MGMT Ch 11 (Test 3)

Entrepreneurship

"Entrepreneurship is the act of being an entrepreneur, or "an owner or manager of a business enterprise who makes money through risk and initiative." Entrepreneurs act as managers and oversee the launch and growth of an enterprise. Entrepreneurship is the process by which either an individual or a team identifies a business opportunity and acquires and deploys the necessary resources required for its exploitation." This definition is narrow, as it fails to include all the other various pieces of entrepreneurship that can occur in a modern capitalistic economy, as well as fails to include the types of entrepreneurship that occurs in modern command economies The definition also makes a negative correlation between opportunity and "exploitation" to a concept that many entrepreneurs would say (if you asked them) provides a positive correlation between opportunity and the market (i.e., consumers and clients).

Side hustling

"Side hustling" (or a "side hustle") is a modern term associated with entrepreneurship that unites the ideas of freelancing with the freedom inherent in consulting, but also the ability to act in an entrepreneurial fashion without having to quit a full-time job. The side hustle allows a person to be successful slowly (so speed is not a factor) while also mitigating the inherent risk of failure in entrepreneurship (so scaling is not a factor). As the power of the Internet to connect people, products, and ideas, has expanded over the last 25 years, "side hustling" (or working on the side) has become a way for people to leverage their hobbies and interests to make money in niche markets that could not be reached formally before the advent of the Internet. Various Internet companies have made this leverage possible, including Amazon, Ebay, PayPal, Uber, Lyft, Apple, Google, Facebook, Dropbox, and many, many more.

21st century

20 years into the 21st century, managers of all experience levels are going to want to understand, appreciate, and leverage the allure of entrepreneurship and the varying approaches to entrepreneurship that many of their employees may employ without their knowledge. With the rise of exciting technologies (many of which have been brought to the public's attention through entrepreneurial risk-taking) such as online social media platforms, online search and even in the hardware and physical product space with home assistive speakers, and electric car technology, the future of entrepreneurship seems bright. There is also the impact of other countries, such as India and China getting in on the entrepreneurial game through supporting technologies such as BitCoin, artificial intelligence technologies, machine learning, and robotics. In the 21st century, the spaces for risk-taking, innovation, storytelling, and the growth of acceptance of entrepreneurship as a path that individuals can pursue to leverage new technologies to add value to the economies of the globe, it seems as though entrepreneurship has a secure future.

Which of the following is not a human relation skills for entrepreneurial success?

Adaptability

Who do you believe can be an entrepreneur?

All of the above

Which of the following is a reason for managers to consider hiring entrepreneurs carefully?

All of the above Leveraging technology for innovation Managing the speed of change Acquiring a competitive advantage Adapting to the impact of black swans

Dutch Mercantilism (15th Century - 18th Century): Increased Risk-Taking and Exploration

Around the end of the Medieval Era in entrepreneurship, exploration became important and the idea of taking greater risks, not only in bringing different products to market but also in traveling further afield to bring products never imagined to consumers, became a predominant idea. We see this most obviously with two movements that coincided with each other: the rise of Dutch Mercantilism and the growing, selling, and speculation in the Dutch-driven tulip bulb markets of the 15th and 16th century. The class that developed after the Medieval Period in Europe did think of themselves as merchants: individuals engaged in the buying and selling of goods and then transferring the capital from those purchases back into the business of trade, including building ships (exploration), hiring people (craftsman and artisan at scale), paying "taxes" (giving payments to government in exchange for favorable policies), and building pre-modern monopolies (stifling competition and keeping wages low).

exponential growth

At this time also, began the promise of exponential growth rather than the type of growth that had been promised to investors in the past—linear growth. Increase in number or size, at a constantly growing rate. It is one possible result of a reinforcing feedback loop that makes a population or system grow (escalate) by increasingly higher amounts. Compound interest is an example of exponential growth. Columbus promised the Queen of Spain a J-Curve of exponential growth over time, even though he had no way to definitively prove the argument that he was making in order to get his exploration funded. The concept of a J-Curve merely states that a curve of growth falls initially (i.e., at the start of a project and then a few years in), and then precipitously and continuously rises over time.20 This is the promise Christopher Columbus made in every court he pitched to on the European continent. This type of comfort on the part of the investor with this type of return, while fundamentally different from the return on investment (or ROI) that existed in the Dutch Tulip speculation craze, is at its heart the kind of comfort that future venture capitalists in the 19th and 20th centuries would exhibit when asked to support other "crazy" ideas such as the spinning loom, factory development in Britain, and early-stage "horseless" carriages (i.e., automobiles) in France and England.

