Concept Of Entrepreneurial Competency 4z3z1p
This document was ed by and they confirmed that they have the permission to share it. If you are author or own the copyright of this book, please report to us by using this report form. Report 3b7i
Overview 3e4r5l
& View Concept Of Entrepreneurial Competency as PDF for free.
More details w3441
- Words: 6,888
- Pages: 20
RCA 204, Innovation & Entrepreneurship Unit III: Opportunity / Identification and Product Selection (8 Hrs) Meaning and concept of Entrepreneurial Competency, Developing Entrepreneurial Competencies, Entrepreneurial Culture, Entrepreneurial Mobility, Factors affecting Entrepreneurial mobility, Types of Entrepreneurial mobility. Entrepreneurial Opportunity Search and Identification; Criteria to Select a Product; Conducting Feasibility Studies; Project Finalization; Sources of Information _____________________________________________________________________________________ MEANING OF ENTREPRENEURIAL COMPETENCY The business operation is considered to be very complex in a competitive business environment, which is constantly changing with fast technological advancements. An entrepreneur is expected to interact with these environmental forces which require him to be highly competent in different dimensions like intellectual, attitudinal, behavioral, technical, and managerial aspects. Entrepreneurs are therefore permanently challenged to deploy a set of competencies to succeed in their entrepreneurial endeavors. Entrepreneurial competencies are defined as underlying characteristics possessed by a person, which result in new venture creation. These characteristics include generic and specific knowledge, motives, traits, self-images, social roles, and skills that may or may not be known to the person. That is, these characteristics may be even unconscious attributes of an individual. Some of these competencies are innate while others are acquired in the process of learning and training and development. Definition “Entrepreneurial competencies can be defined as underlying characteristics such as generic and specific knowledge, motives, traits, self-images, social roles, and skills that result in venture birth, survival, and/or growth.” – Bird (1995) Types of Competencies:
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
The competencies may be classified into following categories: 1. Personal entrepreneurial competencies 2. Venture initiation and success competencies a) Enterprise launching competencies b) Enterprise management competencies Personal Entrepreneurial competencies It is the personal characteristics of an individual who possess to perform the task effectively and efficiently. Personal entrepreneurial competencies include the following: a) Initiative The entrepreneur should be able to take actions that go beyond his job requirements and to act faster. He is always ahead of others and able to become a leader in the field of business. He Does things before being asked or compelled by the situation and acts to extend the business into new areas, products or services. b) Sees and acts on opportunities An entrepreneur always looks for and takes action on opportunities. He Sees and acts on new business opportunities and Seizes unusual opportunities to obtain financing, equipment, land, work space or assistance. c) Persistence An entrepreneur is able to make repeated efforts or to take different actions to overcome an obstacle that get in the way of reaching goals. An entrepreneur takes
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship repeated or different actions to overcome an obstacle and Takes action in the face of a significant obstacle. d) Information Seeking An entrepreneur is able to take action on how to seek information to help achieve business objectives or clarify business problems. They do personal research on how to provide a product or service. They seek information or ask questions to clarify what is wanted or needed. They personally undertake research and use s or information networks to obtain useful information. e) Concern for High Quality of Work An entrepreneur acts to do things that meet certain standards of excellence that gives him greater satisfaction. An entrepreneur states a desire to produce or sell a top or better quality product or service. They compare own work or own company’s work favorably to that of others. f) Commitment to Work Contract An entrepreneur places the highest priority on getting a job completed. They make a personal sacrifice or take extraordinary effort to complete a job. They accept full responsibility for problems in completing a job for others and express concern for satisfying the customer. g) Efficiency Orientation A successful entrepreneur always finds ways to do things faster or with fewer resources or at a lower cost. They look for or find ways to do things faster or at less cost. An entrepreneur uses information or business tools to improve efficiency. He expresses concern about costs vs. benefits of some improvement, change, or course of action. h) Systematic Planning An entrepreneur develops and uses logical, step-by-step plans to reach goals. They plan by breaking a large task into subtask and develop plans, then anticipate obstacles and evaluate alternatives. They take a logical and systematic approach to activities. i) Problem Solving Entrepreneurs identify new and potentially unique ideas to achieve his goals. They generate new ideas or innovative solutions to solve problems and they take alternative strategies to solve the problems. j) Self-Confidence
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship Entrepreneur with this competency will have a strong belief in self and own abilities. They express confidence in their own ability to complete a task or meet a challenge. They stick to their own judgment while taking decision. k) Assertiveness An entrepreneur confronts problems and issues with others directly. Entrepreneur with this competency vindicate the claim to asset their own rights on others. They demand recognition and disciplines those failing to perform as expected. They asset own competence, reliability or other personal or company’s qualities. They also assert strong confidence in own company’s or organization’s products or service. l) Persuasion Entrepreneurs with this competency successfully pursue others to perform the activities effectively and efficiently. An entrepreneur can persuade or influence others for mobilizing resources, obtaining inputs, organizing productions and selling his products or services. m) Use of Influence Strategies An entrepreneur is able to make use of influential people to reach his business goals. Entrepreneurs with this competency influence the environment (Individuals/Institution) for mobilizing resources organizing production and selling goods and services to develop business s. n) Monitoring Entrepreneurs with this competency normally monitor or surprise all the activities of the concern to ensure that the work is completed by maintaining good quality. o) Concern for Employee Welfare Entrepreneurs with this competency take action to improve the welfare of employees and take positive action in response of employee’s personal concerns. Reference: http://www.simplynotes.in/mbabba/entrepreneurial-competency/2/ 2. Venture Initiation and success Competencies In addition to personal competencies, Entrepreneur must also possess the competencies required to launch the enterprise and for its growth and survival. It is further divided into two categories of competencies: a. Enterprise launching competencies b. Enterprise management competencies a)
ENTERPRISE LAUNCHING COMPETENCIES
Competency to understand the nature of business
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship -To analyze the personal advantage of owning a small business. -To analyze the personal risks of owning a small business. -To analyze how to maximize the opportunities and minimize the risks of owning a business. Competency to determine the potential as an entrepreneur -To consider the personal qualification and abilities needed to manage own business. -To evaluate the own potentials for decision-making, problem solving and creativity. -To determine own potential for management, planning, operations, personnel and public relations. Competency to develop a business plan -To identify how a business plan helps the entrepreneur. -To recognize how a business plan should be organized. -To identify and use the mechanisms for developing a business plan. Competency to obtain technical assistance -To prepare for using technical assistance. -To select professional consultants. -To work effectively with consultants. Competency to a choose the type of ownership -To analyze the type of ownership of business. -To follow the steps necessary to file for ownership of the business. -To define politics and procedures for a successful multi-owner. Competency to plan the market strategy -To use goods classification and life cycle analysis as planning tools for marketing. -To develop and modify marketing mixes for a business. -To use decision making tools and aid in evaluating marketing activities. -To evaluate operations to improve decision making about marketing. Competency to locate the business -To analyze customer transportation, access, parking and so forth i.e. relative to alternative site locations. -To complete a location feasibility study for the business. -To determine the cost of renovating or improving a site for the business. -To prepare an occupancy contrast for the business. Competency to finance the business -To describe the source of information available to help in estimating the financing necessary to start a new business. -To determine the finance necessary to start a new business. -To prepare a project profit and loss statement and a projected cash flow statement for the new business. -To prepare a loan application package. Competency to deal with the business -To determine the need for legal assistance. -To select the provisions that is desired in the lease.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship -To prepare sales contract (such a s credit sales or long term sales) that may be utilized in the contracts -To evaluate contracts. -To determine the need for protection of ideas and intentions. Competency to comply with government regulations -To appraise the effects of various regulations on the business operations. -To acquire the information necessary to comply with the various rules and regulations affecting the business. -To develop policies for the business to comply with the Government rules and regulations. b)
ENTERPRISE MANAGEMENT COMPETENCIES
