Entrepreneurship & Ideation

COURSE READER

Becoming an entrepreneur requires various skills and talents. First you must

understand who you are and what you want by identifying your skills and knowing

your passions. A successful entrepreneur matches his or her skills and passions

with the right opportunity. However, it takes more than passion to be successful;

it also takes hard work and preparation. Analyzing the industry and the feasibility

of your idea is critical to success. This course gets you started.

As you proceed through this section of the course, you will be asked to

refer to chapters within this course reader. The content of each chapter in this

reader reinforces and expands on the key ideas that are presented in the course.

You are introduced to the history and foundations of entrepreneurship and given

tools for success. Throughout the chapters, you are presented with two cases

studies that describe two companies, Starlink (satellite internet) and Hometown

Brewery. The case studies are used to illustrate important concepts using “real-

world” examples.

There are many steps along the path to creating a successful

entrepreneurship. Each chapter gives you the background and the basics you need

to understand the first steps to creating the idea. You must

1. Identify an opportunity (Chapter 2)

2. Conduct feasibility analysis (Chapters 3–6)

3. Develop the concept (Chapter 7)

Once you have completed these steps, you will be ready for implementation

and management! Good luck!

Page ii

Table of Contents

Chapter 1: Introduction to Entrepreneurship

1

Chapter 2: Opportunity Identification 9

Chapter 3: Technical Feasibility 14

Chapter 4: Market Feasibility 18

Chapter 5: Industry Feasibility 25

Chapter 6: Financial Feasibility 31

Chapter 7: Developing the Concept 39

Epilogue: Personal Reflection 43

List of Key Terms by Chapter 45

Sources 48

Page iii

Entrepreneurship & Ideation

Entrepreneurship & Ideation Chapter 1 page 1

1 INTRODUCTION TO ENTREPRENEURSHIP Entrepreneurship has much to offer to anyone who has the passion and

drive to start a venture and follow it through. To be a successful

entrepreneur, you need to be aware of your own passions, motivations,

skills, and objectives, and you must know what areas you may need to

improve on or develop. Then, ideally, you will be able to align your skills

and desires with your venture.

History of entrepreneurship Our definition and understanding of entrepreneurship has evolved over the years,

and it continues to evolve in terms of focus and scope. In the broadest terms, we define

entrepreneurship as the pursuit of an opportunity without regard to the resources that

the entrepreneur currently controls. An entrepreneur is therefore a person who identifies

an opportunity, then acquires the resources needed to pursue that opportunity as a

venture.

This is how we think about entrepreneurship today. However, the concept has

taken quite a journey from its roots over 500 years ago. The word entrepreneur comes

from the word enterprise, which has roots in the Latin language in the 15th century—

from the words entre, meaning “between,” and prehendere, meaning “to grasp or take

hold.” Then the word enterprise made its way into French and become entreprendre, which

means “to undertake.” From there, the word evolved and became entrepreneur.

In 1755, the French economist Richard Cantillon (in Essay on the Nature of Trade

in General) was one of the first individuals to define an entrepreneur in a business sense

as someone who uses business judgment to take on a difficult commercial enterprise. Key

to Cantillon’s definition were the ideas that this commercial enterprise had uncertain

outcomes and that the business person was motivated by personal gain. Both of these

features have carried down to our modern thinking about entrepreneurship. Adam Smith,

the Scottish philosopher and economist, added to Cantillon’s definition by incorporating

the idea that an entrepreneur is someone who accumulates capital and is an agent of

progress.

By the mid-19th century, the word entrepreneur was firmly part of the English

language of business. Around this time, the German mathematician Hans von Mangoldt

expanded the idea to include an element of risk; in his mind, risk was essential to the

concept. Then in the early 20th century, Joseph A. Schumpeter, an Austrian economist,

suggested that key elements of entrepreneurship are innovation, vision, and creativity.

Scholars and practitioners further refined the concept, and by the early 20th

century, an entrepreneur was someone who used business judgment in commercial

enterprises with uncertain outcomes, accumulated capital, took risks, and was innovative

and creative. Some people believe that to be truly entrepreneurial, a person has to create

something disruptive, such as a new product, industry, or market, or identify and serve

needs that are not currently being met.

Entrepreneurship & Ideation Chapter 1 page 2

In modern times, the definition of entrepreneurship has been broadened to

describe an entrepreneur as someone who starts a commercial venture, such as

developing and selling a brand-new product or starting a small accounting business in the

downtown of a big city, and someone who starts a nonprofit organization designed to

address a social issue or problem in the community.

