Technological Innovation

Management And
Entrepreneurship
Course Code - 21EC61

Module 4

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 Entrepreneurship

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 Introduction
• Entrepreneur is a person who creates an enterprise. The process of creation
is called as entrepreneurship. The word "entrepreneur" has been derived
from the French verb enterprendre, which means “to undertake”. This
refers to those who "undertook" the risk of new enterprises.
• Entrepreneurship can be defined as a process of action an entrepreneur
undertakes to establish his enterprise. It creates a bridge between
innovation & the marketplace.
• Some of the ways in which entrepreneurs can participate in the
development of an economy.
Contribution to GNP & per capita income – It creates economic stability
by introducing new products & services by effective resource mobilization
thus increasing gross national product as well as per capita income of
people.
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Employment generation– They play an effective role in reducing the
problems of unemployment.
Balanced regional development – The development of enterprises in less
developed regions promotes balanced regional development. It stimulates
distribution of wealth & income to more individuals in geographical areas.
Promotion of export & trade – It promotes country’s export trade & earns
foreign exchange. International trade brings country’s economic strength &
techno-economic reliance.
Improvement in the standard of living – They bring wide variety of products
which competes for people to avail for better quality of products/services at
lower cost.
Increased innovation – With the liberalization of the Indian economy the
increased competition in the domestic & international market encourages
entrepreneurs to be more innovative.
Overall development of the economy - They create new technologies,
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products, services that becomes new wave of new industries.
 Evolution of the concept of Entrepreneurship
• Eg. Marco Polo who attempted to establish trade routes from Venice to the
far East.
• Richard Cantillon – An Irish-French economist, developed one of the early
theories of entrepreneurship where he argued that entrepreneurs made
conscious decisions about resource allocations. He divided society into
fixed income earners & non-fixed income earners.
• Adam Smith – He stated that an entrepreneur has all the knowledge
necessary. He also introduced the concept of liberal & entrepreneurial
capitalism.
• Jean-Baptiste Say – He believed that entrepreneurs behaved with
exceptional insight to fulfil society’s needs through the process of taking
risk.
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• Francis Walker – He defined entrepreneur as one who is endowed with
more than average capacity to organize & coordinate factors of
production like land, labour, capital, enterprise. He is the pioneer, leader
& captain of the firm thus the profit depends on his efficiency & superior
talent.
• Joseph Schumpeter – He extended in the concept of entrepreneurship the
importance of innovation. He viewed entrepreneur as an innovator
playing the role of a dynamic businessman often adding material growth
to economic development.

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 Entrepreneurship today
• Who is an Entrepreneur ?
• How do I become an Entrepreneur ?
Step 1: Generating business ideas & identifying business opportunities –
evaluating business idea & opportunities to create new product/services
1. Observing trends – social & economic trends, technological
developments, political & regulatory changes often crate opportunities
2. Finding gaps in the market – A lack of a product or service in the market is
a disguised opportunity for entrepreneurs
Step 2: Conducting a feasibility analysis – It is the process of determining
the validity of a business idea. The important facets are market analysis,
technical analysis, financial analysis, economic analysis, ecological analysis
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Step 3: Making a business plan – It is a written document typically 20-30
pages which describes what a venture intends to accomplish & how it
plans to achieve it goals. It serves a dual purpose both inside & outside
the firm.
Step 4: Arranging funds – The two most common sources of funding for a
venture are equity & debt financing. Equity financing means exchanging
ownership in a firm for funding like venture capital, private equity,
personal savings, investments from family & friends. In debt financing
money is borrowed to run a business like bank loans, financial
institutions.
Step 5: Setting up an enterprise & building a venture team – Building a
new venture team who will transform an idea of a venture to a fully
functioning firm.
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1. Smooth management of enterprise – The different facets of managing
an enterprise comprises managing, finance, strategy, markets,
operations, technology, human resource.
2. Nurturing growth – The entrepreneur should look at growing the
business organically or inorganically. Organic growth is achieved
through internally driven strategies that rely on efforts generated within
the firm itself. Inorganic growth is the result of external growth
strategies that rely on establishing relationships with third parties.
3. Exit strategies – It involves planning for the termination of one’s
ownership of a company.