Competency to manage the business -To plan goals and objectives for the business. -To develop a diagram showing the organizational structure for the business. -To establish control practices and procedures for the business Competency to manage human resources -To write a job description for a position in the business. -To develop a training programme online for employees. -To develop a list of personnel for employees in the business. -To develop an outline for an employee evaluation system. -To plan a corrective interview with an employee concerning a selected problem. Competency to promote the business -To create a long-term promotional plan. -To describe the techniques used to prepare advertising and promotion -To analyze competitive promotional activities. -To evaluate promotional effectiveness. -To plan a community relations programme. Competency to manage sales efforts. -To develop a sales plan for the business. -To develop policies and procedures for serving the customers. -To develop a plan for training and motivating sales people. Competency to keep business records -To determine who will keep the books for the business and how they will be maintained. -To describe double-entry bookkeeping. -Select the types of journals and ledges that you will use in the business. -To identify the types of records that will be used in the business to record sales, cash receipts, cash disbursements, s receivable, s payable, payroll, petty cash, inventory, budgets and other items. -To evaluate the business records. -To identify how a micro-computer may be used to keep he business records.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship Competency to manage the finances -To explain the importance of cash flow management. -To identify financial control procedures. -To describe how to find cash flow patterns. -To analyze trouble spots in financial management. -To describe how to prepare an owner’s equity financial statement. -To analyze financial management ratios applicable to a small business. -To identify the components of breakeven point problem. -To review microcomputer application for financial management. Competency to manage customer credit and collection -To analyze the legal rights and resource of credit guarantors. -To develop a series of credit collection reminders and the follow up activities. -To develop various credit and collection policies. -To prepare a credit promotion plan. -To discuss information resources and systems that applies to credit and collection procedures. Competency to protect the business -To prepare policies for the firm that will help minimize losses due to employee theft, vendor theft, bad cheques, shoplifting, robbery, injury or product liability. -To determine the kinds, amounts and costs of insurance needed by the firm. DEVELOPING ENTREPRENEURIAL COMPETENCIES The competency results in superior performance. This is exhibited by one’s distinct behavior in different situations. The popular Kakinada experience conducted by McClelland and winter (1969) has proved beyond doubt that the entrepreneurial competency can be injected and developed in human minds through proper education and training. Competency finds expression in human behavior. How to develop and sharpen the entrepreneurial competency is suggested in the following method or procedure consisting of four steps: 1. 2. 3. 4.
Competency Identification and Recognition Competency Assessment Competency Mapping Development Intervention
A brief description about each of these follows in turn: 1. Competency Identification and Recognition: Acquisition of a new behavior like entrepreneurial behavior begins with understanding, identifying and recognizing of what entrepreneurial behavior means. In other words, the first step involved in developing the entrepreneurial competency is first to identify and recognize the set of competencies required to effectively behave like an entrepreneur. 2. Competency Assessment:
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
Once the set of competencies is identified and recognized to behave like an entrepreneur, the next step is now to see what entrepreneurial competencies the person actually possesses. In other words, the actual competencies possessed by an entrepreneur are examined against the required set of competencies to effectively behave or act like an entrepreneur. Where one stands with respect to a set of required competencies to act like an entrepreneur or what is the level of one’s competence can be ascertained by asking the relevant questions to a competence. 3. Competency Mapping: Now, the actual competencies possessed by an entrepreneur are compared with the competencies required to become a successful entrepreneur to ascertain the gap in the entrepreneurial competencies of an entrepreneur (Cooper 2000). This is called in the human resource training and development lexicon as ‘Competency Mapping.’ In other words, this is just like ‘training needs identification’ in case of HR training. This is presented as follows:
A popular performance tool used to map the (entrepreneurial) competency is based on “Skill to Do / Will to Do’ chart.”Skill to Do’ refers to the entrepreneur’s / individual’s ability to do the job and to Do’ refers to the entrepreneur’s individual’s desire or motivation to do the job. In other words, the ‘Ability to Do / No Ability to Do’ dimension of this comes within the purview of the “Entrepreneurial Competence’ and the “Will to Do /No Will to Do’ dimension comes within the purview of the ‘Entrepreneurial Commitment.’ This may result in four possible situations as shown in the following Figure:
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
These four situations mean the following: (A) Ability to Do / Will to Do: Among all four situations, this is the ideal one. The entrepreneur is fully able, i.e. qualified and is performing his job as designed and desired. He is supposed to be star or ideal performer as an entrepreneur. (B) No Ability to Do / Will to Do: In this situation, the entrepreneur is putting out his efforts to perform the job, but is not getting the desired results out of his efforts. It means he is lacking ability or skill to perform the job. Thus, it implies that the entrepreneur needs training, or say, ‘competency building. (C) Ability to Do / No Will to Do: Here, the entrepreneur is qualified or possesses the ability to do his job but is not willing to perform the same. This implies the lack of desire or motivation. Thus, the entrepreneur needs to be motivated to perform his job. (D) No Ability to Do / No Will to Do: The entrepreneur has deficiency in both ability and will (motivation). In a sense, he is just like deadwood and his entrepreneurial job is in jeopardy. Thus, the entrepreneur either needs to continue like this or disappear from the entrepreneurial role. 4. Development Intervention: After understanding, internalizing and practicing a particular behavior or competence, one needs to make an introspection of the same in order to sharpen and strengthen one’s competency. This is called ‘’. In simple , means to know the strengths and weaknesses of one’s new behavior. This helps one know how the new behavior has been rewarding. This enables one to sustain or give up the exhibition of a particular behavior or competence in his future life. INCREASE ENTERPRISE VALUE BY MAINTAINING YOUR ENTREPRENEURIAL CULTURE Edgar Schein (1990) says that the only important thing that leaders do may well by constructing culture. He says that an organization’s culture is grounded in the founder’s basic beliefs, values and assumptions. Values – what is worth having or doing – and vision – where we are going and how we will get there – and how it is communicated are vital ingredients in creating culture. Having entrepreneurship at the core of these values is fundamental and essential for the success of the
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship entrepreneurial organization. Values related to entrepreneurship include creativity, achievement, ownership, change and perseverance. To achieve this, the leader needs to:
Define clearly what the values and vision are. This provides a clear focus on key issues and concerns for the organization. Get everyone in the organization to understand the values and vision through effective communication practices. Guide the development of policies and programmes that the vision. Encourage the enactment of the values and vision through their own personal actions – ‘walking the talk’ – acting consistently over time to develop trust, showing that they are reliable and can be trusted to do what they promise. This reassures people who are concerned about change. Show concern and respect for the of the organization, demonstrating through actions that they are important.
Bowman and Faulkner (1997) talk about organizational culture being formed or embedded in an organization from three influences; organizational processes, cognitive processes and behaviors. All these influences Burns represents in following figure:
Burns talks about five ‘high level’ elements that really set the culture of the organization apart as being entrepreneurial. They represent the real DNA of the entrepreneur:
creativity and innovation empowerment strong relationships continual learning Measured risk-taking.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
Examples: Zappos: Zappos has become almost as well known for its culture as it is for the shoes that it sells online. What does that culture look like? It starts with a cultural fit interview, which carries half the weight of whether the candidate is hired. New employees are offered $2,000 to quit after the first week of training if they decide the job isn’t for them. Ten core values are instilled in every team member as: 1. Deliver WOW Through Service 2. Embrace and Drive Change 3. Create Fun and A Little Weirdness 4. Be Adventurous, Creative, and Open-Minded 5. Pursue Growth and Learning 6. Build Open and Honest Relationships With Communication 7. Build a Positive Team and Family Spirit 8. Do More With Less 9. Be ionate and Determined 10.Be Humble Twitter Employees of Twitter can’t stop raving about the company’s culture. Rooftop meetings, friendly coworkers and a team-oriented environment in which each person is motivated by the company’s goals have inspired that praise. Employees of Twitter can also expect free meals at the San Francisco headquarters, along with yoga classes and unlimited vacations for some. These and many other perks are not unheard of in the startup world. Google It would almost seem wrong not to mention Google on a list of companies with great culture. Google has been synonymous with culture for years, and sets the tone for many of the perks and benefits startups are now known for. Free meals, employee trips and parties, financial bonuses, open presentations by high-level executives, gyms, a dog-friendly environment and so on. Googlers are known to be driven, talented and among the best of the best. Adobe Adobe is a company that goes out of its way to give employees challenging projects and then provide the trust and to help them meet those challenges successfully. While it offers benefits and perks like any modern creative company, Adobe's is a culture that avoids micromanaging in favor of trusting employees to do their best. ENTREPRENEURIAL MOBILITY Entrepreneurial Mobility means movement of entrepreneurs from one location to another and similarly from one occupation to another, which affect the pace and pattern of entrepreneurship development. Based on the movement and settlement of entrepreneurs (being human beings), entrepreneurial mobility may be classified as follows:
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship 1.
