Midterm Study Guide Ch. 1-8

Today's investors look for:

-What the entrepreneur has done, -Customers they've approached, -Interest they have generated If the entrepreneurs have: -tolerance -take action -accept constructive feedback

The seven types of Entrepreneurs

1. Corporate Entrepreneurship 2. Entrepreneurs Inside 3. Buying Franchise 4. Buying small business 5. Social Entrepreneurship 6. Family Enterprising 7. Serial Entrepreneurs

To be certified as a B-Corp, the organization is rated on what 3 things?

1. How is employees are treated 2. Its impact on the environment 3. How it benefits the community in which it operates

Life Skill methods entrepreneurship provides:

1. Think 2. Act 3. Identify Opportunities 4. Specifically approach problems 5. Adapt to new conditions 6. Take control of personal goals & ambitions

Creation Logic

A newer form of viewing entrepreneurship that is used when the future is unpredictable. -Creating something without concrete set of instructions

What is the Act-Learn-Build cycle?

An entrepreneur practice cycle that encourages taking small actions in order to learn, and building that learning into the next step.

How does Sarasvathy's theory of Effectuation align with the creation approach?

Based on the idea that because the future is unpredictable yet controllable, entrepreneurs can "effect" the future.

Who is history's greatest entrepreneur of the Emergence of the Self-Made Man (Colonial America before 1776) period?

Benjamin Franklin -Through a series of experiments with electricity, founding father Benjamin Franklin successfully invented the lighting rod, which has since become a symbol of the ingenuity of a young nation.

Skill of Experimentation

Best described as acting in order to learn - trying something, learning from the attempt and building that learning into the next iteration

Creation Approach

Determine goals according to whatever resources they have at hand. They use what they have rather than wait for extended periods of time to get what they need before taking action. -Employed in times of uncertainty.

T/F: Entrepreneurship is an all-or-nothing (zero-sum) game?

False; It only appears this way looking from the outside.

T/F: The Pinnacle of Entrepreneurship (Second Industrial Revolution, 1865-1920) was the peak of entrepreneurship.

True; During this era, entrepreneurship was at its height; known as the golden era. -Entrepreneur/ "self-made man" was revered in society. Novelists glorified/praised entrepreneurs in glamorous rags-to-riches stories; countless manuals written claiming to teach the secrets of entrepreneurial success.

Franchise is often referred to as a ________

Turnkey operation The franchisee turns the key to open the door and is ready for business.

Confined Re-Emergence (Knowledge Economy 1.0, 1975-Present) entrepreneur defined as:

"An individual or a group who creates something new - a new idea, a new item or product, a new institution, a new market, a new set of possibilities" -Today, entrepreneurs are considered to be essential to the future success of any capitalistic economy.

Rise of Institutional America (Interwar and Postwar America, 1920-1975) entrepreneur defined as:

"One who identifies new combinations, including the doing of new things or the doing of things that are already being done in a new way." "A decision maker who entire role arises out of his alertness to unnoticed opportunities; therefore, entrepreneurship is the ability to perceive new opportunities. This recognition and seizing of the opportunity will tend to 'correct' the market and bring it back toward equilibrium."

Emergence of the Self-Made Man (Colonial America before 1776) entrepreneur defined as:

"One who undertakes a project; a manufacturer; a master builder" -Exulting in the freedom of reinventing themselves without the burden of class or other forms of persecution, these colonists started new ventures, created new markets, and exploited opportunities in exploration, agriculture, trade, and other mercantile activities.

An Entrepreneurial Nation (First Industrial Revolution, 1776-1865) entrepreneur defined as:

"Someone who engages in exchanges for profit; someone who exercises business judgement in the face of uncertainty." -Industrial revolution gave rise to a significant number of inventions/innovations, leading to major business enterprises in manufacturing, agricultural, and transportation technology.

The Pinnacle of Entrepreneurship (Second Industrial Revolution, 1865-1920) entrepreneur defined as:

"The entrepreneur who shifts economic resources out of an area of lower and into an area of higher productivity and greater yield." -Entrepreneurs were instrumental in changing the way people lived (satisfied consumer need to be more connected with others, live in comfort, and to be more efficient)

What are the 7 lesser-known truths about entrepreneurship?

