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Entrepreneurship

Definition of an Entrepreneur

Someone with the ability and willingness to introduce new products or services, that sell, to a market where those products or services where previously either unavailable or not desired.

Characteristics of an Entrepreneur

Risk taker that can live with uncertainty 
Adaptable to change and able to improvise 
Can see how new innovations satisfy a market 
Interested in effectiveness rather than efficiency 
Either creative him/herself or able to utilise those who are 
Has a desire to lead in his/her area of operation or market 
A continuos learner willing to make and or tolerate mistakes 
Flexible, willing to change direction as the circumstances dictate 
Self possessed of a sense of urgency and stimulates that sense in others 
Recognises his/her shortcomings and empowers others who compensate

Entrepreneurial Industries

Most opportunities for entrepreneurial activity come from fast changing industries particularly where technological change is having a major impact. 

Some examples of both fast and slow changing industries are: 

SLOW FAST
News agencies
Hairdressing
Furniture manufacture
Fast food chains
Car rental firms
Electrical product retailing
Restaurants
Real estate sales
Telecommunications
Beauty products
Computers & Software
Snack foods
Automotive design
Home entertainment
Night clubs
Real estate development


The difference between managers and entrepreneurs

Managers manipulate what is, things and information to produce a result that is clearly specifiable in advance.

Entrepreneurs try to create what isn’t by a lot of guesswork, improvisation and learning from mistakes. (from Mitch McCrimmon)


Entrepreneurial functions 

Organisational learning, Knowledge leadership, Creative resourcing,
Flexible structures, Innovation, Visioning, Teamwork & Diversity

Entrepreneurial Culture and Values

Provides an atmosphere that promotes continual experimentation 
Tolerant of loose organisational structures and behaviour 
Willing to hand over decision making to those with expertise in their field 
Helps risk takers and encourages those who fail as much as he/she celebrates those who win 
Networking is seen as more important that traditional lines of authority 
Communication is multi directional and crosses all responsibility levels 
Leadership is allowed to change as situation demands in line with expertise required at any point 
Can easily change direction in response to market, technological or political influences 
Constantly interacts with customers, suppliers, colleagues in fact the total environment 
Seeks feedback from all experiences and sources and highly responsive to new condition/situations

Entrepreneurial Learning vs. Traditional Learning

Traditional or "single loop"

SCANNING, SENSING, PLANNING… (THINK) 

Then 

COMPARISON TO NORMS…  (DECIDE) 

Then 

INITIATE ACTION…(ACT)

Then 

ADJUST… (GET FEEDBACK) 

Then 

SCANNING, SENSING, PLANNING… (THINK) and so the process restarts.

Entrepreneurial "DOUBLE LOOP (adjusted)" 

SCANNING, SENSING, ACTING…(ACT) 

Then

REFLECT ON WHAT HAPPENED…(FEEDBACK)

Then

COMPARISON TO NORMS (THINK) second loop QUESTION NORMS…(THINK)

Then 

ADJUST… (DECIDE) 

Then

SCANNING, SENSING, ACTING…(ACT) and the process continues 

The speed of the process is also critical - faster cycles

Learning Facts.
 

All learning takes place outside our comfort zone 
Entrepreneurial learning is primarily experiential 
Entrepreneurial learning means taking a risk 
Learning is severely hampered by our paradigms 
The rational model (traditional) expects us to decide if we like a new type of food without first tasting it 
Truth is merely a perspective of reality 
Reality is what we need to learn 
Decisions need to be reality based not truth driven

What do learning organizations look like?

Management encourages a culture of exploration and risk taking 
A market action oriented philosophy drives company leaders and staff 
Believes that he only reason a company has to exist is to servo a customer 
Hires for all levels from outside the organization 
Often use outside consultants to bring a new perspective 
Actively promotes job rotation and project teams to develop individuals 
Seeks ways to expose staff to new ideas and perspectives 
Encourages active networking and collaboration with outsiders 
Allows mistakes to be made without recrimination 
Openly rewards healthy rule breaking and policy defiance 
Individual’s knowledge sharing is promoted and rewarded

Practical steps for setting up a learning organization. 

