microwave oven and MP3 players.

Radical Innovation Technology Impact on Society

Telephone Telecommunications New means of mass

communication

Jet Airliner Jet power Growth of mass travel,

foreign holidays

Television Television New leisure activity,

entertainment

Personal computer Microprocessor New administrative system,

internet services eg banking

• Architectural innovation- this is the opposite of Modular innovation where there are
changes in the whole system for example moving from that computer design to a
completely different way of processing information. It entails changing the overall design
of the system or the way components interact. For example transition from a high wheel
bicycle to a safety bicycle.

• Radical innovation-significantly different changes to products, services or processes-‘do

what we do differently’.

DRIVERS OF INNOVATION

Various factors encourage an organization to innovate. Each of these drivers demands continuous
innovation and learning so that the process can be repeated continuously. These drivers also help
to create a sense of urgency around the need to create new organizational goals and generate new
ideas for meeting these goals. These drivers can be summarized as follows:

• Emerging technologies
• Competitor actions
• New ideas from customers, strategic partners, and employees
• Emerging changes in the external environment

EXAMPLES OF INNOVATION
• Email
• Social Networking
• Wifi
• Telephone
• Youtube
• Twitter
• Facebook

SOURCES OF INNOVATION

I. New Market/New consumers Emerges

New markets reflect changing demands for goods and services. In order to meet the changing
demands, businesses are usually required to improve upon the existing product/service offerings.
In order to improve upon these offerings the business would have to find innovative ways of
adding to existing outputs, through incremental or major adjustments.

II. New technology emerges (new ways of doing things)

The emergence of new technologies can be incorporated in business operations to support
innovation. These can be applied in varying sections of a business, in operations, management,
marketing and financial.

III. New political rules

Political conditions which shape the economic and social rules may shift dramatically for
example, the collapse of communism meant an alternative model (capitalist competition) as
opposed to central planning and many ex-state firms couldn’t adapt their ways of thinking.
For eg Free trade/globalization results in dismantling protective tariff and other barriers and new
competition bases emerges.

IV. Running out of road

Firms in mature industries may need to escape the constraints of diminishing space for product
and process innovation and the increasing competition of industry structures by either exit or by
radical reorientation of their business.

When firms/individuals are faced with limited options/end of the road for some products, they
are encouraged to think outside of the box and in order to remain viable they look to turn ideas
into something useful or marketable.

For example, Encyclopaedia Britannica finally running out of road as it is displaced by first CD
based, then online and now open source encyclopaedias like Wikipedia. Sometimes firms
manage to breakout and establish a new trajectory – eg Nokia from timber products to mobile
phones.

V. Sea change in market sentiment or behaviour

Public opinion of behaviour shifts slowly and then tips over into a new model for example, the
music industry is in the midst of a (technology-enabled) revolution in delivery systems from
buying records, tapes and CDs to direct download of tracks in MP3 and related formats.

Long standing issues of concern to a minority accumulate momentum (sometimes through the
action of pressure groups)and suddenly the system switches/tips over. Eg social attitudes to
smoking or health concerns about obesity levels and fast foods.

VI. Deregulation/Changing rules

Too much regulations constrain how much can be changed within processes when responding to
changes in the market. Reduced regulations allows for businesses to find additional ways of
satisfying existing and emerging demands. Organizations could find different approaches in
operations, distribution, production etc. given greater freedom in carrying out its business
process within the deregulated framework.

VII. Business models innovation

A business model is the means by which a firm aspires to get value from the business activities.
It incorporates the company’s processes such as how products are made; for whom it is made.
The business model provides a framework for how the firm will compete in the market/industry.
It involves value creation in the business. Changes in the market/industry e.g. financial crisis,
new technologies, acts of terrorism; shifts in perception for example can impact the business
models encouraging creativity and establishing new products and processes.

