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2642 results in Entrepreneurship and innovation

Page 75 of 133

  • 2 - Opportunity identification

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 15-50

  • Summary

    The purpose of the first segment of the Entrepreneurial Arch is to identify an opportunity to build an organization that can make an impact. Building a business is like building a ladder to climb to a new place. Both the construction and the placement of the ladder are important. How you build it determines the effectiveness of the firm’s execution. Where you place the ladder determines where your company can go. Sadly, too many young firms focus entirely on building the ladder and pay little attention to the placement of that ladder. They focus all their energy on developing a product and very little time thinking about the business.

    Entrepreneurs are notorious for trying to build successful firms in very unattractive industries. There is a high correlation between the problem an entrepreneur chooses for the business to solve and the attractiveness of the industry in which the business will be launched. That correlation is ˗0.77 (Shane, 2008). That’s a significant correlation, unfortunately in the negative direction! This means that most entrepreneurs are consistently picking unattractive industries in which to start their businesses, thereby creating businesses that are destined to fail. This correlation suggests that our instincts are not very good at choosing high-value opportunities. In fact, the number suggests that we would generally be better off following the opposite of our “gut feel!”

  • 7 - Strategies for managing growth

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 220-249

  • Summary

    Growth is the number one concern of corporate executives, economic developers, and government officials desperately trying to reduce unemployment (Shleifer and Vishny, 1997; Ernst & Young, 2012). And why not, since growth is at the heart of economic prosperity – personal, corporate, or regional? Entrepreneurship is at the heart of growth. Growth is driven by entrepreneurs discovering new business opportunities from which they create new businesses and new lines of business within existing companies. Innovatively solving complex problems through organizations is what professional entrepreneurs do. As Archimedes said, “Give me a lever long enough and a fulcrum on which to place it and I shall move the world.” Organizations are that lever, entrepreneurs are that fulcrum.

    All companies rely on innovations to grow over time. In a presentation at Stanford University in 2005 Geoffrey Moore, author of Crossing the Chasm and Escape Velocity, said this about the connection between innovation and growth:

    Why innovation? It has to do with this notion that we are in a capitalist market; we are in a competitively driven market. The effect of competition-driven markets is, over time, to commoditize any differentiation a company has and thereby diminish its ability to win customers and win capital and to win sales at attractive margins; to create attractive returns.

    So the only way you can respond to that is to continually come up with new differentiation and to do that you have to innovate. So it is not rocket-science to understand why we care about this issue [innovation] (Moore, 2005).

    The only way to maintain differentiated margins is to continue to drive innovative growth. Innovation is the tool of the entrepreneur (Drucker, 1985). Throughout this chapter we will draw upon aspects that were developed in other segments of the Entrepreneurial Arch. Growth is not simply about “marketing.” It is not something that a single group in the firm can accomplish on their own. As this chapter will illustrate, growth is an aggregation of all the activities of the Arch that precede this one.

  • 6 - Resourcing the business

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 172-219

  • Summary

    You have a plan for executing your business, but that plan is dependent upon resources. This segment is about marshaling the resources you need to launch your business. The resources that you will need will, in turn, depend on human and financial capital, the emphasis of this chapter. The final segment of the Entrepreneurial Arch, managing growth, will cover the challenges involved in the continued addition of people and resources to the firm as you grow beyond the first five years. This chapter will focus on acquiring the resources you need to survive those critical first five years.

    Entrepreneurs tend to focus on obtaining the financing for their business, but financiers tend to focus on the management team. Clearly you need both in order to launch a successful firm. It is a chicken-and-egg problem for those launching new firms. Jim Collins, author of Good to Great, said that great leaders start with people (Collins, 2001b). They “get the right people on the bus, the wrong people off the bus, and the right people in the right seats.” He summarizes why in this way:

    First, if you begin with “who,” you can more easily adapt to a fast-changing world. If people get on your bus because of where they think it’s going, you’ll be in trouble when you get 10 miles down the road and discover that you need to change direction because the world has changed. But if people board the bus principally because of all the other great people on the bus, you’ll be much faster and smarter in responding to changing conditions. Second, if you have the right people on your bus, you don’t need to worry about motivating them. The right people are self-motivated: Nothing beats being part of a team that is expected to produce great results. And third, if you have the wrong people on the bus, nothing else matters. You may be headed in the right direction, but you still won’t achieve greatness. Great vision with mediocre people still produces mediocre results (Collins, 2001a).

    This chapter will begin with a discussion of people. It will be followed by a discussion of capital. Due diligence will be a part of the discussion on acquiring capital as no institution will provide your team capital without some level of due diligence. Start with people, then money.