Budget, for time, money and man power resources to be allocated to individual and organisational learning – ensure all employees see learning as a hard target 
Identify strategic learning areas for your business – where new products or product innovations are likely to yield the quickest and greatest payoff – invest most of you’re your resources in these areas 
Empower your work force to take risks in the market by decentralising decision making – particularly encourage those in areas of key knowledge 
Set up a system of on job training, job rotation through different functions departments or divisions, provide incentives and support for personal development – initiate a PD (personal development) discussion process 
Form learning partnerships with your suppliers, distributors, and customers- set up feedback mechanisms such as focus groups, R&D joint ventures and customer survey mechanisms 
Have all positions applied for and include outsiders in your recruitment drive – only appoint the best in their field and avoid the all to familiar best of a bad bunch in times of competence shortages 
Benchmark your culture against other entrepreneurial firms – seek ways to understand key success factors for the market leaders in your chosen field of endeavour and study the oppositions’ successes 
Set up a readily accessible knowledge bank and expertise network 
Celebrate and recognize attempts to learn by employees who take a market risk and initiate fast real world feedback mechanisms 
NB Adapted from of Mitch McCrimmon ‘Unleash the Entrepreneur Within’

The changing role of managers in entrepreneurial organizations

TRADITIONAL ENTREPRENEURIAL INFLUENCE
Monitoring and checking work of subordinates Prioritising, allocation of resources and funds and ‘purchase’ of appropriate services (staff) The need for more varied product and service lines and greater levels of specialization and expertise
Delegation of duties Selection of individuals and project teams to balance talent and creative output The trend towards projects rather than long term jobs
Coordination and communication Troubleshoot between entrepreneurial employees, other people and machines Sophisticated information and technology systems
Often took the role of technical expert Liaison between technical experts and traditional delivery sections of the organization Need for interpretation of what the “experts” are saying to senior executives charged with responsibility for overall investment decisions
Adjudicate on customer requests Providing resources needed to compete in the market place Increased customer demands for immediate decisions due to competition
Top down performance appraised against pre set standards Implementers of PD discussions and 360 degree analysis of performance The need for market driven feedback on performance measurement when preparing for the future rather than ‘navel gazing’ over the past
Wielded legitimate power through authority Empowers others to act Power has shifted away from position to knowledge
Fought for assets and resources Brokers the bringing together of diverse internal groups with ideas and external suppliers of resources The greater market push for customized products to suite individual needs & wants i.e. Acer computers
Acted as leader Shares leadership The need for the most knowledgeable to lead at each stage of a project cycle
Planner – responsible for annual plans and allocation of budgets Strategist – needs to come up with broad directions and implement rolling targets that account for current level of market knowledge plus put together feasibility studies to capitalize on bottom up opportunities Rapid changes in market conditions including, competitors, customers, politicians, regulators, environmentalists, unions, consumer groups and the general public. Opportunities in modern market can be fleeting


Managing entrepreneurial teams 

Train members on how to disagree constructively 
Seek methods of getting honest points of view (perhaps anonymously) 
Encourage all to contribute and reward dissention and diversity 
Abandon the concept of a good team player 
De-politicise meeting roles and ensure roles are not aligned to hierarchical status 
Counteract any ‘herd instinct’ of ‘we’re all in this together’ 
Encourage leadership changes to the current ‘expert’ as the needed arises
 
Starting a business! 

Before you start a business you should know some fundamental ‘truths’ regarding what it means to you and your family. 
If you own your own business it will mean you will be ‘at work’ 24 hours a day seven days a week. 
You will, at some time in your business’s development stage, put at risk your entire accumulated wealth, including your home and personal belongings. 
To be successful family and friends will need to take second place in your life. 
You and you alone will need to bear ultimate responsibility for those who depend on the success of your enterprise. 
The three most dangerous people you will ever meet in business are accountants, lawyers and bankers. 
Most people would make more per hour if they worked for somebody else. 
Few people go into business to get rich, it is more often a need to be self determining or as a lifestyle choice.

The place to start, preparing a business plan 

This document will not tell you what will really happen in your business but it is a good place to start. The old saying plans are nothing but planning is everything alludes to the fact that you should at least go through the thinking process even if only to set a direction and consider some of the pertinent issues that may effect your business.

A business plan should address three major issues, 

The mission or vision - why am I doing this?

The plan, goals, objectives, strategies, actions – how will I do this? 

The financial data – what will this cost? 

The need for vision

What is Vision ?

“……foresight, good judgement in planning..."
The Little Oxford Dictionary 

What is a Vision Statement ?

“If you don’t know where your going you’ll never get there.
If you know where you are going you can get there”

“The vision statement is a powerful communications device, one that will make the implementation proceed much more effectively. The vision statement tells your people where you’re going – where the company is headed”

From, World Class Production & Inventory Management

Darryl V. Landvater 

Good Visions

    “Visions need to be developed by leaders” 
         “A leaders vision must be shared with the team & the team must support it”
            “Sharing leads to agreement on direction” 
                “Vision to be successful must be comprehensive and detailed” 
                    ‘Visions must be positive challenging and worth the effort’
                        “Vision is never expressed in financial numbers”

From "The Power of Vision" (Video)

The Plan

Goals or ‘Targets’
  
Organizational goals can be thought of as articulated visions & values i.e., the goal statement “to increase our market share by 6 percent in the next twelve months” implies that attaining growth is both valuable & desirable.  The goal “to develop and publicise a six new service centres by Oct. 1” similarly may imply a value placed on expansion.  Goals, are operational statements of underlying visions of the future tempered by corporate values.