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• Advantages of being an Entrepreneur
 Is an independent person who makes his/her own decisions & acts on
them.
Has enough scope for innovation
Often has the opportunity of realizing dreams & achieving excellence
while simultaneously contributing to the welfare of the society.
Has immense job satisfaction
Can bring about the socio-economic transformation of a region by
generating employment for others & creating wealth.
Can make significant contribution to the development of the country.

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Types of Entrepreneurs
Entrepreneurs may be classified on the basis of functional characteristics,
personality types or schools of thought.
Functional characteristics
• Innovative Entrepreneur – Innovative in their approach to business &
introduce new products, production methods, discover new markets, new
forms of organization in their enterprise.
• Imitative or adoptive Entrepreneur – They imitate products, production
methods, new forms of organization in their enterprise.
• Fabian Entrepreneur – They are not proactive in nature & do not respond
very much to changes in the environment but change only when there is
a threat to the existence of their enterprise.
• Drone Entrepreneur - They are conservative & complacent in nature &
like to maintain the status quo. They may incur losses & have to close
down their enterprise.
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Personality types or schools of thought
• School of entrepreneurship (focusing on intuitive ability, vigour, good
instincts)
• Psychological characteristics school of entrepreneurship
• Classical school of entrepreneurship (focusing on innovative streak in
entrepreneurs)
• Management school of entrepreneurship (focusing on the idea of creating
entrepreneurs by training them to be good managers)
• Leadership school of entrepreneurship (focusing on leadership qualities
of entrepreneurs)
• Intrapreneurship school of entrepreneurship (focusing on developing
entrepreneurial traits in managers in an organization)
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Intrapreneurship
• Cooperate Entrepreneurship or Intrapreneurship is the process by which
teams within an established company conceive, foster, launch, manage
new business that is distinct.
• Intrapreneurs are employees within an organization who use their
entrepreneurial spirit to introduce new
products/processes/methods/forms within the cooperation.
• Intrapreneurship describes the innovation that occurs inside established
companies through the efforts of creative employees.
• It is a top down approach, wherein the top management plays the role of
a facilitator & empowers employees to effectively utilize resources & try
out new ideas.

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Difference between Manager & an
Entrepreneur
• Entrepreneur starts a venture & is the owner of the enterprise whereas
manager is an employee in an enterprise.
• Entrepreneur starts an enterprise & creates wealth & generates profit.
Manager receives a salary for the services rendered to the enterprise.
• An entrepreneur is an employer whereas manager is an employee.
• An entrepreneur is a job provider whereas manager is a job seeker.
• Entrepreneur assumes more risk & uncertainty than manager does.
• Entrepreneur take mainly strategic decisions whereas managers take
operational decisions.

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 Entrepreneurial competencies
• Creativity & innovation – Creativity is the ability to develop new ideas
& to discover new ways of looking at problems & opportunities.
Innovation is the application of creative solutions to problems or
opportunities to enhance or to enrich people’s lives or doing new things.
• Leadership & team building – This should be demonstrated in
networking & problem-solving ability, generating resources, building
teams.
• Opportunity seeking & initiative – Entrepreneurs can pursue
opportunities in any industry at any time.
• Risk-taking & decision-making ability – An entrepreneur’s risk-taking
does not depend on luck but on sheer effort & hard work
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• Tolerance of ambiguity & uncertainty – It is important because the challenges
& potential for success associated with business start-ups are unpredictable.
• Motivation to excel – They are motivated primarily by the desire to create
something new, desire for autonomy, wealth & financial independence,
achievement of personal doing etc. Within the research domain of
characterizing an entrepreneur concept of need for achievement has gained
attention.
• Problem solving – A formal problem solving model helps entrepreneurs solve
problem in a logical manner
Define the problem
Gather information
Identify various solutions

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Evaluate alternatives & select the best option
Take action
Evaluate the action taken
• Goal orientation – Process of setting both long-term & short-term
objectives for successful performance.
• Self-efficiency & adaptability – Self-efficacy is the belief in one’s ability
to muster & implement personal resources, skills, competencies to attain
certain level of achievement. Successful entrepreneurs are adaptive &
resilient.
• Internal locus of control – Locus of control refers to how a person
perceives the causes of events in one’s life. The attitude affects
motivation, expectations, self-esteem, risk-taking behavior.
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• Persistence, persuasion & networking – Entrepreneurs display
persistence, & are not discouraged into quitting by difficulties &
problems that come up in business. Networking is not an option but a
pre-requisite for survival in the world of intense competition.
* SMART (Specific Measurable Achievable Realistic Timely) is an
acronym for goal setting technique among entrepreneur because of its
simplicity & effectiveness.

