ENTREPRENEURSHIP Entrepreneurship isâ¦
ENTREPRENEURSHIP Antti Paasio Professor, director of BID in TSE 2.6.2009
Entrepreneurship is… Starting-up a business ENTREPRENEURSHIP Managing one’s own company Majority ownership of a firm
Proactive, innovative action within any organization
Ability to run open dynamic organizations effectively and innovatively
INTRAPRENEURSHIP
A MINDSET
Three different angles MANAGEMENT
LEADERSHIP
• mgt technology • formal mgt • organizational theories • strategy theories
• human, personal aspect • charisma •culture
ENTREPRENEURSHIP INNOVATION
• change engine • constant improvement • innovator • networker • developer • life-style vs professional entrepreneur • strategy
Why is entrepreneurship important? • We know of its impact on welfare – – – –
job creation regional development innovation service
• We think it is essential for economic growth • We believe it is the engine of renewal to old and new market economies • We would like to achieve the goals set by the Lisbon declaration
Yrittäjyys 2010 • Periferiasta hyvinvointiyhteiskunnan kivijalaksi – Työllistäminen – Innovaatiot – Aluekehitys
• Yrittäjyyskulttuuria kaikkialla – – – –
PK-yritykset uusperustannasta nopeaan kasvuun Suurten yritysten toimintakulttuuri Palveluorganisaatioiden (julkistenkin) malli: asiakasohjautuvuus Oppilaitosten toimintakulttuuri ja opetuksen sisällöt
• Positiivisten arvojen korostuminen – Luottamus – Kehityshakuisuus, innovatiivisuus – Työilmasto, elämänlaatu
Entrepreneurial attitudes in EU countries in 2002 (would you prefer to be a salaried worker or selfemployed/entrepreneur?)
FINLAND
DENMARK
Lähde: Flash Eurobarimeter (134/2002)
SALARIED WORKER Palkkatyössä toisen palveluksessa
Sa ks Lu a xe m bu rg R uo ts i Be lg ia N o Al an rja ko m aa t Su om i
Po rtu ga li IS A Es pa nj a Irl an ti Ita l ia Is la nt Kr i ei kk a Br it a nn ia EU 15 R an sk a Ta ns ka
100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0%
Itsenäinen yrittäjä ENTREPRENEUR
Ei NEITHER kumpaakaan
Entrepreneur is.... CONFIDENT
INITIATIVE VISIONARY CREATIVE RISK-TAKER SELF-MOTIVATING
GOOD COMMUNICATOR GOOD NEGOTIATOR PROBLEM SOLVER PROJECT LEADER OPEN MIND
NETWORKER
EXPERT EASILY INTERESTED PROFESSIONAL KNOWLEDGE-SEEKER INTELLECTUAL CURIOSITY LIFE LONG LEARNER
STRESS-TOLERANT FLEXIBLE TEAM-MINDED ADAPTOR DETERMINED
RESILIENT
What can we say about European entrepreneurship (GEM 2005) ? • Early-stage entrepreneurial activity – Denmark 4.8% Finland 5% Sweden 4% – Latvia 6.6% – Brazil 11.3% China 13.7% Ireland 9.8% New Zealand 17.6%, Average 8.4%
• Overall – Denmark 8.8% Finland 13.5% Sweden 10.2% – Latvia 11.5 % – Brazil 21.4% China 26.7% Ireland 17.7% New Zealand 28.2%, Average 14.8%
Number of companies (2000) related to population (1000 inh) in EU There is room for more!
European Observatory for SME,s 2002
EEA, 2000
MICRO COMPANY SMALL COMPANY MEDIUM-SIZED COMPANY LARGE COMPANY
0-9 EMPLOYEES 10-49 50-249 250-
M
S
M
SME L
AMOUNT
19
1.2 0.2 20.4 0.04
EMPLOYMENT
42
23
16
81
41
MEDIAN SIZE
2
20
95
4
40
ENLARGED +10?