Why is innovation important for managers to address with entrepreneurial thinking?

Because a little entrepreneurship can provide value at scale to organizations

What were the circumstances that supported the development of entrepreneurship in the Medieval Period?

Better living conditions Growing town and village populations Safer trade routes to the east

Medieval Period (9th Century - 14th Century): Banking, and Lending combined with Buy Local Principle

Better living conditions for people overall, increased trade with the East (through the trade efforts of Marco Polo), safety along trade routes that allowed goods and services to pass from town to town as well as internationally. In addition, growing, stable, healthy populations in villages, towns, and cities allowed people (consumers) to have more leisure time to walk—and shop—in outdoor markets. These circumstances allowed the primary idea to develop—and become dominant over time—that buying a hand-crafted product from an experienced local craftsman would benefit both the craftsman and the community. The second idea that sprang forth from this was that if a local craftsman wanted to support his family (and usually at this point in history, men dominated the conversation around entrepreneurship), he would need a way to ensure that payment would be more than a simple barter (and exchange of goods and services without an exchange of money).

Who were the two most important innovations and innovators in the post-World War 2 20th century?

Bill Gates -Windows OS Steve Jobs -Apple Computers

Bootstrapping

Bootstrapping is a way for an entrepreneur to bring a business to market through maxing out credit cards, borrowing money from friends and family, or self-funding through savings. Many entrepreneurs have built businesses slowly through bootstrapping. Many of these businesses serve needs that are common, such as clothing, accessories, toys, and other items. Bootstrapping is common among people building businesses around freelancing services, such as graphic design services, and consulting services. When spending money, entrepreneurs at a minimum must understand the concept of "burn rate." Burn rate is normally used to describe the rate at which a new company is spending its venture capital to finance overhead before generating positive cash flow from operations; it is a measure of negative cash flow. Burn rate is usually quoted in terms of cash spent per month. For example, a burn rate of $1 million would mean a company is spending $1 million per month. Entrepreneurs must also understand what to spend their capital on, for instance, on hiring people, purchasing equipment, and so on, and when to do that, based on the product, service, or process that they seek to bring to market.

Colonialism (14th Century - 20th Century): Expansion and Growth (J-Curve vs Linear Curve) with Other People's Money

Colonialism and the expansion of markets through trade and exploration was not a new concept "per se" in the 15th century, but the combination of surplus money floating through economies in Europe allowed more and more people with ideas about how to get access to new markets to thrive in unique ways. This idea of pitching and presenting an idea that might not work to an investor (or a group of investors) led to the creation of the Dutch East India Company at the dawn of the 17th century, which followed the development of the principles of speculative exploration by the Spanish in the 15th and 16th centuries respectively.

What are the important ways that Colonialism fueled entrepreneurial activities in the 17th Century?

Colonialism fueled entrepreneurship in three ways: it allowed people who had little education or class status to travel to the "New World" and make money, it allowed merchants to expand the types of products (i.e. spices) they offered to consumers in the "Old World" and it allowed gold and silver to come into the banks of royal houses to fund European wars.

Which of the following is not an important business skills for entrepreneurial success?

Conflict resolution

Consultants

Consultants (or the act of consulting) are people (or teams of people) who advise, strategize, and sometimes execute on projects for an organization, team, or institution. Consultants rarely produce a physical product. Instead, they tend to provide expert advice about a process, product, or service about which they have domain knowledge or may be subject matter experts (SME's). Many "white collar" fields can increasingly be designated as fields where consulting can (and often does) happen, including engineering, medicine, and the law. Consultants sometimes scale the act of providing advice and strategies into businesses (i.e., PWC, Bain Consulting, Deloitte, etc.) but usually, those organizations act as temporary employment agencies, and the price markup is high in order to compensate entry-level consultants with little subject matter knowledge. Interestingly enough, sometimes established entrepreneurs will hire consultants (private and those operating in companies at scale) and pay them in equity in lieu of cash, in order to defer hiring full-time resources until those entrepreneurs can self-fund their growth.

