entrepreneurship The pursuit of lucrative opportunities by enterprising individuals.
small business A business having fewer than 100 employees, independently owned and operated, not dominant in its field, and not characterized by many innovative practices.
entrepreneurial venture A new business having growth and high profitability as primary objectives.
The bottom line: Innovation
Entrepreneurship is inherently about innovation—creating a new venture where one didn’t exist before.
entrepreneur Individuals who establish a new organization without the benefit of corporate sponsorship.
intrapreneurs New-venture creators working inside big companies.
Why Become an Entrepreneur?
What Does It Take to Succeed?
Entrepreneurs start their own firms because of the challenge, the profit potential, and the enormous satisfaction they hope lies ahead. People starting their own businesses are seeking a better quality of life than they might have at big companies. They seek independence and a feeling of being part of the action. They feel tremendous satisfaction in building something from nothing, seeing it succeed, and watching the market embrace their ideas and products.
People also start their own companies when they see their progress or ideas blocked at big corporations. When people are laid off, they often try to start businesses of their own. And when employed people believe they will not receive a promotion or are frustrated by bureaucracy or other features of corporate life, they may quit and become entrepreneurs.
Immigrants also may find conventional paths to economic success closed to them and turn to entrepreneurship.
Successful entrepreneurs are innovators and also have good knowledge and skills in management, business, and networking.
franchising An entrepreneurial alliance between a franchisor (an innovator who has created at least one successful store and wants to grow) and a franchisee (a partner who manages a new store of the same type in a new location).
Five successful business models that have been proved to be successful in the e-commerce market
transaction fee model Charging fees for goods and services.
例）Amazon.com, Online travel agents
advertising support model Charging fees to advertise on a site.
affiliate（加入する、提携している） model Charging fees to direct site visitors to other companies’ sites.
intermediary(仲介の） model Charging fees to bring buyers and sellers together.
subscription model Charging fees for site visits.
You are more likely to succees as an entrepreneur if you exhibit the followin 6 characteristics.
1. Commitment and determination: Successful entrepreneurs are decisive, tenacious（あきらめない）, disciplined, willing to sacrifice, and able to immers（沈める） themselves in their enterprises.
2. Leadership: They are self-starters, team builders, superior learners, and teachers. Communicating a vision for the future of the company—an essential component of leadership that you’ll learn more about in Chapter 12—has a direct impact on venture growth.
3. Opportunity obsession: They have an intimate knowledge of customers’ needs, are market driven, and are obsessed with value creation and enhancement.
4. Tolerance of risk, ambiguity, and uncertainty: They are calculated risk takers and risk managers, tolerant of stress, and able to resolve problems.
5. Creativity, self-reliance, and ability to adapt: They are open-minded, restless with the status quo, able to learn quickly, highly adaptable, creative, skilled at conceptualizing, and attentive to details.
6. Motivation to excel: They have a clear results orientation, set high but realistic goals, have a strong drive to achieve, know their own weaknesses and strengths, and focus on what can be done rather than on the reasons things can’t be done.
One common entrepreneurial malady(会社の深刻な問題）
An aversion(嫌悪）to record keeping. Expenses mount, but records do not keep pace. Pricing decisions are based on intuition without adequate reference to costs. As a result, the company earns inadequate margins to support growth.
Sometimes companies reach a point at which the owners want to “go public.” Initial public stock offerings (IPOs) offer a way to raise capital through federally registered and underwritten sales of shares in the company. You need lawyers and accountants who know current regulations.
The reasons for going public include raising more capital, reducing debt or improving the balance sheet and enhancing net worth, pursuing otherwise unaffordable opportunities, and improving credibility with customers and other stakeholders—“you’re in the big leagues now.”
Disadvantages include the expense, time, and effort involved; the tendency to become more interested in the stock price and capital gains than in running the company properly; and the creation of a long-term relationship with an investment banking firm that won’t necessarily always be a good one.
Many entrepreneurs prefer to avoid going public, feeling they’ll lose control if they do.
Increasing Your Chances of Success
buisness plan, key planning elements
Selling the plan
The first formal planning step is to do an opportunity analysis. An opportunity analysis includes a description of the good or service, an assessment of the opportunity, an assessment of the entrepreneur (you), a specification of activities and resources needed to translate your idea into a viable business, and your source(s) of capital.
Then, create business plan.
business plan A formal planning step that focuses on the entire venture and describes all the elements involved in starting it.
