{"id":132,"date":"2015-07-29T22:47:22","date_gmt":"2015-07-29T22:47:22","guid":{"rendered":"https:\/\/courses.candelalearning.com\/intlbusx1xmaster\/?post_type=chapter&p=132"},"modified":"2017-01-09T19:16:42","modified_gmt":"2017-01-09T19:16:42","slug":"entrepreneurship","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/cerritos-internationalbusiness\/chapter\/entrepreneurship\/","title":{"raw":"Reading: Entrepreneurship","rendered":"Reading: Entrepreneurship"},"content":{"raw":"
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Learning Objectives<\/h3>\r\n
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  1. Identify what entrepreneurship is.<\/li>\r\n\t
  2. Understand who an entrepreneur is.<\/li>\r\n\t
  3. Recognize some of the myths of entrepreneurship.<\/li>\r\n<\/ol>\r\n<\/div>\r\n
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    Entrepreneurship and Entrepreneurs<\/h2>\r\nEntrepreneur is a French word that means \u201cto undertake.\u201d In the business world, this term applies to someone who wants to start a business or enterprise. As you may recall, entrepreneurship<\/span><\/span> is defined as \u201cthe recognition of opportunities (needs, wants, problems, and challenges) and the use or creation of resources to implement innovative ideas for new, thoughtfully planned ventures.\u201d[footnote]Mason Carpenter, Talya Bauer, and Berrin Erdogan, Principles of Management<\/em> (Nyack, NY: Unnamed Publisher<\/a>, 2009), accessed January 5, 2011, http:\/\/www.gone.2012books.lardbucket.org\/printed-book\/127834<\/a>.[\/footnote]<\/span> An entrepreneur<\/span><\/span> is a person who engages in entrepreneurship. Entrepreneurs are typically go-getters with high levels of skill and energy. Webster\u2019s<\/em> defines an entrepreneur as \u201cthe organizer of an economic venture; especially<\/em> one who organizes, owns, manages, and assumes the risks of a business.\u201d[footnote]Webster\u2019s Third New International Dictionary, Unabridged,<\/em> s.v. \u201centrepreneur,\u201d accessed November 7, 2010, http:\/\/unabridged.merriam-webster.com\/cgi-bin\/unabridged?va=entrepreneur&x=0&y=0<\/a>.[\/footnote]<\/span> Entrepreneurship, like strategic management, will help you think about the opportunities available when you connect new ideas with new markets.\r\n\r\nEntrepreneurs are distinct from small-business owners in that entrepreneurs often rely on innovation\u2014new products, methods, or markets\u2014to grow their business quickly and broadly. Entrepreneurs rely on innovation and speed to a much greater extent than small-business owners. Small-business owners typically enter established markets, providing a more traditional product or service to a local market. For example, a local dry cleaner may be a small business, whereas a company that develops a revolutionary new way to do dry cleaning and seeks to expand that new method nationally and internationally would be considered entrepreneurial.\r\n\r\nPrior to the end of the last century, most people equated the word entrepreneurship<\/em> with risk takers and nonconformists who were usually unable to work in a corporate environment. It was that small segment of the population that was willing to take what most perceive as very high risks. In truth, that is far from the reality. Entrepreneurs are certainly an adventurous group, but most wouldn\u2019t describe themselves as aggressive risk takers. More often, they are passionate about an idea and carefully plan how to put it into effect. Most entrepreneurs are more comfortable with managed risk than with dangerous get-rich-quick schemes.\r\n
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    Did You Know?<\/h3>\r\nHow do entrepreneurs identify opportunities for new business ventures? First, they actively search for opportunities. That is, they don\u2019t just passively wait for an idea to hit them, and they don\u2019t just look at traditional sources of information, like news and trade publications. Instead, they search out more unusual sources, such as specialized publications or conversations with personal contacts, to get hints of new opportunities. Second, entrepreneurs are particularly alert to opportunities. Specifically, they look for \u201cchanged conditions or overlooked possibilities.\u201d[footnote]Robert A. Baron, \u201cOpportunity Recognition as Pattern Recognition: How Entrepreneurs \u2018Connect the Dots\u2019 to Identify New Business Opportunities,\u201d Academy of Management Perspectives<\/em>, February 2006, 105.[\/footnote]<\/span> Third, research confirms that prior knowledge\u2014information gathered from prior experience\u2014helps entrepreneurs identify potentially profitable opportunities.[footnote]Scott Shane, \u201cPrior Knowledge and the Discovery of Entrepreneurial Opportunities,\u201d Organization Science<\/em> 11, no. 4: 448\u201369.[\/footnote]<\/span> For example, having prior industry or market experience with customers\u2019 needs or struggles to solve particular problems greatly aids entrepreneurs in being able to create innovative new solutions to those problems. The latest research in human cognition shows that these three factors\u2014active search, alertness, and prior experience\u2014combine to help entrepreneurs see patterns among seemingly unrelated events or trends in the external world. As Robert Baron says, these factors help entrepreneurs \u201cconnect the dots\u201d between changes in technology, demographics, markets, government policies, and other factors.