1

1-1 Introduction• Entrepreneurism refers to the study,

understanding, and practice of business as a process from the perspective of the chief executive officer (CEO).– It a potent area of study for people who seek to

become entrepreneurs. – Other career tracks also require knowledge of

entrepreneurism; one such being that of the intrapreneur.

2

Entrepreneurism

• Entrepreneurial Opportunity-A desirable and timely innovation that creates value for interested buyers or end-users.

• Intrepreneur-Anyone who starts and/or operates a business in order to exploit and entrepreneurial opportunity

3

Intrapreneur

• An intrapreneur is a person who works within a large corporation and who applies the principles of entrepreneurism to facilitate innovation and growth for the large enterprise.

4

Ch. 1 Outline

1. Three Forms of Management

2. Characteristics of Entrepreneurial Management

3. Creative Destruction and Entrepreneurism

4. Entrepreneurial Education

5. The Business Process

5

1-2 Three Forms of Management• In the history of business, three basic forms

of management have evolved: – Entrepreneurial management

• Focused on growth and an exit strategy

– Traditional management• Focused on large company issues and challenges

– Small business management • Focused on stability and maintaining a reliable

customer base

• Overlap occurs among the three forms of management.

6

1-3 Characteristics of Entrepreneurial Management

• The entrepreneur whose business arrives at the first stage of maturity and profitability will continue to seek to grow the business rapidly.

• A company in the second stage of growth is called an “emerging” company.– This stage of growth requires additional financing,

which attracts the attention of venture capitalists.

– During this phase in the life of the business, an entrepreneur is most likely to lose ownership control of the business.

7

1-3 Characteristics of Entrepreneurial Management

(cont.)

• The distinction between small business management and entrepreneurial management is not its size but the differing views of growth and risk acceptance.

8

Entrepreneurs Differ Relative To:

• Innovation and Growth

• Decision Making

• Productivity and Efficiency

• Risk Management

9

1-3a Innovation and Growth• Entrepreneurs do not innovate for the sake of

change. They look for innovations that will fill a need and that customers will pay for.– To be a good business idea:

• An innovation must attract customers who will pay a price that will yield the entrepreneur a satisfactory profit after all associated costs have been deducted.

• The product or service must have large growth possibilities.

– An entrepreneur’s job is to turn an idea into a productive and growing business, that by definition, must manage growth constantly.

10

1-3b Decision Making• Entrepreneurial management attempts to

flatten the organization in order to achieve timely decisions from the highest possible level. – The ideal entrepreneurial management situation

occurs when the CEO is directly in touch with the level of management that has contact with the customer.

11

1-3c Productivity and Efficiency• Entrepreneurial companies are usually not

efficient because of the constant changes they incur. – However, they are often productive because of the

technology they employ or because of the work ethic they follow.

– Productivity in the entrepreneurial company is usually achieved by unpaid hours as opposed to additional employees.

• Early adopters:– As innovators and business owners concerned with

enabling rapid growth, entrepreneurs are often early adopters of affordable new technologies.

12

1-3d Risk Management• The way that risk is viewed and managed is another

distinguishing factor between traditional management and entrepreneurial management.– The opportunity for an entrepreneur to become wealthy

from taking risks is different from the traditional manager’s.

– Good entrepreneurs work hard to minimize risk. Still, they usually must take more risks than the traditional CEO could accept.

• Successful entrepreneurs:– Become wealthy based on the ability to establish an

enterprise that creates and sustains value. – Often share their newfound wealth with their key

personnel.

13

Management Methods—Traditional vs. Entrepreneurial

• The size of the organization is one factor that must be considered in the selection of a management method.

• Flexibility is the next most obvious factor that distinguishes traditional and entrepreneurial management methods.– Large organizations tend to adopt structures that are

designed to be stable over time– Change in large organizations is therefore usually

difficult to enact and, if done too rapidly, can produce negative consequences.

14

Management Methods—Traditional vs.

Entrepreneurial (cont.)• Entrepreneurial organizations, in contrast,

normally start with very little structure and are more likely to survive if they are able to change structure rapidly as they grow.

• Perhaps the starkest contrast between the entrepreneurial and traditional management methods lies in the focus and emphasis of the CEO.

15

1-5 Entrepreneurial Education • Most entrepreneurship scholars are convinced that

no single set of traits or characteristics are common to entrepreneurs because:– Knowledge of the skills associated with successful

entrepreneurs will increase an individual’s chances of becoming a successful entrepreneur.

– There will always be persons with a “natural” ability in entrepreneurship.• The natural entrepreneur has a built-in advantage.

• Training in the skills of entrepreneurship rarely offsets the advantage.

16

1-5 Entrepreneurial Education• Until recently, entrepreneurship was widely

believed to result from a unique set of character traits. – The teaching of entrepreneurism must focus on

teaching: • Entrepreneurship• Personal characteristics• Business process from the CEO’s viewpoint, if it is to be

effective

– An entrepreneur who does not have a business plan runs unacceptable risks and is very unlikely to succeed in raising capital.

– Many educators are under the impression that entrepreneurship cannot be taught.

17

1-6 The Business Process • The business process has three basic elements—

revenue, cost and capital.• The entrepreneur must have knowledge of each

element and of the way in which they interact with one another.

• The most important formula of business is: – Revenue – Cost = Profit

• Profit is the fundamental objective of businesses in a free enterprise system.

• The formula does not include capital, although capital is one of the three basic elements of the business process.

18

1-6 The Business Process (cont.)• Entrepreneurs must become familiar with

both the operations and capital requirements of their business.

• The challenge to business educators is to develop an entrepreneurial management education that mirrors the quality and academic rigor found in traditional management education.