2.
Occupational Mobility - means movement or changes in occupation. This may take place in two forms: a) Inter-generation movement: When a person may move or leave from the principle occupation of his/her father, is called Inter-generation movement. b) Intra-generation occupational movement: When a person may move or leave from his/her own occupation during the operational career, is called Intra-generation occupational movement. Locational Mobility - means movement or changes in location. This mobility depends upon some factors like availability of raw material, infrastructure and labor, nearness to market, own resources, knowledge, experience, socio political situation, etc.
FACTORS AFFECTING ENTREPRENEURIAL MOBILITY There are following some important factors influence the entrepreneurial mobility in a given situation and time: 1. Education: An entrepreneur must be educated person. He/she also enables to adjust with the different conditions more easily and clearly and communicate others in a better manner. Thus, an educated entrepreneur tends to be more mobile than an uneducated one. 2. Training and Experience: An entrepreneur must be properly trained and must have some past experience in business or industry. An experienced entrepreneur better perceives the available opportunities, better analyses his/her strengths and weaknesses and also understands the complexities involved in running an enterprise. That technical knowledge and experience influences the entrepreneurial mobility. 3. Availability of Facilities: The entrepreneurs may move from the areas with no or less facilities to the areas with more and better facilities. These facilities include a. Govt. facilities - availability of raw materials, labors, market facilities. b. Infrastructural facility. 4. Political Conditions: The entrepreneurial mobility is also influenced by the political factors, such as tax policy, employment laws, environmental regulations, political stability, trade restrictions and tariffs. 5. Size of Enterprise: Entrepreneurial mobility is related to size of enterprise. Larger business houses are found more mobile than smaller ones. Because a large size of enterprise will have the capability to start a new business at a new place. _____________________________________________________________________________________ PRACTICE EXERCISES: 1. Explain the difference between opportunities and ideas. 2. Describe the three general approaches entrepreneurs use to identify opportunities. 3. Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship 4. Identify and describe techniques entrepreneurs use to generate ideas. 5. Discuss actions to take to encourage continuous development of new ideas in entrepreneurial firms. OPPORTUNITY SEARCH AND IDENTIFICATION Opportunity search means the extent to which possibilities for new ventures exist and the extent to which entrepreneurs have the Smooth way to influence their odds for success through their own actions. Opportunity identification can be defined as the cognitive process or processes through which individuals conclude that they have identified an opportunity. It is important to note that opportunity identification is only the initial step in a continuing process, and is distinct both from detailed evaluation of the feasibility and potential economic value of identified opportunities and from active steps to develop them through new ventures. It is essentially a situation in which new goods, raw materials, markets and organizational strategies can be introduced through the formation of new means, ends or means-ends relationships. Let us try to understand the difference. An idea is like a seed, an impression of a concept or a notion that revolves around seemingly successful product or service. A thought that needs some amount of commercial validation before it shapes self into an opportunity. Opportunity is the care and nurturing that a gardener has to endeavor for to turn the seed into a sapling and then allow it to grow into a tall tree. The gardener ensures that it gets good soil, sunshine, proper environment and protection from harsh rains or weather conditions. Example: Colonel Sanders tried for many years to sell his chicken recipe idea but no one listened to him until he repackaged it and KFC (Kentucky Fried Chicken) was born. The moral of this lesson is that investors invest in business opportunities and ventures, not business ideas. Now how do you turn a business idea into an opportunity? Well, you can turn a business idea into a business opportunity by conducting market research and feasibility study on your idea, writing a business plan and assembling a business team that will work with you on your idea. Only then will such idea become an opportunity that will attract investors and probably get the needed financing. Successful entrepreneurs are good at turning ideas into opportunities. Why most innovations are great big failures? By Payne’s lights, most innovations fail because their creators didn’t ask tough questions at the outset. He calls the problem “putting the ‘wow’ before the 'how.'" Google Wallet. Intended as both a new convenience for consumers and a way to harvest more customer data to drive targeted advertising, the product was designed to replace your old leather billfold with an all-digital phone-based app. Google Wallet had plenty of “wow” but the “how” has been its downfall. For one thing, it involves digitizing credit cards, and the card companies demanded such big fees for participating that Google reportedly lost money on every transaction. Phone
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship companies, seeing Google Wallet as a competitor in the potentially lucrative mobilepayments business, blocked the service. The debacle has so far cost Google at least $300 million, and the executives who led the team have left the company. “Google Wallet is perhaps an idea ahead of its time, though some of the structural factors impeding its success will be hard to ever overcome,” Payne writes. “But for now, it’s a great case study in what can go wrong” with any company’s world-beating idea when too many tough questions go unanswered—or unasked—at the start. What is an opportunity??
An idea that is timely, attractive, durable anchored in a product or service that creates or adds value for its buyer and . An opportunity is a favorable set of circumstances that creates the need for a new product, service, or business idea. An idea, as we defined it, is “Something imagined or pictured in the mind”. The difference is that an idea may or may not represent an opportunity. An opportunity is attractive, durable, timely, and is anchored in a product or service, which creates or adds value for its buyer or end . Jeffrey Timmons
Four Essential Qualities of an Opportunity
Attractive Opportunity: First and foremost, your idea needs to be attractive to your target customers who will buy your idea. You first you need to identify who your target customers are for this idea to work. The idea must also be attractive in the industry in which it is going to compete. When I say “attractive” I do not mean just aesthetics and a cool look and feel. I am also referring to the idea itself. Does it create excitement? Does it have an attractive price point? Will the quality and ease of use meet or exceed the ’s expectations? Is it unique? Does it have attractive features and benefits? Basically, what about your idea would make people want to buy it?
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship Durable: Durability of an idea from a business standpoint means that it can last as a business. A PRODUCT and a BUSINESS are two very different things. Businesses create products, but a whole business built around one product that has little scalability is pretty much a dead end. A scalable product can penetrate multiple markets and sometimes industries with many ways to grow. A perfect example is the invention of the microfiber textile. Some may see this as just a rag for cleaning – thus just a cleaning product. But it can also be cut into the shapes for clothing, embroidered with corporate branding, and BOOM! Now that same rag is sold in the clothing departments with minimal change to the textile’s manufacturing and production processes. Creates Value: This is obviously one of the most important factors to generate sales. Your idea must create value in order for people to purchase it, thus generating revenue for your business to be sustainable. A big consideration here is the cost of the idea in relation to the value it creates for the customer. If it costs more than the value of the pain you are solving, then people will not want to buy it, aka willingness to pay. Recently, consumers have been facing this issue with high-end smart watches. They have a $700 phone in their pocket, so do they really want to spend another $200-$400 to read a text on their wrist? Is the time they save from having to pull their phone out of their pocket really worth $400? The watches do much more than that, but the mass market does not see things the same way as the innovators did. This is common in the early adoption stages, where products are looked at through a very simplified lens by the mass consumer. However, now that the prices have come down, more people are adopting this technology now that the price is beginning to match the perceived value. So, again, does your product create perceivable value that is affordable? Do some research and talk to people in your target markets. It’s amazing how much you can learn if you just ask the right people. Timely: Timely can get a little tricky as this is really an area of economics, demographics, psychographics, and various other externalities. Basically, this quality comes down to the question, “Is this the right time for my idea?” When analyzing this, it is always best to look at various trends. Major trends to consider are economic trends, social trends, technological trends, and industry trends. Window of Opportunity
The term “window of opportunity” is a metaphor describing the time period in which a firm can realistically enter a new market. Once the market for a new product is established, its window of opportunity opens, and new entrants flow in. At some point, the market matures, and the window of opportunity (for new entrants) closes.