The Rise of SMEs • We used to think that large industrial companies are the only important strategic actors • The importance of SMEs started to increase during 70s – SME employment passed Large company employment in the 90s – Present economic crisis might accelerate this development – Digital technology makes market entry easier – Entrepreneurship is increasingly a source of disruptive innovation
Denmark is well placed
Importance of Entrepreneurship (GEM)
• AGRICULTURE TO INDUSTRY • EMERGENCE OF LARGE COMPANIES • PUBLIC SECTOR EXPANSION
????
FIN NECESSITY
• SERVICE SECTOR • INNOVATIVE ENTREPRENEURSHIP • NETWORKING
OPPORTUNITY GDP PER CAPITA
What is different between countries (GEM 2005) • Best in opportunity versus necessity – Denmark, Iceland, New Zealand, Netherlands, Norway
• Worst in opportunity versus necessity – Croatia, Brazil, China, France, South Africa
• Innovative entrepreneurs are relatively rare in all countries!
The European Context within the Global Context • The most competitive region seems to be a false hope? • Our organization culture is perhaps too closed • Open systems (internally and externally) network better • Technology overemphasized over business competence? • We lag behind in new business formation • We lag behind in (fast) growth companies • We have GREAT POTENTIAL
The Entrepreneurial Europe • Knowledge creates business, therefore create more knowledge – new paradigm in universities!
• Innovation is about interfacing – new management paradigm – getting rid of the rigid structural approach
• New policy paradigm – make entry easy, – release demand: services are the future
Entrepreneurial opportunities • Aging population increases demand for services • Aging entrepreneurs • Digital technology means easier entry and supports faster growth (shareholder value!!!) (SKYPE) • Innovations are increasingly customer-driven, time of big research lab –driven innovation is over? • By networking even a small company can compete with the large ones • Difference between slaried work and entrepreneurship becomes fuzzy: Is entrepreneurship really more risky? • Economies of scale are true – but so are economies of smallness!
Financing helps to bridge the death valley, but more is needed
Financing program Management competence Board Knowledge structure Networking -------------------LOOKING BEYOND
Death valley
A general model of new business evolution PERFORMANCE BUSINESS PLANNING
0.5
HIGH GROWTH
100 IDEA DEVELOPMENT
LOW GROWTH
200
50
TIME
60 ”1000” SOURCES
DEATH VALLEY SURVIVAL
08/06/2009
YRS3 Antti Paasio
19
A HT model of business evolution PERFORMANCE IPO INTELLECTUAL CAPITAL
al apit ure c vent flow ,
KS AN
08/06/2009
LOW GROWTH TIME
Cash
B L,
SOURCES
ACCELERATION
INCUBATION ITA AP EC UR NT VE
IDEA DEVELOPMENT
BUSINESS PLANNING EQUITY SOFT LOANS
HIGH GROWTH
DEATH VALLEY SURVIVAL
YRS8 Antti Paasio I/2009
20
Death valley: Business Plan tells you how to become interesting and viable 150 100
1
BUSINESS PLAN FINANCING PROGRAM MGT COMPETENCE BOARD SUPPORT KNOWLEDGE NETWORKING MARKETING RECRUITING ……… -------------------LOOKING BEYOND 50
DEATH VALLEY 08/06/2009
YRS8 Antti Paasio I/2009