[footnote]Robert A. Baron, \u201cOpportunity Recognition as Pattern Recognition: How Entrepreneurs \u2018Connect the Dots\u2019 to Identify New Business Opportunities,\u201d Academy of Management Perspectives<\/em>, February 2006, 104.[\/footnote]<\/span>\r\n\r\n<\/div>\r\nEntrepreneurship became a high-profile subject in the 1990s with the dot-com era, which created a whole new breed of \u201cwannabe\u201d entrepreneurs. Entrepreneurship was in vogue, and everyone wanted to be an entrepreneur. That period shaped the expectations and perceptions of an entire generation of potential entrepreneurs. It also made the world of venture capital more commonplace and accessible. Eventually\u2014as with most business cycles\u2014the Internet bubble burst, and the shift reversed. People sought the surety of corporate life once again. Nevertheless, the allure of entrepreneurship has continued to tempt many people.\r\n
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    So You Want to Be an Entrepreneur?<\/h3>\r\n
    Many people are surprised to learn that successful entrepreneurs do not always have a perfect business plan and marketing and sales strategy in place before launching their businesses. In fact, many often deviate so significantly from the original plan that the business is unrecognizable. Instead, the mark of a successful entrepreneur is the ability to adeptly navigate the daily, weekly, and monthly bumps, twists, and turns in the life of a young or small company. We live in a world of instant gratification. People want immediate success along with everything else. However, there are no prepackaged, absolutely certain paths to successful entrepreneurship. Successful entrepreneurs start a business for what they can get out of it this year, not three to five years down the road\u2014because they\u2019re not likely to make it to that future point if they can\u2019t take care of today. Pay yourself a salary and strive for profitability.Sanjyot P. Dunung, Starting Your Business<\/em> (New York: Business Expert Press, 2010), 4\u20135.<\/span><\/blockquote>\r\n<\/div>\r\n<\/div>\r\n
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    Truths and Myths about Entrepreneurs<\/h2>\r\nThe late Jeffry Timmons, one of the early leaders in entrepreneurship education and an early advisor of Unnamed Publisher<\/a>\u2014the entrepreneurial organization that brings you this book\u2014noted that there are few truths about entrepreneurs but many myths. Among those truths, he said,\r\n
    Entrepreneurs work hard and are driven by an intense commitment and determined perseverance; they see the cup half full, rather than half empty; they strive for integrity; they burn with the competitive desire to excel and win; they are dissatisfied with the status quo and seek opportunities to improve almost any situation they encounter; they use failure as a tool for learning and eschew perfection in favor of effectiveness; and they believe they can personally make an enormous difference in the final outcome of their ventures and their lives.Jeffry A. Timmons, New Venture Creation: Entrepreneurship for the 21st Century<\/em>, 5th ed. (New York: McGraw-Hill, 1999), 44.<\/span><\/blockquote>\r\nThe myths, however, are many. The following five entrepreneurship myths are among the most prevalent:\r\n
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    1. Entrepreneurs are born, not made.<\/strong> The most prevalent myth about entrepreneurs is that they are born with the skills that will make them successful and that anyone who\u2019s not born with those skills will not succeed. In reality, entrepreneurism is a skill that, like any other skill, can be learned.<\/li>\r\n\t
    2. Entrepreneurs make more money.<\/strong> Surprisingly, the typical entrepreneur earns less than he or she would earn if working as an employee. Only the top 10 percent of entrepreneurs earn more than employees.[footnote]Scott Shane, \u201cTop Ten Myths of Entrepreneurship,\u201d How to Change the World<\/em> (blog), January 10, 2008, accessed January 2, 2011, http:\/\/blog.guykawasaki.com\/2008\/01\/top-ten-myths-o.html#tp<\/a>.[\/footnote]<\/span><\/li>\r\n\t
    3. Being original is essential.<\/strong> Another entrepreneurial myth is that entrepreneurs who get to the market first gain the most. Research by Joe Tabet, presented at INSEAD\u2019s Global Entrepreneurship Forum, has shown that the so-called first mover advantage is a myth: Google, eBay, and Swatch are examples of successful businesses that entered markets later. The key, Tabet says, is to find your niche and serve your customers well.[footnote]\u201cDebunking Myths about Entrepreneurs,\u201d Knowledge<\/em> (blog), INSEAD, June 10, 2009, accessed January 2, 2011, http:\/\/knowledge.insead.edu\/Debunkingmythsaboutentrepreneurs090615.cfm<\/a>.[\/footnote]<\/span><\/li>\r\n\t