  • 8 - Summary

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 250-258

  • Summary

    The Entrepreneurial Arch is a graphic representation of a methodology to discover and develop a new financially sustainable organization. The methodology also guides you to a business that aligns with your capabilities; a new venture that both creates and captures value. The systematic reshaping and de-risking attributes of the methodology are aimed at increasing the odds of your post-launch success. There are a lot of moving parts to contend with in discovering and building a new business. Teams often get overwhelmed by the process. Some try to use the structure of the business plan or other dashboard appliances to help them establish some semblance of order during the process. Unfortunately these can cause more harm than good as they typically represent a hodgepodge of activities that range from discovery to operations. By contrast, the Entrepreneurial Arch lays out a rational order for the activities necessary to create and simultaneously de-risk your potential new venture. The method outlined in this book has six segments. These segments represent the dissection of the process of business discovery and launch into manageable parts. This assists in keeping teams on track, so they are not worrying about the kind of financing they may need, for example, when they are still in the business design stage. The tools necessary to perform the activities of each segment appropriately are introduced and described as part of the overall methodology.

    The first half of the Arch is focused on discovering a viable, high-value business that your team or organization can act upon. This is a learning process that involves identifying, describing, reshaping, quantifying, and ultimately assessing potential new ventures. The second half of the Arch focuses on implementing the discovered business. The actions described here are segmented into planning, launching, and growing the firm.

The Entrepreneurial Arch
  • A Strategic Framework for Discovering, Developing and Renewing Firms
  • Timothy L. Faley
  • Published online:
    28 May 2018
    Print publication:
    04 December 2014
  • As the number of universities offering entrepreneurial programs continues to increase, there is a growing need for a suitable framework for the teaching of entrepreneurship beyond the operational side of the business and the preparation of a business plan. This book offers a fresh approach to entrepreneurship by teaching readers how to discover and create a new firm, or grow an existing one, starting from a firm's or team's capabilities. The core methodology is based on the 'entrepreneurial arch' which provides a more holistic view of entrepreneurship by dividing the business development process into six distinct segments. An important feature of this model is the inclusion of learning units focusing on opportunity identification, business design and risk reduction before the business planning stage is attempted. Illustrated with various real-world examples, this structured and concise book will appeal to students, as well as to practitioners looking to develop their entrepreneurial skills.

  • 3 - Business design

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 51-84

  • Summary

    Now that a high-value business opportunity has been identified by working through the opportunity identification segment of the Entrepreneurial Arch, it is time to enter the design phase. The business design segment of the Entrepreneurial Arch, Figure 3.1 below, is the segment in which your business will be framed (designed). The axiom for product development is “design–build–test.” This approach creates a natural feedback loop in which designs are built, tested, and then redesigned based on testing results. Products that are complex and expensive to build are generally tested, via computer simulations, before construction begins. The designs are updated after the testing portion. This is not to say that, after the product is eventually built, there are not re-adjustments to the design; there are. The approach does succeed in accelerating learning and translates to faster product development.

    The purpose of the Entrepreneurial Arch is to accelerate learning and thereby accelerate the development of viable new firms or new lines of business within large firms. To do this, companies should follow a mantra slightly modified from that of product development: Design–test–build. The goal is to “get to plan B” before ever launching a flawed “Plan A.” That certainly does not mean that there will not be adjustments to the plan once the company is launched; of course there will be. As German military strategist Helmuth von Moltke (1800–1891) is paraphrased as saying, “No battle plan survives contact with the enemy.” It is not a question, therefore, of whether your business will change as you progress across the Arch – it will – the only question relates to the degree of that change. The goal is to make substantial changes during the design stage and smaller refinements once you have launched.

  • 5 - Operationalize the business

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 132-171

  • Summary

    This chapter marks the passage from the left-hand section of the Arch, the section in which you discovered a potentially viable business, to the right-hand section, in which you execute that business (Figure 5.1). A plan describing how this business will be executed is the first step toward its realization.

    At the end of the business assessment segment of the Entrepreneurial Arch, you now have a business model. It is specific. It articulates the offering, the firm’s actions that create the offering, and the specific customer that will purchase the offering. It also articulates the key collaborators in the creation and distribution of the offering to these customers. You also have a complete monetization model, which includes a value proposition for both your customers and your collaborators, in addition to a complete financial feasibility analysis. Despite its detail, a business model remains an architectural-level view of the business (Leung, 2007). It tells you what the business intends to do; it does not tell you how this will be done. The operational plan is the how. It is the building construction plan of attack. The business model plus the business’s strategy plus the business’s proposed tactics provide the operating plan for your business. The first step in operationalizing that business is to create an executable plan.

  • Appendix A - Positioning for value capture framework

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 259-264

  • Summary

    Successful businesses capture a significant share of the value their firms create. Clearly you must create value in the marketplace, but though a necessary criterion it is insufficient. What new entrepreneurs often fail to realize is that their business can fail while providing goods for an exceptionally attractive market if the business is not able to capture any of the value created.

