1. Building Entrepreneurial Capacity for Agriculture
Dr. Chris Peterson
Director, MSU Product Center
NACAA Conference
July, 2007
© Dr. H. Christopher Peterson, Michigan State University, 2007

2. The Issues The Problem The Basics of New Venture Creation
Capacities Needed vs. What Exists for Entrepreneurial Agriculture
Overcoming the Capacity Gap to Build an Entrepreneurial Agriculture

3. The Problem
Undesirable outcome: Declining agri-food firm profitability
Possible Responses (not exhaustive):
Find alternatives to commodity production, e.g., value-added and/or non-food uses of ag
Foster sustainable rural development
“Mandate”: Assist new venture creation
Both 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 change
Products & services, processes & technology, capabilities & competencies, supply chain relationships, and markets
Market 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 resources
Only non-marginal decisions about resource accumulation and use
Manager: Ability to sustain a continuing venture.
Existing endowments of resources
Marginal 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 Environment
Innovative Idea
Test of Potential
Prove potential
Create initial “prospectus” to
seek resources
Test of
Feasibility
Prove feasibility
Prepare for implementation
Gather resources
Venture Concept
New Venture
Entrepreneur
Market Opportunity
Resources III
Prop., Plant & Eqmt
Personnel
Management
Buyers
Suppliers
Advisors/Partners
Full Debt & Equity
Resources I
“Potential” Info (general market, process, org., etc.)
“Sweat” Equity
Resources II
“Feasibility” Info (specific market, process, org., etc.)
Initial Equity
Industry and Market Environment

10. What Capacities Are Needed?
Entrepreneurial capacity
Risk seeking and resource creating
Innovation capacity
Willingness to create the new
Capacity to assess market opportunity
What the customer values!
Commercialization Capacity
Ability to convert the concept into practice

11. Entrepreneurial Agriculture?
Do we have entrepreneurs?
Mostly managers, not entrepreneurs
Do we seek innovation?
Rather conservative business approach
Do we assess market opportunity well?
The “commodity” mind set
Do we know how to commercialize?
IP, capital, and partners

12. Entrepreneurial Agriculture?
Two other challenges:
Biological foundation of products
Need for collective action
CONCLUSION: 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 knowledge
Entrepreneurship, innovation methods, market opportunity assessment, commercialization know-how
Encourage and support experience

14. Building Entrepreneurial Ag?
Build partnerships
With ag & non-ag entrepreneurial community
USDA RD, AgMRC, Farm Credit, RECs, FB, etc.
SBA, SBTC, Economic Development Corp., etc.
With rural communities
Creating Entrepreneurial Communities
Through networking organizations
The Product Center and like entities

15. Product Center Networks & Outcomes
PROGRAM DELIVERY NETWORK
GOVERNANCE
Dean and Directors
Department of Ag Economics
Joint Advisory Committee
(with participation from customers, internal & external providers, and sponsors.
COMPONENT
NETWORKS
VENTURE
DEVELOPMENT
Provider Networks
Service Networks
MARKET & INNOVATION RESEARCH
ENTRENEURIAL& COMMUNITY DEVELPMENT NETWORKS
Desired Outcomes:
ECONOMIC OPPORTUNITIES
New businesses
New products
More successful existing businesses
Reduced likelihood of losses from inappropriate business/product decisions
Better access to existing resources
More educated pool of entrepreneurs and managers
Creation of entrepreneurial communities
Customers
(Ag, Food &
Natural Resources)
Entrepreneurs
Existing Firms
Producer Organizations
Commodity Groups
Communities
Government Agencies
MSU Faculty & Units
Economic Development Groups
Local Food Systems
Other economic entities
MSU
PRODUCT CENTER
PROGRAMS
Venture Development
Market & Innovation Research (Knowledge Development)
Entrepreneurial & Community Development
COOPERATORS
EXTERNAL PARTNERS
INTERNAL PARTNERS
INNOVATION COUNSELORS
& EDUCATORS
SPONSORS

16. A FRAMEWORK FOR NEW VENTURE CREATION Industry and Market Environment
Policy Environment
Innovative Idea
Test of
Potential
Prove viability
Create initial “prospectus” to
seek resources
Test of
Feasibility
Prove feasibility
Prepare for implementation
Gather resources
Venture Concept
New Venture
Entrepreneur
Market Opportunity
Resources III
Prop., Plant & Eqmt
Personnel
Management
Buyers
Suppliers
Advisors/Partners
Full Debt & Equity
Resources I
“Viability” Info (general market, process, org., etc.)
“Sweat” Equity
Resources II
“Feasibility” Info (specific market, process, org., etc.)
Initial Equity
Industry and Market Environment

17. Concluding Thoughts
We face a “mandate” to support new venture creation.
A worthy concept comes first.
Entrepreneur, Innovation, Opportunity
Then all the elements of commercialization.
Agriculture is entrepreneurially challenged.
Education, experience, and partnering.