Today there is no single commonly accepted definition of the word entrepreneur.

For some people, being an owner or operator of a business is enough. For others, to be

properly classified as an entrepreneur, the business owner must also be the founder of

the business. The common thread that runs through the definitions is the concept of value

creation, such as economic value for the entrepreneur, or social value for the community.

Table 1-1 lists several successful 21st century entrepreneurships, each of which has

created value either as a profitable venture for the founder or as a beneficial resource for

a community.

Goals and objectives of entrepreneurship The goals of entrepreneurship are to create a new venture and to create value of

some kind, such as social, intellectual, or financial value.

Commercial entrepreneurs often come to mind when one thinks about

entrepreneurship. Their goals are to create viable businesses and to create value, usually

in the form of financial value. One commercial entrepreneur may choose a technology

start-up with the goal of making large profits, growing quickly, and selling the business

to another company. Another commercial entrepreneur may choose to build a small

business with the goal of growing very slowly and generating income for himself or

herself.

Social entrepreneurs are individuals who seek to create nonfinancial value, such as

providing products or services to a community in need. These individuals use the

entrepreneurial process to start nonprofit ventures or otherwise create social value. Their

objectives are not necessarily money or profit; quite often, the goal is to create change in

society and further specific nonfinancial goals (see Table 1-2). These entrepreneurs seek

to build organizations with strong, well-defined missions and to operate within a structure

that enables them to attract funding from people who believe in the mission.

Intrapreneurs are individuals who seek to create new products or services from

within an existing organization (see Table 1-2). These individuals usually work with the

support of the organization, and their objective is to generate a profit for the larger

company.

Hybrid entrepreneurs are individuals who seek to create organizations that have

both nonfinancial and financial goals, such as providing a service to a community and

creating financial value for the owners and investors (see Table 1-2).

Entrepreneurship & Ideation Chapter 1 page 3

Table 1-2: Types of Entrepreneurships

Type of entrepreneurship

Goals

Commercial Business creation

Innovation

Wealth

Social Social mission Social engagement

Intrapreneurship Innovation

Business creation within

existing organization

Profit

Hybrid Business creation

Social mission

Wealth

The entrepreneurial process

The entrepreneurial process can be broken into seven key steps, which can be

applied to any type of venture.

1. Identify an opportunity. Use creative techniques to come up with a new idea, seek

inspiration from existing sources to find an opportunity, or create one of your own

(see Chapter 2).

2. Conduct feasibility analysis. Understand the attractiveness or profitability of the idea

with a technical feasibility analysis (see Chapter 3), a market feasibility analysis (see

Chapter 4), an industry feasibility analysis (see Chapter 5), and a financial feasibility

analysis (see Chapter 6).

3. Develop the concept. Create a strategy and a business model, and write a venture

plan (see Chapter 7).

4. Determine the resources needed. Use the feasibility studies to understand what resources are required to conduct the venture.

5. Acquire the resources. Engage in activities such as hiring employees, renting space,

buying materials, and acquiring supplies.

Entrepreneurship & Ideation Chapter 1 page 4

6. Implement and manage the venture. Run the venture, plan for growth and expansion

and be agile enough to adapt to changing conditions as necessary.

7. Harvest/exit the venture. Close, sell, or transform the venture into something new.

Types of entrepreneurs In addition to the types of ventures they seek to create (such as social or

commercial), entrepreneurs can be categorized by their different ideas for growth of the

venture.

• Lifestyle. These entrepreneurs build a business in a way that is integrated into their

lifestyle. For some lifestyle entrepreneurs, profit (beyond what is needed to sustain

their lifestyle) is not the motive; they plan to keep the venture small. Other lifestyle

entrepreneurs may grow businesses with many employees and significant revenues.

• Foundation. These entrepreneurs plan to build a large, ongoing business with an

objective of long-term growth and profitability. These ventures do not typically attract

venture capital funding or become public companies because of their size and modest

growth potential.

• High-potential growth. These entrepreneurs are interested in building a business that

will grow to be worth a lot of money with the goal of becoming public or acquired by

another company. High-growth companies that grow significantly, at least 20% per

year in the recent past, are called gazelles.

The entrepreneurial mind-set Why does someone decide to start a business? There is no single reason to become

an entrepreneur, and there is no single factor that is true for everyone. Some people see

an opportunity, a need that is not being filled, and work to create a business that fills that

need. Others have different objectives: They are interested in starting a business, so they

look for opportunities that fit their life and work styles.