OPPORTUNITY IDENTIFICATION
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
The first approach to identifying opportunities is to observe trends and study how they create opportunities for entrepreneurs to pursue. There are two ways that entrepreneurs can get a handle on changing environmental trends: They can carefully study and observe them. They can purchase customized forecasts and market analyses from independent research firms. Economic factors in trend: When looking at economic factors and how they affect opportunities, first you should evaluate who has money to spend. When incomes are high in a particular group or there is disposable money available, people are more willing to buy products and services that enhance their lives. A great example of this would be the teen and pre-teen market. When kids have money, they buy stuff. Products and services such as designer clothing, able music services, new smart phones and all the other things that these kids buy are a huge market and therefore have opportunistic possibilities. Another gigantic market is the aging baby boomers. These folks have spent a lifetime saving money and preparing for their retirement and they have disposable income.
Social Factors in trends 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. Often, the reason that a product or service exists has more to do
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship with satisfying a social need than the more transparent need the product fills. The proliferation of fast-food restaurants, for example, isn’t primarily because of people’s love of fast food but rather because of the fact that people are busy and often don’t have time to cook their own meals. Similarly, social networking sites like Facebook and Twitter aren’t popular because they can be used to post information and photos on a Web site. They’re popular because they allow people to connect and communicate with each other, which is a natural human tendency. Changes in social trends alter how people and businesses behave and how they set their priorities. These changes affect how products and services are built and sold. Technological factors: Given the rapid pace of technological change, it is vital that entrepreneurs keep on top of how new technologies affect current and future business opportunities. Entire industries have emerged as the result of technological advances. Airstrip Technologies, a recent start-up, enables doctors to monitor critical patient information remotely on a smart-phone or computer. The company’s founding was motivated by a desire on the part of doctors to stay in closer with their critical care patients while away from the hospital and while those patients are receiving treatment in locations outside a hospital. Advances in wireless technologies made the system possible. In most cases the technology isn’t the key to recognizing business opportunities. Instead, the key is to recognize how technologies can be used and harnessed to help satisfy basic or changing needs. For example, OpenTable.com is a Web site that allows s to make restaurant reservations online and now covers most of the United States Political Factors: Political change also engenders new business and product opportunities. For example, global political instability and the threat of terrorism have resulted in many firms becoming more security conscious. These companies need new products and services to protect their physical assets and intellectual property as well as to protect their customers and employees. The backup data storage industry, for example, is expanding because of this new trend in the tendency to feel the need for data to be more protected than in the past. An example of a startup in this area is Box.net, which was funded by Mark Cuban, the owner of the Dallas Mavericks. Box.net allows its customers to store data “offsite” on Box.net servers, and access it via any Internet connection.” 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 change. Many companies have been started by people who have experienced a problem in their own lives, and then realized that the solution to the problem represented a business opportunity.
GAPS IN THE MARKETPLACE Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
A third approach to identifying opportunities is to find a gap in the marketplace. A gap in the marketplace is often created when a product or service is needed by a specific group of people but doesn’t represent a large enough market to be of interest to mainstream retailers or manufacturers.
CRITERIA TO SELECT A PRODUCT IN ENTREPRENEURSHIP There are three basic stages/steps involved in product/venture selection. These are idea generation, evaluation and choice.
Idea Generation: Product ideas or investment opportunities come from different sources such as business/financial newspapers, research institutes, consulting firms, natural resources, universities, competitors. etc The starting point for idea generation could be a simple analysis of the business’s strengths and weakness. Ideas could also be generated through brainstorming, desk research and various types of management consensus procedures.
Evaluation: Screening of the product ideas is the first step ill evaluation. Such criteria as potential value of the product, time money and equipment required, fitting of potential product into the business’s long range sales plan and availability of qualified people to handle its marketability need be thoroughly considered.
Each identified product/investment opportunity needs to be adequately evaluated. A pre-feasibility study of the product market, technical and financial aspect is necessary at this stage to have a clear picture of the associated cost and benefits. A pre-feasibility is a preliminary version of a feasibility study. It is similar to a feasibility study except that it is less detailed. It is usually carried out for large and complex product/project to determine whether to proceed to the more elaborate feasibility study.
Choice: A choice is made of product which has been found to be commercially viable, technically feasible and economically desirable. At this stage, necessary machineries are set in motion.
In selecting product for your business venture, the following factors must be taken into consideration: 1. Supply-gap: The size of the unsatisfied market demand which constitute a source of business opportunity will dictate, to a great extent the need to select a particular product. The product with the highest chances of success as reflected in its demand will be selected. In essence, there must be existing obvious demand for the selected product.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship 2. Fund: The size of the funds that can be mobilized is another important factor. Adequate fund is needed to develop, produce, promote, sell and distribute the product selected. 3. Availability of and Access to Raw Materials: Different products require different raw materials. The source quality and quantity of the raw materials needed are factors to be seriously considered, Are the raw materials available in sufficient quantities? Where are the sources of raw materials located? Are they accessible? Could they be sources locally or imported? Satisfactory answers should be provided to these and many other relevant questions. 4. Technical Implications: The production process for the product needs to be considered. There is need to know the technical implications of the selected product on the existing production line, available technology and even the labour force. The choice of a particular product may require either acquisition of the machineries or refurbishing of the old ones. The product itself must be technically satisfactory and acceptable to the . 5. Profitability/Marketability: Most often, the product that has the highest profit potential is often selected. However, a product may be selected on the basis of its ability to utilize idle capacity or complement the sale of the existing products. The product must be marketable. 6. Availability of Qualified Personnel: Qualified personnel to handle the production and marketing of the product must he available. The cost of producing the product must be kept to the minimum by reducing wastages. This is achievable through competent hands. 7. Government Policies: This is quite often an uncontrollable factor. The focuses of government policies can significantly influence the selection of product. For instance, a package of incentives from government for a product with 100% local input contents can change the direction of the business’s R & D and hence the product selected. 8. Government objectives: The contributions of the product to the realization of the company’s short and long range objectives must be considered before selection. For instance, the company goal maybe the achievement of sale growth, sales stability or enhancement of the company’s social value. Causes of Product Failure A wrong choice when made, often leads to product failure. Product failure may be caused as a result of one or combination of the following:
Management oversight during the basic planning stages – initial research may be either inadequately done or bungled in the interpretation. Subtle changes in the market. For instance, competitor may introduce a competing product into the market unexpectedly. Lack of sound market appraisal
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
Product problems and defect e.g. the manufacturing of a product that is too costly or too complicated. Inadequate marketing . For Instance, the company may have rated the product so high in the market that they cut back on promotion. Lack of consumer education about the product.
Product Modification Product selection is one thing, the sustainability of the product in the market is another thing entirely. There need to at least stabilize the sale of the product. This is where product modification comes in because of the dynamic nature of the business environment. However, the technique to use to modify a product is dependent upon the circumstance of the product in relation to the buyer. There are some possible alternatives of product modification, namely:
Quality improvement– which aims at strengthening the competitive position of the product. The improvement may be in the appearance or end use. Feature improvement- which is to increase the number of real or imagined product benefits. Style improvement – aims at improving the aesthetic appeal of the product rather than its functional performance. Service improvement e.g. technical advice, faster supply, breaking bulk, etc. Often used by smaller companies competing with large ones. Promotional benefits e.g. giveaways competitions, etc. is used to add value to the product.
