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TOPICS 2 3 AND 5

DYNAMICS – Entrepreneurship

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Entrepreneurial Characteristics and background

Childhood family environmentEducationPersonal valuesAgeWork historyMotivationRole modelsMoral support networkProfessional support network

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• The entrepreneurial PROCESS– Startup.com

• Recognizing opportunity

• Buying an existing business

• Franchises

• Other alternatives to new business

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The Startup

• Classic startup company– innovative idea– develops into a high growth company

• Qualities of a good startup company– Strong leadership from the main entrepreneur– Solid entrepreneurial team

• Complementary talents • Outstanding teamwork

– Skill and ingenuity to find and control resources– Financial backing to chase opportunity

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Desirable & Acquirable Attitudes/Behaviors

• Commitment and determination• Leadership• Opportunity obsession• Tolerance of

– Risk– Ambiguity– Uncertainty

• Creativity, self-reliance, and adaptability• Motivation to excel

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Entrepreneurship is a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach and leadership balanced.

Despite the variety of businesses, entrepreneurs, geographies and technologies, Timmons identify central themes or driving forces that dominate this dynamic entrepreneurial process: •It is opportunity driven •It is driven by a lead entrepreneur and an entrepreneurial team •It is resource stingy and creative •It depends on the fit and balance among these •It is integrated and holistic

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Timmons model Value creationDriving forces :

Opportunity driven

Driven by lead entrepreneur and an entrepreneurial team

Resource constrained and creative

fit and balance among forces

Integrated and holistic

Focus on these forces to improve chances of success

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TIMMONS MODEL

START WITH AN OPPORTUNITY -NOT MONEY ,STRATEGY,NETWORKS TEAM OR BUSINESS PLAN -SHAPE SIZE AND DEPTH OF OPPORTUNITY,ESTABLISHES REQUIRED SHAPE,SIZE AND DEPTH OF RESOURCES AND TEAM

-FOUNDER(ENTREPRENEUR) TAKES CHARGE-IMPROVE FIT AND FILL GAPS-ATTRACTS KEY PLAYERS TO THE TEAM-MANAGE AND REDEFINE THE RISK REWARD EQUATION

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THE OPPORTUNITY

HEART OF THE PROCESS-100 ideas reviewed ;<10% merit due diligence-characteristics of good opportunities-market demand-basis of value-•New functional needs or existing needs at substantially lower cost•Magnitude of value-economic or emotional value, what size and future supply demand patterns•Market structure and size-Demand drivers and growth potential, barriers of entry and competitive advantages•Margin and operating structure-High operating leverage•Capital requirements-Technical ,manufacturing, marketing and distribution, RESOURCES TO CAPTURE VALUE

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The entrepreneurial team

•Quality of the team •Relevant experience and track record•Motivation to excel•Commitment ,determination and persistence •Tolerance of risk,ambiguity,uncertainty•Creativity•Team focus•Adaptability•Opportunity obsession•Communication•Leadership

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THE TEAM

ENTREPRENEURIAL team is a key•Short supply of great teams•Need a team to grow beyond 20 employees and$ 2-3 M in sales

•Entrepreneur Leadership-•Learns and teaches•Resilient ,deals with adversity•Exhibits integrity, dependability and honesty•Builds culture and organization

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Concepts of fit and balance is important:•Between opportunity ,resources and team •Entrepreneurial leader continually assess, revise strategies and tactics• when opportunities grow fill resources gap and build team to maintain team fit and balance•Dynamic process based on logic and trial and error

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Conclusion for Timmons model

Entrepreneurship -creation and realization of value-not just for owners but for all participants and stakeholders-creation and recognition of opportunities-will and initiative to seize them-willingness to take calculated risk personal and financial

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Enlightened Serendipity-an APTITUDE FOR MAKING DESIRABLE DISCOVERIES

• Being in the right place

• At the right time,

• Recognizing it, and

• Acting upon it,

• APPROPRIATELY

• and PASSIONATELY!!!

Luck = Opportunity + Preparation

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What Is An Entrepreneur?

ENTREPRENEURSHIP

The pursuit of opportunity through

innovation, creativity and hard work

without regard for the

resources currently controlled.

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What Is An Opportunity?

A belief that achievement of that state is possible

Recognizing a desired future state involving growth or change

OPPORTUNITY

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Opportunity

• How do we search for the right venture?– Never a straightforward task– Often accidental– Difficult to find deliberately– Can be driven to financial ruin trying ideas

• Let’s think about– The deliberate search– The evaluation process– Other sources of ideas

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The Deliberate Search

• Most appropriate way of finding a venture?– Systematic– Five clearly defined steps:

• Contact people in the know

• Read appropriate publications

• Do Market Research

• Use Government data

• Joint-venture with large companies– Have more demands than time to fill them

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Contact the Right People

• Ask others to inform you of good ideas– Contact technology transfer organizations– Patent attorneys– Investment bankers– Venture capital firms

• Talk to people– Especially marketing, sales, service

• Talk to customers, see what they need

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People are Most Important

• Ideas come from people

• People struggle with the unfulfilled need

• Customers are people

• Designers are professional idea people

• Practice makes better in idea searching

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Read the Printed Word

• Study your desired industry

• Read the appropriate publications:– Trade Indexes in the area– local business newspaper every day– Annual reports of industry public companies– Purchase professional reports

• Look for required improvements

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Mumbai - Signs of economic slowdown in the US and rupee appreciation notwithstanding, the National Association of Software and Services Companies (Nasscom), the consortium that serves as the apex body of the Indian IT software and BPO industry said that India's IT-BPO industry is poised to achieve the target of $75 billion in overall software and services revenues by 2010.