The business plan (1) helps determine the viability of your enterprise, (2) guides you as you plan and organize, and (3) helps you obtain financing. It is read by potential investors, suppliers, customers, and others.
Key Planning Elements
Best plans convey five key factors: the people, the opportunity, the competition, the context, and risk and reward.
The people should be energetic and have skills and expertise directly relevant to the venture. For many astute investors, the people are the most important variable, more important even than the idea. Venture capital firms often receive 2,000 business plans per year; many believe that ideas are a dime a dozen and what counts is the ability to execute. Arthur Rock, a legendary venture capitalist who helped start Intel, Teledyne, and Apple, stated, “I invest in people, not ideas. If you can find good people, if they’re wrong about the product, they’ll make a switch.”
The opportunity should provide a competitive advantage that can be defended. Customers are the focus here: Who is the customer? How does the customer make decisions? How will the product be priced? How will the venture reach all customer segments? How much does it cost to acquire and support a customer, and to produce and deliver the product? How easy or difficult is it to retain a customer?
It is also essential to fully consider the competition. The plan must identify current competitors and their strengths and weaknesses, predict how they will respond to the new venture, indicate how the new venture will respond to the competitors’ responses, identify future potential competitors, and consider how to collaborate with or face off against actual or potential competitors. The original plan for Zappos was for its Web site to compete with other online shoe retailers by offering a wider selection than they did. However, most people buy shoes in stores, so Zappos cofounders Nick Swinmurn and Tony Hsieh soon realized that they needed a broader view of the competition. They began focusing more on service and planning a distribution method that would make online shopping as successful as visiting a store.
The environmental context should be a favorable one from regulatory and economic perspectives. Such factors as tax policies, rules about raising capital, interest rates, inflation, and exchange rates will affect the viability of the new venture. The context can make it easier or harder to get backing and to succeed. Importantly, the plan should make clear that you know that the context inevitably will change, forecast how the changes will affect the business, and describe how you will deal with the changes.
The risk must be understood and addressed as fully as possible. The future is always uncertain, and the elements described in the plan will change over time. Although you cannot predict the future, you must contemplate head-on the possibilities of key people leaving, interest rates changing, a key customer leaving, or a powerful competitor responding ferociously. Then describe what you will do to prevent, avoid, or cope with such possibilities. You should also speak to the end of the process: how to get money out of the business eventually. Will you go public? Will you sell or liquidate? What are the various possibilities for investors to realize their ultimate gains?
Increasing your chances to succeed
legitimacy People’s judgment of a company’s acceptance, appropriateness, and desirability, generally stemming from company goals and methods that are consistent with societal values.
Social capital —being part of a social network, and having a good reputation—helps entrepreneurs gain access to useful information, gain trust and cooperation from others, recruit employees, form successful business alliances, receive funding from venture capitalists, and become more successful. Social capital provides a lasting source of competitive advantage.
Whether or not the company has a formal board of directors, entrepreneurs can assemble a group of people willing to serve as an advisory board. Board members with business experience can help an entrepreneur learn basics such as how to do cash-flow analysis; identify needed strategic changes; and build relationships with bankers, accountants, and attorneys.
Often, two people go into business together as partners. Partners can help one another access capital, spread the workload, share the risk, and share expertise.
Two common approaches used to stimulate intrapreneurial activity are skunkworks and bootlegging.
Skunkworks(コンピュータ業界などでの新製品開発の秘密プロジェクト） are project teams designated to produce a new product. A team is formed with a specific goal within a specified time frame. A respected person is chosen to be manager of the skunkworks. In this approach to corporate innovation, risk takers are not punished for taking risks and failing—their former jobs are held for them. The risk takers also have the opportunity to earn large rewards.
Bootlegging（海賊版の、密造の） refers to informal efforts—as opposed to official job assignments—in which employees work to create new products and processes of their own choosing and initiative. Informal can mean secretive, such as when a bootlegger believes the company or the boss will frown on those activities. But companies should tolerate some bootlegging, and some even encourage it. To a limited extent, they allow people freedom to pursue pet projects without asking what they are or monitoring progress, figuring bootlegging will lead to some lost time but also to learning and to some profitable innovations.
The most dangerous risk in corporate entrepreneurship is the risk of overreliance on a single project. Many companies fail while awaiting the completion of one large, innovative project. The successful entrepreneurial organization avoids overcommitment to a single project and relies on its entrepreneurial spirit to produce at least one winner from among several projects.
