Quiz 1 Content Slides

1. Quiz 1 Content Slides Foundations of Entrepreneurship January 29, 2013

2. Entrepreneurial opportunities Attractive, timely, durable, provide value

3. Defined • Situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at a price that is greater than their cost of production (Casson, 1982) • An opportunity that is attractive, durable, timely, and grounded in a product or service that delivers value to a customer (Armstrong)

4. Run a prison! • Timely? • Durable? • Attractive? • Grounded in a product or service that delivers value to a customer?

5. Pet rocks! • Timely? • Durable? • Attractive? • Grounded in a product or service that delivers value to a customer?

6. Type writer repair! • Timely? • Durable? • Attractive? • Grounded in a product or service that delivers value to a customer?

7. “Handheld electronic device” • Timely? • Durable? • Attractive? • Grounded in a product or service that delivers value to a customer? Apple Newton Message Pad, 1993-1998

8. Apple Newton’s Message Pad

9. Newton MessagePad • Newton MessagePad, a tablet-PDA hybrid with handwriting recognition. • There was nothing else like it, but its ungainly size, , and hard-to-read screen relegated it to technology-cult status. • But its innovations lived on, with its handwriting recognition still used in the Mac OS X's Ink control panel that appears when a pen tablet is connected and that helped form the gesture technology used in the iPhone. • The Newton also inspired 1996's Palm Pilot, which used many of the Newton's ideas in a size that made it easy to carry around.

10. Takeaways • You must meet all criteria (attractive, timely, durable, provides value) to ensure quality of opportunity • Experiment, prototype, and protect intellectual property (see Apple Newton example) • Prepare for imitators – what is unique about your offering?

11. The institutional context of entrepreneurship

12. Entrepreneurship Defined: Entrepreneur: someone who perceives an opportunity and builds an organization to pursue that opportunity. Entrepreneurship involves all the functions, activities, and actions associated with perceiving opportunities and creating organizations to pursue them. These include: Market and Customer Research Service and Product Innovation Team Building Finding & Managing Resources Leadership Etc…

14. Basic requirements • Institutions • Infrastructure • Macroeconomic stability • Health and primary education

15. Efficiency enhancers • Higher education and training • Goods market efficiency • Labor market efficiency • Financial market sophistication • Technological readiness • Market size

16. Innovation and entrepreneurship • Entrepreneurial financing • Government policy • Government entrepreneurship programs • Entrepreneurship education • R&D transfer • Market openness • Physical infrastructure for entrepreneurship • Commercial, legal infrastructure… • Social and cultural norms

17. Entrepreneurship profile • Attitudes • Perceived opportunities and capabilities • Fear of failure • Social status of entrepreneurship • Activity • Opportunity- / necessity-driven • Early stage, established, exit • Aspirations • Growth, innovations, international orientation

18. Personal Attributes Environmental Factors Factors Influencing theDecision to Start a Company • Local, Regional, or National attitudes towards entrepreneurship • Social and cultural pressures for or against risk taking and entrepreneurship • Access to entrepreneurial role models • Responsibilities to family and community Higher Internal Locus of Control Desire for Financial Success Desire to Achieve Self-Realization Desire for Recognition Joy of Innovation Risk Tolerance Remember: No single type of person is best suited for entrepreneurship! Entrepreneurs come from all walks of life, backgrounds, etc!

19. Entrepreneurship process Compare to Moore’s Model:

21. The Timmons Model for Entrepreneurial Success:

22. The Tenets of the Timmons Model: 1) The Opportunity Is there a clear customer need for the proposed product or service? Is the timing right: is the team ready, is the market ready? Ideas are a dime a dozen – it’s the combination of the factors above and the execution of the business plan that makes an idea an opportunity. 2) The Lead Entrepreneur and Management Team Experience within the proposed industry can be essential to success. Investors and other backers prefer to see a track record of driving growth and profits. An ‘A’ team with a ‘B’ idea is almost always better than the opposite. 3) The Resources Resources include capital, technology, equipment, and most importantly – people. The entrepreneur’s mantra is one of Low Overhead, High Productivity, and Controlling but not Owning resources. The best entrepreneurs are incredibly creative at finding ways to get things done inexpensively and effectively. You can always find ways to do things faster, cheaper, or better!

24. Decision making, emotions, and entrepreneurship Ivey 908M58

25. Key questions • What’s new about emotional intelligence in our understanding of human behavior? • Is EI really as “touchy-feely” as it’s been portrayed in popular media? • How can you use dimensions of EI? • Why have some managers / individuals persisted in discounting emotional intelligence?