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The total value of Indian healthcare industry is US$ 35 billion, and expected to grow US$ 75 billion by 2012, as reported by Technopak Advisors.

By 2010, India will need about 30,000 hospital managers.

According to a CII report on employment generation, while the direct employment in the healthcare sector was 4 million in 2001, it is expected to grow and provide direct and indirect employment to 9 million by 2012.

There are several specialized MBA institutes that offer courses in Healthcare sector.   

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Research the Market

• What do people want, nobody is producing

• Ask buyers what they have trouble finding

• Determine what’s missing in trade catalogs

• Ask store managers– What do customers want but can’t buy

• Attend trade shows– Ask people about what may be needed– Good stimulation for new ideas!!

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Government, a Goldmine of Data

• Examine industry statistics– Select high-growth areas

• Consider legislation’s effect on business– May create needs for businesses to comply

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OVERVIEW OF PERFORMANCE OF THE INDIAN AUTOMOBILE INDUSTRY IN 2007- 08

Domestic SalesThe cumulative growth of the Passenger Vehicles segment during April 2007 – March 2008 was 12.17 percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent and Multi Purpose Vehicles by 21.39 percent in this period.The Commercial Vehicles segment grew marginally at 4.07 percent. While Medium & Heavy Commercial Vehicles declined by 1.66 percent, Light Commercial Vehicles recorded a growth of 12.29 percent.

Three Wheelers sales fell by 9.71 percent with sales of Goods Carriers declining drastically by 20.49 percent and Passenger Carriers declined by 2.13 percent during April- March 2008 compared to the last year.

Two Wheelers registered a negative growth rate of 7.92 percent during this period, with motorcycles and electric two wheelers segments declining by 11.90 percent and 44.93 percent respectively. However, Scooters and Mopeds segment grew by 11.64 percent and 16.63 percent respectively.

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ExportsAutomobile Exports registered a growth of 22.30 percent during the current financial year.

The growth was led by two wheelers segment which grew at 32.31 percent. Commercial vehicles and Passenger Vehicles exports grew by 19.10 percent and 9.37 percent respectively. Exports of Three Wheelers segment declined by 1.85 percent.

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CREATIVITY

Creativity involves generation of new ideasp-creativity: A new idea for a person

A person may come to a new realization

h-creativity: A new idea historicallyNovel inventions are h-creative

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Brainstorming

• Great way to generate ideas

• As many ideas as possible

• Everyone participates

• Write down all ideas presented

• Spark off of others’ ideas

Methods of Generating New Ideas for Entrepreneurs

GROUP CREATIVITY

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Brainstorming Rules

• No criticisms or judgments– Don't even groan, frown, or laugh

– All ideas are equally valid at this point

• All ideas are welcome– Silly ideas out OK!

– Be creative

– The more ideas the better

• Absolutely no discussion – Ideas will be discussed after brainstorming is complete

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Brainstorming• Family (size matters - more is better)• People with the right education/experience• People who are in the idea search business:

– Designers– Advertising people– Promotional planners– Inventors– Other entrepreneurs– The right corporate people

• Sales & marketing• Service

Focus groups

• Focus Groups – these are the groups of individuals providing information in a structural format. A moderator leads a group of people through an open, in-depth discussion rather than simply asking questions to solicit participant response. Such groups form comments in open-end in-depth discussions for a new product area that can result in market success. In addition to generating new ideas, the focus group is an excellent source for initially screening ideas and concept.

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Problem inventory analysis– it is a method for obtaining new ideas and solutions by focusing on problems. This analysis uses individuals in a manner that is analogous to focus groups to generate new product ideas. However, instead of generating new ideas, the consumers are provided with list of problems and then asked to have discussion over it and it ultimately results in an entirely new product idea. The entrepreneur is not limited by only the three methods.