21
INCUBATION INITIAL RESOURCES PROMISING RESEARCH IDEAS INITIAL INVESTMENT SINGLE/TEAMSKILLS PREVIOUS EXPERIENCE ENTREPRENEURIAL SPIRIT
INCUBATION PROCESS FINANCE BUSINESS DEVELOPMENT IC MARKET ACCESS NETWORKING ACCELERATION
VIABLE FIRM
BUSINESS DEV LAB BUSINESS EDUCATION MARKETING SUPPORT FINANCIAL SUPPORT EQUITY FACILITY SHARING NETWORKING 08/06/2009
YRS8 Antti Paasio I/2009
22
IPO
Acquired
Close Doors Walking Dead
Self-Growth
Formal Capital Close Doors
Acquired
Walking Dead
Acquired
Grow Close Doors
Walking Dead
Rough Stages in the Entrepreneurial Period of a High-Growth Company
Grow Close Doors Stay Small
08/06/2009
YRS8 Antti Paasio I/2009
Source: Von Bargen
23
Growth ingredients • Willingness – Owners’ commitment, growth in evidence, management commitmet, risk taking ability, international outlook
• Ability – Strategic competence, innovativity, resources, plan, networks
• Recognised competitiveness – Innovation, knowledge, cost effectiveness, brand, proximity to market, key strategic partnerships
• Market opportunity – Focus, demand, solution to customer need, growth potential, competitive situation 08/06/2009
YRS8 Antti Paasio I/2009
24
GROWTH IN VARIOUS INDUSTRIES TRADITIONAL
LIFE SCIENCE GROWTH
ICT FAST GROWTH
• TURNOVER FAST GROWTH • MODERATE/LOW PROFIT G • RAPID INVESTMENT G • FAST SOLIDITY DECLINE • PARTLY INCOME FINANCE • SEVERAL EQUITY ROUNDS • IPR GROWTH
GENERIC GROWTH •TURNOVER GROWTH • PROFIT GROWTH • EMPLOYMENT GROWTH • INVESTMENT GROWTH • NET WORKING CAPITAL • SOLIDITY DECLINE • INCOME FINANCE GROWTH THROUGH M&A TRADITIONAL VALUE MEASURE
SIZE, PROPERTY CUSTOMERS... 08/06/2009
• NO TURNOVER • MONEY BURNED • SEVERAL EQUITY ROUNDS • 7-10 YEARS NO SALES • IPR GROWTH EXPECTATIONS TRADITIONAL+EXPECTATIONS VALUE VALUE MEASURE MEASUREMENT NETWORKS INNOVATIVITY SPEED PIPELINE PEOPLE EXPECTATIONS YRS8 Antti Paasio I/2009
25
Organizational Evolution towards Entrepreneurship MANAGEMENT Planning
INSTRUCTIONS AND RULES PLANNING REPORTING BUDGETING COST ACCOUNTING RESOURCE DRIVEN OWNERSHIP/POWER WEAK CUSTOMER INFLUENCE
+
LEADERSHIP
+
Efficiency
STRATEGIC MANAGEMENT CORE BUSINESS ONLY RETURN ON INVESTMENT PRODUCTIVITY: MACHINES/HUMAN MARKET-DRIVEN MARKET PRICE DRIVEN ACQUISITION DRIVEN PSEUDO CUSTOMERS
ENTREPRENEURSHIP Networks
GENUINE CUSTOMER-DRIVEN KNOWLEDGE AND COMPETENCE LOW HIERARCHY EMPOWERMENT INNOVATIVITY INCENTIVES STRUCTURES PROCESSES VIRTUALITY, PROSUMERISM EXPECTATIONS-DRIVEN
Innovative/entrepreneurial company • Goes beyond products to rewiring themselves • Apple, Google, 3M, Toyota, Microsoft, GE, Procter&Gamble • …Nokia…Virgin…BMW… • How – – – – –
bring them together encourage initiative (really!) promote young talent tell stories of old achievements get involved on the ground
Business Competence in the Networking organization • Ability to lead a fast-changing organisation in an innovative and entrepreneurial way • Ability to extend leadership into multi-cultural (international) networks • Deep understanding of market, competition, and competitors • Ability to integrate technology and business into new business models
It does NOT have to be big!!
