Innovation Series #5 – What is Entrepreneurship?

8 07 2008

The spirit of Entrepreneurship – the notion of human progress, development, achievement and change – motivates and energizes the people and organizations that improve our lives.

5 out of 10 people today want to be entrepreneurs. Why? Is the term fascinating or gives a social status? Is entrepreneurship new? No. It did exist since the beginning of human race. This post concentrates on speaking about what is Entrepreneurship all about, a basic definition and its dimensions.

There are by far many definitions of entrepreneurship, however, let us look at one of the best definitions which I ever read…

Entrepreneurship is the creation of an innovative economic organization for the purpose of gain or growth under conditions of risk and uncertainty.

Let us understand the underlined words above more in detail.

Creation means founding or starting or origin. So, this clearly means that if you are buying out an organization or if you are hereditarily taking over, you are clearly not an entrepreneur, you are simply a business person. However, there is one factor which can determine if you are an entrepreneur or not – the degree of change in the organization you are taking over.

If you would want to be an entrepreneur, you will need to create an opportunity. What kind of opportunity? If you are offering a new product or service or creating a new line of business. All these factors attribute to determine if you are an entrepreneur or not.

Economic organization means that you are creating an organization whose purpose is to allocate scare resources to bring out a new line of operation. What this means is that you might be creating a new business venture, a new line of operation in existing organization or even starting a not-for-profit organization.

Risk and Uncertainty are the conditions in which you begin your venture. They co-exist in any organization and go hand-in-hand. Risk refers to the variability of outcome. If there no risk in the organization, then the organization is operating in a risk-free environment and the organization is bound to grow over the period of time. Without risk, is there entrepreneurship? No. However, making calculated risks is what is recommended. If you are writing your business plan and you have not identified your risks and potential measures to overcome them, then the chances of you getting investments is very less. However, the more the number of risks you identify and device a contingency plan, the better is your execution.

Uncertainty is the confidence the entrepreneur has in his/her estimate in how the world accepts their offering. If there is no uncertainty, then it would be an everlasting profit making organization J Uncertainty is how markets works and this is what makes entrepreneurship exciting. The better you estimate your customers and how the world operates, the better are prospects of your organization profit making.

Where does Entrepreneurship exist?

Entrepreneurship clearly exists in countries which have higher economic freedom. Hong Kong, for example is the most economically free country, which clearly encourages entrepreneurs. Singapore, Bahrain, New Zealand, Switzerland, USA, UK, Taiwan, Bahamas and Netherlands appear in the top 10 countries in the world which provide the most economical independence.

On the flip side, North Korea is one of the most orthodox countries in terms of economic freedom. Angola, Azerbaijan, Iran, Libya, Somalia, Vietnam, Iraq, Cuba and Laos add to the list of most strict countries in terms of providing economic independence.

Sam Walton’s 10 Best Rules

Before I end this post, let me list down the 10 best rules Mr.Sam Walton has mentioned for his success.

Rule 1: Commit to your business and believe in it.

Rule 2: Share your profits with your partners (employees)

Rule 3: Motivate your partners, challenge them and keep score.

Rule 4: Communicate everything

Rule 5: Appreciate your associates with well-chosen words.

Rule 6: Celebrate your success.

Rule 7: Listen to everyone and get them talking.

Rule 8: Exceed your customers expectation.

Rule 9: Control your expenses.

Rule 10: BREAK ALL THE SULES. Swim upstream and go up way.

To put it in Mr. Sam’s words, the above rules might not apply to everyone, and also might not be the success factor for every entrepreneur. However, these were his success tips…





Innovation Series #4: Entrepreneurship Life Cycle

7 07 2008

The aspect of entrepreneurship is very inspiring and many have taken this path to create history and to change the way we live. However, there are many areas where we see gaps and these gaps play a very important role in building the enterprise and making a mark.

It can be a commercial organization, not-for-profit or social organization, each start-up has its own way of building up and it has its own life cycle.

Below is the typical life cycle of an Entrepreneur:

Aspiration for Entrepreneurship

One day you get this beautiful idea and aspire to make your dream come true. The journey begins here. A journey, which is adventurous and most satisfying.

Is aspiration all enough?

Normally, it is good enough to realize your dreams. But, the commitment to your ideology plays a bigger role. Entrepreneurship is about contribution to the society, rather than thinking it to be a source of extended income. It is tough and it is a penance. Attitude is all what it takes to be an entrepreneur. Entrepreneurship is about living in Risks. If you are a person who does not like taking risks, then you are not set for setting up your own organization. Entrepreneurship is just not about setting up an organization for profit making, but for solving a particular problem – be it commercial or social.