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 Capacity Building for Entrepreneurs
• Create the right eco-system – There is a need to scale up & enrich the
ecosystem. The various elements for commercialization are venture
capitalists, institutional support system, govt. schemes, incubators.
• Build skills – The five most important skills needed are personal skills,
communication skills, negotiation skills, leadership skills & sales skills.
• Provide access to capital – Determining capital requirements, crafting
financial & fund-raising strategies, managing financial process are
critical to a new venture’s success.
• Enable networking & exchange – A network serves to provide a lot of
support to the entrepreneurial enterprise in times of crisis.

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 Identification of Business
Opportunities

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 Introduction
• A business opportunity may be defined as a set of favourable
circumstances in which an entrepreneur can exploit a new business idea
that has the potential to generate profits.
• Fundamental features are:
The create or add significant value to the customer
They solve a significant problem by removing pain points or meeting a
significant want or need for which someone is willing to pay a premium
They have a robust market, margin, money making characteristics that will
allow the entrepreneur to estimate & communicate sustainable value to
potential stakeholders
They are a good fit with the founders & management at the time &
marketplace along with an attractive risk-reward balance
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What defines a good business opportunity ?
• An idea is a thought or a concept that comes into existence in the mind as a
product of mental activity. The sources of business ideas:
A resolved problem faced by an actual or potential entrepreneur
An unmet customer need discovered by an actual or potential entrepreneur
at a place of employment
Changes in business environment
• A 5 step framework to screen ideas for a good business opportunity. They
are characterized by:
Urgency of the market need – The business envision a product or service
that satisfies a market need or need of the customer
Adequate market size – A business usually targets a particular market
segment
01-Jul-2024 after assessing their demographic, geographical & lifestyle factors
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Sound business model – It includes various core aspects of business
such as purpose, strategies, infrastructure, organizational structures,
marketing programmes, operational processes & policies.
Potential brand value – The product/service being offered must be
differentiated from those being offered by competitors to maintain a
competitive advantage in the market
An able management team – The ability & passion of team members
to use a business opportunity is important to success. The team should
have contacts among suppliers, competitors & customers

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When is an Idea an opportunity?
• A business opportunity is a set of favourable circumstances that
creates a need for a new product or service.
• The essential qualities needed:
 attractiveness
Timeliness
Durability
Quality of being anchored in a product or service that creates or adds
value for its buyer or end user

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How to generate business ideas ?
• Brainstorming – Technique used to quickly generate a large number of ideas
& solutions to problems. Brainstorming works individually or group of 8-12
people to share ideas with assurance that there is no right or wrong answer.
• Survey method – To collect information by direct observation of a
phenomenon or systematic gathering of data from a set of people. Surveys
generate new products, services & business ideas because they ask specific
questions & get specific answers. It can be general, special, regular, ad hoc,
preliminary, final, census & sample surveys.
• Reverse brainstorming – Similar to brainstorming with the exception that
criticism is allowed also called (negative brainstorming).
• The Gordon method – This is a creative technique to develop new ideas.
Collective discussion addresses every aspect of the planned product in an
uninhibited
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What leads to the creation of opportunities ?
• Technological changes – It leads to entrepreneurial opportunities because
they make it possible for people to do things in new & more productive
ways. It can take in 5 forms of business opportunity new products &
services, methods of production, markets, ways of organizing, raw materials.
• Political & regulatory changes - It leads to business opportunities by paving
the way for new, more productive use of resources or a redistribution of
wealth from one person to another. To start firms that help other firms &
community to comply with requirements.
• Social & demographic changes – It alters people’s preferences or demand for
products & services & consequently make it possible to generate new ideas
to meet new demands.
• Economic changes – Economic forces affect business opportunities by
determining
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who has money to spend. 26
How to identify business opportunity ?
• Observing trends – Entrepreneurs can identify business opportunities
by carefully observing trends. The important trends to follow are
economic, social, technological, political.
• Solving a problem – To identify business opportunities is to recognize
& solve a problem that customers are facing today i.e. every problem
is a disguised opportunity.
• Finding gaps in the marketplace – To find gaps between what is
needed by the customer & what is actually provided to the customer
which would help to develop new products & improve existing ones.