Enemies of Innovation • • • • • • • • •
Slow idea-to-market process Lack of coordination Risk-averse culture Limited customer insight Poor ideas Inadequate measurement, too much measurement Lack of ideas Marketing or communication failure Too much tech is TOO MUCH
Entrepreneurship and Learning • Basic goal of knowledge-intensive education: Increasing the amount of systematic knowledge reduces uncertainty and increases success: – I know more and therefore perform better
• Basic idea of entrepreneurial education: we cannot remove uncertainty, therefore we must learn to cope with it through entrepreneurial learning – I understand better, therefore I am better able to cope with increasing uncertainty – Ability to regard uncertainty as an opportunity – It is essential to fail and thus find one’s limits
Entrepreneurship
IS A MINDSET
Entrepreneurship is… Starting-up a business ENTREPRENEURSHIP Managing one’s own company Majority ownership of a firm
Proactive, innovative action within any organization
Ability to run open dynamic organizations effectively and innovatively
INTRAPRENEURSHIP
A MINDSET
Three different angles MANAGEMENT
LEADERSHIP
• mgt technology • formal mgt • organizational theories • strategy theories
• human, personal aspect • charisma •culture
ENTREPRENEURSHIP INNOVATION
• change engine • constant improvement • innovator • networker • developer • life-style vs professional entrepreneur • strategy
Why is entrepreneurship important? • We know of its impact on welfare – – – –
job creation regional development innovation service
• We think it is essential for economic growth • We believe it is the engine of renewal to old and new market economies • We would like to achieve the goals set by the Lisbon declaration
Yrittäjyys 2010 • Periferiasta hyvinvointiyhteiskunnan kivijalaksi – Työllistäminen – Innovaatiot – Aluekehitys
• Yrittäjyyskulttuuria kaikkialla – – – –
PK-yritykset uusperustannasta nopeaan kasvuun Suurten yritysten toimintakulttuuri Palveluorganisaatioiden (julkistenkin) malli: asiakasohjautuvuus Oppilaitosten toimintakulttuuri ja opetuksen sisällöt
• Positiivisten arvojen korostuminen – Luottamus – Kehityshakuisuus, innovatiivisuus – Työilmasto, elämänlaatu
Entrepreneurial attitudes in EU countries in 2002 (would you prefer to be a salaried worker or selfemployed/entrepreneur?)
FINLAND
DENMARK
Lähde: Flash Eurobarimeter (134/2002)
SALARIED WORKER Palkkatyössä toisen palveluksessa
Sa ks Lu a xe m bu rg R uo ts i Be lg ia N o Al an rja ko m aa t Su om i
Po rtu ga li IS A Es pa nj a Irl an ti Ita l ia Is la nt Kr i ei kk a Br it a nn ia EU 15 R an sk a Ta ns ka
100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0%
Itsenäinen yrittäjä ENTREPRENEUR
Ei NEITHER kumpaakaan
Entrepreneur is.... CONFIDENT
INITIATIVE VISIONARY CREATIVE RISK-TAKER SELF-MOTIVATING
GOOD COMMUNICATOR GOOD NEGOTIATOR PROBLEM SOLVER PROJECT LEADER OPEN MIND
NETWORKER
EXPERT EASILY INTERESTED PROFESSIONAL KNOWLEDGE-SEEKER INTELLECTUAL CURIOSITY LIFE LONG LEARNER
STRESS-TOLERANT FLEXIBLE TEAM-MINDED ADAPTOR DETERMINED
RESILIENT
What can we say about European entrepreneurship (GEM 2005) ? • Early-stage entrepreneurial activity – Denmark 4.8% Finland 5% Sweden 4% – Latvia 6.6% – Brazil 11.3% China 13.7% Ireland 9.8% New Zealand 17.6%, Average 8.4%
• Overall – Denmark 8.8% Finland 13.5% Sweden 10.2% – Latvia 11.5 % – Brazil 21.4% China 26.7% Ireland 17.7% New Zealand 28.2%, Average 14.8%
Number of companies (2000) related to population (1000 inh) in EU There is room for more!
