The Entrepreneurial Mindset (Part I)
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A brief introduction to the Entrepreneurial Mindset and how it is different from the traditional mindset taught to students of traditional business or management programs. I deliver regular courses based on these concepts, and regularly help aspiring and experienced entrepreneurs to put these principles to use in the process of creating new ventures.
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The Entrepreneurial Mindset (Part I)
- 1. What is the “Entrepreneurial Mindset”? Entrepreneurship and Small Business Management Christopher Zobrist, MBA Adapted from “The Entrepreneurial Method” by S.D. Sarasvathy, 2006
- 2. Theories of Entrepreneurship Personality/Trait Theory “Crystal Ball” or Lone Visionary Opportunity Recognition Right Place, RIght Time Entrepreneurial Thought Process Managerial vs Entrepreneurial
- 3. Facts About Entrepreneurs 65% did not start businesses as children or students, and did not have parents who were entrepreneurs 75% learned skills they used in starting their business after age 21 Source: Inc 500 Founders’ Survey (1996)
- 4. Facts About Entrepreneurs 65% developed their idea by talking to or working with customers or partners 70% did not have a vision for a “venture- scale” business, they just wanted to start something Source: Inc 500 Founders’ Survey (1996)
- 5. Case Study: Bill Gates The Myth Bill Gates was a visionary who saw the future that all PCs would run Windows Built Microsoft into the bigest software company in the world by himself because of his vision and talent
- 6. Case Study: Bill Gates The Facts Bill’s family was very wealthy, and Bill went to a gifted high school for children of rich families Bill learned how to program a computer in high school (in the late 1960s, computers were very rare) Bill did not “drop out” of Harvard, but rather took a “leave of absence” and could come back at any time Bill’s mother introduced Bill’s new company, Micro-Soft, to the CEO of IBM A few weeks after the introduction, IBM signed a deal with Bill for MS-DOS, allowing Bill to retain the IP Source: Leap, by Rick Smith
- 7. Case Study: Mark Zuckerberg The Myth Mark was a visionary who saw online social networks as the future of online media Mark built Facebook by himself from the beginning based on his vision and talent Through his strong vision and character, was able to raise millions of dollars easily for Facebook
- 8. Case Study: Mark Zuckerberg The Facts Learned how to write computer programs since he was 10 years old Worked on many “projects” including Facemash and The Facebook, many of which failed early, but he learned from them Started The Facebook with just $2000 Had a strong core team who helped him grow Facebook before getting external funding Met Sean Parker who helped him raise money to grow the business Source: The Facebook Effect, by David Kirkpatrick
- 10. Case Study: Japan – SONY Co-founded by Ibuka First innovation (electric rice cooker) failed Stayed in business by repairing short-wave radios Ibuka envisioned a pocket radio, but was initially denied the license by the Japanese government
- 11. Case Study: Japan - SONY Bell Labs developed transitors, but didn’t think they could be used in a pocket radio Ibuka licensed the technology and pushed his engineers for 3 years to develop the first transitor radio Sold 1.5 million units, and Sony became a technology leader
- 12. Class Discussion: Vietnam – FPT Who started FPT? How? Why? What was FPT’s original business? Were they successful in this business? How did FPT’s business evolve over time? Are they successful? Why or why not?
- 13. What is the Entrepreneurial Mindset? Entrepreneurial vs Managerial Effectual vs Causal
- 14. Learning Objectives How do entrepreneurs think when starting a new business? How is this different from how Managers think when managing an established business?
- 15. The Entrepreneurial Mindset: Cause vs Effect
- 16. Causal - If we can accurately predict the future, then we can control it. Predictive: Start with Goals Analysis Before Action Goals drive stakeholder and resource acquisition Control is achieved by being one step ahead of the competition Avoid failure at all costs
- 17. Effectual - If we can control the future, we don’t need to predict it. Non-predictive: Start with Means Actions and interactions with stakeholders drive the process Goals are set by stakeholders who invest only what they are willing to lose Control is achieved by action; transforming current reality into new and unforeseen possibilities Fail small and early and LEARN from it
- 18. So which method is better?
- 19. Who moved my cheese?
- 20. Elements of the Effectual Entrepreneur Process Principles Logic
- 21. Effectual Process Begin with who you are, what you know, and whom you know Take action and interact with other people Focus on what you can do and do it People you interact with self- select into the process by making commitments to the venture Each commitment results in new means and new goals for the venture
- 22. Effectual Process Expanding Cycle of Resources New Means Possible Goals and Actions Who I am Obtain Interact with What I know What I can do Stakeholder other people Whom I know Committment Means Available Converging Cycle of Interests New Goals New Markets New Opportunities New Ventures
- 23. Effectual Principles Means-driven (as opposed to goal-driven) action Affordable loss, stakeholders only invest what they are willing to lose Negotiate with any and all stakeholders who are willing to make actual commitments to the project Be flexible by leveraging surprises rather than trying to avoid them Work with potential customers as the prime driver of opportunity
- 24. Effectual Logic See the world as open, still in the making Very rarely see opportunities as given or outside of their control Have an instrumental view of firms and markets Do not seek to avoid failure because it is part of the learning process
- 25. Class Activity and Discussion Read “Venturing” Case Excise Problem 1 Based on your new knowledge of Effectuation, work in teams to provide answers to the questions in Problem 1 After you have finished answering the questions, choose a partner and compare your answers. Be prepared to discuss your answers with the class.
- 26. Venturing Problem 1 1. Who could be your potential customers for this product? 2. Who could be your potential competitors for this product? 3. What information would you seek about potential customers and competitors—list questions you would want answered. 4. How will you find out this information—what kind of market research would you do? 5. What do you think are the growth possibilities for this company?
Notes de l'éditeur
- Contingent (depends on) the situation Causal – Better for stable and mature companies, when goals are clear and efficient execution is most important. Effectual – Better for new firms or markets where goals are not yet clear and flexibility is most important.
- Experienced Entrepreneurs begin with who they are, what they know, and whom they know, and immediately start taking action and interacting with other people. They focus on what they can do and do it, without worrying much about what they should do. Some of the people they interact with self- select into the process by making commitments to the venture. Each commitment results in new means and new goals for the venture. As resources accumulate in the growing network, constraints begin to appear. The constraints reduce possible changes in future goals and restrict who may or may not be admitted into the stakeholder network. Assuming the stakeholder accumulation process does not fail, goals and networks concurrently converge into a new market and a new firm.
- Means-driven (as opposed to goal-driven) action. The emphasis here is on creating something new with existing means rather than discovering new ways to achieve given goals. Commit in advance only what one is willing to lose rather than investing in calculations about expected returns to the project. Negotiate with any and all stakeholders who are willing to make actual commitments to the project, without worrying about opportunity costs, or carrying out elaborate competitive analyses. Be flexible by leveraging surprises rather than trying to avoid them, overcome them, or adapt to them. Work with potential customers as the prime driver of opportunity rather than limiting entrepreneurial efforts to exploiting factors such as technological trajectories and socioeconomic trends.
- Effectuators see the world as open, still in the making. They see a genuine role for human action. In fact, they see both firms and markets as human-made artifacts. Effectuators very rarely see opportunities as given or outside of their control. For the most part, they work to create as well as recognize and discover opportunities. Effectuators often have an instrumental view of firms and markets. They do not act as though they were the agents of the firm or as suppliers catering to demand―firms are a way for them to create something new for themselves and/or for the world; markets are more likely made than found; and they are made through an expanding network of self-selected stakeholders. Effectuators do not seek to avoid failure; they seek to achieve success. They recognize that failing is an integral part of becoming an experienced entrepreneur.