#1: Entrepreneurship is not reserved for startups #2: Entrepreneurs do not have a special set of personality traits #3: Entrepreneurship can be taught (its a method that requires practice) #4: Entrepreneurs are not extreme risk-takers #5: Entrepreneurs collaborate more than they compete #6: Entrepreneurs act more than they plan #7: Entrepreneurship is a life skill NR Norsemen ride SS sailing sea T to NE north east C California A and LS Leave Skandinavia

What are the two big assumptions of starting a new business?

(1) You have the finances and resources for research and marketing. (2) You have the time to invest in intensive planning and research.

Truth #3: Entrepreneurship can be taught (it's a method that requires practice)

-A body of skills developed through practice over time constitute a toolkit for entrepreneurial action. -The entrepreneurial method requires consistent practice so that knowledge and expertise can be continuously developed and applied to future endeavors.

Traditional of view of startups

-Anyone who starts a business is called an entrepreneur. The entrepreneur creates a business based on research to assess the validity of an idea or business model. -The business may be partially funded by seed money from family members or investors, but usually the majority is funded by the entrepreneurs themselves.

Some B-corp members

-Betterworld Books; donates a book to someone in need with book purchase. -Revolution Foods; provides affordable fresh-prepared meals to low-income school children. -Warby Parker; prescription eyewear company "Buy a pair, give a pair" donating one pair of eyeglasses for every pair sold. -Over 900 companies in 29 countries have received B-Corp certification.

List some historical entrepreneurs of the Entrepreneurial Nation

-Charles Goodyear invented vulcanized rubber -George Crum invented the potato chip -Daniel Hess invented the vacuum cleaner. -Mary Dixon Kies, the first woman ever to be granted a US patent, invented a process for weaving straw with silk or thread that boosted the hat industry.

Entrepreneurs inside

-Consists of employees who who think and act entrepreneurially within organizations. -Building a tribe of willing supporters is essential for getting buy-in to their ideas, and proving there is a market for them.

Truth #1: Entrepreneurship is not reserved for startups

-If the business is successful, the startup does not remain a startup. It can develop into an organization in its own right, be merged with another organization, or be bought or acquired by another company. -The truth is that entrepreneurs are everywhere, from corporations to franchises, to for-profit and nonprofit organizations, to family enterprises.

What lead to the shift to big corporations in the Rise of Institutional America (Interwar and Postwar America 1920-1975) era?

-Innovation slowed down considerably when the country plunged into the Great Depression. - Post WWII saw the rise of a rapidly expanding middle class. Meeting these growing demands meant an increase in production, which superseded novel product development. -By the 1950s, big corporations had taken over the American culture, and the traditional entrepreneur was perceived as not only eccentric but a threat to the established order.

Truth #2: Entrepreneurs do not have a special set of personality traits

-There is no evidence to suggest that entrepreneurs have a special set of personality characteristics that distinguishes them from the rest of us.

What novel inventions came out of the Rise of Institutional America (Interwar and Postwar America 1920-1975) era?

-Transistor radio -Musical synthesizer -Videotape recorder -Word processor -Microchip -By the 1970s, corporate entrepreneurship had reached its height, and a growing interest in information technology would set the scene for impending globalization and the transition toward a knowledge-based economy.

During the Rise of Institutional America era, an entrepreneur was defined as one who identifies new combinations... What were these new combinations?

1) Introduction of a new good 2) New method of production 3) Opening a new market 4) New source of supply 5) New organizations

Four main traits of entrepreneurs

1. A desire for achievement 2. An innate sense of having the ability to influence events 3. A tendency to take risks 4. Tolerance for uncertainty -No scientific evidence to confirm whether these traits are a result of nature or nurture or any proven patterns in the behavior of entrepreneurs versus non-entrepreneurs.

Chapter 2: Five learning objectives

1. Compare and contrast the prediction and creation approaches to entrepreneurship 2. Create a portfolio of five skills essential to building a mindset for the practice of entrepreneurship 3. Distinguish between entrepreneurship as a method and a process 4. Illustrate the key components of the practice of Entrepreneurship 5. Assess the role of deliberate practice in achieving mastery

What are the eight necessary conditions needed in place for small and medium businesses (SMEs) to flourish, and together they form the entrepreneurship ecosystem?