In short, the way I define an entrepreneur is:

E – Energetic
N – Neutral
T – Tough
R – Romantic
E – Elaborative
P – Passionate
R – Researcher
E – Empowered
N – Novice
E – Enterprising
U – Understanding
R – Rich

Energetic – Need to have energy to face failure.
Neutral – Never get carried away, you need to always be on ground to take off.
Tough – When the going gets tough, the tough gets going.
Romantic – Need to Romance with your Passion.
Elaborative – If you cant be straight forward, then the road ahead is bumpy.
Passionate – Eat, Sleep, Drink only your thoughts.
Researcher – Only when you explore, do you succeed.
Empowered – Empower yourself with Passion.
Novice – Because, every day is a new day.
Enterprising – Because, every day you need to be creative.
Understanding – If you cannot understand others, you can never solve their problem.
Rich – Attitude, Passion and Commitment to Succeed.

Identify the Problem / Need

If there was no problem / gap in life cycle bothering your mind, you definitely would not have aspired to be an entrepreneur. However, this is not the only reason for you to aspire. But, in most of the cases, there is a problem / gap in the life cycle which bothers your mind and you want to provide a solution / better solution to solve the problem better / faster / economical / convenient. Think differently to identify the problem. Just because the whole world or people around you are taking about mobile or web, just don’t fix your ideas only in that spectrum. Look around and you will find many areas which need better solutions.

One of my favourite examples is from the book Innovative India. An auto is a common mode of transport in our country; however, have you seen a change in the structure or working of an auto since its inception back in the 1980’s? NO. Bi-cycle’s, 2 Wheelers, Cars, Bus’s, Lorry’s and all have seen a drastic change in their life-cycle. But, an auto has hardly seen a change. Why? One main reason for this is because the competition is very less. There are hardly 2-3 companies which manufacture autos and all of them have been very contented with the design and working of their innovation. Try speaking to any auto driver; he would give you an enormous list of good to have things in the auto. Looks like a good problem? Try solving it J

My intention of quoting the above is to request you to look around. There are many trivial things which need attention and which people can benefit.

Probable Solution

When you have identified the problem, you definitely must have given a thought about a probable solution. Lay out and outline your solution. Put it on paper for you to evaluate.

The Bottom of Pyramid is one area you would want to concentrate while designing your solution. The concept of BoP elucidates that the need for better and optimized solutions for problems which are frequented by majority of people. Do not aim your solutions at a high level, instead have a humble beginning and make the impact.

When you are designing a solution and want your solution to reach the majority, focus on the Pyramid. Identify your potential customers and then plan your solution. This gives your solution a better mileage than what you anticipate.

Assess the Solution

Meet with people, talk about the problem and share your thoughts on how you wish to solve. You might not want to speak to everyone, but definitely speak to your friends / family / mentor’s about your ideas because, without evaluation, it is like jumping into the lake without knowing the parameters of the lake.

If you want to make toys, spend a lot of time with children and understand their thought process. Many a times, we think we are providing a better toy, however, when it reaches the child, you might not be able to attract him/her for a long time.

If you are building a security system for home’s, speak to as many people as you can and understand the nature of problems they encounter. Example, in villages, there might be a threat with animals coming into homes. In cities, it is just not burglary, but children or domestic help might be at home and parents want to secure few things from them.

The list goes on. What I want to iterate here is that spending a lot of time with the end-users will give you a deep dive into their thinking and you will benefit because, when you get to design a solution, it is easily accepted.

Practicality of the Solution

How practical is your solution? Is it trying to provide Mobile Commerce solutions or search capabilities in the rural areas? You might have the most cutting edge technology, but the target customers are very important. We are not debating if your customers should be based in rural/urban areas, but we are looking at the usage and practicality of the solution.

As an example, I can mention the platform ticket vending machine in railway stations which have come up in the recent past. Do you notice one common problem with them? They accept only one rupee coins and five rupee coins. And if you insert a five rupee coin for one ticket, you do not get back the change. What happened? The queue at the counter still remains the same, because many might not carry change always. So, what happened to the innovation, it simply added burden to the organization – the return on investment (RoI) is not met.

Build the Business Plan

The most important aspect of realizing your dream is to have your business plan in place. You will need to put it in writing as to how you would accomplish your goal.

There are many versions as to how you should write a business plan. I only recommend only one way – write your plan in simple words. Do not use jargons which are very common and a common person might not be able to read/understand. Be Simple, Manageable, Achievable, Result-oriented and Time bound (SMART) while writing.

Few important aspects which you might want to consider/have them mandatorily addressed in your business plan:

  • Vision
  • Mission
  • Problem Identified
  • Proposed Solution
  • Financial Plan
  • Road map (Building the Solution and Return on Investment)

What I mentioned above is the minimum. If you can elaborate and write more, there is nothing like it. A Business Plan is not a frozen document, but a continuous working document. So, keep re-visiting you plan from time to time and keep updating the same as your idea evolves 🙂