MGT 6500 The Entrepreneurial Challenge Mark T. Schenkel, Ph.D. Assistant Professor in Entrepreneurship.

MGT 6500MGT 6500The Entrepreneurial ChallengeThe Entrepreneurial Challenge

Mark T. Schenkel, Ph.D.Mark T. Schenkel, Ph.D.Assistant Professor in Assistant Professor in EntrepreneurshipEntrepreneurship

Getting AcquaintedGetting Acquainted

IntroductionsIntroductions

Your initial thoughts about the Your initial thoughts about the course?course?

Your course goals & objectives?Your course goals & objectives?

Learning Objectives for TermLearning Objectives for TermUnderstanding Opportunities Understanding Opportunities

Entrepreneurial ProcessEntrepreneurial Process

Entrepreneurial StrategiesEntrepreneurial Strategies

Entrepreneurial FinanceEntrepreneurial Finance

Business PlanningBusiness Planning

Ethics and valuesEthics and values

Growth Strategy & ManagementGrowth Strategy & Management

Entrepreneurship in Larger Entrepreneurship in Larger OrganizationsOrganizations

Contact InformationContact Information

Office: BMH 436Office: BMH 436

Office Phone: 460-5474Office Phone: 460-5474

e-mail: e-mail: [email protected]

Course RequirementsCourse RequirementsAttendanceAttendance

– Required: see syllabus for detailsRequired: see syllabus for details

ContributionContribution

– Critical to meeting learning objectivesCritical to meeting learning objectives

TextText

– Integrated into discussions & exercisesIntegrated into discussions & exercises

– Integrated into your papersIntegrated into your papers

Course RequirementsCourse Requirements

Case AnalysesCase Analyses

– Individual: case memosIndividual: case memos

– Group: teach caseGroup: teach case

Major Class ProjectMajor Class Project

– Entrepreneurial Venture AnalysisEntrepreneurial Venture Analysis

ENTREPRENEURSHIP

What is it? Why does it matter?

Entrepreneurship

What is it? Some examples . . . – McDonald’s (New Venture / Franchising)– Polaroid (Technology)– FedEx (Business model)– Sam Adams (Emerging segment in “mature”

industry)

Entrepreneurship: What is it NOT?

Some myths . . . – Entrepreneurs have more freedom in life (i.e., “I won’t have

anyone looking over my shoulder”)– Money is the main reason to be an entrepreneur– Entrepreneurs have the ability to control things– Going public with my company some day will be an easy

way to make a lot of money.– Entrepreneurs are gamblers.– Entrepreneurs don’t have to worry about numbers.– All you need is money to be an entrepreneur.

Defining Entrepreneurship

“Entrepreneurship is no longer a job title. It is the state of mind of people who want to change the future.” – Guy Kawasaki

“Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach [emphasis added], and leadership balanced” (Timmons, 1999: 27).

Strategic entrepreneurship involves “. . . the integration of entrepreneurial (i.e., opportunity-seeking actions) and strategic (i.e., advantage-seeking actions) perspectives to design and implement entrepreneurial strategies that create wealth.” (Hitt et. al, 2002)

The Entrepreneurial Process (Timmons, 2000)

Opportunity Resources

Team

Communication

Business PlanFits and Gaps

Creativity Leadership

Capital Market ForcesUncertainty

Ambiguity Exogenous Forces

Founder

Key concepts

Opportunity– Where knowledge, skills, abilities and motivations

meet favorable market characteristics

Risk– Absolute . . . “sinking the boat”– Relative . . . “missing the boat”

Resources & Capability Process, not person: Balance is key . . .

Entrepreneurship

Why does it matter?

What History Tells Us . . .

Entrepreneurship as a means of hope for prosperity and an increase in living standard– The last great period when entrepreneurs transformed

the American economy was in the late 1800’s In fact, most of the 1997 Fortune 200 were already among

the largest corporations in 1917 197 of the 200 largest companies in America were started by

entrepreneurs Many of these entrepreneurs were first generation Americans

Government Market Forces

The Early 1900s Reflected a Free Market Approach

What History Tells Us . . .

Mid 1940s – Mid 1970s – Rise of mass production

– Conglomerate Integration

– Rise of corporate economy and corporate society

– Industrial/Governmental alliance

Government Market Forces

Late 1900s Reflect an Increasingly Activist Approach

Mid 1970s – Mid 1990s

Period of economic transition

Stagnation and decline Crisis of confidence Change in focus emerged

in business education– My experience in mid

1980s– My experience in the

1990s

Demarcation Point: The Decline of “Brontosaurous Capitalism”

The large corporations formed in the last great entrepreneurial era in America are no longer creating new jobs in significant numbers

Total employment by the Fortune 500 companies has dropped from 20% of US workforce in 1980, to about 7% in the late 1990s (Carlsson, 1992 and 1999)

Fortune 500 actually lost over 5 million jobs during the past 20 years

Emergence of the New Entrepreneurial Economy

23 million small business today in US economy

Make up 50% of GDP New business formation

has grown from about 200,000 per year in mid 1900’s to over 3.5 million per year today