1. Financial Resources 2. Support from Government 3. Entrepreneurship Education 4. Research & Development transfer 5. Commercial and Legal Infrastructure 6. Entry Regulation 7. Physical Infrastructure 8. Cultural and Social Norms

The seven cons of owning a franchise

1. Franchise fees paid upfront 2. Royalties to be paid every month 3. Strict rules with no wiggle room 4. Requirement to pay a percentage of gross sales into the franchisor's marketing fund 5. Most products/supplies need to be purchased from franchisor 6. Sale of franchise requires approval 7. Potential competition from other franchisees in the networks

What two factors is the extent of costs and procedures for entry regulation dependent on?

1. Market dynamics - the annual rate of change in markets 2. Market openness - the degree to which new businesses have the freedom to enter new markets

Six possible collaborators for entrepreneurs

1. Other entrepreneurs 2. Target customers 3. Potential investors 4. Family/Friends 5. Competitors 6. Suppliers

The seven pros of owning a franchise

1. Ready-made business systems to help franchise become operational right away 2. Formal training programs 3. Technology is designed to help manage customers and administrative tasks 4. Marketing/Advertising already in place 5. Excellent Support Systems 6. Real-estate resources to help sources the best locations 7. An entire franchisee network to reach out for help/advice

What are the most important five skills to the practice of entrepreneurship?

1. Skill of Play 2. Skill of Experimentation 3. Skill of Empathy 4. Skill of Creativity 5. Skill of Reflection

TEA across the globe

13% U.S. population involved in some form of (early form) entrepreneurship. -Europe displays the lowest TEA rates over all, with Bulgaria, Germany, and Italy, in particular, showing the lowest rates—less than 5% of the working adults begin or run new businesses.

The five periods (eras) of the history of entrepreneurship in the U.S.

1: Emergence of the Self-Made Man (Colonial America before 1776) 2: An Entrepreneurial Nation (First Industrial Revolution, 1776-1865) 3: The Pinnacle of Entrepreneurship (Second Industrial Revolution, 1865-1920) 4: Rise of Institutional America (Interwar and Postwar America, 1920-1975) 5: Confined Re-Emergence (Knowledge Economy 1.0, 1975-Present)

Muhammad Yunus

2006 Nobel Peace Price Winner who founded Grameen Bank in the 1970's. Grameen Bank provided short-term loans to the impoverished in Bangladesh (micro-loans) "All human beings are entrepreneurs. When we were in the caves we were all self-employed . . . finding our food, feeding ourselves. That's where human history began . . . As civilization came we suppressed it. We became labor because they stamped us, 'You are labor.' We forgot that we are entrepreneurs."

Family Enterprise

A business that is owned and managed by multiple family member, typically for more than one generation. Each generation has opportunity to bring progress organization forward in new, innovative ways. -80% to 90% of US businesses are family-owned or controlled by a family45 and 65% of the US workforce is employed by a family business

Corporate Entrepreneurship (or intra-preneurship)

A process of creating new products, ventures, processes, or renewal within large organizations -Typically carried out by employees working in units separate from the organization who create and test innovations that are then assimilated back inside the broader organization. -They explore new possibilities and seek ways in which the organization's current structure and process can enable innovation.

Royalties

A share of the proceeds of a business from one party to another

Benefit Corporation (B-Corp)

A subcategory of social entrepreneurship; form of organization certified by the nonprofit B Lab. Voluntary certification; designed for for-profit companies aiming to achieve social goals alongside business ones. -Ensures strict standards of social and environmental performance, accountability, and transparency are met, and certification protects corp. from potential lawsuits by stakeholders claiming the company spends more time or resources on social issues rather than maximizing profit.

Startup

A temporary organization in search of a scalable business model. (Steve Blank's definition)

Franchise

A type of license purchased by a franchisee from an existing business, to allow them to trade under the name of that business. -Beneficial way for entrepreneur head start in launching their own businesses, with less time spent on marketing, building the brand, developing processes, and sourcing product.

Microloans

A very small, short-term loan often associated with entrepreneurs in developing countries

Entrepreneurship requires what two traits?

Action and Practice

Entrepreneurship

Actions taken by an individual or a group to create something new i.e. a new idea, a new item or product, a new institution, a new market, a new set of possibilities.

Entrepreneur

An individual or a group who creates something new - a new idea, a new item or product, a new institution, a new market, a new set of possibilities

Predictive Logic

An older form of thinking that sees entrepreneurship as a linear process in which steps are followed and outcomes are ideally predictable. -Dominant logic of large, established organizations, where goals are predetermined, issues are transparent, and information is reliable and accessible.