Human Relations Skills

Empathy— Empathy is the ability to care about other people in meaningful ways. The ability to understand why people don't want your product, service, or process is counterintuitive to many people. Courage—Courage is the ability to confront agony, intimidation, pain, danger, or uncertainty without ceasing from your original goal. Courage is evident in the development of many entrepreneurial projects and in bringing innovations to market. Listening—Listening without hearing happens many times in business. Many entrepreneurs are "tone deaf"—that is, they do not listen to customers, critics, the market (through pricing, competition, etc.), or themselves and their team. Listening is the act that entrepreneurs have to be the best at in order to determine what human beings want, particularly when the cost of bringing goods, services, and processes to market seems inexpensive. Decision-Making—Entrepreneurs make decisions. They also are very adept at understanding the difference between making a decision (a temporary act with long-term consequences) and having choices (a permanent state of affairs in the entrepreneurial journey). Entrepreneurs will always be surrounded by various choices, but the ability to make decisions is not something that can be taught. Instead, decision-making is an act that entrepreneurs get better and better at the more that they fail at. Success comes after many failed decisions. Decision-making takes listening, empathy and courage to make a decision in the face of the unknown of whether the decision is going to be successful or not.

Why is Entrepreneurship Important?

Entrepreneurship (and entrepreneurial thinking) is important for industry managers to understand for many organizational reasons, but there are four we believe are primary to consider. Innovation (technological leveraging) Change (speed of) Change Management (competitive advantage) Black Swans (non-obvious ideas)

Conclusions

Entrepreneurship has become more and more of a viable option for individuals interested in taking risks with their ideas, other people's capital, and leveraging the low to no cost digital tools that are available through the Internet. This is not that far a cry from the entrepreneurial efforts taken up by merchants, tradesmen, craftsmen and others in the Medieval Period, Josiah Wedgewood's innovative approach to pottery in the 18th century, or even Thomas Edison with GE.

What are the types of entrepreneurial activity people engage in? Select all that apply.

Freelance Work "Side" Hustling Consulting

Freelancers

Freelancers (or freelancing) are people who create work and get paid for it by independently contracting with a larger organization, team, or institution. The freelancer provides value by having expertise in a domain area, having a point-of-view about a topical area, and by having the skillset to leverage that point of view for the success of their clients. Freelancing and freelancers are increasingly associated with the developing the "gig" economy in post-modern economies, and the IRS estimate that by 2040, 40% of all reported income will be from individuals engaged in freelance activities. This includes everything from Uber and Lyft drivers to babysitters and writers. Another important differentiation between freelancing and entrepreneurship is that freelancers rarely hire other people, scale businesses, create products, or do any of the other activities we often associate with entrepreneurs.

What are the most important financial skills for entrepreneurs?

Getting a loan from a bank Bootstrapping Spending money and watching "burn rate"

Giving away equity

Giving away equity—in the business in exchange for capital is the most popular idea, most notably seen in the show Shark Tank. Giving away equity involves the entrepreneur making a deal with an investor with money and claiming that the investor will see a rate of return greater than the initial investment itself. Gaining capital in exchange for giving away portions of shares in the business idea is what has allowed organizations as varied as Snap, Inc. (the parent company of the social media platform SnapChat) all the way to Amazon (the online retailer) to raise capital quickly and cleanly by raising capital in series of rounds. Giving away equity began in earnest with the Dutch East India Company in the 16th century and continues to this day.

How did Google develop?

Google, founded by Larry Page and Sergey Brin, was developed from the combination of two ideas: patenting the code to allow people to search the Internet for information by keyword, rather than by web page, and allowing businesses and organizations to bid on particular words in auctions.

Josiah Wedgewood

He also created the basis of modern marketing in an industrialized setting by encouraging members of British nobility to lend their names to his pottery in an early form of leveraging branding of another famous person to sell more products. Wedgewood also scaled his talents and creativity and was able to hire people to work in factories making pottery based on designs that he had initially created. The principles of scale were exemplified in Wedgewood's approach to selling pottery. He also pioneered the idea that his pottery was the best pottery on the market by providing consumers at the higher end of the market with specialty pottery, thus creating a monopoly in the market and squeezing out his competitors—who all tried to copy his designs, approach, marketing, and processes. Finally, as an ardent abolitionist, Wedgewood used his wealth to make social statements and used his organization to create anti-slavery medallions and other social responsibility efforts in the 18th century. This was an early example of social entrepreneurship. Other entrepreneurs in the 18th and 19th century, from bicycle makers to textile manufacturers to bankers and railroad magnates, would follow Wedgewood's model of entrepreneurship. This included having an original idea for a product, service, or process, pursuing funding from other non-interested parties, building factories, buildings, or even infrastructure to execute on developing a product, service, or process. Other parts included employing people in order to scale the process, making the process, service, or product "unique" in order to establish a monopoly, and finally, creating enough capital to engage in social responsibility, speculation, or even to launch other businesses around other products.

