university of sunderland bm205 entrepreneurship for mba students entrepreneurs in society by dr....

University of Sunderland BM205

EntrepreneurshipEntrepreneurship for MBA Studentsfor MBA Students

Entrepreneurs in Society

By Dr. Tarik BRAHIMI

MBA


Introduction

• The fundamental principle of entrepreneurship has not changed: entrepreneurs earn their reward by managing projects and accepting and managing the associated uncertainty. This does not make the entrepreneur a gambler. Far from it

• The best entrepreneurs are not risk takers, although part of their task is to manage risks. Of course no venture is certain to succeed.

• If the entrepreneur manages the risks well, then the risk becomes smaller and smaller

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Introduction

• The entrepreneur takes charge of some project that will deliver valuable benefits and brings it to completion

• The entrepreneur manages uncertainty, overcoming the many unforeseen dangers that face the venture and preserving the interests of stakeholders

• The entrepreneur has some advantage which means that a project in the entrepreneur’s charge will succeed in the face of challenges that would destroy a less well managed and planned venture.

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Entrepreneurs and Wealth

• The ethical entrepreneur creates new wealth, most of which passes to the new enterprise’s workers, suppliers and customers

• The value and benefit received from buying the good or service from an entrepreneur’s venture should exceed its price.

• The entrepreneur’s employees are better off since they are getting a more attractive package of benefits than they were before they took a job with the entrepreneur

• The entrepreneur’s customers are better off, receiving more value for money than before

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The Money Manipulator

• Social entrepreneurs are proven leaders whose approaches and solutions to social problems are helping to better the lives and circumstances of countless underserved or disadvantaged individuals

• Social entrepreneurship is:• * about applying practical, innovative

and sustainable approaches to benefit society in general, with an emphasis on those who are marginalized and poor.

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Social Entrepreneurship

• Social Entrepreneurship is the use of business practices such as business planning, project management, marketing and sales, for advancing social causes

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Business Ethics and Entrepreneurship

• Business Ethics - Ethics, in general, is simply "behaving fairly". However, this is very vague as different people view "fair" differently. – For instance, many people follow the concept that the

business world is a 'dog eat dog' world. This implies that "all is fair" or "do whatever it takes", including destroying your own kind just to win.

– Some believe that it is okay for a salesperson to tell a 'white fib' to make the sale. They believe that such 'white fibs' are not outright 'lying' and are okay as long as the sale is made.

• Others would say that 'a lie is a lie is a lie' and should never, never be told.

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• We all draw our own line as to what is right and what is wrong. Our personal background has a big influence on where we draw this line. Influences of our ethical behavior include but are not limited to:

• Our past experiences, where we grew up, how our parents taught us, etc.

• Our current friendships, reference group, etc. • The business and/or industry we are working

within. • Etc.

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• Especially with the way that we can market 'worldwide', we must be aware of other cultures' ethics. Each culture, whether it is beyond our national boundaries or not, has its own set of ethics (don't forget that individuals within any culture have their parameters of ethics also). The point here is that what maybe be acceptable in one culture may not be acceptable in another. For instance, in some cultures, what we may label as 'bribery' with executives may be found to be the norm. If you are selling to these people and you don't offer some 'extra incentive' you may be 'insulting' them.

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• Let me give you a sales situation in which ethics come in to play. Imagine that you are a professional salesperson. One day you are in the office of a potential customer whom hasn't chosen to purchase from you yet. You have pressure from your boss to "get that customer or else". The customer is called out of her/his office to take care of something urgent. While waiting, you notice a bid or a proposal from a competitor sitting on the desk. This bid offers a lot of specifics that will allow you to under-bid and offer a better bid for the contract. You realize that this information could offer you 'inside' information that could gain your biggest ever sale or contract and, therefore, save your job.

• Would you secretly browse the proposal? • Would you attempt to steal that information? • If not, why not? • If so, would you be able to justify it to yourself and/or your boss? • Would you be able to live with the thought? Could you sleep at night knowing

what you had done. • The real question to the previous scenario is about our own personal ethics.

You see, some would be able to rationalize such behavior and some couldn't. They just would not be able to justify the rewards against the costs their personal values.