26. Emotions and feelings… • Reduce rationality • Contribute to poor decision making • Weak • Incompetent • Inappropriate

27. Decision making > intellect alone • Feelings play a fundamental role in the way we make decisions • Lack of emotion reduces our ability to make good decisions • People with damage in the “emotion” neighborhood of their brains tend to make inappropriate or bad decisions

28. Logic + feelings = good decisions Feelings help us to: • Direct our attention to highly important things • Make choices between competing options • Be flexible, maintain options, and widen our points of view • Be creative and aware of opportunities that surround us

29. Positive v. negative feelings • Positive feelings associated with increased creativity, integrative thinking, inductive reasoning • Negative feelings associated with greater attention to detail, detection of errors, problem solving and detailed information processing

30. Moods and emotions • Are expressions of feelings or “affect” • Moods are low-level, non-specific feeling that we may not even be conscious of • Emotions tend to be sharp, short-lived specific responses to specific events • Moods and emotions are differentiated by their level of energy

31. Describing moods and emotions

32. How moods affect our decisions • We tend to store information that is consistent with our mood • We tend to recall information that is consistent with our mood • When decision making we tend to selectively remember information that does not provide a balanced assessment of the situation

33. Positive = good, negative = bad, right? • Good moods increase susceptibility to decision making biases like planning fallacy, optimistic bias, greater belief in likelihood of positive outcomes, and lower likelihood of negative outcomes • Negative emotions can refocus a leader’s attention, alert us to focus on issues that we’d otherwise ignore (attention to detail)

34. Emotional intelligence • “The ability to effectively join emotions and reasoning, using emotions to facilitate reasoning and reasoning intelligently about emotions” • EI provides insights into organizational behavior • EI can mitigate decision making biases caused by emotions

35. Importance of EI • EI is twice as important as both technical skills and IQ in terms of performance • EI is more important at higher levels within an organization, accounting for 90% of difference between average and high performers • Teams with critical mass of EI significantly outperform teams without EI critical mass

36. The emotionally intelligent entrepreneur Self-awareness Self-regulation EI Entrepreneur Motivation Empathy Social skill

37. Goleman’s model of emotional intelligence

38. Goleman’s model of emotional intelligence

39. Goleman’s model of emotional intelligence

40. Goleman’s model of emotional intelligence

41. Goleman’s model of emotional intelligence

42. Hallmarks of EI entrepreneur

43. How entrepreneurs think Foundations of Entrepreneurship

44. How entrepreneurs think • Causal processes – a process that starts with a desired outcome and focuses on the means to generate the outcome • Effectuation processes - a process that starts with what one has (who they are; what they know; and whom they know) and selects among possible outcomes

45. Example – The chef in the kitchen Causation • Chef picks out menu • Chef identifies ingredients, shops for them, and cooks meals • Customers presumably will pay to eat what’s on menu Effectuation • Chef looks through cupboard to see what’s there • Imagines possible menus based on ingredients and utensils • Prepares the meal

46. 5 principles of effectuation

47. 5 principles of effectuation • Patchwork quilt: create something new with what you have on hand • Affordable loss: commit in advance to what you’re willing to lose instead of calculating expected returns • Bird-in-hand: negotiate with stakeholders to commit resources to project • Lemonade: use surprises to create benefits instead of problems • Pilot-in-the-plane: use people as prime driver of opportunity, not resources external to individual

48. These 5 principles… • Put entrepreneurs in control of their new ventures (instead of pre-programmed plans) to shape environment and exploit unexpected events • Help entrepreneurs think in an environment of high uncertainty – environments are complex, dynamic, and characterized by rapid, substantial, and discontinuous change

49. Entrepreneurial mindset • The ability to rapidly sense, act, and mobilize, even under highly uncertain conditions • Individuals attempt to (1) make sense of opportunities in the context of constantly changing goals, (2) constantly questions one’s “dominant logic,” and (3) revisit deceptively simple questions about what we believe to be true about markets and the firm • Requires “cognitive adaptability”…

50. Cognitive adaptability • “The extent to which entrepreneurs are dynamic, flexible, self-regulating, and engaged in the process of generating multiple decision frameworks focused on sensing and processing changes in their environments and acting on them.” • More simply: “an individual’s ability to reflect upon, understand, and control one’s thinking and learning”* • Requires us to “think about our thinking” to reflect, be strategic, plan, have a plan in mind, know what to do, and to self-monitor * Schraw & Dennison, 1994