Organizational Behavior

How people engage in groups and the culture they develop either accidentally, or on purpose, is another skill entrepreneurs need to possess. Understanding organizational behavior includes having emotional intelligence, empathy, and strong listening skills. In addition, the skill of knowing when to collaborate and when to be independent is also important. Finally, understanding other people's motivations, negotiation, mediation, and conflict management are also key skill sets. Organizational behavior circles around all of these areas and many times entrepreneurial projects fail because founders, V.C.'s and others fail to understand the importance of these skills.

Medieval Period developments

In this mix, craftsman, merchants, and artisans arose throughout towns and villages in Medieval Western Europe that focused on crafting and delivering a variety of goods With this variety of goods, services also began to develop, including policing, regulations, and other aspects that make the Medieval Era begin to resemble the Modern Era of entrepreneurship. Within this system also began the idea of holding money in escrow: lending money out at interest (usury) for the development of ideas involving the expansion of the development of manufactured commodities. Paying people in money (typically shillings) rather than in pure barter for a service rendered also began to develop. This allowed craftsmen the freedom to focus on developing one skill (or a niche) at the expense of being generally good at several crafts and allow competition to develop between towns to have the "best" artisan or craftsman in a town. The Medieval Catholic Church opposed the charging of usury (interest) on money by its members (much of the population of Medieval Europe), and thus it fell upon other populations of individuals to engage in banking. As a result, banking became the province of individuals in religious populations who had no such admonition against charging usury to non-believers, such as Jewish and Islamic populations throughout Europe, as well as rising Protestant populations throughout Europe. This created a system of banking to spread across Europe for the benefit of the dominant majority engaged in entrepreneurial activity.

What were the most important aspects of Josiah Wedgewood's contributions to entrepreneurial innovations in the 18th century?

Innovation -Idea Entrepreneurial -Scale

What are the drawbacks to entrepreneurship?

Lack of management support Lack of management perceiving long-term value

What are the most important aspects of entrepreneurship for the 21st century?

Leveraging low to no cost digital tools Using other people's capital

Business Skills

Management Organizational Behavior Sales Marketing Strategy

Management

Many entrepreneurs don't consider management, and the clear majority (the statistic is around 90%) of all entrepreneurial ventures fail within the first year. The lack of consideration around hiring, firing and developing the skills for managing employees is common. Hiring a team involves the entrepreneur having a strategic combination of financial understanding (how many employees can we afford to do the work?) and the ability to understand and empathize with human beings (what kind of culture do we want in our organization?). When entrepreneurs hire, particularly in high tech, software companies, cultural considerations become key, including acknowledging what type of culture an entrepreneur seeks to build in a long-term way. When early Zappos investor (and later CEO) Tony Hsieh invested in the company in 1999, he began to think intimately about making sure that the employees he hired were committed to customer service, including the happiness of both customers and other employees. This thinking about hiring transformed his company from one based in a hierarchy to one based on a holocracy. Seeking alignment in hiring involves thinking quite deeply about who is hired and even how employees are hired. Firing people is at the other end of building entrepreneurial projects. From the early 1970s until the early 2010s there was a tendency by investors to fire and replace the founder of a company with a more seasoned CEO with experience, who would help shepherd the company through moving from a private company to a publicly traded company on the stock market. The change in thinking really began when Facebook founder and CEO Mark Zuckerberg continued to head the company in spite of his inexperience. At the top, there may be little churn in modern entrepreneurial ventures, but at the middle of these companies and at the bottom, many start-up companies experience a high rate of turnover, particularly as companies transition from being private to being public. Workload responsibilities increase as well as public scrutiny. Finally, many employees may stay from the point of their hire and then, after the company becomes publicly traded, may sell their company stock shares and leave the company voluntarily.