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• Here is an interesting statistic that I read once. • 2% to 4% of people are constantly on the lookout for a

chance to steal or cheat. These are the ones who will do so every chance they get.

• 2% to 4% of people would never steal; no matter what the circumstances. These are the most honest in every situation and could never 'rationalize' such behavior.

• 92% to 96% are what they call opportunists. These are put on a spectrum of sorts who could possibly do it if the circumstances were 'right' for them. Circumstances being 'right' may include: – Do the 'rewards' outweigh the potential risks? – What are the risks? – Would I be able to justify my actions in my own heart.

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• It seems dangerous to ground a society on the value of trying to disadvantage others. That is exactly what market liberalism proposes, and the results are predictable. Since the entrepreneur has no other interest other than his own, he will not seek to protect others. When he benefits, he will seek to actively harm others - if he thinks he can get away with that. An endless series of scandals show that entrepreneurs are indeed prepared to injure and kill others for their gain.

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• The sale of contaminated food is probably the most typical example of entrepreneurial behavior. Governments find it necessary to restrain entrepreneurs in the food industry, by regulation, to prevent them from poisoning the population. That in itself ought to say enough about the entrepreneurial mentality. Nevertheless, entrepreneurs continue to evade these regulations. Recent epidemics of animal diseases in Europe, Asia and Middle East illustrate that. Although everyone in the sector is familiar with the risks, there are always some who use contaminated feed, or transport animals illegally, and so spread the disease. The entrepreneur seems incapable of self-regulation - and that is not surprising, since liberal market culture abhors regulation.

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Characteristics of an 'enterprise'

• In practice, all enterprises have certain characteristics which clearly distinguish them from an ethical organization, even when both operate in a market society:

• the enterprise competes for market share with other similar organizations

• it is prepared to damage the interests of its competitors, for instance by reducing their market share

• it sells products at more than cost price • it seeks to ensure its own continued existence, even when that

contradicts ethical goals • it excludes from decision-making persons of good will, who might seek

its dissolution on moral grounds • it does not distinguish on moral criteria, among its customers, or

suppliers, or clients, or in the selection of its personnel

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Entrepreneurs

• The entrepreneur shifts economic resources out of an area and into an area of higher productivity and greater yield.

- Jean Bapiste Say (19th Century Economist)• The function of entrepreneurs is to reform or revolutionize the patterns

of production . . . By exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry and so on.

- Joseph Schumpeter (20th Century Economist)• The entrepreneur always searches for change, responds to it, and

exploits it as an opportunity.

- Peter Drucker (Management Guru)

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Entrepreneurs

Entrepreneurs are innovative,

opportunity-oriented, resourceful,

value-creating change agents.- Dees & Economy (Enterprising Nonprofits)

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Entrepreneur 10 D’s

• Dreamers• Decisiveness• Doers• Determination• Dedication• Devotion• Details• Destiny• Dollars• Distribution

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• Social entrepreneurs play the role of change agents in the social sector, by:– Adopting a mission to create and

sustain social value– Recognizing and relentlessly

pursuing new opportunities to serve that mission

– Engaging in a process of continuous innovation, adaptation, and learning

– Acting boldly without being limited by resources currently in hand

Social entrepreneurs are not content just to give a fish, or teach how to fish. They will not rest until they have revolutionized the fishing industry.

- Bill Drayton (Ashoka)

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Social Entrepreneur Characteristics

• They are constantly looking for new ways to serve their constituencies and to add value to existing services.

• They are willing to take reasonable risk on behalf of the people that their organization serves.

• They understand the difference between needs and wants.• They understand that all resource allocations are really

stewardship investments.• They weigh the social and financial return of each of these

investments.