Disruptive, Incremental and Open innovations

• Disruptive innovation-the phenomenon by which an innovation transform an existing market
or sector by introducing simplicity, convenience accessibility and affordability where
complication and high costs are the status quo. Initially a disruptive innovation is formed in a
niche market that may appear unattractive or inconsequential to industry incumbents, but
eventually the new product or idea completely redefines the industry. It may also be referred to
as radical innovation is a term of art coined by Clayton Christensen, describes a process by
which a product or service takes root initially in simple applications at the bottom of a market
and then relentlessly moves up market, eventually displacing established competitors. It may
also be defined as an innovation is disruptive if it ultimately replaces the technology that
preceded it.
A classic example is the personal computer. Prior to its introduction, mainframes and
minicomputers were the prevailing products in the computing industry. At the minimum they
were priced at around $200,000 and required engineering experience to operate. Apple began
selling its personal computer but as toys to children at that point the product wasn’t good enough
to compete with the minicomputers but Apple customers didn’t care because they couldn’t afford
or use the expensive minicomputers. The inferior computer was much better than their
alternative: nothing at all. Little by little the innovation improved. Within a few years, the
smaller, more affordable personal computer became good enough that it could do the work that
previously required minicomputers. This created a huge new market and ultimately eliminated
the existing industry. It is important to remember that disruptive innovation is a positive force.

Disruptive innovations are not breakthrough technologies that make good products better; rather
they are innovations that make products and services more accessible and affordable, thereby
making them available to a much larger population.

Disruptive innovation often occurs because new sciences and technology are introduced or
applied to a new market that offers the potential to exceed the existing limits of technology.
Research laboratories usually are the source of disruptive technologies. Many companies watch
out for the outcome of this type of technology, and from this they choose potential winners that
are quickly adopted for new products and services

Examples of this type of innovation include:

Disruptor Disruptee

Personal computer Mainframe and minicomputers

Cellular phones Fixed line telephony

Community colleges Four year colleges

Discount retailers Full-service department stores

Effect of disruptive and incremental innovations on the entrepreneurial process

Open innovation- Among the latest developments in corporate innovation is the concept of open
innovation. Open innovation1 is the intentional leveraging of the research, ideas, or technologies of
outsiders—that is, people or companies that are not part of the corporate entity—rather than relying solely
on innovations that are generated from inside the company. Open innovation takes innovation beyond a
company’s Research & Development lab and lets customers and partners participate in the creation of
new product and services.

Open innovation was defined as the use of purposive inflows and outflows of knowledge to
accelerate internal innovation, and expand the markets for external use of innovation,
respectively (Chesbrough, 2003). Once open innovation is adopted, the organization's boundaries
become permeable and that allows combining the company resources with the external co-
operators.

Procter & Gamble (P&G) embarked on open innovation in 2001 with its Connect + Develop program. For
example, the innovation of printing text or images on Pringles chips came about through P&G partnering
with a professor in Italy who ran a small bakery and had invented a technology that used ink-jet
techniques to print pictures on pastries.

One method by which a company can manage and run open innovation is to use a contest or “challenge”
method. In the contest method, the company poses a challenge, such as a way “to drop large amounts
Humanitarian food and water packages from an aircraft in populated areas such that there is no danger of
falling objects (i.e., non-food items) causing harm to those on the ground” and offers a financial reward to
the person, company, or team that solves the problem first.
 Principles of Open innovation

✓ Not all of the smart people work for us so we must find and tap into the knowledge ad
expertise of bright individuals outside our company
✓ External R&D can create significant value; internal R&D is needed to claim some portion
of that value.
✓ We don’t need to originate the research to profit from it.
✓ If we make the best use of internal and external ideas; we will win
✓ Building a better business model is better than getting to market first

Open innovation (Cont’d)

​
Closed innovation companies innovate by using only internal resources. Usually during the
innovation process, ideas are evaluated and only the best and most promising ones are selected
for their development and commercialization. The ones that show less potential are abandoned.
The difference between open and closed innovation is that in the case of closed innovation the
ideas, inventions, investigations and developments required to place a product in the market, are
generated within the company. However, when applying the open innovation system, the
company can use external resources such as technology and at the same time make available
their own innovations to other organizations.