Conducting Feasibility Study Starting a new business project is inherently risky because there is no guarantee that a new company, product or service will be profitable. A feasibility study is an analysis that attempts to assess whether a new project has the potential to succeed. Feasibility studies are commonly used in the early stages of planning new ventures to help managers decide whether to go forward with new projects. Feasibility studies technically aren't required to launch new ventures, but they can provide valuable insights that help managers make better decisions and avoid costly mistakes.
Prepared by Neelam Rawat
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
The competencies may be classified into following categories: 1. Personal entrepreneurial competencies 2. Venture initiation and success competencies a) Enterprise launching competencies b) Enterprise management competencies Personal Entrepreneurial competencies It is the personal characteristics of an individual who possess to perform the task effectively and efficiently. Personal entrepreneurial competencies include the following: a) Initiative The entrepreneur should be able to take actions that go beyond his job requirements and to act faster. He is always ahead of others and able to become a leader in the field of business. He Does things before being asked or compelled by the situation and acts to extend the business into new areas, products or services. b) Sees and acts on opportunities An entrepreneur always looks for and takes action on opportunities. He Sees and acts on new business opportunities and Seizes unusual opportunities to obtain financing, equipment, land, work space or assistance. c) Persistence An entrepreneur is able to make repeated efforts or to take different actions to overcome an obstacle that get in the way of reaching goals. An entrepreneur takes
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship repeated or different actions to overcome an obstacle and Takes action in the face of a significant obstacle. d) Information Seeking An entrepreneur is able to take action on how to seek information to help achieve business objectives or clarify business problems. They do personal research on how to provide a product or service. They seek information or ask questions to clarify what is wanted or needed. They personally undertake research and use s or information networks to obtain useful information. e) Concern for High Quality of Work An entrepreneur acts to do things that meet certain standards of excellence that gives him greater satisfaction. An entrepreneur states a desire to produce or sell a top or better quality product or service. They compare own work or own company’s work favorably to that of others. f) Commitment to Work Contract An entrepreneur places the highest priority on getting a job completed. They make a personal sacrifice or take extraordinary effort to complete a job. They accept full responsibility for problems in completing a job for others and express concern for satisfying the customer. g) Efficiency Orientation A successful entrepreneur always finds ways to do things faster or with fewer resources or at a lower cost. They look for or find ways to do things faster or at less cost. An entrepreneur uses information or business tools to improve efficiency. He expresses concern about costs vs. benefits of some improvement, change, or course of action. h) Systematic Planning An entrepreneur develops and uses logical, step-by-step plans to reach goals. They plan by breaking a large task into subtask and develop plans, then anticipate obstacles and evaluate alternatives. They take a logical and systematic approach to activities. i) Problem Solving Entrepreneurs identify new and potentially unique ideas to achieve his goals. They generate new ideas or innovative solutions to solve problems and they take alternative strategies to solve the problems. j) Self-Confidence
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship Entrepreneur with this competency will have a strong belief in self and own abilities. They express confidence in their own ability to complete a task or meet a challenge. They stick to their own judgment while taking decision. k) Assertiveness An entrepreneur confronts problems and issues with others directly. Entrepreneur with this competency vindicate the claim to asset their own rights on others. They demand recognition and disciplines those failing to perform as expected. They asset own competence, reliability or other personal or company’s qualities. They also assert strong confidence in own company’s or organization’s products or service. l) Persuasion Entrepreneurs with this competency successfully pursue others to perform the activities effectively and efficiently. An entrepreneur can persuade or influence others for mobilizing resources, obtaining inputs, organizing productions and selling his products or services. m) Use of Influence Strategies An entrepreneur is able to make use of influential people to reach his business goals. Entrepreneurs with this competency influence the environment (Individuals/Institution) for mobilizing resources organizing production and selling goods and services to develop business s. n) Monitoring Entrepreneurs with this competency normally monitor or surprise all the activities of the concern to ensure that the work is completed by maintaining good quality. o) Concern for Employee Welfare Entrepreneurs with this competency take action to improve the welfare of employees and take positive action in response of employee’s personal concerns. Reference: http://www.simplynotes.in/mbabba/entrepreneurial-competency/2/ 2. Venture Initiation and success Competencies In addition to personal competencies, Entrepreneur must also possess the competencies required to launch the enterprise and for its growth and survival. It is further divided into two categories of competencies: a. Enterprise launching competencies b. Enterprise management competencies a)
ENTERPRISE LAUNCHING COMPETENCIES
Competency to understand the nature of business
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship -To analyze the personal advantage of owning a small business. -To analyze the personal risks of owning a small business. -To analyze how to maximize the opportunities and minimize the risks of owning a business. Competency to determine the potential as an entrepreneur -To consider the personal qualification and abilities needed to manage own business. -To evaluate the own potentials for decision-making, problem solving and creativity. -To determine own potential for management, planning, operations, personnel and public relations. Competency to develop a business plan -To identify how a business plan helps the entrepreneur. -To recognize how a business plan should be organized. -To identify and use the mechanisms for developing a business plan. Competency to obtain technical assistance -To prepare for using technical assistance. -To select professional consultants. -To work effectively with consultants. Competency to a choose the type of ownership -To analyze the type of ownership of business. -To follow the steps necessary to file for ownership of the business. -To define politics and procedures for a successful multi-owner. Competency to plan the market strategy -To use goods classification and life cycle analysis as planning tools for marketing. -To develop and modify marketing mixes for a business. -To use decision making tools and aid in evaluating marketing activities. -To evaluate operations to improve decision making about marketing. Competency to locate the business -To analyze customer transportation, access, parking and so forth i.e. relative to alternative site locations. -To complete a location feasibility study for the business. -To determine the cost of renovating or improving a site for the business. -To prepare an occupancy contrast for the business. Competency to finance the business -To describe the source of information available to help in estimating the financing necessary to start a new business. -To determine the finance necessary to start a new business. -To prepare a project profit and loss statement and a projected cash flow statement for the new business. -To prepare a loan application package. Competency to deal with the business -To determine the need for legal assistance. -To select the provisions that is desired in the lease.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship -To prepare sales contract (such a s credit sales or long term sales) that may be utilized in the contracts -To evaluate contracts. -To determine the need for protection of ideas and intentions. Competency to comply with government regulations -To appraise the effects of various regulations on the business operations. -To acquire the information necessary to comply with the various rules and regulations affecting the business. -To develop policies for the business to comply with the Government rules and regulations. b)
ENTERPRISE MANAGEMENT COMPETENCIES
Competency to manage the business -To plan goals and objectives for the business. -To develop a diagram showing the organizational structure for the business. -To establish control practices and procedures for the business Competency to manage human resources -To write a job description for a position in the business. -To develop a training programme online for employees. -To develop a list of personnel for employees in the business. -To develop an outline for an employee evaluation system. -To plan a corrective interview with an employee concerning a selected problem. Competency to promote the business -To create a long-term promotional plan. -To describe the techniques used to prepare advertising and promotion -To analyze competitive promotional activities. -To evaluate promotional effectiveness. -To plan a community relations programme. Competency to manage sales efforts. -To develop a sales plan for the business. -To develop policies and procedures for serving the customers. -To develop a plan for training and motivating sales people. Competency to keep business records -To determine who will keep the books for the business and how they will be maintained. -To describe double-entry bookkeeping. -Select the types of journals and ledges that you will use in the business. -To identify the types of records that will be used in the business to record sales, cash receipts, cash disbursements, s receivable, s payable, payroll, petty cash, inventory, budgets and other items. -To evaluate the business records. -To identify how a micro-computer may be used to keep he business records.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship Competency to manage the finances -To explain the importance of cash flow management. -To identify financial control procedures. -To describe how to find cash flow patterns. -To analyze trouble spots in financial management. -To describe how to prepare an owner’s equity financial statement. -To analyze financial management ratios applicable to a small business. -To identify the components of breakeven point problem. -To review microcomputer application for financial management. Competency to manage customer credit and collection -To analyze the legal rights and resource of credit guarantors. -To develop a series of credit collection reminders and the follow up activities. -To develop various credit and collection policies. -To prepare a credit promotion plan. -To discuss information resources and systems that applies to credit and collection procedures. Competency to protect the business -To prepare policies for the firm that will help minimize losses due to employee theft, vendor theft, bad cheques, shoplifting, robbery, injury or product liability. -To determine the kinds, amounts and costs of insurance needed by the firm. DEVELOPING ENTREPRENEURIAL COMPETENCIES The competency results in superior performance. This is exhibited by one’s distinct behavior in different situations. The popular Kakinada experience conducted by McClelland and winter (1969) has proved beyond doubt that the entrepreneurial competency can be injected and developed in human minds through proper education and training. Competency finds expression in human behavior. How to develop and sharpen the entrepreneurial competency is suggested in the following method or procedure consisting of four steps: 1. 2. 3. 4.
