The Entrepreneurial and Intrapreneurial MindChapter 2 (Hisrich..)

International Entrepreneurship Lecture 4

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The Entrepreneurial Process The process through which a new

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venture is created by an entrepreneur. 1. Identification and evaluation of the opportunity 2. Development of the business plan 3. Determination of the required resources

Aspects of Entrepreneurial Process

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Identify and Evaluate the Opportunity Opportunity identification is the process by which

an entrepreneur comes up with the opportunity for a new venture. Difficult and no formal process but some techniques: Identifying unfulfilled needs and wants

Observing or monitoring use of existing products Advice from consumers, distributors, and business

associates Using technical knowledge

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Identify and Evaluate the Opportunity Each opportunity must be carefully screened and

evaluated whether the specific product or service has the returns needed compared to the resources required Window of opportunity is the time period available for creating the new venture. Market size and the length of the window of opportunity are the primary basis for determining the risks and rewards. Evaluate whether opportunity fit personal skills and goals of the entrepreneur.5

Develop a Business Plan Business plan is the description of the future

direction of the business. A good business plan is essential to developing the opportunity and determining the resources required, obtaining those resources, and successfully managing the resulting venture. It is time consuming

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Determine the Resource Required The resources needed for addressing the opportunity

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must be determined. This process starts with an appraisal of the entrepreneur's present resources. Any resources that are critical need to be differentiated from those that are just helpful. Care must be taken not to underestimate the amount and variety of resources needed. The downside risks associated with insufficient or inappropriate resources should also be assessed. Acquiring the needed resources in a timely manner while giving up as little control as possible is the next step in the entrepreneurial process. An entrepreneur should strive to maintain as large an ownership position as possible, particularly in the start-up stage.

Manage the Enterprise After resources are acquired, the entrepreneur

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must use them to implement the business plan. The operational problems of the growing enterprise must be examined. This involves implementing a management style and structure. as well as determining the key variables for success. A control system must be established, so that any problem areas can be quickly identified and resolved. Some entrepreneurs have difficulty managing and growing the venture they created.

Managerial versus Entrepreneurial Decision Making Administrative domain is the ways managers

make decisions. Entrepreneurial domain is the way entrepreneurs make decisions The difference between the entrepreneurial and the managerial styles can be viewed from five key business dimensions-strategic orientation,1. 2. 3. 4.

commitment to opportunity, commitment of resources, control of resources, management structure.

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commitment to opportunity In terms of the commitment to opportunity, the two

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domains vary greatly with respect to the length of this commitment. The entrepreneurial domain is pressured by the need for action, short decision windows, a willingness to assume risk, and few decision constituencies and has a short time span in terms of opportunity commitment. The administrative (managerial) domain is not only slow to act on an opportunity, but once action is taken, the commitment is usually for a long time span, too long in some instances. There are often no mechanisms set up in companies to stop and reevaluate an initial resource commitment once it is made-a major problem in the administrative (managerial) domain.

commitment of resources An entrepreneur is used to having resources

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committed at periodic intervals that are often based on certain tasks or objectives being reached. These resources, often acquired from others, are usually difficult to obtain, forcing the entrepreneur to maximize any resources used. Even though the funding may also be implemented in stages in the administrative domain, the commitment of the resources is for the total amount needed. Administratively oriented individuals respond to the source of the rewards offered and receive personal rewards by effectively administering the resources under their

control of resources Since the administrator (manager) is rewarded by

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effective resource administration, there is often a drive to own or accumulate as many resources as possible. The pressures of power, status, and financial rewards cause the administrator (manager) to avoid rental or other periodic use of the resource. The opposite is true for the entrepreneur whounder the pressures of limited resources, the risk of obsolescence, a need for flexibility, and the risks involved strives to rent, or otherwise achieve periodic use of, the resources on an as-needed basis.

Management structure The final business dimension, management

structure, also differs significantly between the two domains. In the administrative domain, the organizational structure is formalized and hierarchical in nature, reflecting the need for clearly defined lines of authority and responsibility. The entrepreneur, true to his or her desire for independence, employs a flat organizational structure with informal networks throughout.13

Corporate versus Intrapreneurial Culture The typical corporate culture has a climate and a

reward system that favor conservative environment of a decision making. Emphasis is on gathering large amounts of data as the basis for a rational particular organization decision and then using the data to justify the decision should the intended results not occur. Risky decisions are often postponed until enough hard facts can be gathered.

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Comparison

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Climate for Intrapreneurship

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How can the climate for intrapreneurship be established in an organization? The first of these is that the organization operates on

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the frontiers of technology. Since research and development are key sources for successful new product ideas, the firm must operate on the cutting edge of the industry's technology, encouraging and supporting new ideas instead of discouraging them, as frequently occurs in firms that require a rapid return on investment and a high sales volume. Second, experimentation-trial and error-is encouraged. Successful new products or services usually do not appear fully developed; instead, they evolve. Third, an organization should make sure that there are no initial opportunity parameters inhibiting creativity in new product development.

How can the climate for intrapreneurship be established in an organization? Fourth, the resources of the firm need to be available and easily

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accessible. Fifth, a multidisciplined team approach needs to be encouraged. This open approach, with participation by needed individuals regardless of area, is the antithesis of the typical corporate organizational structure. Sixth, the spirit of intrapreneurship cannot be forced upon individuals; it must be on a volunteer basis. There is a difference between corporate thinking and intrapreneurial thinking, with certain individuals performing much better on one side of the continuum or the other. The seventh characteristic is a reward system. The intrapreneur needs to be appropriately rewarded for all the energy, effort, and risk taking expended in the creation of the new venture. Rewards should be based on the attainment of established performance goals. Eighth, a corporate environment favorable for intrapreneurship has sponsors and champions throughout the organization who not only support the creative activity but also have the planning flexibility to establish new objectives and directions as needed. Finally, and perhaps most important, the intrapreneurial activity must be wholeheartedly supported and embraced by top management, both by their physical presence and by making sure that the personnel and the financial resources are available.

Intrapreneurial Leadership Characteristics

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