2 The Issues The Problem The Basics of New Venture Creation Capacities Needed vs. What Exists for Entrepreneurial AgricultureOvercoming the Capacity Gap to Build an Entrepreneurial Agriculture
3 The ProblemUndesirable outcome: Declining agri-food firm profitabilityPossible Responses (not exhaustive):Find alternatives to commodity production, e.g., value-added and/or non-food uses of agFoster sustainable rural development“Mandate”: Assist new venture creationBoth new businesses & new products/services
4 The Problem What capacities are needed to create new ventures? Do we have these capacities in agriculture?If not, how do we get them?How knowledgeable and skillful are we (the entrepreneurial support community) in assisting new venture creation?
5 Examining the Basics Entrepreneurship vs. Innovation Entrepreneurship: The drive and skill to commercialize a new venture.Innovation: The drive and means to create a new idea; not adoption; not a venture.Entrepreneurs and innovators need not be the same; but mixture is possible.Entrepreneurship does require an innovative idea; but degree of innovative varies widely.
6 Examining the Basics Innovation vs. Market Opportunity Innovation: a new idea for business changeProducts & services, processes & technology, capabilities & competencies, supply chain relationships, and marketsMarket Opportunity: the demand and supply conditions that would lead to an innovation’s commercialization through a new venture.Idea and opportunity are too often mixed.
7 Examining the Basics Entrepreneur vs. Manager Entrepreneur: Ability to create a new venture.No existing endowment of resourcesOnly non-marginal decisions about resource accumulation and useManager: Ability to sustain a continuing venture.Existing endowments of resourcesMarginal and non-marginal decisions about resource use and growth
8 Examining the Basics Venture Potential vs. Feasibility No common definition for a business plan or a feasibility study.A useful distinction?Potential: Can the venture create needed profits under a general set of assumptions?Feasibility: Can the venture create needed profits when all knowable factors (in advance) are taken into account?
9 A FRAMEWORK FOR NEW VENTURE CREATION Industry and Market Environment Policy EnvironmentInnovative IdeaTest of PotentialProve potentialCreate initial “prospectus” toseek resourcesTest ofFeasibilityProve feasibilityPrepare for implementationGather resourcesVenture ConceptNew VentureEntrepreneurMarket OpportunityResources IIIProp., Plant & EqmtPersonnelManagementBuyersSuppliersAdvisors/PartnersFull Debt & EquityResources I“Potential” Info (general market, process, org., etc.)“Sweat” EquityResources II“Feasibility” Info (specific market, process, org., etc.)Initial EquityIndustry and Market Environment
10 What Capacities Are Needed? Entrepreneurial capacityRisk seeking and resource creatingInnovation capacityWillingness to create the newCapacity to assess market opportunityWhat the customer values!Commercialization CapacityAbility to convert the concept into practice
11 Entrepreneurial Agriculture? Do we have entrepreneurs?Mostly managers, not entrepreneursDo we seek innovation?Rather conservative business approachDo we assess market opportunity well?The “commodity” mind setDo we know how to commercialize?IP, capital, and partners
12 Entrepreneurial Agriculture? Two other challenges:Biological foundation of productsNeed for collective actionCONCLUSION: Agriculture is challenged in every capacity needed for venture creation.This does not mean that agriculture can not be entrepreneurial.
13 Building Entrepreneurial Ag? The way we always have in extension by working directly with agricultural producers and related firms.Apply knowledgeEntrepreneurship, innovation methods, market opportunity assessment, commercialization know-howEncourage and support experience
14 Building Entrepreneurial Ag? Build partnershipsWith ag & non-ag entrepreneurial communityUSDA RD, AgMRC, Farm Credit, RECs, FB, etc.SBA, SBTC, Economic Development Corp., etc.With rural communitiesCreating Entrepreneurial CommunitiesThrough networking organizationsThe Product Center and like entities
15 Product Center Networks & Outcomes PROGRAM DELIVERY NETWORKGOVERNANCEDean and DirectorsDepartment of Ag EconomicsJoint Advisory Committee(with participation from customers, internal & external providers, and sponsors.COMPONENTNETWORKSVENTUREDEVELOPMENTProvider NetworksService NetworksMARKET & INNOVATION RESEARCHENTRENEURIAL& COMMUNITY DEVELPMENT NETWORKSDesired Outcomes:ECONOMIC OPPORTUNITIESNew businessesNew productsMore successful existing businessesReduced likelihood of losses from inappropriate business/product decisionsBetter access to existing resourcesMore educated pool of entrepreneurs and managersCreation of entrepreneurial communitiesCustomers(Ag, Food &Natural Resources)EntrepreneursExisting FirmsProducer OrganizationsCommodity GroupsCommunitiesGovernment AgenciesMSU Faculty & UnitsEconomic Development GroupsLocal Food SystemsOther economic entitiesMSUPRODUCT CENTERPROGRAMSVenture DevelopmentMarket & Innovation Research (Knowledge Development)Entrepreneurial & Community DevelopmentCOOPERATORSEXTERNAL PARTNERSINTERNAL PARTNERSINNOVATION COUNSELORS& EDUCATORSSPONSORS
16 A FRAMEWORK FOR NEW VENTURE CREATION Industry and Market Environment Policy EnvironmentInnovative IdeaTest ofPotentialProve viabilityCreate initial “prospectus” toseek resourcesTest ofFeasibilityProve feasibilityPrepare for implementationGather resourcesVenture ConceptNew VentureEntrepreneurMarket OpportunityResources IIIProp., Plant & EqmtPersonnelManagementBuyersSuppliersAdvisors/PartnersFull Debt & EquityResources I“Viability” Info (general market, process, org., etc.)“Sweat” EquityResources II“Feasibility” Info (specific market, process, org., etc.)Initial EquityIndustry and Market Environment
17 Concluding ThoughtsWe face a “mandate” to support new venture creation.A worthy concept comes first.Entrepreneur, Innovation, OpportunityThen all the elements of commercialization.Agriculture is entrepreneurially challenged.Education, experience, and partnering.