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CREATIVE PROBLEM SOLVING

•REVERSE BRAINSTORMING•BRAINWRITING -6 MEMBERS ,3 IDEAS DURING FIVE MINUTES TIME•GORDON MEHTOD: when individuals are unaware of the problem•Checklist method: New idea developed through a list of related issues•Free association: through word associations •Forced relationships: by product combinations•Collective network book: by regularly recording ideas•Attribute listing: by looking at positives and negatives •Big dream approach: thinking without constrains-thinking big •Parameter analysis: by focusing on parameter identification and creative synthesis •Technology observation-need analysis-parameter identification –creative synthesis-realization

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The Search Criteria

• Criteria to evaluate ideas

• What do you want out of the effort – There will be sacrifices and costs

• Weight the criteria to reflect importance

• Depend on individual circumstances

• Covers several basic issues

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Sample Criteria

• Amount of time required• Flexibility in hours worked• Income potential• Geographical location• Financial requirements• Personality preference• Personal satisfaction• Product or Service• Market Issues

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Other Sources of Ideas

• Besides deliberate thinking– Unplanned “Eureka!" ideas

• Hard to predict

– Trends around you• More about this in the next few slides

– Opportunity from “lack” you see• Always pay attention to everyday problems• Best ideas solve problems

– Government action• New programs, incentives

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Consider Current Trends

• These are examples, trends always change– Aging population– Energy costs rising– Marital status changes– Families without children– Leisure time growing– Health & physical fitness– Personal care– Financial planning

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Trend: Aging Population

• Aging population:– Major shift to young age.– The "big generation”– Fastest growing age group is15-34– Affluent

• Over 100% asset growth in past ten years

– The WOOPies are often commercially ignored• (Well off older people)

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Trend: Marital Status & No Children

• Marital status changes:– Living alone

• Divorced, separated, widows/ers

– Later marriages– A large number of singles– Career women– Families without children:

• Double income - no children (DINCs)• Large disposable income• Lots of time; No ties.

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Trends: Personal Care

• Enormous growth in demand

• Enormous profit margins possible

• Packaging/marketing are the real expense

• Looks are very important to everyone

• Example- Gyms, cosmetics

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Trends: Health

• Health and physical fitness– Very popular– Major opportunities available– Recreation (1,000 new golf courses/year)– Tennis, squash, skiing grows– Cigarettes, junk food, liquor declining

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Adoption of New Technology

• Time until adoption by 25% of the Population– Household electricity (1873)

• 46 years

– Telephone (1875)• 35 years

– Automobile (1885)• 55 years

– Airplane travel (1903)• 54 years

– Radio (1906)• 22 years

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Opportunity Analysis: Assessing the Opportunity

• What market need does it fill?• What personal observations have you

made?• What are the underlying social conditions?• Examine the market research data.• Assess competition. Any patents?• Where is the money to be made?

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Opportunity Assessment Plan

• Description of the product or service– Functions and features– Target buyers/users

• Assessment of the opportunity– Market size, window of opportunity– Real and perceived value– Risks and returns– Differential competitive advantage

• Assessment of the entrepreneur and the team• Specification of the activities and resources needed,

source of financing

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Getting into Business

• Buy an Existing Business

• Open a Franchise

• Start a New Business

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Buying a Business

• Many businesses are for sale

• Consider why seller is selling– Struggling for some reason?

• If they are struggling, can you do better?– If so, could be big opportunity

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Pluses of Existing Business: Less Risk

• Fewer surprises

• Fewer problems to discover

• Fewer mistakes to make

• Less likely to have missed something

• May already be generating profit

There may be a fatal flaw in a raw startup that you won’t discover until you try!

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Pluses of Existing Business: Less Effort

• Saves pure startup time and efforts– Establishing business entity– Finding location– Legal issues– Insurance– Marketing – logos, ads, signs, etc.– Hiring staff– Setup payroll– Much more!

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Pluses of Existing Business: Low Price

• May find an under-priced business

• Seller may be “motivated”– No longer involved in business– Failing health/retiring– Already has other plans

• Seller may not value properly– Examine books to determine your value

• External conditions may be depressed

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Minuses of Existing Business

• Environment– May face factors that are beyond control

– E.g. market is too small, too much competition

– Bad location

• Internal Problems– Why do we see “Under new management”?

– Bad reputation

– Bad relationship with employees

• Loss of existing owner could be difficult– Esp. if professional practice

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Finding a Business

• Businesses on the market– Business brokers– Classified Ads

• Businesses not on the market– Ask professionals if they know who might sell

• Bankers, lawyers, accountants, etc.

– Approach owners of appropriate businesses• Ask if they know of any for sale - not if they’ll sell

• They’ll tell you if they’re interested

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Entrepreneurs: Type A Personalities

• Chronic and severe sense of time urgency.

• Constant involvement in multiple projects subject to deadlines.

• Neglect of all aspects of life except work.

• A tendency to take on excessive responsibility, combined with the feeling that “Only I am capable of taking care of this matter.”

• Explosiveness of speech and a tendency to speak faster than most people.

The Dark Side of Entrepreneurship

• The Entrepreneur’s Confrontation with Risk

– Financial risk versus profit (return) motive varies in entrepreneurs’ desire for wealth.

– Career risk—loss of employment security

– Family and social risk—competing commitments of work and family

– Psychic risk—psychological impact of failure on the well-being of entrepreneurs

Stress and the Entrepreneur

• Entrepreneurial Stress

– The extent to which entrepreneurs’ work demands and expectations exceed their abilities to perform as venture initiators, they are likely to experience stress.

• Causes of Entrepreneurial Stress

– Loneliness

– Immersion in business

– People problems

– Need to achieve

Dealing with Stress

• Networking

• Getting away from it all

• Communicating with employees

• Finding satisfaction outside the company

• Delegating

• Exercising Rigorously