MGT 6500 The Entrepreneurial Challenge

1. MGT 6500The Entrepreneurial Challenge Mark T. Schenkel, Ph.D. Assistant Professor in Entrepreneurship

2. Getting Acquainted • Introductions • Your initial thoughts about the course? • Your course goals & objectives?

3. Learning Objectives for Term • Understanding Opportunities • Entrepreneurial Process • Entrepreneurial Strategies • Entrepreneurial Finance • Business Planning • Ethics and values • Growth Strategy & Management • Entrepreneurship in Larger Organizations

4. Contact Information • Office: BMH 436 • Office Phone: 460-5474 • e-mail: schenkelm@mail.belmont.edu

5. Course Requirements Attendance Required: see syllabus for details Contribution Critical to meeting learning objectives Text Integrated into discussions & exercises Integrated into your papers

6. Course Requirements Case Analyses Individual: case memos Group: teach case Major Class Project Entrepreneurial Venture Analysis

7. ENTREPRENEURSHIP What is it? Why does it matter?

8. Entrepreneurship • What is it? Some examples . . . • McDonald’s (New Venture / Franchising) • Polaroid (Technology) • FedEx (Business model) • Sam Adams (Emerging segment in “mature” industry)

9. Entrepreneurship: What is it NOT? • Some myths . . . • Entrepreneurs have more freedom in life (i.e., “I won’t have anyone looking over my shoulder”) • Money is the main reason to be an entrepreneur • Entrepreneurs have the ability to control things • Going public with my company some day will be an easy way to make a lot of money. • Entrepreneurs are gamblers. • Entrepreneurs don’t have to worry about numbers. • All you need is money to be an entrepreneur.

10. Defining Entrepreneurship “Entrepreneurship is no longer a job title. It is the state of mind of people who want to change the future.” – Guy Kawasaki “Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach[emphasis added], and leadership balanced” (Timmons, 1999: 27). Strategic entrepreneurship involves “. . . the integration of entrepreneurial (i.e., opportunity-seeking actions) and strategic (i.e., advantage-seeking actions) perspectives to design and implement entrepreneurial strategies that create wealth.” (Hitt et. al, 2002)

11. The Entrepreneurial Process (Timmons, 2000) Communication Opportunity Resources Business Plan Fits and Gaps Ambiguity Exogenous Forces Creativity Leadership Team Uncertainty Capital Market Forces Founder

12. Key concepts • Opportunity • Where knowledge, skills, abilities and motivations meet favorable market characteristics • Risk • Absolute . . . “sinking the boat” • Relative . . . “missing the boat” • Resources & Capability • Process, not person: Balance is key . . .

13. Entrepreneurship • Why does it matter?

14. What History Tells Us . . . Entrepreneurship as a means of hope for prosperity and an increase in living standard • The last great period when entrepreneurs transformed the American economy was in the late 1800’s • In fact, most of the 1997 Fortune 200 were already among the largest corporations in 1917 • 197 of the 200 largest companies in America were started by entrepreneurs • Many of these entrepreneurs were first generation Americans

15. The Early 1900s Reflected a Free Market Approach Market Forces Government

16. What History Tells Us . . . Mid 1940s – Mid 1970s • Rise of mass production • Conglomerate Integration • Rise of corporate economy and corporate society • Industrial/Governmental alliance

17. Late 1900s Reflect an Increasingly Activist Approach Government Market Forces

18. Mid 1970s – Mid 1990s • Period of economic transition • Stagnation and decline • Crisis of confidence • Change in focus emerged in business education • My experience in mid 1980s • My experience in the 1990s

19. Demarcation Point: The Decline of “Brontosaurous Capitalism” • The large corporations formed in the last great entrepreneurial era in America are no longer creating new jobs in significant numbers • Total employment by the Fortune 500 companies has dropped from 20% of US workforce in 1980, to about 7% in the late 1990s (Carlsson, 1992 and 1999) • Fortune 500 actually lost over 5 million jobs during the past 20 years

20. Emergence of the New Entrepreneurial Economy • 23 million small business today in US economy • Make up 50% of GDP • New business formation has grown from about 200,000 per year in mid 1900’s to over 3.5 million per year today • Survival rates are now over 50%

21. Entrepreneurship and Employment • Over 50% of workforce now is employed in small businesses • 45% of total payroll comes from small businesses • 99% of employers are small businesses • Entrepreneurs and small business owners are responsible for 77% of new jobs created in past twenty years