Under the open innovation paradigm there is an important flow of external knowledge into the
organization which turns into projects in co-operation with external partners and causes the
purchase and incorporation of external technologies. At the same time, the innovations generated
within the company can be sold as technology and/or industrial property to other organizations
since either they are not applicable within their business model or because the company has no
capacity or experience to develop the invention. The final result is that some products reach the
market by using exclusively internal resources from the initial idea up to the commercialization
of the final product. Other products are the result of incorporating external knowledge at
different stages of their development
There are clear advantages of opening the innovation process to the flow of ideas and knowledge
in both directions. They can be summed up as follows:
• Reduction in the time and cost of innovation projects
• Incorporation of solutions and innovations in the form of ideas, patents, products and
technologies which would have never been generated by the company due to lack of time,
knowledge and technological resources
• Commercialization of inventions which due to lack of ability or to strategic reasons cannot be
placed in the market by the company owning them.

Examples of Open Innovation

➔ The Audi car manufacturer has launched the Audi Production Award. It is a contest that
invites the participants to think about the car of the future. The winner receives a trophy as well
as 5,000 Euros.
➔Procter & Gamble has published the list of technical problems that their team wasn’t able to
solve or hasn’t solved on time on its website. They make a call to all the web surfers who may
have the magic solution. Every idea is welcome!
➔ GE have launched their program Ecomagination Challenge. Its goal? To collect ideas from
entrepreneurs, students and any other innovative people, regarding problems connected to
energy.
➔ The HP (Hewlett Packard) IT company has created open innovation laboratories for allowing
worldwide researchers to work together and for initiating partnerships between the HP teams and
external scientists.
➔ The Danish Lego Company has gone the longest way on the path of open innovation. And this
is already happening for many years (MindStorms, Lego Ambassador, Lego Factory and lastly
the Lego Cuuso…). It’s no surprise then that Lego is often nominated in open innovation studies.
In every one of their operations/programs, Lego makes a point of honor by having their fans
participate in the evolution of their product lines. Nothing could be more efficient in bonding the
Lego community, made out of young and less young people.

The Importance of Innovation

Whereas innovations are able to generate competitive advantages in the medium and long term,
innovate is essential for the sustainability of the companies and the countries in the future.
Innovation has the ability to add value to company’s products, differentiating it, even
momentarily, in the competitive environment. Innovation is even more important in markets with
plenty of commodities, such as the ones presenting a high level of competition and whose
products are roughly equivalent between competitors. Those who innovate in this context, either
doing incremental or radical, product, process or business model innovations, are at an advantage
over the others.
Innovations are important because they allow companies to access new markets, increase
revenues, perform new partnerships, learn new knowledge and increase the value of their brands.
Obviously, the benefits of innovation are not limited to the companies. Innovations enable
countries and regions to increase the level of employment and income, as well as the access to
the globalized world. Innovations offer new products that now have more benefits of the
products offered.
NURTURING AND MANAGING INNOVATION

Innovation must be nurtured and manage from both the micro/organisational level and the
macro/national level.

Micro/Organisational level

For innovations to be effective the following factors must be considered at the micro level:

✓ Incentives for Innovating

​
Incentives generally encourages persons to find new ways of doing things without fear of failure.
Rewards for such effort signals to the owner/employee that his ideas and work are appreciated
and welcome. This further encourages owner/employees to be more expressive and willing to
share ideas with other employees encouraging further innovation. Some incentives that can be
given are:

• Cash Prizes
• Gift Vouchers
• Lunch with the chief Executive Officer
• Awards-Eg Employee of the month
• Employee of the quarter
• Recognition at staff meetings
 ✓ Internal policy
Organizational practices are guided by its policy, which can support or discourage innovative
behaviour. In an environment where the policy encourages open thinking and sharing of ideas
across departments, more innovation usually takes place. In an environment with many
restrictions, innovation tends to be non-existent or at best minimal.

✓ Organisational culture

Organizational culture is a system of shared assumptions, values and beliefs which governs how
people behave within an organization. The leaders in the organization must make a deliberate
attempt to build a culture of innovation within the origination. This can be done through:

• Inspiration

Persons perform best when they are driven by inspiration. One way of inspiring employees to
innovate is by placing before them, using creative means, famous innovators that they can
emanate. Workers will observe the recognition of, the lifestyle and financial rewards of those
innovators and wish to follow suit. Publicizing and celebrating leadership’s innovative efforts
will also help.

• Observation

Build a culture where employees, leaders, customers, suppliers and other stakeholders, keep a
watch out for and share their opportunities to innovate.