Competency Identification and Recognition Competency Assessment Competency Mapping Development Intervention
A brief description about each of these follows in turn: 1. Competency Identification and Recognition: Acquisition of a new behavior like entrepreneurial behavior begins with understanding, identifying and recognizing of what entrepreneurial behavior means. In other words, the first step involved in developing the entrepreneurial competency is first to identify and recognize the set of competencies required to effectively behave like an entrepreneur. 2. Competency Assessment:
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
Once the set of competencies is identified and recognized to behave like an entrepreneur, the next step is now to see what entrepreneurial competencies the person actually possesses. In other words, the actual competencies possessed by an entrepreneur are examined against the required set of competencies to effectively behave or act like an entrepreneur. Where one stands with respect to a set of required competencies to act like an entrepreneur or what is the level of one’s competence can be ascertained by asking the relevant questions to a competence. 3. Competency Mapping: Now, the actual competencies possessed by an entrepreneur are compared with the competencies required to become a successful entrepreneur to ascertain the gap in the entrepreneurial competencies of an entrepreneur (Cooper 2000). This is called in the human resource training and development lexicon as ‘Competency Mapping.’ In other words, this is just like ‘training needs identification’ in case of HR training. This is presented as follows:
A popular performance tool used to map the (entrepreneurial) competency is based on “Skill to Do / Will to Do’ chart.”Skill to Do’ refers to the entrepreneur’s / individual’s ability to do the job and to Do’ refers to the entrepreneur’s individual’s desire or motivation to do the job. In other words, the ‘Ability to Do / No Ability to Do’ dimension of this comes within the purview of the “Entrepreneurial Competence’ and the “Will to Do /No Will to Do’ dimension comes within the purview of the ‘Entrepreneurial Commitment.’ This may result in four possible situations as shown in the following Figure:
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
These four situations mean the following: (A) Ability to Do / Will to Do: Among all four situations, this is the ideal one. The entrepreneur is fully able, i.e. qualified and is performing his job as designed and desired. He is supposed to be star or ideal performer as an entrepreneur. (B) No Ability to Do / Will to Do: In this situation, the entrepreneur is putting out his efforts to perform the job, but is not getting the desired results out of his efforts. It means he is lacking ability or skill to perform the job. Thus, it implies that the entrepreneur needs training, or say, ‘competency building. (C) Ability to Do / No Will to Do: Here, the entrepreneur is qualified or possesses the ability to do his job but is not willing to perform the same. This implies the lack of desire or motivation. Thus, the entrepreneur needs to be motivated to perform his job. (D) No Ability to Do / No Will to Do: The entrepreneur has deficiency in both ability and will (motivation). In a sense, he is just like deadwood and his entrepreneurial job is in jeopardy. Thus, the entrepreneur either needs to continue like this or disappear from the entrepreneurial role. 4. Development Intervention: After understanding, internalizing and practicing a particular behavior or competence, one needs to make an introspection of the same in order to sharpen and strengthen one’s competency. This is called ‘’. In simple , means to know the strengths and weaknesses of one’s new behavior. This helps one know how the new behavior has been rewarding. This enables one to sustain or give up the exhibition of a particular behavior or competence in his future life. INCREASE ENTERPRISE VALUE BY MAINTAINING YOUR ENTREPRENEURIAL CULTURE Edgar Schein (1990) says that the only important thing that leaders do may well by constructing culture. He says that an organization’s culture is grounded in the founder’s basic beliefs, values and assumptions. Values – what is worth having or doing – and vision – where we are going and how we will get there – and how it is communicated are vital ingredients in creating culture. Having entrepreneurship at the core of these values is fundamental and essential for the success of the
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship entrepreneurial organization. Values related to entrepreneurship include creativity, achievement, ownership, change and perseverance. To achieve this, the leader needs to:
Define clearly what the values and vision are. This provides a clear focus on key issues and concerns for the organization. Get everyone in the organization to understand the values and vision through effective communication practices. Guide the development of policies and programmes that the vision. Encourage the enactment of the values and vision through their own personal actions – ‘walking the talk’ – acting consistently over time to develop trust, showing that they are reliable and can be trusted to do what they promise. This reassures people who are concerned about change. Show concern and respect for the of the organization, demonstrating through actions that they are important.
Bowman and Faulkner (1997) talk about organizational culture being formed or embedded in an organization from three influences; organizational processes, cognitive processes and behaviors. All these influences Burns represents in following figure:
Burns talks about five ‘high level’ elements that really set the culture of the organization apart as being entrepreneurial. They represent the real DNA of the entrepreneur:
creativity and innovation empowerment strong relationships continual learning Measured risk-taking.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
Examples: Zappos: Zappos has become almost as well known for its culture as it is for the shoes that it sells online. What does that culture look like? It starts with a cultural fit interview, which carries half the weight of whether the candidate is hired. New employees are offered $2,000 to quit after the first week of training if they decide the job isn’t for them. Ten core values are instilled in every team member as: 1. Deliver WOW Through Service 2. Embrace and Drive Change 3. Create Fun and A Little Weirdness 4. Be Adventurous, Creative, and Open-Minded 5. Pursue Growth and Learning 6. Build Open and Honest Relationships With Communication 7. Build a Positive Team and Family Spirit 8. Do More With Less 9. Be ionate and Determined 10.Be Humble Twitter Employees of Twitter can’t stop raving about the company’s culture. Rooftop meetings, friendly coworkers and a team-oriented environment in which each person is motivated by the company’s goals have inspired that praise. Employees of Twitter can also expect free meals at the San Francisco headquarters, along with yoga classes and unlimited vacations for some. These and many other perks are not unheard of in the startup world. Google It would almost seem wrong not to mention Google on a list of companies with great culture. Google has been synonymous with culture for years, and sets the tone for many of the perks and benefits startups are now known for. Free meals, employee trips and parties, financial bonuses, open presentations by high-level executives, gyms, a dog-friendly environment and so on. Googlers are known to be driven, talented and among the best of the best. Adobe Adobe is a company that goes out of its way to give employees challenging projects and then provide the trust and to help them meet those challenges successfully. While it offers benefits and perks like any modern creative company, Adobe's is a culture that avoids micromanaging in favor of trusting employees to do their best. ENTREPRENEURIAL MOBILITY Entrepreneurial Mobility means movement of entrepreneurs from one location to another and similarly from one occupation to another, which affect the pace and pattern of entrepreneurship development. Based on the movement and settlement of entrepreneurs (being human beings), entrepreneurial mobility may be classified as follows:
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship 1.
2.