    4. It takes a lot of money to start a business.<\/strong> Research by Scott Shane of Case Western Reserve University has shown that the average new business needs only $25,000 in financing and that most of that money can be raised through debt.[footnote]Scott Shane, \u201cTop Ten Myths of Entrepreneurship,\u201d How to Change the World<\/em> (blog), January 10, 2008, accessed January 2, 2011, http:\/\/blog.guykawasaki.com\/2008\/01\/top-ten-myths-o.html#tp<\/a>.[\/footnote]<\/span><\/li>\r\n\t
    5. Entrepreneurs must be risk takers.<\/strong> According to this myth, entrepreneurs are good at starting businesses but can\u2019t manage them once they grow. Research by Babson College professor Joel Shulman shows that the stocks of publicly traded companies run by entrepreneurs significantly outperform those run by nonentrepreneurs and continue to do so even after adjusting by market cap size, sector, geography, or time period.[footnote]Jeff Cornwall, \u201cAnother Entrepreneurial Myth Busted,\u201d The Entrepreneurial Mind<\/em> (blog), December 17, 2009, accessed January 1, 2011, http:\/\/www.drjeffcornwall.com\/entrepreneurial-myths<\/a>.[\/footnote]<\/span><\/li>\r\n<\/ol>\r\n<\/div>\r\n
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      Should You Become an Entrepreneur?<\/h2>\r\nWhatever your reasons for becoming an entrepreneur, understand and be clear about your personal motivations. This will help you make decisions and choices along the way. The short survey that follows this section might provide you with helpful insights, though keep in mind that\u2014as the survey says\u2014\u201cno reliable predictive model or entrepreneurial character has successfully been developed.\u201d\r\n\r\nBeyond such self-assessment and reflection, as you go through the personal decision-making process, try to talk to as many people as you possibly can. Seek out others who have tried entrepreneurship\u2014both those who have been successful and those who have not. Talk to people in your industry, including colleagues, friends, and potential advisors. You\u2019d be surprised how open people can be about their experiences\u2014good and bad. Read lots of books and get a variety of opinions. You\u2019re not trying to get people\u2019s \u201cpermission\u201d to be an entrepreneur, nor are you looking to give yourself permission to try. What you should strive for is to understand the factors critical to success and see if you\u2019re comfortable with them. There are no right or wrong answers. Only another entrepreneur can tell you what it\u2019s like to lie awake at night stressing about whether you\u2019ll make payroll that month. But at the same time, it\u2019s that entrepreneur who can tell you what strategy worked to make payroll that month. It\u2019s not the issues that define you as an entrepreneur but how you respond to those issues.\r\n\r\nAs you consider entrepreneurship, you need to assess whether it will provide you with the ability to support and sustain yourself and your family, both in the beginning and later on, when you eventually achieve your personal financial goals. Are you comfortable with the time it may take to grow and sustain your business? Many people start companies expecting to grow them aggressively (in financial terms), only to find that they are actually quite content with a profitable lifestyle business that allows them the ability to pursue other personal goals. Think about what kind of growth you\u2019re comfortable with. Do you want a lifestyle business or an aggressive-growth business? Both are commendable choices, but only you can make that decision.\r\n\r\nIf you decide to become an entrepreneur, take a look at your professional and personal support systems\u2014particularly the latter. Are they supporting you or thinking you\u2019re off your rocker? Even if you are comfortable with the risks, uncertainties, and challenges, a spouse or other key family member may not be. Negative whisperings can rock the very confidence that\u2019s required for entrepreneurship. Be wary not only of your own demons but also those of others around you.\r\n\r\nAttitude is a key factor. For example, if deep down you\u2019re happiest as a sole proprietor but are talking about growing a company because it sounds so much better, then guess what? You\u2019re likely to stay a sole proprietor and defeat yourself subconsciously. You will not grow your company, and you\u2019ll also be unhappy and unfulfilled, even if your company is successful by financial and market definition. Get in touch with what you really want and how you define success. Be comfortable and confident with your own answers. Confidence is a key component\u2014it will bring customers, investors, and supporters to you.\r\n\r\nYou also need to assess how you handle stress. How determined are you to succeed? Starting a business isn\u2019t always easy. You may have more naysayers than coaches around you. Many businesses fold in the second year despite the fact that the next year might have been the turning point. Most entrepreneurs will tell you that they hit a key milestone of sustainability around the third year of their business. If you can make it to that point, you can keep going, barring any unforeseen problems inside or outside the company. For example, you could be doing great, and then in the fifth year, your largest customer stumbles badly, creating a ripple effect in your company. If you\u2019ve been astute enough to diversify, it should be no problem\u2014if not, you\u2019ll drown, too. Diversification in terms of your customer base is essential.