Marketing

Marketing in developing an entrepreneurial product, service, or process is an area that entrepreneurs have tended to focus on quite a bit. Marketing from the days of the Medieval Period until the 21st Century has been focused on the art of persuasion. Persuasion is defined by the researcher Robert Cialdini in the book Influence: The Psychology of Persuasion as "the process aimed at changing a person's (or a group's) attitude or behavior toward some event, idea, object, or other person(s), by using written or spoken words to convey information, feelings, or reasoning, or a combination thereof." 27 Understanding the psychology of how and why a person feels the way that they do about buying pottery, woolen coats, horses, computers, or digital goods hasn't changed over time, because human psychology hasn't shifted much around the need for an emotional connection to a product, service, or process before deciding to make a purchase. Digital tools such as websites, social media platforms, and other Internet-based applications can allow the leverage of creative means such as design, in order to create a deeper emotional response to a product, service, or process. Advertising, as a subset of marketing, is about the act of either pushing a product, service, or process to a customer, or pulling them toward a product, service, or process, in order to get them to buy it at a precise moment in time.

linear growth

Meanwhile, in the Eastern World, there was a phenomenon of entrepreneurial-based thinking that was influencing exploration in other ways, and that was proving that the opposite type of growth—linear growth—was also important to have in an economic system. The Chinese developed massive long boats, known as junk ships 20, starting around 2800 BCE and used these ships to explore not only parts of Asia but also the East Coast of the African continent and the Islamic Middle East. The development and funding of exploration by the Chinese reached its apex in the 14th century with the exploration of the Pacific Ocean by the junk ship captain, Zheng He. These voyages were supported and funded in the mode of linear growth—that is, growth that occurs slowly over time in spite of setbacks, failures, and even successes, rather than in bursts along an ever-extending upward curve. The only problem with this type of slow (in the case of the Chinese, centuries-long) growth is that it didn't allow for rampant shifts based in speculation (as we saw in Europe). It also doesn't allow for the benefits of rampant risk-taking to filter down through a society or culture, as is the case with modern entrepreneurship. In essence, a guy with a "crazy idea" plus an emperor with money, but without overall cultural backing, are the factors that can encourage an entrepreneur to grow an idea slowly over time.

Basic Overview of Entrepreneurial Ideas and Approaches Throughout History

Medieval Period (9th Century - 14th Century): Banking, and Lending combined with Buy Local Principle Dutch Mercantilism (15th Century - 18th Century): Increased Risk-Taking and Exploration Colonialism (14th Century - 20th Century): Expansion and Growth (J-Curve vs Linear Curve) with Other People's Money Industrial Revolution (18th Century - Late 20th Century) Executing Scalable Ideas and Gaining a Monopoly Computer and Digital Age (Mid-20th Century - Current Age): Economies of Scale Fragmented by Globalism

Who Can Be an Entrepreneur?

No matter what answer you chose to the question above, the fact is, there is no certification, stamp of approval, or diploma for anyone to engage in entrepreneurship. There are certain skills and traits that help people get further down the road to successful entrepreneurship than others, but building a business idea and being an entrepreneur requires just one necessary skill: The courage, vision, and ability to start building a project, a business, or an idea. This ability to succeed in starting a project—and in finishing it—is the number one trait of ever entrepreneur throughout history, as we are about to see.

speculative markets

One of the activities that merchants and their mercantilism drove during this period, was the development of speculative markets based on attempting to influence buyer behavior through attractive pricing of commodities, handmade goods, luxury items, and items brought back to Europe through wars and exploration. This led to the development of speculative activity; later on, this activity would presage the development of the modern stock market. The speculation around the growth, distribution, and sale of tulips illustrates this effectively

What was Christopher Columbus's big idea?

Opening trade routes to the East

What business did Josiah Wedgewood scale?

Pottery

Sales

Sales and the revenues generated through a sales cycle, support the development of any entrepreneurial venture. Customer acquisition through understanding the development of a sales funnel is critically important for the success of any entrepreneurial venture. As potential customers become prospects and then buyers, the cycle of opening and closing sales requires an appreciation of several aspects of traditional sales, as well as the growing field of inbound sales. Inbound sales rely heavily on acquiring sales leads via websites, social media platform interactions, email lists, and other methods involving non-traditional means. Customer loss occurs when a potential customer leaves the sales cycle and moves on to another product, service, or process. Many entrepreneurs have traditionally established proprietary processes to determine why a customer would leave the sales cycle before making a purchase and this process has become more efficacious with digital tools. Entrepreneurs and entrepreneurial thinking drive the sales cycle in determining how, when, and where a potential customer can be touched.

