ENT 422 The Role of Entrepreneurship in Value Creation in Large and Small Enterprises Lecture 2

1. ENT 422 The Role of Entrepreneurship in Value Creation in Large and Small Enterprises Lecture 2

2. Highlights of September 19 • Entrepreneurship consists of five phases but our focus will be on the first – determining if an idea can become an opportunity. • The remaining phases will be discussed during the course. • To help evaluate ideas we will use the “Idea Generation Guide”, the “Quickscreen” exercise and the “Venture Opportunity Screening” exercises (VOSE) • Entrepreneurship has its genesis in older disciplines: law, economics social sciences, finance, etc. • After this course students will be prepared for other entrepreneurship offerings. • Teams are critical in developing businesses. We ask students to form teams of two or three

3. Corporate Venturing Block and Macmillan Chapter I Corporate Venturing – What Is It? Why Do It?

4. What Is It? • A New Venture Begun Internally • Involves Risk • For the corporation • For the individuals involved and their careers

5. Why Do It? Corporations start new businesses because – • The base business is maturing • To meet strategic goals • New ideas from employees • Pressure for revenue/profit growth • Attempt to commercialize IP

6. Track Record • Varies From Excellent to Disastrous • Successful Ventures Are – • Often more rewarding than acquisitions • Usually profitable in 2 to 3 years • Achieve greater ROI levels than base business • The Key To Success – • Today? • Tomorrow?

7. Track Record(cont.) • The Reasons for Failure – • Inadequacy of management team • Lack or organizational mentor • Inadequate evaluation of the idea • Project is inadequately resourced; forced to play under rules of base business • Career path – uncertain for the team

8. Should All Companies Attempt Venturing? • The Short Answer Is ― Yes! • Key management/mentor support critical. • A significant opportunity for younger employees. • It could be you!!

9. Personal Experiences • Ingersol Products, Division of Borg Warner Corp. Manufacturer of Agricultural Components • Chief engineer had an idea • Motorize the functions of hospital beds • A. T. Kearney asked to evaluate idea • Secondary and primary research was conducted • Conclusion: an “opportunity” existed • Resources were assembled including preparation of a business plan • A new business was launched • After launching typical enhancements were added • It became the largest hospital bed supplier • The chief engineer was handsomely rewarded

10. Personal Experiences (cont.) Sarah Coventry, Intl., manufacturer and marketer of costume jewelry • Used party plan method of selling • Two managers had an idea – Sell Jewelry By Direct Mail – Four Countries – Selected As Test Markets – Germany, France, Italy and Spain – Consultants Hired To Conduct The Study • All countries found fairly equal in terms of – Population – Receptivity to direct mail and catalogue purchasing – Disposable income – Conclusion: an “opportunity” existed – Germany was selected as first among equals • Resources were assembled including a business plan • A new business was launched under the two managers who came up with the idea • It was successful and breakeven reached in 18 months

11. Peter may want to add some personal experiences.

12. Entrepreneurship Baron and Shane Chapter 2: “Uncovering Opportunities” Selected Highlights from the Chapter

13. Major Changes Occurring Causing Opportunities for Entrepreneurs • Technological – makes it possible to do things in new and different ways • Political and regulatory – makes it possible to develop business ideas that are more productive • Social and demographic – changes in preferences provide opportunities for new offerings

14. Established Firms Often Find Difficulty Inventing New Technologies • New technologies may not satisfy present customers • New technology of little use to satisfied customers and may cause them to change suppliers • New firms may have nothing to lose by inventing new technology

15. Three Industry Components Influencing New Venture Success • Knowledge conditions – complexity of information required for success demand conditions – attributes that create desire on the part of purchasers. • Industry life cycles – the stage of an industry influences the success of new ventures. • Industry structure – those industries requiring a lot of capital, heavy advertising, concentration in few companies and high average size bad for startups.

16. Impact of Dominant Design on New Ventures • New firms more successful when adopting their own • When dominant mode present startups must adopt in order to compete

17. Entrepreneurship Baron and Shane Chapter 3: “Cognitive Foundations of Entrepreneurship” Selected Highlights from the Chapter

18. Entrepreneurs And the Illusion of Control • They tend to assume a greater control of events than is realistic. • These include economic conditions, competition customer’s reactions, effects of laws/regulations.

19. Creativity and Prototypes • Prototypes may interfere with creativity: people may tend to regard them as the “final” design or product. • But they can be helpful by providing a framework conveying new information.

20. What Is Creativity? • Defined as creating something new and useful. • Important because it provides knowledge, advances improving quality of life.

21. Three Components of Intelligence First Analytical: Ability to think critically. Second Creative: Ability to formulate ideas and insights in problem solving. Third Practical: Being intelligent in a realistic sense. We encourage reading both chapters for in-depth understanding of the issues

22. Sources of Ideas Hisrich (handout) Chapter 5 “Creativity and the Business Idea” Selected Highlights from the Chapter

23. Sources of New Ideas • Some of the more frequent are – • Consumers – entrepreneurs should consider them both formerly an informally for ideas and needs • Existing products and services – should closely monitor competitive offerings for opportunities • Distribution channels – rich source because of familiarity with market needs • Federal government – patent office files and response to government regulations are good idea sources • Research and development – entrepreneur’s own efforts are the single largest possibility

24. Methods for Generating Ideas Even many sources already mentioned – sometimes difficult to come up with ideas. Some suggestions – • Focus groups – open, in-depth discussions. I’ve often used them successfully • Brainstorming – uninhibited development of ideas • Problem inventory analysis – obtaining ideas by focusing on problems There are other techniques less frequently used which the chapter describes. Read at your leisure.

25. Workshop • Hand in list of team members • Hand in completed student biographical form • Discuss idea generation guide, the Quickscreen exercise and the 12 venture opportunity screening exercises (VOSE) • Readings (handout materials) • Work on selecting two ideas” using the idea generation exercise

26. Assignment for September 28 • Guest Speaker: Jim Doyle, Jr., Executive Director Proventure (Far East) Ltd. Topic: “How We Evaluated Ideas, Selected One And Built a Company” • Lecture: sources of information for evaluating ideas readings: Baron, Chap. 4: “Acquiring Information”, (handout materials); Alreck, Chap. 1: “Initiating a Survey”; Chap. 2: “Planning the Project”; The Market Research Encyclopedia; Business Plan; Competition Resources; Conjoint Analysis; Internet sources including Google; Business Week article, “Get Creative” • Workshop: • – Hand in and discuss the idea generation guide for two ideas • – Work on the application of Quickscreen exercise for two ideas, • deciding on one for further study (due at the next class)