\r\n\r\nIf you\u2019re choosing entrepreneurship as a response to a personal or professional transition, think through your motivations thoroughly. If you\u2019re starting a company because you were laid off from your last job, do you see it as a life-changing opportunity, or are you treading water until a suitable full-time position becomes available? If a personal situation or crisis is motivating you to consider entrepreneurship as a way to balance your obligations, you may want to focus on being a sole proprietor for a while, as growing a company of any size is a very time- and energy-consuming endeavor.[footnote]Sanjyot P. Dunung, Starting Your Business<\/em> (New York: Business Expert Press, 2010), 17\u201319.[\/footnote]<\/span>\r\n
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      Entrepreneurship and the Changing Nature of \u201cCorporate\u201d Life<\/h3>\r\nAs corporate life continues to offer less and less security, more people are considering entrepreneurship. Some leave, taking their former corporate employer as their first customer. For others, it\u2019s an opportunity to enter an entirely new industry. For most of us, we\u2019re hoping to capitalize on our experience and know-how or on a new idea or market to fill a gap in our own industry.\r\n\r\nMany entrepreneurs have actually discovered their vision and opportunity through a former employer. If you\u2019ve spent your professional life in the corporate world, then you can recognize that the early years of an entrepreneurial venture demand very hands-on involvement. It\u2019s not a joke when we say that you should be ready to take out the garbage. Most entrepreneurs have in the early days.\r\n\r\nWhen you make the leap from corporate life to entrepreneurship, it involves major changes. The biggest difference is that entrepreneurs don\u2019t have a buffer between a mistake and total failure. When a large company makes a bad bet on a product or market, the damage gets absorbed, perhaps with a hit to earnings or the stock price. In the early stages of company growth, a bad bet can destroy everything. There are no shock absorbers.\r\n\r\nMany large companies attempt to create the spirit of entrepreneurship inside their organizations. These internal groups, or intrapreneurs<\/em>, may spur more innovation, but this intrapreneurship<\/em> is a far cry from the realities of entrepreneurship. These groups have far more resources than most new ventures. They are protected from feeling the immediate impact of failures and mistakes, and there\u2019s no immediate risk of losing a paycheck.[footnote]Sanjyot P. Dunung, Starting Your Business<\/em> (New York: Business Expert Press, 2010), 19\u201320.[\/footnote]<\/span>\r\n
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      Surveying Your Entrepreneurial Character Traits<\/h3>\r\nThe survey below was developed by analyzing the character traits of entrepreneurs. It measures entrepreneurial readiness\u2014whether one considers himself or herself an entrepreneur.\r\n\r\nRate each of the eleven characteristics using the following scale:\r\n\r\n+2 = I\u2019m very strong in this characteristic.\r\n\r\n+1 = I possess this characteristic.\r\n\r\n0 = I don\u2019t know.\r\n\r\n\u22121 = I have very little of this characteristic.\r\n\r\n\u22122 = I don\u2019t possess this characteristic.\r\n
      \r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
      TRAIT<\/th>\r\nCIRCLE ONE CHOICE IN EACH TRAIT<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
      Creativity<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Calculated<\/em> Risk Taker<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Self-confident<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Dynamic<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Like to Lead Others<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Market Savvy<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Resourceful<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Perseverant\/Determined<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Optimistic<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Knowledgeable<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      Energetic<\/td>\r\n+2<\/td>\r\n+1<\/td>\r\n0<\/td>\r\n\u22121<\/td>\r\n\u22122<\/td>\r\n<\/tr>\r\n
      <\/td>\r\n<\/td>\r\n<\/td>\r\n<\/td>\r\n<\/td>\r\n<\/td>\r\nTOTAL SCORE______<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nDespite all the academic research around the world covering entrepreneurship, no reliable predictive model exists to identify who could be a successful entrepreneur. Having the traits in the chart doesn\u2019t guarantee success, but the higher your total score, the more characteristics you possess that are similar to successful entrepreneurs.[footnote]Adapted from Center for Ethics in Free Enterprise, 21st Century Entrepreneurship<\/em>, Entrepreneurship Course Workbook (Jacksonville: University of North Florida Press, 1997\u201399), chap. 1.[\/footnote]<\/span>\r\n\r\n<\/div>\r\n
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      Key Takeaways<\/h3>\r\n