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 Mobility of Entrepreneurs
• Political conditions
• Education
• Experience
• Size of enterprise
• Availability of facilities
Geographical mobility of Entrepreneurs – Geographical or locational
mobility refers to the movement of entrepreneurs from one location to other
locations in search of better business opportunities. The factors responsible
are availability of raw material, new & emerging markets, skilled labour,
govt. incentives, better infrastructural facilities, access to resources.

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There are 3 stages – entrepreneur sets up a venture at one place & sticks to
one place of working, entrepreneurs start moving out within a limited area
of business of business development, as business expands there is an
increase in the entrepreneur’s resources & network size with greater degree
of mobility.
Occupational Mobility – it denotes movement or change in occupation. The
emerging class of entrepreneurs is characterized by better education &
technical knowledge. Liberalization, privatization & globalization of the
Indian economy have brought about drastic changes in the occupation of
people. The major factors influencing are one’s personal preference,
motivation, opportunities & skill set.
• Intergenerational occupational movement
• Intragenerational occupational movement
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 Business opportunities in India
• India is a well established democratic country with a free & fair judicial
system.
• It has well established banking system consisting of public & private
banks & other financial institutions.
• It has huge middle-class with enhanced purchasing power with high
growth economy, that creates potential for a huge growth in
manufacturing, services, retail sector.
• It has vibrant trade links with South Asian Association for Regional
Cooperation (SAARC) nations such as Sri Lanka, Pakistan, Nepal,
Bhutan, Bangladesh, Maldives.

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• It has a competitive advantage in the global market with the availability
of a huge pool of cheaper labour & knowledgeable workers to enhance
industry productivity.
• Economic reforms & policy changes have created an investment
friendly environment.
• The capital markets in India are one of the fastest-growing markets in
the world, attracting huge foreign investments.
• It is self sufficient in agriculture & rich in natural resources.
• It is a part of the BRICS group of nations comprising Brazil, Russia,
China, South Africa & has vibrant trade links with these nations.

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 Models for opportunity evaluation
1. The RAMP Model – It consists of 4 factors return, advantage, market
& potential
• Return on Investment
 Will your revenues be higher than your expenses? Is the business
profitable?
How much time will the business take to break even?
How much investment is needed to start the business? How are you
going to raise this investment?
What is the exit strategy?

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• Advantages
What are the barriers to entry?
What will be your distribution channel for selling your product?
Do you have a proprietary advantage such as patent or exclusive license
on what you will be selling?
What is the cost structure taking into account things like suppliers &
sourcing?
• Market
Is there a value proposition? What is the need you will fill or problem
you will solve?
How do you define the targeted market? Are you selling to consumers
or business? What are the demographic features of your targeted
market?
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What percent of the market do you believe you could gain? How fast is
the market for your product growing?
How is the competition? What will be the price of your product?
• Potential
Does the team have the potential to successfully launch & sustain the
business? What will be the nature of the business entity?
Is the business concept compatible with the business mission of the
team?
What is the risk involved? What is the reward for the founders &
investors if the company succeeds?
How will you differentiate your company from what is already out
there?
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2. Mullin’s seven-domain framework
Successful entrepreneurship comprises of 3 critical elements- market, industry & the key
people that make up the entrepreneurial team.
• Market domain-macro level
• Market domain-micro level
• Industry domain-macro level
• Industry domain-micro level
• Team domain-aspirations
• Team domain-capability of execution
• Team domain-connections or networks
Are the market & industry attractive?
Does the opportunity offer compelling customer benefits as well as sustainable
advantage over other solutions to the customer’s needs?
Can the team deliver the results they seek & promise to others?
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