Occupational Mobility - means movement or changes in occupation. This may take place in two forms: a) Inter-generation movement: When a person may move or leave from the principle occupation of his/her father, is called Inter-generation movement. b) Intra-generation occupational movement: When a person may move or leave from his/her own occupation during the operational career, is called Intra-generation occupational movement. Locational Mobility - means movement or changes in location. This mobility depends upon some factors like availability of raw material, infrastructure and labor, nearness to market, own resources, knowledge, experience, socio political situation, etc.
FACTORS AFFECTING ENTREPRENEURIAL MOBILITY There are following some important factors influence the entrepreneurial mobility in a given situation and time: 1. Education: An entrepreneur must be educated person. He/she also enables to adjust with the different conditions more easily and clearly and communicate others in a better manner. Thus, an educated entrepreneur tends to be more mobile than an uneducated one. 2. Training and Experience: An entrepreneur must be properly trained and must have some past experience in business or industry. An experienced entrepreneur better perceives the available opportunities, better analyses his/her strengths and weaknesses and also understands the complexities involved in running an enterprise. That technical knowledge and experience influences the entrepreneurial mobility. 3. Availability of Facilities: The entrepreneurs may move from the areas with no or less facilities to the areas with more and better facilities. These facilities include a. Govt. facilities - availability of raw materials, labors, market facilities. b. Infrastructural facility. 4. Political Conditions: The entrepreneurial mobility is also influenced by the political factors, such as tax policy, employment laws, environmental regulations, political stability, trade restrictions and tariffs. 5. Size of Enterprise: Entrepreneurial mobility is related to size of enterprise. Larger business houses are found more mobile than smaller ones. Because a large size of enterprise will have the capability to start a new business at a new place. _____________________________________________________________________________________ PRACTICE EXERCISES: 1. Explain the difference between opportunities and ideas. 2. Describe the three general approaches entrepreneurs use to identify opportunities. 3. Discuss the personal characteristics of entrepreneurs that contribute to their ability to recognize business opportunities.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship 4. Identify and describe techniques entrepreneurs use to generate ideas. 5. Discuss actions to take to encourage continuous development of new ideas in entrepreneurial firms. OPPORTUNITY SEARCH AND IDENTIFICATION Opportunity search means the extent to which possibilities for new ventures exist and the extent to which entrepreneurs have the Smooth way to influence their odds for success through their own actions. Opportunity identification can be defined as the cognitive process or processes through which individuals conclude that they have identified an opportunity. It is important to note that opportunity identification is only the initial step in a continuing process, and is distinct both from detailed evaluation of the feasibility and potential economic value of identified opportunities and from active steps to develop them through new ventures. It is essentially a situation in which new goods, raw materials, markets and organizational strategies can be introduced through the formation of new means, ends or means-ends relationships. Let us try to understand the difference. An idea is like a seed, an impression of a concept or a notion that revolves around seemingly successful product or service. A thought that needs some amount of commercial validation before it shapes self into an opportunity. Opportunity is the care and nurturing that a gardener has to endeavor for to turn the seed into a sapling and then allow it to grow into a tall tree. The gardener ensures that it gets good soil, sunshine, proper environment and protection from harsh rains or weather conditions. Example: Colonel Sanders tried for many years to sell his chicken recipe idea but no one listened to him until he repackaged it and KFC (Kentucky Fried Chicken) was born. The moral of this lesson is that investors invest in business opportunities and ventures, not business ideas. Now how do you turn a business idea into an opportunity? Well, you can turn a business idea into a business opportunity by conducting market research and feasibility study on your idea, writing a business plan and assembling a business team that will work with you on your idea. Only then will such idea become an opportunity that will attract investors and probably get the needed financing. Successful entrepreneurs are good at turning ideas into opportunities. Why most innovations are great big failures? By Payne’s lights, most innovations fail because their creators didn’t ask tough questions at the outset. He calls the problem “putting the ‘wow’ before the 'how.'" Google Wallet. Intended as both a new convenience for consumers and a way to harvest more customer data to drive targeted advertising, the product was designed to replace your old leather billfold with an all-digital phone-based app. Google Wallet had plenty of “wow” but the “how” has been its downfall. For one thing, it involves digitizing credit cards, and the card companies demanded such big fees for participating that Google reportedly lost money on every transaction. Phone
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship companies, seeing Google Wallet as a competitor in the potentially lucrative mobilepayments business, blocked the service. The debacle has so far cost Google at least $300 million, and the executives who led the team have left the company. “Google Wallet is perhaps an idea ahead of its time, though some of the structural factors impeding its success will be hard to ever overcome,” Payne writes. “But for now, it’s a great case study in what can go wrong” with any company’s world-beating idea when too many tough questions go unanswered—or unasked—at the start. What is an opportunity??
An idea that is timely, attractive, durable anchored in a product or service that creates or adds value for its buyer and . An opportunity is a favorable set of circumstances that creates the need for a new product, service, or business idea. An idea, as we defined it, is “Something imagined or pictured in the mind”. The difference is that an idea may or may not represent an opportunity. An opportunity is attractive, durable, timely, and is anchored in a product or service, which creates or adds value for its buyer or end . Jeffrey Timmons
Four Essential Qualities of an Opportunity
Attractive Opportunity: First and foremost, your idea needs to be attractive to your target customers who will buy your idea. You first you need to identify who your target customers are for this idea to work. The idea must also be attractive in the industry in which it is going to compete. When I say “attractive” I do not mean just aesthetics and a cool look and feel. I am also referring to the idea itself. Does it create excitement? Does it have an attractive price point? Will the quality and ease of use meet or exceed the ’s expectations? Is it unique? Does it have attractive features and benefits? Basically, what about your idea would make people want to buy it?
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship Durable: Durability of an idea from a business standpoint means that it can last as a business. A PRODUCT and a BUSINESS are two very different things. Businesses create products, but a whole business built around one product that has little scalability is pretty much a dead end. A scalable product can penetrate multiple markets and sometimes industries with many ways to grow. A perfect example is the invention of the microfiber textile. Some may see this as just a rag for cleaning – thus just a cleaning product. But it can also be cut into the shapes for clothing, embroidered with corporate branding, and BOOM! Now that same rag is sold in the clothing departments with minimal change to the textile’s manufacturing and production processes. Creates Value: This is obviously one of the most important factors to generate sales. Your idea must create value in order for people to purchase it, thus generating revenue for your business to be sustainable. A big consideration here is the cost of the idea in relation to the value it creates for the customer. If it costs more than the value of the pain you are solving, then people will not want to buy it, aka willingness to pay. Recently, consumers have been facing this issue with high-end smart watches. They have a $700 phone in their pocket, so do they really want to spend another $200-$400 to read a text on their wrist? Is the time they save from having to pull their phone out of their pocket really worth $400? The watches do much more than that, but the mass market does not see things the same way as the innovators did. This is common in the early adoption stages, where products are looked at through a very simplified lens by the mass consumer. However, now that the prices have come down, more people are adopting this technology now that the price is beginning to match the perceived value. So, again, does your product create perceivable value that is affordable? Do some research and talk to people in your target markets. It’s amazing how much you can learn if you just ask the right people. Timely: Timely can get a little tricky as this is really an area of economics, demographics, psychographics, and various other externalities. Basically, this quality comes down to the question, “Is this the right time for my idea?” When analyzing this, it is always best to look at various trends. Major trends to consider are economic trends, social trends, technological trends, and industry trends. Window of Opportunity
The term “window of opportunity” is a metaphor describing the time period in which a firm can realistically enter a new market. Once the market for a new product is established, its window of opportunity opens, and new entrants flow in. At some point, the market matures, and the window of opportunity (for new entrants) closes.