Buying a small business

Arrangement for entering the world of entrepreneurship, the entrepreneur buys out an existing owner and takes over operations. -May appear less risky and overwhelming than starting from scratch.

Types of play

Can include the use of serious games (i.e., educational games) such as alternative reality games and learning simulations that challenge you to be creative and to think like an entrepreneur.

In which era was the "tech entrepreneur" born?

Confined Re-Emergence (Knowledge Economy 1.0, 1975- Present) -The rise of information technology, advanced software development, biotech and medical research, and new materials drove transformations in the economy that created new markets and new business opportunities. -A swing in the direction of a predominantly service- and knowledge-based economy, dominated by technology-related enterprises such as Apple, Microsoft, Google, IBM, and Oracle, among others.

Truth #4: Entrepreneurs are not extreme risk-takers

Contrary to the stereotype that entrepreneurs gamble when the stakes are high, there is no evidence to suggest that entrepreneurs take more risks than anyone else. -Most entrepreneurs are very calculated risk takers and gauge what they are willing to lose with every step taken.

Why is empathy so important for an entrepreneur?

Developing empathy is essential for truly understanding the reality of being an entrepreneur as well as evaluating your own ability to become an entrepreneur.

Skill of Empathy

Developing the ability to understand the emotion, circumstances, intentions, thoughts, and needs of others

Predictive Approach

Entrepreneurs determine the goals they need to achieve and look for the resources to enable them to reach their goals. -Prediction works best in times of certainty and when there is access to existing information and data on which to base decisions.

Truth #5: Entrepreneurs collaborate more than they compete

Entrepreneurs draw on shared experience and desire to learn from others facing similar challenges. -Support group of like-minded entrepreneurs helpfully willing a "pay it forward" attitude, collaborating for the greater good.

Whats the main difference between corporate entrepreneurs and entrepreneurs inside?

Entrepreneurs inside can exist and function in any type of organization, big or small, including government agencies, nonprofits, religious entities, self-organizing entities, and cooperatives.

What is the Diana project?

Established in 1999 to explore women's entrepreneurship and raise awareness of women in business.

T/F: Investors rely on facts and figures alone

False Facts, figures, and projections are important, but they can be presented in a more visual way, through a demo/short video clip.

T/F: Every entrepreneur need a business plan to succeed?

False Research shows that fewer 50% Inc. 500 founders had formal business plans prior to launch; Fewer than 30% had only basic business plans.

T/F: Entrepreneurship is predictable

False; Entrepreneurship is not predictable and is not a linear process. (A process assumes known inputs/outputs and implies arriving to a specific destination)

T/F: People are born with an entrepreneurial mindset

False; you have to work to develop it.

Effectual entrepreneurs

Focus on creating a future rather than predicting it. - They create new opportunities, make markets rather than find them. - Accept and learn from failure, and build relationships with a variety of stakeholders. -Effectual entrepreneurs use their own initiative to fulfill their vision of the future.

Skill of Play

Frees the imagination, opens up our minds to a wealth of opportunities and possibilities, and helps us to be more innovative as entrepreneurs.

Skill of Reflection

Helps make sense of all the other actions required of play, empathy, creativity, and experimentation.

Entrepreneurship under creation approach is based on:

How entrepreneurs think. -Navigating uncertain worlds to create rather than finding existing opportunities; make markets, learn from failure, and connect with a variety of stakeholders to fulfill their vision of the future.

New Business Owners

Individuals who are former nascent entrepreneurs and have been actively involved in a business for over three months but less than three and a half years

Necessity-based Entrepreneurs

Individuals who are pushed into starting a business because of circumstances such as redundancy, threat of job loss, and unemployment

Potential Entrepreneurs

Individuals who believe they have the capacity and know-how to start a business without being burdened by the fear of failure

Nascent Entrepreneurs

Individuals who have set up a business they will own or co-own that is less than three months old and has not yet generated wages or salaries for the owners

Opportunity-based Entrepreneurs

Individuals who make a decision to start their own businesses based on their ability to create or exploit an opportunity, and whose main driver for getting involved in the venture is being independent or increasing their income, rather than merely maintaining their income

Truth #7: Entrepreneurship is a life skill

Many individuals/institutions perceive entrepreneurship as a life skill that helps people deal with future uncertainty by providing them methods.