 Objectives 

Objectives are goals that have been made more specific. For example, the goal “to improve the order-processing system” may generate several objectives such as “in the next quarter, to reduce the data-processing time on an average order by thirty seconds, or perhaps, introduce more effective customer ordering system buy the 30th of June. Another example might be, for the goal of increasing market share,‘ to take over the corner shop down the road’ or ‘increase the sales staff ratio from 1:1 to 2: 1 over the next ‘x’ months.

 Strategies 

Strategies are sub groups of objectives that define overall methods by which the particular objective is to be reached. If the mission or vision is (to use a military analogy) to liberate the hostages and the goal is to mount a successful rescue the objectives could then be, limit rescue force casualties, get out all hostages alive and minimise political damage caused. Strategies for objective one could be, gather intelligence, maintain secrecy by limiting ‘those in the know’, use helicopters, do it at night and use a small well rehearsed team.

 Actions 

Actions are the area where most business plans fail, both in the writing and in the implementation. Other than actually needing to do something, which is obvious but often neglected, action statements must be supported buy a time element, a success measurement and of course a person to take the responsibility for the task.

Issues to be addressed in the plan. 

Market profile, can be gut feel or formal market research 
Economic profile, local government statistics can support your market profile 
Trading profile, retail, wholesale, manufacturing, transport 
Competitor profile, try to get copies of annual reports, stock exchange reports, trade publications, press releases, price lists and advertisements 
Customer profile, demographics, age sex income levels socio-economic groups etc 
SWOT analysis i.e. strengths, weaknesses, opportunities and threats 
Target market, a more specific analysis of primary and secondary most likely buyers from your customer profile
Marketing plan, such things as advertising, promotions, telephone, mail, direct selling, trade shows, travelling circus, in store promotions, and letter drops 
Competitive advantage, sometimes called the ‘unique selling feature’, either price differentiation - cheaper or product differentiation – better or at least different 
Sales forecast – beware, money lenders particularly watch these to judge your credit worthiness as you progress, prepare at least a worst case and best case scenario, an extra somewhere in the middle would not hurt 
Operational plan, sometimes known as a production plan, discussed in more detail later, suffice to say at this stage it is more important to worry about selling the product and getting paid for it at stage of a business 
Policies, i.e. powers of the board, chief executive, audited statements, planning method and cycle, employment opportunities and morel or ethical constraints 

The financial data

Four types of data need to be prepared and maintained 
Annual Budgets – your best guess of what might happen or what you hope will happen 
Forecasts or Rolling Budgets – what recent experience and latest information tells you is more likely to happen 
Actual to Budget – what really happened 
Set of accounts – an accountant’s version of what happened based on a universally accepted set of reporting rules 
Budgets are most effective when they are cash flow budgets because cash is the life blood of all business, non cash items, such as depreciation or future tax benefits are best left to accountants

Fighting our past indoctrination!  

Truly entrepreneurial people need to be open to new ideas and ways of looking at the world.
A thought, for the thoughtful!...
or quick test of your ability to see things differently.
Do you agree wit the following statements?

Reality 

What is! 

Truth

A narrow perspective on reality developed as a result of the accident of the place and time of our birth, reinforced by those who seek an ally to support and perpetuate their own version of the ‘truth’. 

Beliefs 

Faith in a set of learnt ‘truths’ formed as a result of our indoctrination by the influential when we are to young to resist. 

Values 

A subjective point of view regarding the worth of our attitudes and the worth and perceived attitudes of those we view or interact with, based on our own narrow perspective.

Attitudes

Personal opinion governing rules of behaviour we think we can get away with when dealing with others from whom we are taking, or to whom we are giving, in the interests of our personal wellbeing. 

Motivation 

The selfish desire, inherent in all of us, to satisfy ourselves. 

Culture 

A set of behavioural rules developed over time by those with little or no understanding of their existence, perpetuated by the intellectually inept in an attempt to maintain their narrow perspective on reality. 

Sin 

The act of disobeying the will of powerful.

Law 

Rules developed by the most persuasive individuals in and attempt to ensure personal safety whilst giving credence to their own truths. 

Crime 

The act of getting caught pandering to your own desires at another’s cost. 