Entrepreneurial orientation is the tendency of an organization to engage in activities designed to identify and capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services. Entrepreneurial orientation is determined by five tendencies: to allow independent action, innovate, take risks, be proactive, and be competitively aggressive.
To allow independent action is to grant to individuals and teams the freedom to exercise their creativity, champion promising ideas, and carry them through to completion.
Innovativeness requires the firm to support new ideas, experimentation, and creative processes that can lead to new products or processes; it requires a willingness to depart from existing practices and venture beyond the status quo.
Risk taking comes from a willingness to commit significant resources, and perhaps borrow heavily, to venture into the unknown. The tendency to take risks can be assessed by considering whether people are bold or cautious, whether they require high levels of certainty before taking or allowing action, and whether they tend to follow tried-and-true paths.
To be proactive is to act in anticipation of future problems and opportunities. A proactive firm changes the competitive landscape; other firms merely react. Proactive firms are forward thinking and fast to act, and are leaders rather than followers. Similarly, some individuals are more likely to be proactive, to shape and create their own environments, than others who more passively cope with the situations in which they find themselves. Proactive firms encourage and allow individuals and teams to be proactive.
Finally, competitive aggressiveness is the tendency of the firm to challenge competitors directly and intensely to achieve entry or improve its position. In other words, it is a competitive tendency to outperform one’s rivals in the marketplace. This might take the form of striking fast to beat competitors to the punch, to tackle them head-to-head, and to analyze and target competitors’ weaknesses.
Describe why people become entrepreneurs and what it takes, personally.
People become entrepreneurs because of the profit potential, the challenge, the satisfaction they anticipate (and often receive) from participating in the process, and sometimes because they are blocked from more traditional avenues(手段) of career advancement. Successful entrepreneurs are innovators, and they have good knowledge and skills in management, business, and networking. While there is no single “entrepreneurial personality,” certain characteristics are helpful: commitment and determination; leadership skills; opportunity obsession; tolerance of risk, ambiguity, and uncertainty; creativity, self-reliance, the ability to adapt; and motivation to excel.
Summarize how to assess opportunities to start new businesses.
You should always be on the lookout for new ideas, monitoring the current business environment and other indicators of opportunity. Franchising offers an interesting opportunity, and the potential of the Internet is being tapped (after entrepreneurs learned some tough lessons from the dot-bomb era). Trial and error and preparation play important roles. Assessing the business concept on the basis of how innovative and risky it is, combined with your personal interests and tendencies, will also help you make good choices. Ideas should be carefully assessed via opportunity analysis and a thorough business plan.
Identify common causes of success and failure.
New ventures are inherently risky. The economic environment plays an important role in the success or failure of the business, and the entrepreneur should anticipate and be prepared to adapt in the face of changing economic conditions. How you handle a variety of common management challenges also can mean the difference between success and failure, as can the effectiveness of your planning and your ability to mobilize nonfinancial resources, including other people who can help.
Discuss common management challenges.
When new businesses fail, the causes often can be traced to some common challenges that entrepreneurs face and must manage well. You might not enjoy the entrepreneurial process. Survival— including getting started and fending off competitors—is difficult. Growth creates new challenges, including reluctance to delegate work to others. Funds are put to improper use, and financial controls may be inadequate. Many entrepreneurs fail to plan well for succession. When needing or wanting new funds, initial public offerings provide an option, but they represent an important and difficult decision that must be considered carefully.
Explain how to increase your chances of success, including good business planning.
The business plan helps you think through your idea thoroughly and determine its viability. It also convinces (or fails to convince) others to participate. The plan describes the venture and its future, provides financial projections, and includes plans for marketing, manufacturing, and other business functions. The plan should describe the people involved in the venture, a full assessment of the opportunity (including customers and competitors), the environmental context (including regulatory and economic issues), and the risk (including future risks and how you intend to deal with them). Successful entrepreneurs also understand how to develop social capital, which enhances legitimacy and helps develop a network of others including customers, talented people, partners, and boards.
Describe how managers of large companies can foster entrepreneurship.
Intrapreneurs work within established companies to develop new goods or services that allow the corporation to reap the benefits of innovation. To facilitate intrapraneurship, organizations use skunkworks—special project teams designated to develop a new product—and allow bootlegging—informal efforts beyond formal job assignments in which employees pursue their own pet projects. Organizations should select projects carefully, have an ongoing portfolio of projects, and fund them appropriately. Ultimately, a true entrepreneurial orientation in a company comes from encouraging independent action, innovativeness, risk taking, proactive behavior, and competitive aggressiveness.