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ENT 422 The Role of Entrepreneurship in Value Creation in Large and Small Enterprises Lecture 2.

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Presentation on theme: "ENT 422 The Role of Entrepreneurship in Value Creation in Large and Small Enterprises Lecture 2."— Presentation transcript:

1 ENT 422 The Role of Entrepreneurship in Value Creation in Large and Small Enterprises Lecture 2

2 Highlights of September 19  Entrepreneurship consists of five phases but our focus will be on the first – determining if an idea can become an opportunity.  The remaining phases will be discussed during the course.  To help evaluate ideas we will use the “Idea Generation Guide”, the “Quickscreen” exercise and the “Venture Opportunity Screening” exercises (VOSE)  Entrepreneurship has its genesis in older disciplines: law, economics social sciences, finance, etc.  After this course students will be prepared for other entrepreneurship offerings.  Teams are critical in developing businesses. We ask students to form teams of two or three

3 Corporate Venturing Block and Macmillan Chapter I Corporate Venturing – What Is It? Why Do It?

4 What Is It?  A New Venture Begun Internally  Involves Risk – For the corporation – For the individuals involved and their careers

5 Why Do It? Corporations start new businesses because –  The base business is maturing  To meet strategic goals  New ideas from employees  Pressure for revenue/profit growth  Attempt to commercialize IP

6 Track Record  Varies From Excellent to Disastrous  Successful Ventures Are – – Often more rewarding than acquisitions – Usually profitable in 2 to 3 years – Achieve greater ROI levels than base business  The Key To Success – – Today? – Tomorrow?

7 Track Record (cont.) The Reasons for Failure –  Inadequacy of management team  Lack or organizational mentor  Inadequate evaluation of the idea  Project is inadequately resourced; forced to play under rules of base business  Career path – uncertain for the team

8 Should All Companies Attempt Venturing? The Short Answer Is ― Yes!  Key management/mentor support critical.  A significant opportunity for younger employees.  It could be you!!

9 Personal Experiences Ingersol Products, Division of Borg Warner Corp. Manufacturer of Agricultural Components  Chief engineer had an idea – Motorize the functions of hospital beds – A. T. Kearney asked to evaluate idea – Secondary and primary research was conducted – Conclusion: an “opportunity” existed  Resources were assembled including preparation of a business plan  A new business was launched  After launching typical enhancements were added  It became the largest hospital bed supplier  The chief engineer was handsomely rewarded

10 Personal Experiences (cont.) Sarah Coventry, Intl., manufacturer and marketer of costume jewelry  Used party plan method of selling  Two managers had an idea – Sell Jewelry By Direct Mail – Four Countries – Selected As Test Markets – Germany, France, Italy and Spain – Consultants Hired To Conduct The Study  All countries found fairly equal in terms of – Population – Receptivity to direct mail and catalogue purchasing – Disposable income – Conclusion: an “opportunity” existed – Germany was selected as first among equals  Resources were assembled including a business plan  A new business was launched under the two managers who came up with the idea  It was successful and breakeven reached in 18 months

11 Peter may want to add some personal experiences.

12 Entrepreneurship Baron and Shane Chapter 2: “Uncovering Opportunities” Selected Highlights from the Chapter

13 Major Changes Occurring Causing Opportunities for Entrepreneurs  Technological – makes it possible to do things in new and different ways  Political and regulatory – makes it possible to develop business ideas that are more productive  Social and demographic – changes in preferences provide opportunities for new offerings

14 Established Firms Often Find Difficulty Inventing New Technologies  New technologies may not satisfy present customers  New technology of little use to satisfied customers and may cause them to change suppliers  New firms may have nothing to lose by inventing new technology

15 Three Industry Components Influencing New Venture Success 1. Knowledge conditions – complexity of information required for success demand conditions – attributes that create desire on the part of purchasers. 2. Industry life cycles – the stage of an industry influences the success of new ventures. 3. Industry structure – those industries requiring a lot of capital, heavy advertising, concentration in few companies and high average size bad for startups.

16 Impact of Dominant Design on New Ventures  New firms more successful when adopting their own  When dominant mode present startups must adopt in order to compete

17 Entrepreneurship Baron and Shane Chapter 3: “Cognitive Foundations of Entrepreneurship” Selected Highlights from the Chapter

18 Entrepreneurs And the Illusion of Control  They tend to assume a greater control of events than is realistic.  These include economic conditions, competition customer’s reactions, effects of laws/regulations.

19 Creativity and Prototypes  Prototypes may interfere with creativity: people may tend to regard them as the “final” design or product.  But they can be helpful by providing a framework conveying new information.

20 What Is Creativity?  Defined as creating something new and useful.  Important because it provides knowledge, advances improving quality of life.

21 Three Components of Intelligence First Analytical: Ability to think critically. Second Creative: Ability to formulate ideas and insights in problem solving. Third Practical: Being intelligent in a realistic sense. We encourage reading both chapters for in-depth understanding of the issues

22 Sources of Ideas Hisrich (handout) Chapter 5 “Creativity and the Business Idea” Selected Highlights from the Chapter

23 Sources of New Ideas Some of the more frequent are –  Consumers – entrepreneurs should consider them both formerly an informally for ideas and needs  Existing products and services – should closely monitor competitive offerings for opportunities  Distribution channels – rich source because of familiarity with market needs  Federal government – patent office files and response to government regulations are good idea sources  Research and development – entrepreneur’s own efforts are the single largest possibility

24 Methods for Generating Ideas Even many sources already mentioned – sometimes difficult to come up with ideas. Some suggestions –  Focus groups – open, in-depth discussions. I’ve often used them successfully  Brainstorming – uninhibited development of ideas  Problem inventory analysis – obtaining ideas by focusing on problems There are other techniques less frequently used which the chapter describes. Read at your leisure.

25 Workshop  Hand in list of team members  Hand in completed student biographical form  Discuss idea generation guide, the Quickscreen exercise and the 12 venture opportunity screening exercises (VOSE)  Readings (handout materials)  Work on selecting two ideas” using the idea generation exercise

26 Assignment for September 28  Guest Speaker: Jim Doyle, Jr., Executive Director Proventure (Far East) Ltd. Topic: “How We Evaluated Ideas, Selected One And Built a Company”  Lecture: sources of information for evaluating ideas readings: Baron, Chap. 4: “Acquiring Information”, (handout materials); Alreck, Chap. 1: “Initiating a Survey”; Chap. 2: “Planning the Project”; The Market Research Encyclopedia; Business Plan; Competition Resources; Conjoint Analysis; Internet sources including Google; Business Week article, “Get Creative”  Workshop: – Hand in and discuss the idea generation guide for two ideas – Work on the application of Quickscreen exercise for two ideas, deciding on one for further study (due at the next class)

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