Rights 

Rules of human engagement set up buy the powerful in case they become weak and sold to the gullible as the will of a superior authority (often called god). 

Justice 

A mythical perspective on realty implying 360-degree vision imposed by the powerful to legalise the demise of those acting on a different truth.

Entrepreneurial Dilemma 

Business success depends on two distinct and inherently different issues, those of efficiency and effectiveness. Efficiency is concerned with product and service delivery, quality improvement and cost control, while effectiveness is more concerned with opportunity recognition, knowledge acquisition and creativity. This dilemma is often expressed as the difference between “doing things better V’s doing better things”.  
To understand the conflict better the following table should provide some insights:

  EFFICIENCY EFFECTIVENESS
STRUCTURE Hierarchy or matrix Amorphous or self managed teams
SELF IMAGE Mechanistic Organic
CONTROL Political, technical, central Charisma, leadership, decentralised
TASK ALLOCATION Defined and documented Ambiguous undefined
FOCUS Inward and up Outward and 360 deg.
STAFF VALUED FOR Loyalty, conformity, systems awareness Creativity, dynamism, diversity
MAJOR ACTIVITY Cut costs & raise sales Develop new products and opportunities
OBJECTIVE Hold or improve market position Create new markets or business
RESOURCE ALLOCATION Production, financial control and administration R&D and S&M
REPORTING Broad, frequent and comprehensive Exceptions and bottom line only
POWER Authority & referent Knowledge & competence
EFFECT OF CHANGE Fear and resistance Seen as providing opportunity
APPRAISAL/REWARD SYSTEM Measured against pre-defined standards Results, new ideas and innovations
PROMOTION Seniority Results
LEARNING Single loop Double loop
OPERATIONS Planned Opportunistic

Images of Organizations

(Gareth Morgan, Images of Organizations)

If you see organizations as machines organisational theory will be limited to a form of engineering preoccupied with relationships between goals, structures and efficiencies. The resultant approach is to expect organizations to operate in a routine, efficient, reliable and predictable manner. This is a very inward stance, which ignores the external influences and the nature of human beings.

Viewing organizations as living organisms

allows us to consider issues of survival,

organization environment, relations and

effectiveness.


Organizations can also be viewed as brains. As such can be characterised as information processing systems and or a holographic system.

With this perspective we see the total 'image' is stored in each part of the image, much as the image of the pond and its ripples can be seen in the individual drops of water created when a pebble is thrown into a pond.

Challenges for an entrepreneurial ‘manager’

As traditional manager you are expected to control inputs and encouraged to reward those who learn and posses the best process skills. Functional responsibilities are to control the people, oversee organization roles and ensure the correct skills are applied to the task at hand.

As an entrepreneur you need to manage outputs, reward achievement, develop market-focussed competencies (knowledge and skills applied to the task at hand) and develop and lead an appropriate value system.

Also in contrast you need to develop a creative outlook on what is to be done in response to and as a result of interacting with a fast changing environment. You must be very conscious of the effect of your paradigms on how you see things an overcome the need for stability and a reliance on systems. An ability and willingness to follow hunches is essential for an entrepreneurial manager.

To develop and encourage an entrepreneurial spirit in others you must encourage them to seek feedback on their performance from their external customers. This tends to come hard to those more use to seeking acceptance from organization members interested in systems, and delivery issues (often, senior management). One way to expose staff to experiential learning (learning by doing) is to get them involved in cross-functional project teams. Performance can then be assessed on team customer satisfaction levels rather than comparison to some pre determined performance management system. In addition non-managerial, professional career schemes will need to be available to ensure a motivating future with appropriate rewards can be envisaged.

Leadership of an entrepreneurial organization is different to leadership in a traditional hierarchy.

TRADITIONAL ENTREPRENEURIAL
Top down (role based) Bottom up (act based)
Based on positional Authority Based on knowledge
Transactional (constant processes) Transformational (direction changes, process changes)
Company Goal/target/objective oriented Customer needs and wants oriented
Close to the management power base (organization's centre) Close to the customer power base (at the edge of the organization)
Given to those most able to maintain the status quo Taken by those comfortable in new areas of risk
Knowing the system (e.g. jargon) Having expertise
Often feared Often respected
Long term Short term & shifting
Abdication of personal responsibility by followers (theory X prevails) True empowerment (theory Y)
Concerned with processes, how, form Concerned with content, what, substance
Leads for power Leads to sell ideas and perspectives
Motivates to influence Inspires to influence
Buys services, skills and competence Sells knowledge and competence

Richard Townsend
Corporate Learning Consultant





Copyright Orglearn - Richard Townsend 2008