OPPORTUNITY IDENTIFICATION
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
The first approach to identifying opportunities is to observe trends and study how they create opportunities for entrepreneurs to pursue. There are two ways that entrepreneurs can get a handle on changing environmental trends: They can carefully study and observe them. They can purchase customized forecasts and market analyses from independent research firms. Economic factors in trend: When looking at economic factors and how they affect opportunities, first you should evaluate who has money to spend. When incomes are high in a particular group or there is disposable money available, people are more willing to buy products and services that enhance their lives. A great example of this would be the teen and pre-teen market. When kids have money, they buy stuff. Products and services such as designer clothing, able music services, new smart phones and all the other things that these kids buy are a huge market and therefore have opportunistic possibilities. Another gigantic market is the aging baby boomers. These folks have spent a lifetime saving money and preparing for their retirement and they have disposable income.
Social Factors in trends 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. Often, the reason that a product or service exists has more to do
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship with satisfying a social need than the more transparent need the product fills. The proliferation of fast-food restaurants, for example, isn’t primarily because of people’s love of fast food but rather because of the fact that people are busy and often don’t have time to cook their own meals. Similarly, social networking sites like Facebook and Twitter aren’t popular because they can be used to post information and photos on a Web site. They’re popular because they allow people to connect and communicate with each other, which is a natural human tendency. Changes in social trends alter how people and businesses behave and how they set their priorities. These changes affect how products and services are built and sold. Technological factors: Given the rapid pace of technological change, it is vital that entrepreneurs keep on top of how new technologies affect current and future business opportunities. Entire industries have emerged as the result of technological advances. Airstrip Technologies, a recent start-up, enables doctors to monitor critical patient information remotely on a smart-phone or computer. The company’s founding was motivated by a desire on the part of doctors to stay in closer with their critical care patients while away from the hospital and while those patients are receiving treatment in locations outside a hospital. Advances in wireless technologies made the system possible. In most cases the technology isn’t the key to recognizing business opportunities. Instead, the key is to recognize how technologies can be used and harnessed to help satisfy basic or changing needs. For example, OpenTable.com is a Web site that allows s to make restaurant reservations online and now covers most of the United States Political Factors: Political change also engenders new business and product opportunities. For example, global political instability and the threat of terrorism have resulted in many firms becoming more security conscious. These companies need new products and services to protect their physical assets and intellectual property as well as to protect their customers and employees. The backup data storage industry, for example, is expanding because of this new trend in the tendency to feel the need for data to be more protected than in the past. An example of a startup in this area is Box.net, which was funded by Mark Cuban, the owner of the Dallas Mavericks. Box.net allows its customers to store data “offsite” on Box.net servers, and access it via any Internet connection.” 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 change. Many companies have been started by people who have experienced a problem in their own lives, and then realized that the solution to the problem represented a business opportunity.
GAPS IN THE MARKETPLACE Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
A third approach to identifying opportunities is to find a gap in the marketplace. A gap in the marketplace is often created when a product or service is needed by a specific group of people but doesn’t represent a large enough market to be of interest to mainstream retailers or manufacturers.
CRITERIA TO SELECT A PRODUCT IN ENTREPRENEURSHIP There are three basic stages/steps involved in product/venture selection. These are idea generation, evaluation and choice.
Idea Generation: Product ideas or investment opportunities come from different sources such as business/financial newspapers, research institutes, consulting firms, natural resources, universities, competitors. etc The starting point for idea generation could be a simple analysis of the business’s strengths and weakness. Ideas could also be generated through brainstorming, desk research and various types of management consensus procedures.
Evaluation: Screening of the product ideas is the first step ill evaluation. Such criteria as potential value of the product, time money and equipment required, fitting of potential product into the business’s long range sales plan and availability of qualified people to handle its marketability need be thoroughly considered.
Each identified product/investment opportunity needs to be adequately evaluated. A pre-feasibility study of the product market, technical and financial aspect is necessary at this stage to have a clear picture of the associated cost and benefits. A pre-feasibility is a preliminary version of a feasibility study. It is similar to a feasibility study except that it is less detailed. It is usually carried out for large and complex product/project to determine whether to proceed to the more elaborate feasibility study.
Choice: A choice is made of product which has been found to be commercially viable, technically feasible and economically desirable. At this stage, necessary machineries are set in motion.
In selecting product for your business venture, the following factors must be taken into consideration: 1. Supply-gap: The size of the unsatisfied market demand which constitute a source of business opportunity will dictate, to a great extent the need to select a particular product. The product with the highest chances of success as reflected in its demand will be selected. In essence, there must be existing obvious demand for the selected product.
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship 2. Fund: The size of the funds that can be mobilized is another important factor. Adequate fund is needed to develop, produce, promote, sell and distribute the product selected. 3. Availability of and Access to Raw Materials: Different products require different raw materials. The source quality and quantity of the raw materials needed are factors to be seriously considered, Are the raw materials available in sufficient quantities? Where are the sources of raw materials located? Are they accessible? Could they be sources locally or imported? Satisfactory answers should be provided to these and many other relevant questions. 4. Technical Implications: The production process for the product needs to be considered. There is need to know the technical implications of the selected product on the existing production line, available technology and even the labour force. The choice of a particular product may require either acquisition of the machineries or refurbishing of the old ones. The product itself must be technically satisfactory and acceptable to the . 5. Profitability/Marketability: Most often, the product that has the highest profit potential is often selected. However, a product may be selected on the basis of its ability to utilize idle capacity or complement the sale of the existing products. The product must be marketable. 6. Availability of Qualified Personnel: Qualified personnel to handle the production and marketing of the product must he available. The cost of producing the product must be kept to the minimum by reducing wastages. This is achievable through competent hands. 7. Government Policies: This is quite often an uncontrollable factor. The focuses of government policies can significantly influence the selection of product. For instance, a package of incentives from government for a product with 100% local input contents can change the direction of the business’s R & D and hence the product selected. 8. Government objectives: The contributions of the product to the realization of the company’s short and long range objectives must be considered before selection. For instance, the company goal maybe the achievement of sale growth, sales stability or enhancement of the company’s social value. Causes of Product Failure A wrong choice when made, often leads to product failure. Product failure may be caused as a result of one or combination of the following:
Management oversight during the basic planning stages – initial research may be either inadequately done or bungled in the interpretation. Subtle changes in the market. For instance, competitor may introduce a competing product into the market unexpectedly. Lack of sound market appraisal
Prepared by Neelam Rawat
RCA 204, Innovation & Entrepreneurship
Product problems and defect e.g. the manufacturing of a product that is too costly or too complicated. Inadequate marketing . For Instance, the company may have rated the product so high in the market that they cut back on promotion. Lack of consumer education about the product.
Product Modification Product selection is one thing, the sustainability of the product in the market is another thing entirely. There need to at least stabilize the sale of the product. This is where product modification comes in because of the dynamic nature of the business environment. However, the technique to use to modify a product is dependent upon the circumstance of the product in relation to the buyer. There are some possible alternatives of product modification, namely:
Quality improvement– which aims at strengthening the competitive position of the product. The improvement may be in the appearance or end use. Feature improvement- which is to increase the number of real or imagined product benefits. Style improvement – aims at improving the aesthetic appeal of the product rather than its functional performance. Service improvement e.g. technical advice, faster supply, breaking bulk, etc. Often used by smaller companies competing with large ones. Promotional benefits e.g. giveaways competitions, etc. is used to add value to the product.
Conducting Feasibility Study Starting a new business project is inherently risky because there is no guarantee that a new company, product or service will be profitable. A feasibility study is an analysis that attempts to assess whether a new project has the potential to succeed. Feasibility studies are commonly used in the early stages of planning new ventures to help managers decide whether to go forward with new projects. Feasibility studies technically aren't required to launch new ventures, but they can provide valuable insights that help managers make better decisions and avoid costly mistakes.
Prepared by Neelam Rawat
Related Documents 3m3m1z
Concept Of Entrepreneurial Competency 4z3z1p
November 2019 35
Emergence Of Entrepreneurial Class 6s2yi
December 2021 0
Components Of Competency 5m3v7
November 2019 57
The Entrepreneurial Schoools Of Thought 4a1h3w
October 2019 86
Entrepreneurial Environment 291q2l
December 2019 41