What are the six different ways to practice reflection?

Narrative reflection Emotional reflection Perceptive reflection Analytical reflection Evaluative reflection Critical reflection

What may be the most important of all the five skills found at the center of all five skills?

Reflection -Taking time for reflection is very important. -Helps to critically analyze our own feelings and the knowledge we possess, provides us with new perspectives, and allows us to evaluate outcomes and draw conclusions.

Skill of Creativity

Requires a general openness to the world and relates unleashing our creative ability to create and find opportunities and solve problems

Famous serial entrepreneur

Richard Branson -Made his fortune through Virgin, began as a music retailer before expanding the brand to include Virgin Atlantic airlines. Branson turned his hand to railway, music, media, banking, and more.

Small enterprises will almost always begin with __________ , but as they collect data in the real world, they will use _______________ for analysis.

Small enterprises will almost always begin with creation, but as they collect data in the real world, they will use prediction for analysis.

"Buy one, Give one" programs are an example of what type of entrepreneurship?

Social entrepreneurship

Types of experimentation

Taking action; getting out of the building and collecting real-world information to test new concepts, rather than sitting at a desk searching databases for the latest research. It involves asking questions, validating assumptions, and taking nothing for granted.

One of the greatest myths concerning entrepreneurship

That is is a male-only profession. -According to GEM studies, an estimated 200 million women are starting or running new businesses in 83 economies, and an additional 128 million are running established businesses.55

What is the GEM?

The Global Entrepreneurship Monitor (GEM)—a global research study founded by Babson College and the London Business School in 1999. -Today the study is conducted by a consortium of universities around the world and measures entrepreneurial activity across 70 countries.

What helped launch the creativity and innovation of the Entrepreneurial Nation (First Industrial Revolution 1776-1865) period?

The U.S. Constitution was a launching pad tool for creativity and innovation by its democratic terms; rights to own private property, access to a professional banking system, and protection for their enterprises in the form of patent laws. People had a more fairly equal chance of being an entrepreneur, inventors became more commonplace, producing new products/services alongside the merchants and industrialists.

Effectuation

The idea that the future is unpredictable yet controllable. (Researcher Saras Sarasvathy; she discovered patterns of thinking, a theory she calls effectuation)

The opportunity to be a corporate entrepreneur very much depends on who/what?

The organization

Established Business Owners

The people who are still active in business for over three and a half years

Total Entrepreneurial Activity (TEA)

The percentage of the population of each country between the ages of 18 and 64, who are either a nascent entrepreneur or owner-manager of a new business. -A main focus of the GEM study

Mindset

The precursor to action.

The two main perspectives on entrepreneurship are:

The predictive logic, the older and more traditional view; and the creation logic, which has been developed through recent advances in the field.

What are the different phases of entrepreneurship based on the GEM study?

The process begins with: 1) Potential entrepreneurs 2) Nascent entrepreneurs 3) New business owners 4) Established business owners

Social Entrepreneurship

The process of sourcing innovative solutions to social and environmental problems, while making a profit. -Can encompass both for-profit and non-profit ventures.

Serial Entrepreneurs (or habitual entrepreneurs)

The type of entrepreneurs who start several businesses, whether simultaneously or one after the other.

Traits of entrepreneurs in the right frame of mind.

There is greater: -Confidence -Intentionality -Vision to bring ideas from the whiteboard to the real world.

Truth #6: Entrepreneurs act more than they plan

They each practiced being an entrepreneur. Entrepreneurs act by going out, talking to other people, connect to customers, generated buzz about their product/service, and build strong networks. -With every action, they collected real data that informed the next step.

What did the Rise of Institutional America (Interwar and Postwar America 1920-1975) era signal?

This era signaled a shift from the traditional entrepreneur to the big corporation. -Small firms founded by entrepreneurs either merged with other companies or were swallowed by larger organizations.

Explain the differences in women's desire to become entrepreneurs in developed vs. developing countries?

Women in less developed countries with higher rates of unemployment, poverty, and lack of work choices are more likely to be driven by necessity, whereas women in more developed countries are more motivated by opportunity and innovation

Traditional education, the need to find the correct answer, and the constant need for measurement and assessment has inhibited our _________________ nature.

creative