19.1 Overview of Entrepreneurship
- What are some different types of entrepreneurship?
Entrepreneurship is the creation of something valuable. Social entrepreneurship involves creating innovative solutions to immediate social and/or environmental problems and mobilizing resources to achieve social transformation. Corporate entrepreneurship involves the creation of new products, processes, and ventures within existing large organizations. Family entrepreneurship involves a business that is owned and managed by multiple family members, usually for more than one generation. Serial or habitual entrepreneurship refers to individuals who start several businesses, simultaneously or one after another. Lifestyle entrepreneurship involves a venture to suit a personal lifestyle and not for the sole purpose of making profit. High-technology entrepreneurship involves ventures in the information, communication, and technology space.
19.2 Characteristics of Successful Entrepreneurs
- What characteristics lead individuals to become entrepreneurs?
Most entrepreneurs are ambitious, independent, self-confident, risk-taking, visionary, creative, energetic, passionate, and committed. Entrepreneurial individuals are often competitive, with a need to achieve, and are self-starters who prefer to lead. Compared to the average population, entrepreneurs are more decisive and confident in their abilities, and they choose moderate risk where they can affect outcomes. Entrepreneurs spot and act on trends, often producing innovative product designs, marketing strategies, and managerial solutions. Entrepreneurs are able and willing to work hard, and are attached to the work and the outcomes, so much that they are willing to make personal sacrifices to achieve their goals.
19.3 Business Model Canvas
- How can the business model canvas help us to describe and assess a business model?
A business model provides an explanation of how an organization creates, delivers, and captures value. The business model canvas achieves this goal by describing four main areas of any venture—customers, offering, infrastructure, and financial viability—through nine building blocks that describe and assess a business model. Customer segments are categories of customers that have common characteristics. The value proposition is the reason that customers choose one option over another when deciding what to buy. Channels bring the value proposition to the customers through communication, distribution, and sales. Companies need to maintain relationships with their customers to acquire and retain customers and boost sales. There are two general types of revenue stream: revenues from one-time customers and revenues from ongoing payments. Any business needs resources—physical, financial, intellectual, and/or human—to function and provide their products or services to their customers. Key activities are the critical tasks that a company does to succeed and operate successfully. Companies build partnerships to optimize their business, reduce risk, or gain resources. All businesses incur costs through operation, whether fixed or variable.
19.4 New Venture Financing
- How do entrepreneurs finance their new business ideas?
Bootstrapping is attempting to found and build a company from personal finances or from the operating revenues of the new company. Entrepreneurs can access debt capital, which is borrowed money that must be repaid by a future date, and equity capital, which is the owner’s investment in the company and does not have a specific date for repayment. Crowdfunding is the process of raising new venture funds from a large “crowd” audience, typically virtually from the Internet.
19.5 Design Thinking
- How can entrepreneurs leverage design thinking to solve complex problems and navigate uncertain environments?
Design thinking uses core elements and skills of play, empathy, reflection, creation, and experimentation to collaborate, create, and build upon findings. Through observation, synthesis, alternatives, critical thinking, feedback, visual representation, creativity, problem-solving, and value creation, entrepreneurs can use design thinking to identify unique venture opportunities. There are three main phases of design thinking: inspiration, ideation, and implementation. The problem, or design challenge, is the inspiration. Ideation is a creative process of solving the design challenge based on observations. Ideas are turned into actions in the implementation phase. Possible solutions are tested through experiments to create the best version of the product. In all of these phases, there are two main types of thinking: convergent and divergent. Convergent thinking moves from broad thoughts to concrete understanding, while the thoughts from divergent thinking can be narrowed down to the most promising ideas and solutions. Divergent thinking uses the imagination to open the mind to new possibilities and solutions, and ultimately to become more innovative.
19.6 Optimal Support for Entrepreneurship
- How can government support entrepreneurship?
Government can support entrepreneurship by reducing negative incentives or by increasing positive ones. In particular, government can:
- Reduce barriers to entrepreneurship erected by previous governments or in society.
- Protect intellectual property and capital through the patent system and the rule of law.
- Provide businesses with technology ready for commercialization.
- Increase incentives for entrepreneurship, which comes at a cost to other priorities.
- Provide special benefits to favored industries, businesses, or regions, although such cronyism can come at a political and economic cost by distorting markets and playing favorites.