Survival rates are now over 50%

Entrepreneurship and Employment

Over 50% of workforce now is employed in small businesses

45% of total payroll comes from small businesses

99% of employers are small businesses

Entrepreneurs and small business owners are responsible for 77% of new jobs created in past twenty years

Entrepreneurship and Innovation

Small businesses create 67% of all new innovations in the US

95% of all radical innovations over the past 60 years have come from small businesses

Create 14 times the number of patents per employee than large patenting firms

Entrepreneurship in America

Two demographic groups are most active in this economic transition:

Baby Boomers (Entre-Boomers)

Entrepreneurial Generation

The Entrepreneurial Generation

They are those born between 1977 and 2002

50% of today’s college students have business ownership as a primary career goal

They are more financially savvy – 37% of today’s college students already thinking and planning for retirement.

They are independent thinkers

They embrace change – and they view entrepreneurship as a career path that will allow them to use the changes that are occurring in our current world to their advantage

The Entrepreneurial Generation

Work is important They seek high levels of

achievement 40-50% of our students arrive with profitable businesses already operating.

They want their work to make a difference and have meaning.

But, they do not want it to become all consuming –they seek the ability to create balance through business ownership

An E-generation Thought . . .

“My generation is really focused on keeping family first, even before career. Some say that this is because we watched so many baby boomers screw this whole family thing up. My take on it is that because the baby boomers sometimes grew up wanting, they determined in their minds that their families would want for nothing. Unfortunately, my generation has all they want, but grew up with workaholic parents who were absent in their lives. I believe we're searching to find that balance between family and career.”

The Entrepreneurial Generation

They do not trust large institutions – be it corporations or government

They are politically independent, but leaning toward a more libertarian philosophy

They are concerned about our culture, our society and our economy – and they view entrepreneurship as a way to make things better

A Third Approach . . .

Favored by many in the entrepreneurial generation

Recognizes that markets are morally neutral Without a sense of responsibility, markets can

alienate society Culture can provide a moral framework

Government Market Forces

Values-based Approach

Culture

Why study entrepreneurship?

Entrepreneurial activity is now the driving force (e.g., “hyper-competition) of the US and World economy (Bettis & Hitt, 1995; Friedman, 2005)

Even if you do not want to be a business owner, increasingly entrepreneurs are becoming…. – your customers – your competitors– your employers

OK, But Can Entrepreneurship Actually Be Taught?

Research suggests learning is key element of the process . . . – Opportunity identification is positively

associated with general and specific knowledge– Success rates increase to 80-90% with

education and training– Success rate is positively associated with start

up experience over time

ENTREPRENEURSHIP IS A WAY OF THINKING, REASONING AND ACTING THAT IS OPPORTUNITY OBSESSED, HOLISTIC IN APPROACH [EMPHASIS ADDED], AND LEADERSHIP BALANCED” (TIMMONS, 1999: 27).

The Entrepreneurial Process

Defining Entrepreneurship

“Strategic entrepreneurship involves “. . . the

integration of entrepreneurial (i.e., opportunity-seeking actions) and strategic (i.e., advantage-seeking actions) perspectives to design and implement entrepreneurial strategies that create wealth.” (Hitt et. al, 2002)

The Entrepreneurial Process (Timmons, 2000)

Opportunity Resources

Team

Communication

Business PlanFits and Gaps

Creativity Leadership

Capital Market ForcesUncertainty

Ambiguity Exogenous Forces

Founder

Pre

-laun

ch

Star

t-up

Gro

wth

Tran

sitio

n

Exit/

Succ

essi

on

Life Cycle of a Business Venture

Pre-launch: Opportunity IdentificationDoes the Idea = an Opportunity?

Market Margin Mission

(session 1)

The Right Team?The Necessary Resources?

The Start-up Process

Filling the GapsThe Business Plan

Executive Summary Market Analysis and Marketing Plan Operating Plan and Team Financial Plan

Growing the Business

CASH FLOW MANAGEMENTBuilding a CultureMarketingStaffingBuilding Management & Administrative

Systems

Exit or Succession?

Course Theme: Strategic Entrepreneurship

Why is there a need to study it?– There are many forms of “entrepreneurial strategy,”

yet each is achieved through a common means of acquiring and applying resources to create value by capitalizing on “personal theory” about the true value of a resource bundle. Goals are to understand the primary interface of creation-performance and sustainability-performance.

Course Theme: Strategic Entrepreneurship

Helps us make “good” or “better” decisions?– Highlights role of operational effectiveness as

“necessary but not sufficient” for assessing and exploiting opportunity (Porter, 1985)

***Avoid the seductiveness***

– Focuses us on “unique activities,” and “strategic intent” (Prahalad & Hamel, 1995)

– Highlights the need to make tradeoffs to achieve sustainability (Barney, 1991)

– Emphasizes the importance of activity “fit” over any one activity, or subset of activities