One individual may see a consumer need that is not being met and find a way to

address that. Another individual may have a personal hobby that inspires him or her to

create a venture. Someone else may discover an opportunity as a result of previous

employment. Another individual may want to create an organization that is a mechanism

for social change. Someone else may choose to start a new venture because of a desire

for a certain lifestyle or level of wealth.

Some people believe that the entrepreneurial mind-set is something a person is

born with. In some ways, this is true. To be an entrepreneur, a person must have a passion

and a core set of values that are in line with the type of business the person is interested

in creating. These two factors give certain people the drive and dedication to create a new

venture and be successful at it. However, many aspects of entrepreneurship require basic

business skills that can be learned by anyone who is interested in doing so.

Entrepreneurship & Ideation Chapter 1 page 5

Attributes and skills of successful entrepreneurs

Despite the impression given by stories in the media about successful

entrepreneurs who are mavericks and extreme risk takers, there is no single personality

trait that predicts that someone will become an entrepreneur or be successful at it. Among

entrepreneurs, there are introverts and extroverts, artistic and scientific individuals,

sensitive and tough people—they can have any type of personality. What entrepreneurs

share is their drive to launch a new venture and to create value.

There are several skills, both personal and professional, that entrepreneurs need

to have to succeed. On the personal side, people who choose to be entrepreneurs need to

have a certain understanding of themselves, especially who they are and how they work

best, since starting or running a business of any type requires dedication and a lot of

work. On the business side, an entrepreneur needs to have enough organizational or

management skills to turn an idea into a viable business.

Examples of key attributes include the following:

• Adaptability

• Creativity

• Drive to achieve

• Initiative

• Leadership skills

• Motivation

• Perseverance

• Tolerance of ambiguity

• Tolerance of risk

• Vision

One thing that most successful entrepreneurs have is either a mentor or a strong

network of friends, colleagues, and supporters. Although in some cases an entrepreneur

may work alone, for the most part starting a venture requires teamwork and the input and

advice of several individuals. Entrepreneurs who work with a mentor can tap into the

expert guidance of someone in the same industry or someone who has experience with

entrepreneurship or general business. A broad network of colleagues and friends provides

access to resources, ideas, and support that are critical to success in the entrepreneurial

world.

Entrepreneurship & Ideation Chapter 1 page 6

CASE STUDY

Company: Starlink satellite internet company

Business: Provider of low-orbit satellite wireless internet globally. The

company often is the only way for some users to obtain internet service in

hard to reach world areas.

Key attributes of founder:

• Motivation to solve the problem of erratic and patchy or often non-

existent internet access in many areas of the world • Tolerance of risk in entering global markets • Adaptability in addressing changing technologies and market needs

Company: Hometown Brewery

Business: Brewer of craft beers for sale locally

Key attributes of founder:

• Creativity in designing craft beer • Desire to share passion and create lifestyle business • Perseverance in finding the right product recipes and funding to start

the business

Self-assessment

Creating an entrepreneurial venture from the ground up is an arduous process. An

individual who is interested in doing so needs to understand himself or herself to know

whether this type of lifestyle is suitable.

As you consider starting a new venture, it is helpful to understand your strengths

and weaknesses, what you are able to contribute to the venture, and in what areas you

will need to partner with someone to be successful. Because of the nature of

entrepreneurship and how it differs from being an employee at a company, it is also very

helpful to understand your feelings about and capacity for hard work, how you deal with

insecurities and adversity, and your capacity for working toward a goal.

As you think about your skills and attributes, it is also important to understand

your life goals—personal, professional, and financial. Where does a venture fit into those

Entrepreneurship & Ideation Chapter 1 page 7

goals? How will starting a new venture help you to meet the goals you have set for your

future?

Entrepreneurship & Ideation Chapter 1 page 8

Are you ready?

Understanding yourself is a vital step toward understanding what type of

entrepreneur you are and to increase your odds for success. Here are some questions to

ask yourself as you consider starting a new venture. There are no right or wrong answers.

Your answers will help you understand who you are, what type of venture may be best for

you to start, and what is important to you in starting a venture.

Entrepreneurial

• Why do I want to start a venture?

• Do I have a passion for a certain market or type of venture?

• Am I willing to work long hours?

• Am I willing and able to work without pay for some amount of time?

• What experience do I have running a business or managing people?

• Am I am able to rely on the expertise of others?

• Do I have good organizational skills?

Personal

• How do I feel about risk?

• How do I face failure or the possibility of failure?

• How do I deal with change and unpredictability?

• Am I able to make decisions about important things?

• Am I able to meet my commitments?

• How do I deal with pressure?

• What is my comfort level with debt and financial insecurity?

• Am I creative?

