Lecture 1

250-387 Entrepreneurship: 

250-387 Entrepreneurship Introduction to The Entrepreneurial Perspective

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PART I: Orientation

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Happy Birthday Ben!

FRANKLIN INVENTIONS: 

FRANKLIN INVENTIONS BIFOCALS Ben had poor vision and needed glasses to read. He got tired of constantly taking them off and putting them back on, so he decided to figure out a way to make his glasses let him see both near and far. He had two pairs of spectacles cut in half and put half of each lens in a single frame. Today, we call them bifocals. LIGHTNING ROD Everyone knows the story of Ben's famous kite flight. Although he made important discoveries and advancements, Ben did not "invent" electricity. He did, however, invent the lightning rod which protected buildings and ships from lightning damage. SAFE STOVE In colonial America, most people warmed their homes by building a fire in a fireplace even though it was kind of dangerous and used a lot of wood. Ben figured that there had to be a better way. His invention of an iron furnace stove allowed people to warm their homes less dangerously and with less wood. The furnace stove that he invented is called a Franklin stove. Interestingly enough, Ben also established the first fire company and the first fire insurance company in order to help people live more safely. ODOMETER As postmaster, Ben had to figure out routes for delivering the mail. He went out riding in his carriage to measure the routes and needed a way to keep track of the distance. He invented a simple odometer and attached it to his carriage. LONG ARM In his old age, Ben retired from business and public service and wanted to spend his time reading and studying. He found, however, that his old age had made it difficult for him to reach books from the high shelves. Even though he had many grandchildren to help him, he invented a tool called a long arm to reach the high books. The long arm was a long wooden pole with a grasping claw at the end.

MORE FRANKLIN INVENTIONS: 

MORE FRANKLIN INVENTIONS CATHETER Even though Ben is not famous for his study of bioscience, he was interested in how the human body works and looked for ways to help it work better. For example, Ben's older brother John suffered from kidney stones and Ben wanted to help him feel better. Ben developed a flexible urinary catheter that appears to have been the first one produced in America. Daylight Savings Time: While in Paris, Franklin was the first to propose the idea of Daylight Savings Time. Franklin hoped to provide the world with a greater opportunity of doing productive work during the summer months, as opposed to the cold and dreary days of winter. Fire Department: In 1736, Benjamin Franklin started the first fire department ever. Located in Philadelphia, Pennsylvania, it was called the Union Fire Company Fire Insurance Company: In 1752, Franklin was responsible for setting up America's first fire insurance company. Political Cartoon: Benjamin Franklin is credited with creating the first political cartoon. By combining both his wit and political convictions, he portrayed his own reflections on issues affecting society. Since then, the political cartoon has become a staple of modern culture and thought.

The Franklin Incentive: 

The Franklin Incentive

New Industries Launched by the E-Generation: 

New Industries Launched by the E-Generation Personal computers Biotechnology Wireless cable TV Fast oil changes FC software Desktop information Wireless communication/handheld devices Healthy living products Electronic paging Voice mail information technology services Cellular phone services CD-ROM Internet publishing and shopping Desktop computing Virtual imaging Convenience foods superstores Digital media and entertainment Pet care services

Mega-Entrepreneurs Who Started in Their 20s: 

Mega-Entrepreneurs Who Started in Their 20s Microsoft Netscape Dell Computers Gateway 2000 McCaw Cellular Apple Computers Digital Equipment Corporation Federal Express Genentech Polaroid Nike Lotus Development Ipix.com Bill Gates and Paul Allen Marc Andressen Michael Dell Ted Waitt Craig McCaw Steve Jobs and Steve Wozniak Ken and Stan Olsen Fred Smith Robert Swanson Edward Land Phil Knight Mitch Kapor Kevin McCurdy

Forms of innovation: 

Forms of innovation A new product or service New methods or technology New markets New sources of raw materials and resources New forms of industrial organization

Entrepreneurial Innovation: 

Entrepreneurial Innovation Innovation and R&D effectiveness of small entrepreneurial firms have resulted in: 95% of the radical innovations that have occurred since WWII 50% of all innovations 2 times as many innovations per R&D dollar vs. the giants 2 times as many innovations per scientist 24 times as many innovations per R&D dollar vs. firms with > 10,000 employees

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What is Entrepreneurship?

Definition 1: 

Definition 1 Entrepreneurship – is the process of creating something new, with value, by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.

Definition 2: 

Definition 2 From the French, literally “between taker” or “go-between” A person who takes responsibility for a business project, organizes the resources it requires, and assumes the risk it entails.

Definition 3: 

Definition 3 Entrepreneurship—a way of thinking, reasoning, and acting that is opportunity obsessed, holistic in approach, and leadership balanced (This definition of entrepreneurship has evolved over the past two decades from research at Babson College and the Harvard Business School and has recently been enhanced by Stephen Spinelli, Jr., and John H. Muller, Jr., Term Chair at Babson College.)

