ENT | 3

Entrepreneurship Part 3 - The Key Elements of ENT

Let’s continue our entrepreneurial journey by having a look on opportunities as it seems that these have a crucial impact on our path of self fulfillment. We thereby follow the key elements of entrepreneurship as shown in part 1.

An opportunity can be defined as a situation in which new services, products or processes can be introduced and sold at a greater price than its own costs of production. Entrepreneurs perceive market needs and/or underemployed resources and recognize a “match” between those two.

What may later be called an opportunity may appear as imprecisely defined market needs. These are the sources of market-pulled opportunities. The role of the entrepreneur is to recognize these needs and develop an offer in which customers are willing to pay for.

Under-utilized or unemployed resources may also offer possibilities to create value for customers. This type of opportunities can be called market-pushed opportunities. The role of the entrepreneur is to identify resources that are not optimally used and then seek a better user or combination of these for a specific market.

According to Peter Drucker, Austrian-born American management consultant, educator, and author (1909-2005), there are three different categories of opportunities:

1. Inefficiencies within existing markets due to either information asymmetries or the limitations in technology in terms of satisfying certain known but unfulfilled market needs

2. The emergence of significant changes in social, political, demographic and economic forces

3. Inventions and discoveries that produce new knowledge

The tendency to discover these opportunities are dependent on psychological characteristics, information and knowledge availability, creative processing and cognitive heuristics.

Good entrepreneurial opportunities fulfill the following four criteria:

1. They generate additional value for the customer and thereby for parts of society or society as a whole

2. They satisfy desires and needs for which some people are willing to pay for

3. They have a solid market potential, i.e. generate revenues and yield, so that the entrepreneurs can easily show a clear value proposition to their stakeholders

4. They are in accordance with entrepreneur’s characteristics and balance risk and return

The heterogeneous field of entrepreneurship - by Bruyat & Julien (2001)

With the opportunities on the one hand we have to have a look on the resources on the other.

The term resource includes a variety of different things. Basically any thing or quality that is useful in doing something can be considered as a resource.

The resource based view of companies recoginzes six different types of resources:

1. Financial

2. Physical

3. Human

4. Technological

5. Social

6. Organizational

The third key element of entrepreneurship is the organization.

Many different types of organizational arrangements exist for the exploitation of entrepreneurial opportunities. Although most attention has been paid to new independent start-ups, other possible types of organizational structure include corporate ventures, spin-offs/spin-outs, franchises, joint ventures or business acquisitions.

Entrepreneurship can take place in diverse environments and there are many ways to become an entrepreneur also MBO or MBI (Management Buyout/Management buy-in).

Looking at the key elements of entrepreneurship next in line will be the surrounding environment.

The environment plays a crucial role on the entrepreneurial journey as it can be more or less rich of opportunities. Several conditions influence the pursuit of these opportunities. For example, opportunities can emerge because of market inefficiencies that result from information asymmetry across time and place, or as a result of political, regulatory, social or demographic changes.

There are two relevant levels of the environment:

1. At the community level, both the number of organizations in an industry and the strength of relationships between these organizations are important to entrepreneurs.

2. At the social level, cultural norms and values shape the environment for an organization as well as government activities and policies.

This was it for today - in part 4 will be discussing the entrepreneurial journey as a process.