What did David Ogilvy believe about advertising?

Story appeal Make the truth interesting The more you tell the more you sell A touch of singularity

Industrial Revolution (18th Century - Late 20th Century) Executing Scalable Ideas and Gaining a Monopoly

The Industrial Revolution, which began in Britain in the 17th century, entailed the mass production and scaling of products, services, and processes, based in the principles of production control (monopoly) and supply chain development (stability). The entrepreneurs of the 17th century who succeeded and created a world of products, services, and processes that served the needs of a growing base of wealthy consumers also lifted whole economies into a new stratum of social, economic and even cultural, development. One example of such an individual is Josiah Wedgewood. Wedgewood, a potter and entrepreneur, applied the principles of the growing field of modern science in the 18th century to his development of better glazes and finishes for his home-grown pottery.

Founders' Myth

The Wedgewood model of growth, scalability, and monopolistic control of an idea, service, or process was followed by future entrepreneurs. This led to the development of the Founders' Myth—the idea that an entrepreneur develops a "world-changing" idea through grit, resilience, risk-taking, and without the help of other parties. This myth would fuel the development of products, services, and processes, and would ultimately be reinforced through the development of the digital era in the middle of the 20th century all the way through today. However, with the development of computers, the Internet, and global trade policies, in the 20th century, the Wedgewood model would get a steroid-like injection and would push entrepreneurs to focus less and less on delivering products, services, and processes to a growing consumer class, and instead shift to delivering ideas, experiences, and relationships globally.

Strategy

The ability to intuitively understand the long-term impacts of decisions and to not be fearful of their impact and the ability to mitigate the impact of short-term strategic decisions is an entrepreneurial business skill. Goal setting, focus, planning, and implementation (or execution) have been explored academically in many other areas. However, for the practicing entrepreneur, strategic thinking and responding is a day-by-day, moment-by-moment, management skill set that is invaluable for success. Many entrepreneurs fail in their business projects when they cannot explain their strategy to others (i.e. employees and investors) or when they have no strategy and are merely reacting to the market on a day-by-day basis.

What is entrepreneurship?

The ability to scale an idea into a revenue generating business over time

Change Management (competitive advantage)

The advantages that 20th-century firms and businesses used to have (size, scale, market dominance, limited competition, etc.) are no longer applicable. Monopolies in a knowledge economy might be a competitive advantage, as the Facebook investor, PayPal co-founder, and venture capitalist Peter Thiel argues in his book Zero to One: Notes on Startups, or How to Build the Future. But the fact is that many businesses in many sectors of the economy are seeing monopolies based on competitive advantages that they believed were proprietary, disappear due to the advent of the Internet, but also globalism, free trade, and an ever-expanding knowledge-based economy. Managers need to leverage entrepreneurial thinking to navigate market sectors where competitive advantages that used to be dominant, may be on the wane.

Change (speed of)

The competitive cycles in free market economies have tightened considerably, as have the cycles between technological innovations. The theory of riding a Blue Ocean strategy of creating demand in a market niche to market dominance (popularized through the 2004 Harvard Business Review article Blue Ocean Strategy 10 written by W.Chan Kim and Renee Mauborgne) no longer applies in businesses where competitors come into markets via indirect methods. This indirect methodology causes businesses to have speed-to-market and causes market competitors to scramble to pivot at the last minute. There are multiple examples of this in all industries, from Amazon going into the health insurance industry to Netflix being offered through Comcast cable service, or the local heavy manufacturing company developing a VR application to train workers on how to use a forklift and then selling that application to its competitors. Managers have a responsibility to adapt, manage, and compete through change cycles that are unpredictable (due to technology changes and an increase in competition). Applying entrepreneurial thinking to your management style may reduce the anxiety that comes from addressing these changes.

