Chapter 2 The Entrepreneur: On-Line Lesson
This chapter introduces the student to the concepts of entrepreneurism. If it were easy to start your own business we would all be doing it. It is important to understand the barriers to entrepreneurship and the strategies used to identify entrepreneurial opportunities. Small businesses represent 99.7% of U.S. firms that pay employees and 61.8% of net new jobs.
Topics:
 | Four faces of the entrepreneur |
| Eight sources of innovation |
| Four entrepreneurial strategies |
Terms:
| demographics |
| incongruity |
| innovation |
| systematic entrepreneurship |
Profile of the Entrepreneur
Entrepreneurs are individuals with a unique combination of personal drive, skills, intelligence, and success orientation. They are very aware of and/or study the environment, especially social change, market trends, and technological advancements, and economic conditions. They find some sort of change or trend that they can exploit as an opportunity. After careful study and analysis, the entrepreneur finds resources, brings them together, and manages the in such a way to create something new and different.
Characteristics of Entrepreneurs
Entrepreneurs have different personality traits than corporate managers, scoring far higher on traits such as openness to experience and conscientiousness. Entrepreneurs can emerge at any stage of life and from any realm and they come in all personality types and with any grade point average. Entrepreneurs are:
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Passion |
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Don't take no for an answer |
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Competitive nature |
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Ennegram = #1 |
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Self-starter |
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Think outside the box |
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Unpredictable |
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Strong people skills |
Characteristics of Leisure Service Entrepreneurs
Commercial recreation and tourism entrepreneurs likely have the same characteristics of other entrepreneurs in general, but they have differences as well. In one study (Berrett, Burton, and Slack, 1993) found that sport and leisure service entrepreneurs had no particular economic planning preceded the entrepreneurs' success. They also tended to de-emphasize growth potential in favor of remaining small, viable operation. Commitment to the quality of the product or service was the key to success that the sport and leisure entrepreneurs most often emphasized.
Systematic Entrepreneurship and Sources for Innovation
Entrepreneurs are usually very familiar with a certain industry/business and find ways to improve that industry/business's products or services. Innovation is defined as any act that endows resources with new capacity to create wealth.
Eight Sources of Innovation
Peter Drucker's (1985) sources of innovation are listed below in their rank order of reliability and predictability. The first are more likely to succeed than the later in the list.
The Unexpected Success or Failure: the unexpected success or failure of a company’s product or service (Teflon; 3M post-it notes). Be aware of the event and capitalize on it. See Slinky.
Incongruities: a discrepancy between what is and what "ought to be." The soccer program was started even though no one had requested it. It was very successful.
Process Need: a task-focused innovation that perfects a process that already exists by improving or redesigning with new knowledge. See Watercycle devotees choose pedals over paddles.
Industry and Market Structure: A search for flaws in the basic nature of the industry. Effective when an industry has a few large companies which dominate.
Demographics: Innovations based on demographics (age, gender, education, ethnicity, occupation, religion, marital status, etc.) are the most predictable of the external sources of innovation.
Changes in Perception: When facts do not change but their meanings do. The fitness trend is an example.
New Knowledge: are the "Superstars" of entrepreneurship. An important factor is the long lead time necessary for development and the "receptivity gamble" of whether the consumer wants the product or service.
The Bright Idea: the majority of patents belong to this category. The bright idea is the riskiest and least successful for of innovation. Only 1 in 500 bright ideas make significant revenue, but seven out of 10 patents filed belong in this category. Examples include the Hula Hoop and Frisbee. See Father's sandals makes son a millionaire.
High Potential Areas for Entrepreneurs
Six categories for entrepreneurs interested in buying a franchise.
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Senior Care |
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Children's Enrichment |
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Pizza |
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Fitness |
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Personal care |
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Vending |
Entrepreneurs Within the Sharing Economy
The sharing economy, also known as collaborative consumption, is a trending business concept that highlights the ability of individuals to rent or borrow goods rather than buy and own them. Examples include Uber, a ride sharing app, and Airbnb, which helps individuals rent their spare room or empty house to people vacationing in their city.
Experts predict that the sharing economy will only continue to grow and offer fantastic opportunities for entrepreneurs. Some of the benefits are:
Developing the Entrepreneurial Concept
According to Scott Molander, the "10 Secrets to Success," are his constant guide for his enterprise:
Four Faces of the Entrepreneur
These are the four very different roles that must be filled for an innovative concept to become an entrepreneurial success.
The Explorer: Enjoys searching for new ideas and looks in unknown areas.
The Artist: transforms what the "Explorer" finds into a working concept.
The Judge: evaluates the "Artists" new ideas and may modify or eliminate them.
The Warrior: does whatever it takes to implement the idea, once the Judge approves it. The warrior must have passion for the idea and be able to fight for a long time.
Working as an Entrepreneur Within an Organization
While some entrepreneurs start their own businesses, many people have entrepreneurial characteristics and work within an existing framework in the corporate or public organization. 75% of small businesses specifically and directly encourage their employees to suggest new ideas for new products and services or better ways to produce and distribute them. The four essential traits of intrapreneurs are:
Barriers/Challenges to Intrapreneurship
Organizations that have become bureaucratic in nature create more challenges, including the following:
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resistance to change |
| resentment of individuality |
| red tape that makes it difficult to operate quickly and entrepreneurially |
| discouragement of creative ideas |
| little tolerance for risk |
| insufficient research and development funding |
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overemphasis on accountability |
Overcoming Intrapreneurship Barriers
To overcome the previous barriers, Loeb (1995) suggest the following strategies:
Entrepreneurial Strategies for the Market
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Fustest With the Mostest: Entrepreneur tries to capture an entire market by being first with a new product/service. |
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Hit ’Em Where They Ain’t: Entrepreneur will wait until someone has offered a new product/service then improve it. |
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Ecological Niches: Aims at controlling a small segment of a market. Based on a specialty skill, product or service. |
| Changing Value and Characteristics: Converting an established product or service into something new. |
Entrepreneurship in Public Service Organizations
Service institutions (city or county governments) such as public park and recreation departments need to be just as innovative and entrepreneurial as a private business. The problem is that service institutions often have cumbersome structures, procedures, and traditions that are greater barriers than are found in even the most bureaucratic of private companies. Specific obstacles include the following:
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