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• Social entrepreneurship implies blurring of sector boundaries– Nonprofit organization– Social purpose business

ventures– Hybrid organizations

mixing nonprofit and for-profit elements

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Successful Entrepreneurs

• Founders• Focused • Fast• Flexible• Forever Innovating• Flat• Frugal• Friendly• Fun

1st Class Team

Niches, Specialization

Decisions & Implement Quickly

Open Mind, Respond to Change

Tireless Innovators

Few Layers of Management

Overhead Low, Productivity High

To Customers, Suppliers, Workers

Exciting Atmosphere

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Key Elements of Social Entrepreneurship

• Social entrepreneurship addresses social problems or needs that are unmet by private markets or governments

• Social entrepreneurship is motivated primarily by social benefit

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The Process of Social Entrepreneurship

Opportunity recognition• Social problems• Unmet needs

Concept development• Identification of social

rewards• New products or markets

Resource determination and acquisition• Financial resources• Human resources• Human capital

Launch and venture growth• Measurement of returns• Expansion and change

Goal attainment• Succeed in mission and shut down• Succeed in mission and find new

opportunity• Attain a stable service equilibrium• Integrate into another venture

Opportunity recognition• Social problems• Unmet needs

Concept development• Identification of social

rewards• New products or markets

Resource determination and acquisition• Financial resources• Human resources• Human capital

Launch and venture growth• Measurement of returns• Expansion and change

Goal attainment• Succeed in mission and shut down• Succeed in mission and find new

opportunity• Attain a stable service equilibrium• Integrate into another venture

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Characteristics that

Predict an Entrepreneurial Orientation

Innovativeness

Education and experience

Achievement orientation

Independence

Sense of control over destiny

Low risk aversion

Tolerance for ambiguity

Entrepreneurialorientation

Community awarenessAnd social concern

Socially-entrepreneurialorientation

Innate characteristics

Innovativeness

Education and experience

Achievement orientation

Independence

Sense of control over destiny

Low risk aversion

Tolerance for ambiguity

Entrepreneurialorientation

Community awarenessAnd social concern

Socially-entrepreneurialorientation

Innate characteristics

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Effective Social Entrepreneurs

• Can “see” a venture through to its end stages• Adopt a mission to create and sustain social value• Identify and pursue opportunities to serve mission• Engage a process of continuous innovation, adaptation, and

learning• Act without being limited to resources currently in hand• Exhibit accountability to constituents and outcomes

Ref. Dees, et al.

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Opportunities vs. Threats

• Social entrepreneurs are always scanning the horizon for opportunities

• Opportunities for entrepreneurs look like threats and tragedies to others

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Third players:Community

groups/associations• Their values

• Solidarity (neither domination,nor benevolence)• Autonomy• Responsibility• Justice• Equity• Respect for personal dignity

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The community …

• Different forms– Community of identity: the Chinese, the French-

speaking, the Muslims …– Community of interest: the business sector, the

teachers, the trade unions …– Local community (geographic): – The local community: crossroads where

individuals and « systems » interact daily

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Risk and Innovation

Risk-averse Open to risk

Highly innovative Dreamer Entrepreneur

Not innovative Stuck Gambler

Ref. Morris p. 44

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Characteristics of a Feasible

Social Enterprise Plan

• Vision– Clear concept of social value

• Mission– Focuses on creating and

sustaining social value• Execution

– Gives specifics on how to serve mission

– Outlines how the organization will innovate, adapt, and learn

– Exhibits a concrete timeline

• Constraints– Goes beyond resources

currently in hand– Demonstrates plan to acquire

resources– Demonstrates plan to manage

risk• Accountability

– Plans for accountability to constituencies

– Plans for measuring outcomes

Ref. Dees 2001

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Enterprise Plan Outline

1. Business descriptiona. Business outline

b. Industry background

c. Fit in industry

d. Goals and potential

e. Uniqueness of product

2. Marketinga. Research and analysis

i. Target market

ii. Market size and trends

iii. Competition

iv. Estimated market share

b. Marketing plani. Strategy

ii. Pricing

iii. Fundraising

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Enterprise Plan Outline (2)

3. Locationa. Identify location

b. Advantages

c. Zoning and taxes

d. Proximity to clients

4. Managementa. Management team

b. Legal agreements

c. Board

5. Financiala. Expected profit or loss

b. Cash flow

c. Breakeven

d. Budgeting plans

6. Riska. Expected problems

b. Predicted likelihood of issues

c. Alternative courses of action

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university of sunderland bm205 entrepreneurship for mba students entrepreneurs in society by dr....

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