Maximilian Stark (mail@dakror.de), WS2018
Stand: 12.01.2019
Introduction to Entrepreneurship and Ethical Business
Introduction to Entrepreneurship
Definition
- Discovery, Evaluation, Exploitation of Opportunities to create Novelty by mobilizing resources (Shane & Venkatarmaran)
Core properties
- Disruption of industries
- Creation of industries
- Creative Destruction
- Sought even as employee (entrepreneurial thinking)
- correlation with wealth of nation
Management strategies
Traditional
- Fight for place inside industry
- Market share as success measure
Entrepreneurial
- Fight for territory across the board
- Share of opportunity space as success measure
Entrepreneurial behavior
- Understanding the people side of entrepreneurship
- Probing entrepreneurship phenomena only from economic perspective not enough (Busenitz)
- Central questions in entrepreneurship research (Baron)
- Why only some people become entrepreneurs
- Why some people see opportunities better
- Why success rate of entrepreneurs varies
Personality
Definition
- stability over time
- Traits: dispositions to (re-)act in various situations
- influences by genetics and environment
The Big Five
- Introversion vs. Extroversion
- Neuroticism vs. Emotional stability
- Antagonism vs. Agreeableness
- Undirectedness vs. Conscientiousness
- Closedness vs. Openness
Findings in entrepreneurship
- Correlation of traits to venture creation & performance
- All aspects stronger than for managers
- positive Conscientiousness
- negative Neuroticism
- positive Openness
- very positive Autonomy
- positive Achievement motivation
- positive Risk taking propensity
- very positive self efficacy
- positive Locus of control
- weakly negative / insignificant Agreeableness
- weakly positive / insignificant Extraversion
Motivational Needs Theory (David McClelland)
- Into-Action-Push by internal forces
- Everyone driven by 3 basic needs
- Change of dominant need over life course and experience
- Achievement
- Autonomy
- Power
Importance of Entrepreneurial Affect
- Highly uncertain environment
- Unpredictability
- Model
- Affect (disposition / event)
- .
- Priming of mood-related associations & memories
- Affect as heuristic cue
- Effects on cognitive processes
- Judgement
- Perception
- Decisions
- Memory
- Creativity
- Stress coping strategies
- heuristic thought preference
- Potential effects on entrepreneurial business
- Opportunity recognition
- Resource acquisition
- Social network development
- Effective response to dynamic environments
- Stress tolerance
Creativity
- generation of novel and useful ideas, insights, solutions (Baas)
- reactive to problems and challenges, also proactive (Runco)
- Techniques
- conceptual combination (affordable luxury)
- analogical reasoning (copy nature)
- WIBNI: Wouldn't it be nice if...
- Checklist method
- Adapt
- Modify
- Magnify
- Minify
- Subsitute
- ...
- Brainstorming
- Defer judgement
- Encourage wild ideas
- Build on ideas of others
- Stay focues on boundary conditions
- One conversation at a time
- Go for quantity
- Delphi Technique
- Written approach
- Iterative converging process
- Experts filling out questionaires
- Presentation of anonymized summary
- Re-evaluation of statements, cycle repetition
- Six thinking hats
- Perspective changes
- Blue: Process
- Green: Creativity
- White: Facts
- Yellow: Benefits
- Red: Feelings
- Black: Cautions
Development of market opportunity from technology
- Analyzing tech
- Broad problem / application field identification
- Decision for single problem / application field
- Identification of target customer
Entrepreneurial process
- Idea generation
- Difficulty in judgement of being worthwile, not in generation
- Hard to imagine novelties
- Evaluation based on internal models, not rational
- Uncertainty, countless factors
- Matching ideas an capabilities
- Problem scale
- Relevance to team
- Opportunity development
- Sources
- Technology Push (TUM Konux)
- Demand pull (TUM Lilium)
- Contributing factors
- Creativity
- Knowledge
- previous experience
- can be restrictive, Creativity to overcome
- Networks
- Changes in the Environment
- Emergence from complex pattern of changing conditions
- PEST conditions: political, economic, societal, technological
- Venture or business unit foundation
- Growth
Prototyping
- Sharing
- Validation
- Fast failing
- Stages
- Inspiration
- Embrace failure
- Build to think
- Low resolution
- Evolution
- Expect changes
- Experiment
- Targeted models
- Validation
- Manage changes
- Build to spec.