• Listening to Consumers

Build a mechanism that allow for the constant flow of innovative ideas. This could be done
verbally or through the use of a suggestion box.

✓ Organizational Structure

Instead of setting up a structure where there is much bureaucracy, establish one that is “flatter”
and encourage the smooth flow of communication back and forth. A democratic approach would
best nurture innovation

Conditions for effective innovation on the Macro/National level

On the national level, policies must be developed to encourage organizations to innovate. The
nation must be made to understand that increased economic development and growth can only
come about when all entities enter into partnerships to accomplish such goals. There must be the
development of policies in the areas given below:

✓ Social
Social policies of the nation must be conducive for innovation to take place. Policies must
surround areas such as gender, age ethnicity (changing demographics). One area that is currently
in focus is the supply of women entrepreneurs. Women have been found to be very
entrepreneurial and should be significant drivers of economic growth. However they are faced
with problems such as lack of financing and the inability to access the formal business network
which results in the slow growth of their businesses. It is recommended that Caribbean
governments need to increase the availability of finance and the infrastructure to help women
entrepreneurship to grow and flourish.

✓ Political

Governments must offer good and stable governance to encourage and sustain entrepreneurship
in Caribbean economies. Many governments tend to struggle with eradicating corruption from
inside and outside of government. Caribbean heads of governments must partner to come up with
policies such as anti-corruption ones to increase their overall prosperity.

✓ Economic

This include setting up and encouraging laws, regulations, institutions etc. that will increase
effective innovation. For example through the provision of protection of intellectual property.
They can also provide grants and subsidies to reduce the cost of innovation in businesses.

✓ Environmental
Environmental policies are a must to protect against the gradual breakdown of the country’s
environmental systems as a result of innovation. They consist of laws and regulations that protect
and sustains the environment. They establish environmental responsibility thus saving the
country form incurring unnecessary social cost as a result of innovation.

✓ Cultural
Governments are responsible for protecting and preserving the good cultures of a nation.
Therefore the government should ensure through its laws and regulation that the rights of no sub-
group of a country is violated by the innovations put out by enterprises. All indigenous customs
and practices should be respected.

✓ Ethical
Ethics relate to the moral principles that governs a person’s or a business’ behaviour. In order to
avoid lawsuits and the violation of individuals and entities rights, organizations need to have
thorough knowledge and understanding of business ethics.
METHODS OF PROTECTING INNOVATION AND CREATIVITY
​
Intellectual Property

The term intellectual property refers broadly to the creations of the human mind. Intellectual
property rights protect the interests of creators by giving them property rights over their
creations. The Convention Establishing the World Intellectual Property Organization (1967)
gives the following list of subject matter protected by intellectual property rights

✓ literary, artistic and scientific works;

✓ performances of performing artists, phonograms, and broadcasts;
✓ inventions in all fields of human endeavor;
✓ scientific discoveries;
✓ industrial designs;
✓ trademarks, service marks, and commercial names and designations;
✓ protection against unfair competition; and
✓ “all other rights resulting from intellectual activity in the industrial, scientific, literary or
artistic fields.”

The Intellectual Property laws cover the following:

Trademark:

A trademark is a distinguishing word, figure, symbol, design, numeral or a combination of these

that identify particular goods or services.

The trademark gives the proprietor the exclusive right to use the trademark in relation to the
goods or services for which it was registered. Trademarks can also be transferred with or without
transmitting the goodwill of the business. The trademarks can be established in the market
through brand building activities.

Trademark Symbols
The symbols usually associated with trademarks are
TM, SM
and ®.
TM
What does the symbol mean?

TM TM
The symbol is used to provide notice of a claim of rights in a trademark. A is usually used
in connection with an unregistered trademark and is used to inform potential infringers that a
TM
term, slogan, logo, or other indicator is being claimed as a trademark. Use of the symbol does
not guarantee that the owner's mark will be protected under trademark laws.

What does the symbol

SM
mean? ​
SM TM
The symbol functions similarly to the symbol, but is used in connection with services, such
SM
as banking services or legal services, rather than tangible goods. Use of the symbol does not
guarantee that the owner's mark will be protected under trademark laws.
What does the symbol
®
mean?

