David and Goliath David and Goliath
Nov 21, 2014
‘We now stand on the threshold of a new age - the age of revolution. In our minds, we know the new age has already arrived: in our bellies, we’re not
sure we like it. For we know it is going to be an age of upheaval, of tumult, of fortunes made and
unmade at head-snapping speed. For change has changed. No longer is it additive. No longer does it move in a straight line. In the twenty first century,
change is discontinuous, abrupt, seditious.’
Gary Hamel
EntrepreneursEntrepreneurs
Entrepreneurs use innovation to exploit or create change and opportunity for the
purpose of making profit.
They do this by shifting resources from an area of lower productivity into an area of higher productivity and greater yield,
accepting a high degree of risk and uncertainty in doing so.
‘We learned the importance of ignoring conventional wisdom and doing things our way....It’s fun to do things that people don’t
think are possible or likely. Its also exciting to achieve the unexpected.’
Michael Dell
Managers, Owner-managers &Managers, Owner-managers &EntrepreneursEntrepreneurs
Owner-managers Managers
Entrepreneurs
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
Cantillon (1755)
Introduced the concept of entrepreneur from ‘entreprendre’ (ability to take charge)
Jean Baptist Say (1803, 1815)
Emphasised the ability of the entrepreneur to ‘marshal’ resources in order to respond to
unfulfilled opportunities
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
Ely and Hess (1983)
Attributed to entrepreneurs the ability to take integrated action in the enterprise as a
whole, combining roles in capital, labour, enterprise and entrepreneur
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
Schumpeter (1911/1934, 1928)
Envisioned that entrepreneurs proactively ‘created’ opportunity using ‘innovative
combinations’ which often included ‘creative destruction’ of passive or lethargic economic
markets
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
Knight (1921)
Suggested that entrepreneurs were concerned with the ‘efficiency’ in economic
factors by continually reducing waste, increasing savings and thereby creating
value, implicitly understanding the opportunity-risk-reward relationship
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
Hayek (1948, 1952, 1967)
Continued the Austrian tradition of analytical entrepreneurs giving them capabilities of
discovery and action, recognising the existence of information asymmetry which
they could exploit
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
Shapero (1975, 1984, 1985)
Attributed a ‘judgement’ ability to entrepreneurs to identify ‘credible
opportunities’ depending on two critical antecedents – perceptions of ‘desirability’
and ‘feasibility’ from both personal and social viewpoints
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
Drucker (1974)
Attributed to entrepreneurs a sense to ‘foresee’ market trends and make a timely
response
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
Kirzner (1973, 1979, 1997, 1999)
Attributed to entrepreneurs a sense of ‘alertness’ to identify opportunities and
exploit them accordingly
The antecedence of modern The antecedence of modern entrepreneurshipentrepreneurship
SME DefinitionsSME Definitions
Micro SmallMedium
Max. employees 9 49 249
Max. turnover (euros) - 7m 40m
Max. total assets (euros) - 5m 27m
Characteristics of Small FirmsCharacteristics of Small Firms
• Most are very small• Strong influence of owner-manager (+ family)• Short-term horizons• Short of cash• Raising finance a major problem• Local orientation• Little influence on market• Scope of activity limited• Over reliance on small number of customers
Lifestyle FirmsLifestyle Firms
• Provides ‘comfort level’ of activity
• Provides acceptable income
• Routine, tactical management
Characteristics of Growth FirmsCharacteristics of Growth Firms• Strong influence of entrepreneur (+ family)
• Operates in uncertain, risky environment - Personal implications of failure important influence - Strongly intuitive, but self reliant and confident - Good at resolving conflict and ambiguity
• Sees opportunities and pursues them - Uses innovation to create competitive advantage - Short-term, incremental approach to decisions - Flexible, adaptive, emergent approach to strategy
• Relationship based approach to management
‘I am often asked what it is to be an entrepreneur and there is no simple answer. It is clear that successful entrepreneurs are vital
for a healthy, vibrant and competitive economy.
If you look around you, most of the largest companies have their foundations in one or
two individuals who have the determination to turn a vision into reality.’