Small Business Types: 

Small Business Types 1. Job substitutes A living, hard to realize a capital gain 2. Lifestyle firm More than a living, but basically a family business 3. Foundation company New business area, rarely goes public Gore 4. High potential venture new Netscape

Classic Entrepreneurship: The Startup: 

Classic Entrepreneurship: The Startup Raw startup company—an innovative idea that develops into a high growth company Qualities of a startup company Strong leadership from the main entrepreneur Complementary talents and outstanding teamwork of team members Skill and ingenuity to find and control resources Financial backing to chase opportunity

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The Entrepreneurial Revolution

Contributions of New Businesses: 

Contributions of New Businesses New Technologies New Industries New Jobs 37% of households have member in primary role in a new or emerging business 15% of fastest growing companies accounted for 94% of new jobs New Capital for Reinvestment Community Contribution/Leadership Opportunities for success and independence to anyone and everyone (Horatio Alger, our national heritage) >50% of new businesses are started by women 35% of businesses – 18 million employees Increasing minority startups 621,000 African American owners – revenues of $32 bilion Outgrowth of downsizing/unemployment Spinoffs to employees

The Backbone of American Economy: 

The Backbone of American Economy Research findings by U.S. Small Business Administration’s Office of Advocacy Small businesses represent 99 percent of all employers Small businesses provide about 75 percent of all new net jobs

The Global Economic Weapon: 

The Global Economic Weapon Global Entrepreneurship Monitor 2000 Report High levels of entrepreneurial activity equals above average economic growth Top three of twenty-one countries surveyed Brazil Korea at United States

America’s Self-Made Millionaires: 

America’s Self-Made Millionaires The Millionaire Next Door by Thomas J. Stanley and William D. Danko Millionaire—a person with a net worth of $1 million or more Traits of these millionaires Two-thirds are self-employed Over 80 percent accumulated their wealth in one generation

Entrepreneurship as an Equalizer and Mobilizer: 

Entrepreneurship as an Equalizer and Mobilizer Indifferent to race, religion, sex, or geography Rewards performance and punishes shabbiness and ineptness Greatest chance for self-sufficiency, self-determination, and economic improvement

Moving On Up: 

Moving On Up

Collegiate Entrepreneurs: 

Collegiate Entrepreneurs In the year 2000, people who took collegiate entrepreneurship courses were: ·34% more likely to start their own businesses than people who did not ·798% more likely to be successful in their business than those graduates who did not take entrepreneurship course(s)

Entrepreneurship Graduates (U. of AZ, 2000): 

Entrepreneurship Graduates (U. of AZ, 2000) Have annual incomes that are 27 percent higher Own 62 percent more assets Are three times more likely to start new businesses. Are three times more likely to be self-employed Are more satisfied with their jobs

Entrepreneurial economy: (Wells Fargo/NFIB, 1998) : 

Entrepreneurial economy: (Wells Fargo/NFIB, 1998) ·5,744,000 start-ups, about 40% are subsidiaries of existing businesses, this means about 1% of the U.S. population applied for a business license ·1,799,000 businesses purchased ·1,333,000 businesses closed for various reasons ·Highest incidence of start-ups is in the southeast ·About 50% of start-ups were in the service industries ·About 60% profitable within the first year ·However, the number of self-employed persons fell about 10% between 1994 and 1999 while their income increased 35%

The Stock Market Explosion: 

The Stock Market Explosion Source: Security Industries Factbook, Securities Industry Association 1985 1990 1999 Dow Jones Ind. Ave. (year end) 1546.67 2633.66 11497.12 Equity Mutual Fund Assets $116.9 billion $245.6 billion $4,041.9 billion Net Cash Flows into Mutual Funds* $68.2 billion $44.4 billion $364.2 billion

U.S. Stock Markets Total Value: 

U.S. Stock Markets Total Value Source: SIA Research Department

The Impact of Entrepreneurship on America: Giants Old and New: 

The Impact of Entrepreneurship on America: Giants Old and New Market Sales in Employees Capitalization 2000 in 2000 in Mid-March ($billion) (thousands) 2001 ($billion) General Motors 184.6 386.0 33.8 Ford 162.6 364.6 45.0 Chrysler 151.6 463.6 43.4 Total 498.8 1219.6 122.2 Intel 29.3 67.4 179.0 Microsoft 21.8 31.4 362.2 Cisco Systems 14.9 21.0 121.7 Total 66.0 119.8 662.9 Source: Forbes 500s Annual Directory 2002

U.S. Venture Capital Investment by Year: 

U.S. Venture Capital Investment by Year

New Technology: 

New Technology Time for new technologies to reach 25% of the U.S. Population Household electricity (1873)—46 years Telephone (1875)—35 years Automobile (1885)—55 years Airplane travel (1903)—54 years Radio (1906)—22 years Television (1925)—26 years Videocassette recorder (1952)—34 years Personal computer (1975)—15 years Cellular phone—13 years World Wide Web—7 years

Semiconductor Industry: Cumulative Number of Venture Capital Investments and Industry Shipments: 

Semiconductor Industry: Cumulative Number of Venture Capital Investments and Industry Shipments

Microcomputer Industry: Cumulative Number of Startup Companies and Industry Shipments: 

Microcomputer Industry: Cumulative Number of Startup Companies and Industry Shipments

The Fall of the Giants: 

The Fall of the Giants “People don’t want to be managed. They want to be led.”—Ewing M. Kauffman Characteristics of giant firms Hierarchical in structure Leadership as managing and administering from the top down Rewards for “the largest” (assets, budgets, etc.)

The Fall of the Giants: 

The Fall of the Giants “People don’t want to be managed. They want to be led.”—Ewing M. Kauffman Cause of downfall Slow to change archaic strategy (average 6 years) Slow to change outdated culture (average 10 to 30 years) Slow to recognize and incorporate entrepreneurship, entrepreneurial leadership, and entrepreneurial reasoning

Small business : 

Small business Legally Defined Any business that is independently owned and operated and is not dominant in its field (Small Business Act of 1953) Committee for Economic Development Independent ownership Owner supplied capital Mainly local operation Relatively small size in the industry Entrepreneurship vs. Intrapreneurship