• Do I have a strong ability to solve problems?

Our understanding of entrepreneurship has evolved over the years. In modern

times, entrepreneurs have been thought of as a unique type of person, unorthodox or

daring. We now know that entrepreneurs are not a special breed of individual. Some

Entrepreneurship & Ideation Chapter 1 page 9

entrepreneurs are born with many of the attributes needed to be successful. But it is also

possible to develop some of the skills necessary to create a successful venture. The

important thing to understand is that if you are interested in an entrepreneurial life, it is

attainable.

Entrepreneurship & Ideation page 10

Chapter 2

2 OPPORTUNITY IDENTIFICATION Identifying opportunities is the first critical step of an entrepreneurial

venture. Opportunities can present themselves in a variety of ways. An

opportunity may appear as a problem that needs to be solved or as a good

idea that can be made better. The key to finding the right opportunity for

you is creativity. Creativity is an important attribute for an entrepreneur. It

is what enables entrepreneurs to stand out from the crowd, create

businesses that are different from others in the market, and solve unique

and challenging problems. Creativity is also the basis for innovation,

discovery, and finding new ideas; these are key elements to success in any

entrepreneurial venture.

Creativity and innovation What is creativity? It is the ability to use imagination to see something in a new

way or to make connections between disparate objects, thoughts, or ideas. Being creative

also involves a willingness to take a risk on something new, to be open to failure, perhaps

even to go against accepted thinking or ways of doing something. There are many ways

to be creative. For the entrepreneur, creativity is about finding a new way to solve a

problem or deliver a service.

There is no single formula for being creative, and everyone has the potential to be

creative in some way. Creative ideas can come from anywhere—from researching and

learning about a topic, talking to others, or imagining different ways to solve a problem.

For those who need a little inspiration, there are plenty of exercises that can encourage

creative thinking. Table 2-1 provides some sample techniques.

Table 2-1: Creative Problem-Solving Techniques

Name Technique

Entrepreneurship & Ideation page 11

Chapter 2

Brainstorming This is the process of identifying as many ideas as

possible and choosing potential solutions from the

ideas that are generated.

• Define the problem to be solved, for

example: How do we make high-quality

shoes? Generate ideas for solving the

problem without criticism or judgment

of any of the ideas. All ideas, even

those that seem crazy, are welcome

and useful in this process, for example:

hire a team of cobblers, set up a

traditional factory, use a 3D printing

machine, buy already manufactured

shoes and alter them, use recycled

paper, melt wax around consumers’

feet, give materials to third graders

and see what they develop, etc.

• Try to generate as many ideas as

possible— more is better.

Brainstorming can be done individually or with a team. Look at all the answers, and see whether any of them may be useful to test or whether any spur additional ideas.

Entrepreneurship & Ideation page 12

Chapter 2

Analogy This is the process of thinking of something similar to

the problem you want to solve. This technique gets you

thinking about another topic or field as a way to generate fresh ideas.

• Identify what information you want to end

up with, and find a phrase that captures it, for

example: how to make shoes.

• Then create a list of items that are like that

original idea in some way, for example: how to

build a house. Making shoes and building a house

both involve using raw materials to create a

complex final product.

• Try to generate as many items and

analogies as possible—more is better.

• Choose one analogy, ideally one that is in a

very different field or topic area from what you are

trying to solve, and describe all the active and

passive aspects of the items in your analogy, for

example: shoes are used by consumers to protect

their feet but also to make fashion statements. A

single shoe is small enough to hold in your hand.

People generally own many shoes.

Are there aspects of the analogy that are directly applicable to the problem you are going to solve? Do the differences give you any ideas about how to solve your problem?

Asking who, what, why, when, where, and how

This is the process of coming up with as many ways to think about a problem as you can. This technique is helpful to open up your mind to think about a problem from for many different angles.

Entrepreneurship & Ideation page 13

Chapter 2

• Use these terms to create a list of questions about

the problem you are trying to solve, for example:

What is the best way to make high-quality shoes—

by machine or by hand?

• Look for answers to the questions. This can be

with a formal technique like brainstorming or more

informal techniques such as a checklist.

Use the answers to generate actions or next steps, for example: if the best way to make shoes is by hand, how do we find the talented craftspeople to make our shoes? If we can’t find very many people who make high-quality shoes, do we want to use machines or train people to make shoes the way we want them?

New opportunities

Where do entrepreneurs find ideas for new opportunities? In addition to using creative

problem-solving techniques for inspiration, there are many other ways to find ideas for

new business ventures. While inspiration can come from anywhere, there are several key </

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