The most apocryphal stories of exploration that represent the principles of entrepreneurship are the story of the funding of Columbus's first voyage to the New World

The concept of using debt to finance exploration—and the idea of putting up collateral on the part of the person requesting the money—lies at the bottom of the development of many innovations and technologies that were born through entrepreneurship in the 20th and 21st century. This process began in earnest in the 15th and 16th centuries in Europe. In essence, this is the idea that a person who seems crazy can indeed convince a person with money who seems sane, that the risk of gain in an entrepreneurial venture is higher than the risk of loss.

Apple and Windows OS

The development of both Apple and Windows OS could not have occurred with globalism and free trade. The establishing of secured trading and communication routes during the Cold War (1945-1989) by both the Soviet Union and the United States led to the development of an economic system that would ensure new markets, and new consumers, for innovative products, services, and processes. As the 20th century wound to a close, the World Wide Web began to develop commercially, and innovative entrepreneurs such as Sergei Brin and Larry Page (founders of Google), David Filo and Jerry Yang (founders of Yahoo), and later on Tom Anderson (founder of MySpace) would take the principles of entrepreneurship laid out in previous centuries and apply them to the digital and Internet landscape.

internet

The explosion of the Internet allowed the expansion of entrepreneurial opportunity to women and minorities worldwide, following a simple principle: If you have access to the Internet, there is no one stopping you from building any type of service, product, or process (from meal delivery services to file storage and sharing services) and growing those ideas to businesses. This is the world that modern managers and others are operating in when they seek to work with employees in an entrepreneurial fashion. It has become easier and easier for a person with an idea to develop a side hustle that, if enough effort is placed behind it, can very well become a moderately successful business. But what are the traits of a successful (even moderately successful) entrepreneur that managers can harness in the 21st century?

Innovation (technological leveraging)

The fact of the matter is, Google (founded in 1997) and other Internet-based companies have pushed the envelope of what technology can do for organizations in the development of products, processes, and services for consumers. In a modern industrialized economy, a little entrepreneurship could provide massive scale value (e.g., profits, consumer value), with a high level of proprietary control of knowledge, information, process, and procedures. Innovation does not always come about from leveraging technological advances alone. Many times, innovation in a market sector comes from a new business perspective being applied to an old market problem. In a post-modern knowledge-based economy, the Internet and companies based on it have provided the impetus for challenging network effects and the ability for the average individual to leverage the technology available for smaller (but not insignificant) profits.

Black Swans (non-obvious ideas)

The idea of black swans—incidents that have a major impact, are explained in hindsight, and are outliers and thus impossible to accurately predict—was popularized by investment banker and author Nicholas Nassim Taleb. The impact of black swan events can be seen everywhere in post-modern market economies, from the slow-motion collapse of modern B2C book retailing due to the presence of Amazon, all the way to the changes in how passengers fly on planes due to September 11th. The problem for managers compounds because many organizations are primed to be reactive in their posture toward the impact of black swans. However, entrepreneurs by their nature and entrepreneurial thinking by its nature are inherently proactive toward the presence of black swans, thus making entrepreneurs ideal for managers to consider as hires in their organizations. One way to combat the overwhelming impact of black swans is for managers to prioritize execution on non-obvious solutions to problems, which is a skill at the core of entrepreneurship itself. The other skill for managers to develop is thinking in light of a portfolio of potential strategic actions. All entrepreneurs must solve problems, and usually, they do so by taking ideas from market sectors, and businesses unrelated to their own, and then applying those ideas in a portfolio approach to potential black swan events.

What were the key components of entrepreneurship in the Medieval Period?

The key components of entrepreneurship were a growing banking system, trade increasing throughout towns and villages, and a growing population of people in towns and villages.

modern entrepreneurship

The most modern (i.e., 21st century) definition of entrepreneurship views the act of creating an innovative business, based on innovative business models, as one that causes disruption in established markets of goods, services, products, and processes. This disruption can come through leveraging technology, leveraging a product innovation (e.g., through patents and trademarks), or leveraging a new perspective on an old process (e.g., Google's use of keyword search terms to create an auction for publishers, marketers, and others) in order to generate value to both an end user and other individuals in the supply chain.

In an attempt to influence buyer behaviour, the Dutch mercantilists used speculative activity. This eventually led to the creation of:

The stock market The class that developed after the Medieval Period in Europe did think of themselves as merchants: individuals engaged in the buying and selling of goods and then transferring the capital from those purchases back into the business of trade, including building ships (exploration), hiring people (craftsman and artisan at scale), paying "taxes" (giving payments to government in exchange for favorable policies), and building pre-modern monopolies (stifling competition and keeping wages low).