Richard Branson
Global Entrepreneurship MonitorGlobal Entrepreneurship Monitor
ECONOMIC GROWTH
LEVEL OF ENTREPRENEURIAL ACTIVITY
Demography Education CultureEconomic
Infrastructure
EntrepreneurialOpportunity
EntrepreneurialCapacity
Economists’ perspectives on Economists’ perspectives on entrepreneurshipentrepreneurship
Industrial economist’s perspective:
Growth of SMEs is explained by attractiveness of market entry into an industry because of its profitability, growth, the barriers to entry and its concentration
Economists’ perspectives on Economists’ perspectives on entrepreneurshipentrepreneurship
Labour market economist’s perspective:
Analysis of the factors influencing individuals to set up an SME
Evolutionary TheoryEvolutionary Theory
Why entrepreneurship encourages growth:
1. It encourages competition by increasing the number of enterprises.
2. It is a mechanism for ‘knowledge spill-overs’ – transmission of knowledge from its point of origin to other individuals or organizations.
3. It generates diversity and variety among enterprises in any location.
Innovation and Competitive AdvantageInnovation and Competitive Advantage
Increasing competitive advantage
Frequency of Innovation
Degree of InnovationHighLow
High
Adaptor v InnovatorAdaptor v InnovatorAdaptor
• Employs a disciplined, precise, methodical approach
• Is concerned with solving, rather than finding, problems
• Attempts to refine current practises
• Tends to be means orientated• Is capable of extended detail
work• Is sensitive to group cohesion
and cooperation
Innovator• Approaches task from unusual
angles
• Discovers problems and avenues of solutions
• Questions basic assumptions related to current practices
• Has little regard for means; is more interested in ends
• Has little tolerance for routine work
• No need for consensus; often is insensitive to others
Ability to be CREATIVE
Ability to spot OPPORTUNITIES
INVENTION
INNOVATION
SUCCESS
ENTREPRENEURIAL ENVIRONMENT
Creativity, Invention, Opportunity and Creativity, Invention, Opportunity and EntrepreneurshipEntrepreneurship
Invention and EntrepreneurshipInvention and Entrepreneurship
STRUGGLER
COPIER
INNOVATOR
STAGNATOR
Creativity / Invention
Opportunity perception / Entrepreneurship
Hi
Lo Hi
Schumpter’s InnovationsSchumpter’s Innovations• Introduction of a new or improved good
• Introduction of a new process
• Opening of a new market
• Identification of a new source of supply of raw materials
• Creation of new types of industrial organization
Drucker’s Sources of OpportunityDrucker’s Sources of Opportunity• The unexpected• The incongruity• The inadequacy in underlying processes• The changes in industry or market structure
PLUS• Demographic changes• Changes in perception, mood or meaning• New knowledge
Why? Why?Why? Why?
Deliveriesunreliable Transport
problems
Productionbottlenecks
Quality issuspect
Price notcompetitive
Materials notconsistent
Lost bestsalespersonSales are
falling Inadequatechecking
We use ‘costplus’ pricing
Inadequaterewards
Why?
Why?
Why?
Why?
Why?
Why?
Why?
Why?
Why?Why?
Why?
Influences on Owner-managers and Influences on Owner-managers and EntrepreneursEntrepreneurs
Antecedent influences
Personal characteristics and traits
Situational factors
Culture of society
Managerial TypologiesManagerial TypologiesType of manager Type of business
Owner-managerLifestyle firm, often trade or craft based. Will not grow
Entrepreneur
Manager
Growth firm. Pursuit of growth & personal wealth important
Manages business for others. organization similar to large firm
Personality Characteristics: Personality Characteristics: Methodological ProblemsMethodological Problems
• Not stable over time
• Requires subjective judgements
• Measures tend to ignore cultural and environmental influences
• The role of education, learning, training is often overlooked
• Issues such as age, sex, race, social class can be overlooked
Characteristics of Owner-ManagersCharacteristics of Owner-Managers
• The need for independence
• The need for achievement
• Internal locus of control
• Measured risk takers
• Need for personal control
• Unwilling or unable to delegate
• Can distrust subordinates
• Needs applause and recognition
Danger Signs for Owner- ManagersDanger Signs for Owner- Managers
Characteristics of Entrepreneurial Characteristics of Entrepreneurial OwnersOwners
• Opportunistic• Innovative• Self confident (or delusional?)• Self motivated and restless• Proactive and decisive• Vision and flair (creating an image)• Willing to take even greater risks
‘I have always lived my life by thriving on opportunity and adventure. Some of the best ideas come out of the blue, and you have to keep an open mind to see their
virtue.’
Richard Branson