- Integrated models
Discussions
- BATNA: best alternative to negotiated agreement
- Bargaining tactics
- Reciprocity
- repay in kind
- Uninvited debts
- Reciprocal concessions
- "Door-in-the-face": Extrem request with reasonable follow up
- "That's-not-all-folks": Offer increase or cost reduction
- Commitment and consistency
- Pressure to consistent behaviour
- "Foot-in-the-door": Escalating pattern of requests
- "Low-balling": Withdrawal of inducements after deal
Decision making: Context for entrepreneurs
- High uncertainty
- Time pressure
- Emotional intensity
- Ambiguity
- Consequential extremes
- Environment
- Personality traits
- Heuristics and biases
Idea development
- From idea to opportunity
- Development activities
- Goal Setting
- Effectuation
Goal Setting
- SMART goals
- Specific
- Measurable
- Achievable
- Relevant
- Time-Bound
- Action planning: Breaking of goals into subgoals and plans
Effectuation
- General principle: Causation -> Effectuation
- Start with your resources: Means -> Goals
- not chasing investors
- not waiting for perfect opportunity
- working on own strenghts
- oppportunities that fit
- Creativity with few resources
- Affordable loss: Expected return -> Affordable loss
- Limitation of investments
- Minimizing costs
- Use of low-cost resources
- Form partnerships: Competition -> Partnership
- new means from investors
- only investment of disposables
- unexpected contingencies, leverable
- Leverage surprise
- In action
- Means
- Goals
- Interact
- Stakeholder commitments
- new means
- new goals
- Changes in environment
- Expanding cycle of resources
- Converging cycle of constraints
- => new firms/products/markets
Teams
- Research
- Upper echelons perspective: relationship team <-> venture performance (Strategic Management)
- Intermediary mechanism exploration: team input & effectiveness (Organizational and Entrepreneurial Behaviour)
- Upper echelons + Input-mediators-outcomes
- Journey
- Finding members
- Heterogeneity vs. Homogeneity
- Complementary competence vs Friendship and availability
- Team setup
- Strong ties: Professionalize
- Weak ties: Team build up
- Building blocks
- Foundations
- Roles & expectations
- Contributions & rewards
- Future development
- Equity distribution
- Difficulty management
- Relationship conflicts vs. Task conflicts
- Destructive vs. constructive
- Taking breaks
- Team rules
- Reflection
- Feedback
- Neutral coaches
- Effective communication
Equity distribution
- Criteria
- Backwards orientation
- Idea premium
- Capital contribution
- Opportunity costs
- => Certainty about contributions
- Forwards orientation
- Prior experience
- Level of commitment
- Titles
- Timing
- early split
- attractive
- calm negotation before pressure
- previous experience with co-founders
- late split
- commitment more clear
- future incentives
- established business model
- no re-negotations
- static vs. dynamic split
- Contribution uncertainty
- Vesting: Split level change over time
- time based
- milestone based
- Handling early leavers
- Protection for members
- Inputs
- Prior experience
- Social capital
- Personality
- General mental ability
- Mediators
- Team processes
- Transitions: Membership changes
- Interpersonal: Team conflicts
- Actions
- Emergent States
- Cognitive
- Collective cognition
- Cohesion
- Affective
- Team confidence
- Psychological safety
- Affective tone
- Outcomes
- Sales growth
- Profitability
- Number of employees
- Innovativeness
- Satisfaction
- Well-being
Market Entry
- Startup: temporary organization, repeatable, scalable business model
- Liabilities of newness
- Capitalization on newness assets
- Product not the solution, business model is
- Entry strategies
- First mover
- + Cost advantage
- + Less competitive rivalry
- + Securing of supply/distro channels
- - Market uncertainty
- - Technological uncertainty
- - Uncertainty for customer
- Imitation
- Franchising: acquire proven formula
- Copying and minor modifications
- + less R&D costs
- + organizational legitimacy
- + less customer uncertainty
- Narrow-scope
- Fill specific niche
- + Gain specialist expertise
- + High end market
- + Less competition
- - Much uncertainty
- Broad-scope
- Wide range of products / markets
- learning process
- - Many fronts of competition
- + less market uncertainty
- Reduction of uncertainties
- Informal advertising
- Highlighting advantages
- Frame of reference
- Domentration & documentation
Business model
- Backend
- Key activities
- Key partners
- Key resources
- Cost structure
- Value proposition (the product)
- Frontend
- Customer relationships
- Customer segments
- Distribution channels
- Revenue streams
- Who is customer?
- Who is user?
Growth
Market |
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Existing |
Penetration |
Product development |
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New |
Market development |
Diversification |
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Existing |
New |
Product |
- Ansoff matrix
- Penetration: Aggressive marketing for current products
- Market development: Grow to new customers
- geographic
- demographic
- new product use
- Product development
- Capitalize on existing distro
- Capitalize on reputation
- Diversification
- Backward integration: step back up value-added chain toward raw materials
- Forward integration: step forward down value-added chain toward customer
- Horizontal integration: Same level, different chain
- Process model of growth
- Creativity: Crisis of leadership
- Direction: Crisis of autonomy
- Delegation: Crisis of control
- Coordination: Crisis of Red Tape
- Collaboration: Crisis of growth
- Alliances
- Firm categories
- Micro firm
- < 10 employees
- < 2m€ turnover & balance
- Small firm
- < 50 employees
- < 10m€ turnover & balance
- Medium sized firm
- < 250 employees
- < 50m€ turnover
- < 43m€ balance
- Large firm
- Rapid growth firm
- > 10 employees
- annual growth > 20% over 3 yrs
- Gazelle
- < 5 yrs old
- > 10 employees
- avg annual growth > 20% over 3 years
- Unicorn: Startup valued > 1bn$
Internationalization
- 1960/70s
- Gradual expansion
- Perceived uncertainty about foreign markets
- Foreign market entry mode
- Sporadic export
- Regular export
- Sales subsidiary
- Production subsidiary
- Born global, 1990s
- Environment
- Increasingly internationalized industries
- Advances in ICT and transportation technologies
- Product
- High degree of innovation and specialization (shorter product life cycles)
- Unique competitive advantage
- Products often standardized (quick international roll-out)
- Customers / Market
- Often niche segments
- International growth due to narrow market
- "Global" need (increasing homogenization of customer preferences)
- Management team
- International background or experience: mindset
- High international entrepreneurial orientation
- Existing networks abroad -> previous customers, suppliers, etc.
- Foreign market entry barriers
- Institutional barriers
- import tarrifs or quota
- Local ownership restrictions (joint ventures)
- Local content clauses for foreign direct investment
- Market-based barriers
- hindered access to distribution systems
- Personnel acquisition problems
- Customer preferences for local companies
- Foreign market attractiveness
- Volume
- Growth
- Price structure
- Cost structure
- Infrastructure
- Foreign market entry modes
- Exporting
- Licensing (Franchising)
- Joint Venture
- Subsidiary
- Foreign market entry: Eclectic Theory
- Ownership advantages (no) -> No internationalization
- Internationalization advantages (no) -> Licensing
- Location advantages in foreign country
- (no) -> Export
- (yes) -> Subsidiary