    Your organization’s ability to capture value is dictated by the relative robustness of your capabilities. In judging the outcome of any competitive sporting event, it is not enough to evaluate the talent of your team; rather, that talent must be evaluated in comparison with that of your opponent. No organization is an island. It takes an industry to serve a customer. You will need capabilities outside your firm to create and deliver your solution to your customer. Your capabilities relative to those in the ecosystem that you need to leverage will determine your organization’s share of that created value. David Teece, in his seminal paper, discussed the ability of firms to capture value from their intellectual property (Teece, 1986). The positioning for value capture (PVC) framework, Figure A1, broadens that work beyond intellectual assets to include the firm’s entire capability set.

  • Preface

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp xi-xiii

  • Summary

    Preface

    The parable of the blind men and the elephant is well known. Each feels a different part of the elephant and describes that part as though it were the whole animal. One believes an elephant is like a snake as he feels its trunk, another a fan as he feels the elephant’s ear, still another a rope as he grasps the elephant’s tail, another feels the elephant’s side and believes the elephant is like a wall, the last man feels the elephant’s tusk and describes the elephant as a spear. Entrepreneurship is described in a very similar way. Some emphasize the business plan; others argue how the business plan is “dead” and it is now all about the business model; still others argue that it is all about financing or growth or passion. Like the blind men, they are all correct and simultaneously all wrong, as they each describe a piece and not the whole.

    The Entrepreneurial Arch is the result of my quest to pull all these pieces into a unified description of entrepreneurship. That description has two parts: Business Discovery and Business Execution. Each of those parts has three components. Together the six components describe fundamental skills that every organization wishes it could enhance:

  • identifying emerging opportunities (and threats)

  • formulating innovative business solutions around those opportunities

  • assessing the feasibility of those proposed businesses

  • developing a practicable implementation plan from disparate and incomplete information

  • identifying, aligning and/or acquiring the necessary resources needed to power the plan forward, and

  • driving accelerated growth.

    • We call people with the above skill-set entrepreneurs.

  • Appendix D - Investment potential framework

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 279-283

  • Summary

    The financial sources used to capitalize new companies can range from the straightforward (credit card debt) to complex investment agreements crafted between these companies and venture capitalists. As convoluted as the entrepreneurial company’s funding may become, it is critical the financing structure of the company be completely aligned with two things:

  • the company’s needs and

  • the founder’s desires.

    • Funding the initial financial needs of entrepreneurial companies is challenging as most of these nascent organizations have no collateral to leverage for a traditional bank loan. As a result, these companies must seek alternate forms of financing, which often include selling equity in the business. Selling company equity creates additional company owners whose desires must also be aligned with future funding decisions. The founders, however, are the ones that from the onset must make sure that the financing path they take the company down delivers both what the company needs and what is consistent with their personal vision for their new company. This appendix discusses the financing from the perspective of the financiers. Appendix C discusses the impact the various type of financing option will have on the founders.

    The type of funding entrepreneurs can seek for their new venture, if they desire, must be consistent with the business that is being created. The investment potential framework (shown in Figure D.1), indicates the type of funding that could be attracted to the firm as it is currently designed. Of course, the simple fact that the firm is potentially equity investable (upper right-hand quadrant) does not mean that the founders desire that type of funding. It simply means they are creating the type of business that would be attractive to that type of investor. On the other hand, a firm that finds itself in one of the other three quadrants would not be attractive to equity investors even if the founders desired such investment. Few firms even have the potential to be equity investable. Indeed, in 1999, at the height of the VC investment bubble, only 6.3 percent of Inc. 500 companies had equity investments (Inc. Magazine, 1999). Today the percentage is less than half that level. This is despite the fact that the Inc. 500 represents the top privately held companies in the United States.

  • Appendix E - Product development and the Entrepreneurial Arch

  • Timothy L. Faley
  • Book:
    The Entrepreneurial Arch
    Published online:
    28 May 2018
    Print publication:
    04 December 2014, pp 284-285

  • Summary

    Product development is a part of the overall business development process. The example listed below offers one view as to how the product development steps could overlay and synchronize with the business discovery, development, validation, and launch phases of the Entrepreneurial Arch.

    Historically, the challenge of product development was that it was out of sync with the ideal business development de-risking. In a typical product development scheme (product concept → prototype → beta product → commercial product), no direct customer feedback was obtained until after the beta product had been created. This meant that, for many products, a significant investment was made before it was known whether the product would resonate with a customer. There were a couple of exceptions. One was software, where the development costs are low. The other exception was devices that create the same user experience as current products, albeit in a differentiated way (faster, cheaper, better). This classic product development schema created a disconnection between product development and business development, since the significant resources available for beta-product development are not generally available until the resource phase of the Entrepreneurial Arch. This meant that on the product development side entrepreneurs tended to leap from product concept to prototype development. In other words, entrepreneurs were leaping from the opportunity identification segment of the Arch to the resourcing segment, where financing was available. In turn, this leaping legitimately called into question the value of the business planning activities, since these plans were often being completed with little or no customer feedback. However, the real issue is not the value of assessing the feasibility of one’s business or of determining how to operationalize it before resourcing and launching it; rather it is the re-synchronizing of the business’s development processes with the product development process.

Page 75 of 133