22. Entrepreneurship and Innovation • Small businesses create 67% of all new innovations in the US • 95% of all radical innovations over the past 60 years have come from small businesses • Create 14 times the number of patents per employee than large patenting firms

23. Entrepreneurship in America Two demographic groups are most active in this economic transition: • Baby Boomers (Entre-Boomers) • Entrepreneurial Generation

24. The Entrepreneurial Generation • They are independent thinkers • They embrace change – and they view entrepreneurship as a career path that will allow them to use the changes that are occurring in our current world to their advantage • They are those born between 1977 and 2002 • 50% of today’s college students have business ownership as a primary career goal • They are more financially savvy – 37% of today’s college students already thinking and planning for retirement.

25. The Entrepreneurial Generation • Work is important • They seek high levels of achievement 40-50% of our students arrive with profitable businesses already operating. • They want their work to make a difference and have meaning. • But, they do not want it to become all consuming –they seek the ability to create balance through business ownership

26. An E-generation Thought . . . “My generation is really focused on keeping family first, even before career. Some say that this is because we watched so many baby boomers screw this whole family thing up. My take on it is that because the baby boomers sometimes grew up wanting, they determined in their minds that their families would want for nothing. Unfortunately, my generation has all they want, but grew up with workaholic parents who were absent in their lives. I believe we're searching to find that balance between family and career.”

27. The Entrepreneurial Generation • They do not trust large institutions – be it corporations or government • They are politically independent, but leaning toward a more libertarian philosophy • They are concerned about our culture, our society and our economy – and they view entrepreneurship as a way to make things better

28. A Third Approach . . . • Favored by many in the entrepreneurial generation • Recognizes that markets are morally neutral • Without a sense of responsibility, markets can alienate society • Culture can provide a moral framework

29. Values-based Approach Culture Market Forces Government

30. Why study entrepreneurship? • Entrepreneurial activity is now the driving force (e.g., “hyper-competition) of the US and World economy (Bettis & Hitt, 1995; Friedman, 2005) • Even if you do not want to be a business owner, increasingly entrepreneurs are becoming…. • your customers • your competitors • your employers

31. OK, But Can Entrepreneurship Actually Be Taught? • Research suggests learning is key element of the process . . . • Opportunity identification is positively associated with general and specific knowledge • Success rates increase to 80-90% with education and training • Success rate is positively associated with start up experience over time

32. The Entrepreneurial Process Entrepreneurship is a way of thinking, reasoning and acting that is opportunity obsessed, holistic in approach[emphasis added], and leadership balanced” (Timmons, 1999: 27).

33. Defining Entrepreneurship “ Strategic entrepreneurship involves “. . . the integration of entrepreneurial (i.e., opportunity-seeking actions) and strategic (i.e., advantage-seeking actions) perspectives to design and implement entrepreneurial strategies that create wealth.” (Hitt et. al, 2002)

34. The Entrepreneurial Process (Timmons, 2000) Communication Opportunity Resources Business Plan Fits and Gaps Ambiguity Exogenous Forces Creativity Leadership Team Uncertainty Capital Market Forces Founder

35. Courage: Risk and the Dimensions of Work Life Cycle of a Business Venture

36. Pre-launch: Opportunity Identification • Does the Idea = an Opportunity? • Market • Margin • Mission (session 1) • The Right Team? • The Necessary Resources?

37. The Start-up Process • Filling the Gaps • The Business Plan • Executive Summary • Market Analysis and Marketing Plan • Operating Plan and Team • Financial Plan

38. Growing the Business • CASH FLOW MANAGEMENT • Building a Culture • Marketing • Staffing • Building Management & Administrative Systems

39. Exit or Succession?

40. Course Theme: Strategic Entrepreneurship • Why is there a need to study it? • There are many forms of “entrepreneurial strategy,” yet each is achieved through a common means of acquiring and applying resources to create value by capitalizing on “personal theory” about the true value of a resource bundle. Goals are to understand the primary interface of creation-performance and sustainability-performance.

41. Course Theme: Strategic Entrepreneurship • Helps us make “good” or “better” decisions? • Highlights role of operational effectiveness as “necessary but not sufficient” for assessing and exploiting opportunity (Porter, 1985) • ***Avoid the seductiveness*** • Focuses us on “unique activities,” and “strategic intent” (Prahalad & Hamel, 1995) • Highlights the need to make tradeoffs to achieve sustainability (Barney, 1991) • Emphasizes the importance of activity “fit” over any one activity, or subset of activities