Entrepreneurial Skillsets

There are certain entrepreneurial skillsets that become apparent for success that both managers and employees need to foster the growth of, and to assist in, entrepreneurial growth in organizations. Human Relations Skills Financial Skills Business Skills

Financial Skills

There are two financial skills that every entrepreneur must possess: the ability to determine how to raise money (e.g., through a loan, through giving away equity in the business in exchange for capital to a wealthy investor, or through bootstrapping—that is, self-funding and customer funding) and when to spend money. Both of these are discretely different skills.

Getting a loan from a bank

This is the most common way for entrepreneurs to think about starting a business, particularly if they have little capital—or credit—established. If an idea is particularly risky, such as an idea to compete against the iPhone by making a new type of cell phone in America, then the risk might be too much for a bank to back through a loan with collateral. Getting a loan from a bank worked better in the era before the mortgage-based securities trading based economic collapse of 2008, but in the time after that, banks have moved more in the direction of offering high-interest lines of credit to fund risk ventures.

Computer and Digital Age (Mid-20th Century - Current Age): Economies of Scale Fragmented by Globalism

Throughout the 20th Century, entrepreneurs continued to expand their businesses and projects using principles of scale, monopolistic trade, and pricing practices, and through having access to capital. As global markets exploded, initially after the First World War and in earnest after the Second World War, many entrepreneurs began to push toward new innovations in the field of communications, transportation, and entertainment and the use of those innovations to catapult growth. The combat communications innovations that the British, Japanese, Germans, and Russians developed in the mid-20th century included radar, sonar, solid fuel rockets, and eventually the silicon chip. The exploitation of all of these wartime innovations would set the stage for the development of personal computing technology, telecommunications, and the Internet. Integral also to the growth of innovation during this time was the impact of Andy Grove's work at Intel and Gordon Moore's work at Fairchild Semiconductor in the mid-1960s and the development of Moore's Law. Moore's law states that the number of transistors in a dense integrated circuit (i.e., a computer chip) doubles about every two years.27 Innovators and entrepreneurs began also to flock en mass to geographic areas such as Northern California (soon to become known as Silicon Valley) to make their entrepreneurial fortunes come to life. Two of these innovators, Steve Jobs (the co-founder of Apple Computers) and Bill Gates (the founder of Microsoft) would serve as examples of how innovation, driven by geography, an understanding of Moore's Law, and other factors, would compete to foster a culture of growth and success that would fuel other innovations, such as the Internet in the 21st century.

What was the main reason for Chinese junk ships to go around the Indian Ocean?

To have a "show of force" to other nations

What were the main traits of successful merchants in the mercantile period?

Transferring capital back into the trade business Paying "taxes" to governments Building monopolies

Entrepreneurial Roles

We have talked quite a bit in this chapter about entrepreneurs, but when the principles of entrepreneurship—innovation, risk-taking, scaling, acquiring resources, etc.—are applied inside an already-established organization, then we define the individuals who engage in these acts as intrapreneurs ​Intrapreneurship is the act of behaving like an entrepreneur while working within a large organization. Intrapreneurship is known as the practice of a corporate management style that integrates risk-taking and innovation approaches, as well as the reward and motivational techniques, that are more traditionally thought of as being the province of entrepreneurship Intrapreneurship is a case of management inside of major organizations attempting to harness the innovative power of entrepreneurship. Unfortunately, many managers may struggle with internalizing and capitalizing on the long-term value of entrepreneurial thinking and approaches in a standardized, scaled, and revenue generating system. These are the systems that are internal to major organizations, corporations, and businesses. Thus, they may fail to contribute resources to support intrapreneurial efforts such as employees, time, energy, or other material resources to intrapreneurial efforts. Many such efforts have failed recently, even in innovative and progressive organizations, such as Target in Canada.

entrepreneurs need

attitude creativity relationships organization

What is the importance of establishing culture when hiring employees for an entrepreneur?

​Culture determines how employees will work in the organization and how motivated employees will be to stay in the organization. Workplace culture is determined by considerations the entrepreneur has to make about who to hire (race, gender, etc.), when to hire (right away or later), and what kind of work best "fits" a new hire's talents and skill sets.