The ® symbol is a notice of registered ownership used in many countries or regions to advise
the public that a trademark or service mark is registered and providing constructive notice of the
®
legal ownership status of the mark with which it is used. The symbol should be used only in
®
connection with registered marks. Use of with any unregistered trademark may result in claims
of fraud or other difficulties in trying to obtain and/or enforce trademark rights.

• Copyright: The copyright laws protect the legal rights of a person for his or her work of
writing or authorship. This law prevents others from reproducing the work in any other way.
The intellectual property under copyright include:

✓ Literary work (books, articles, manuscripts etc.)

✓ Dramatic work (drama, dance choreography, costumes etc.)
✓ Musical work (lyrics, music, graphical notations etc.)
✓ Artistic work (drawing, painting, sculpture, photographs etc.)
✓ Cinematographic work (recoding, sound tracks, sound effects etc.)
✓ Computer work (programmes, tables, databases etc.)

• Patents:

A patent gives protection to the inventor of a new product/ process/ design to solely use the
copying/ selling/ using of the invention for a limited period of time. This right acts as an
incentive for the inventors who have worked hard and created something innovative. The
term ‘invention’ is defined as ‘a new product involving an innovative step and having
industrial application’. In India, the rights of patents are granted to the person who first
applies. Anything, for which a patent is desired, should be:

✓ New: patents are not granted for things already well known and well established.

✓ Useful: inventions should be beneficial for people and should be capable of industrial
applications.

Licensing

Licensing may be defined as a contractual agreement between two parties where one party
having some proprietary rights agrees to transfer its rights to another party by charging some
kind of fee or royalty in a proper mode. Licensing has acquired great importance in today’s
global world. There are many examples where a company owning the intellectual property of a
product, manufactures it in its country and gives license to other businessmen in other countries
to manufacture the same product.

Branding

Branding has come a long way from its humble beginnings as an identification mark to its
current position as a tool for communicating with consumers. Firms use branding as a way to
control and manage consumers’ perceptions about their products and image. In many cases,
branding creates sustainable competitive advantage for firms.
What are design registration rights?
Design rights are intellectual property rights that protect the visual design of objects; i.e. the
visual perception of an object by a viewer. Design plays an important role in everyday life:
influencing the shape or decoration of man-made products such as household utensils and
ornaments, furniture, fabrics, the clothes we wear, the cars we drive; in each case, making them
easier or more attractive to use. For a design to be protectable it must have particular
characteristics:
• It must display features of shape, configuration, pattern or ornamentation which are applied to
an article which has "eye-appeal" (aesthetic appeal);

• The appearance of the article must be such that it matters to consumers as a quality distinct
from its function. Design protection does not extend to features which are prompted purely
by function (i.e. solely dictated by the function which the article has to perform), such as the
seat of a chair (although the particular shape of the seat may be protectable).
Why protect industrial designs?
Industrial designs are what makes a product attractive and appealing; hence, they add to the
commercial value of a product and increase its marketability.
When an industrial design is protected, this helps to ensure a fair return on investment. An
effective system of protection also benefits consumers and the public at large, by promoting
fair competition and honest trade practices.
Protecting industrial designs helps economic development, by encouraging creativity in the
industrial and manufacturing sectors and contributes to the expansion of commercial activities
and the export of national products.
What is a Trade Secret?
Broadly speaking, any confidential business information which provides an enterprise a
competitive edge may be considered a trade secret. Trade secrets encompass manufacturing or
industrial secrets and commercial secrets. The unauthorized use of such information by persons
other than the holder is regarded as an unfair practice and a violation of the trade secret.
In its simplest terms, a trade secret is information which a business wants to keep secret, because
keeping the information secret helps the business or the release of the information could harm
the business and help its competitors.
For example, Kentucky fried chicken

✓ The secret recipe of “11 herbs and spices” lies in a bank vault.

✓ Few people know it, and they are contractually obligated to secrecy.

✓ The ingredients are mixed by two different companies in two different locations and then
combined elsewhere in a third, separate location. To mix the final formula, a computer
processing system is used to blend the mixtures together and ensure that no one outside
KFC has the complete recipe

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