European Observatory for SME,s 2002
EEA, 2000
MICRO COMPANY SMALL COMPANY MEDIUM-SIZED COMPANY LARGE COMPANY
0-9 EMPLOYEES 10-49 50-249 250-
M
S
M
SME L
AMOUNT
19
1.2 0.2 20.4 0.04
EMPLOYMENT
42
23
16
81
41
MEDIAN SIZE
2
20
95
4
40
ENLARGED +10?
The Rise of SMEs • We used to think that large industrial companies are the only important strategic actors • The importance of SMEs started to increase during 70s – SME employment passed Large company employment in the 90s – Present economic crisis might accelerate this development – Digital technology makes market entry easier – Entrepreneurship is increasingly a source of disruptive innovation
Denmark is well placed
Importance of Entrepreneurship (GEM)
• AGRICULTURE TO INDUSTRY • EMERGENCE OF LARGE COMPANIES • PUBLIC SECTOR EXPANSION
????
FIN NECESSITY
• SERVICE SECTOR • INNOVATIVE ENTREPRENEURSHIP • NETWORKING
OPPORTUNITY GDP PER CAPITA
What is different between countries (GEM 2005) • Best in opportunity versus necessity – Denmark, Iceland, New Zealand, Netherlands, Norway
• Worst in opportunity versus necessity – Croatia, Brazil, China, France, South Africa
• Innovative entrepreneurs are relatively rare in all countries!
The European Context within the Global Context • The most competitive region seems to be a false hope? • Our organization culture is perhaps too closed • Open systems (internally and externally) network better • Technology overemphasized over business competence? • We lag behind in new business formation • We lag behind in (fast) growth companies • We have GREAT POTENTIAL
The Entrepreneurial Europe • Knowledge creates business, therefore create more knowledge – new paradigm in universities!
• Innovation is about interfacing – new management paradigm – getting rid of the rigid structural approach
• New policy paradigm – make entry easy, – release demand: services are the future
Entrepreneurial opportunities • Aging population increases demand for services • Aging entrepreneurs • Digital technology means easier entry and supports faster growth (shareholder value!!!) (SKYPE) • Innovations are increasingly customer-driven, time of big research lab –driven innovation is over? • By networking even a small company can compete with the large ones • Difference between slaried work and entrepreneurship becomes fuzzy: Is entrepreneurship really more risky? • Economies of scale are true – but so are economies of smallness!
Financing helps to bridge the death valley, but more is needed
Financing program Management competence Board Knowledge structure Networking -------------------LOOKING BEYOND
Death valley
A general model of new business evolution PERFORMANCE BUSINESS PLANNING
0.5
HIGH GROWTH
100 IDEA DEVELOPMENT
LOW GROWTH
200
50
TIME
60 ”1000” SOURCES
DEATH VALLEY SURVIVAL
08/06/2009
YRS3 Antti Paasio
19
A HT model of business evolution PERFORMANCE IPO INTELLECTUAL CAPITAL
al apit ure c vent flow ,
KS AN
08/06/2009
LOW GROWTH TIME
Cash
B L,
SOURCES
ACCELERATION
INCUBATION ITA AP EC UR NT VE
IDEA DEVELOPMENT
BUSINESS PLANNING EQUITY SOFT LOANS
HIGH GROWTH
DEATH VALLEY SURVIVAL
YRS8 Antti Paasio I/2009
20
Death valley: Business Plan tells you how to become interesting and viable 150 100
1
BUSINESS PLAN FINANCING PROGRAM MGT COMPETENCE BOARD SUPPORT KNOWLEDGE NETWORKING MARKETING RECRUITING ……… -------------------LOOKING BEYOND 50
DEATH VALLEY 08/06/2009
YRS8 Antti Paasio I/2009
21
INCUBATION INITIAL RESOURCES PROMISING RESEARCH IDEAS INITIAL INVESTMENT SINGLE/TEAMSKILLS PREVIOUS EXPERIENCE ENTREPRENEURIAL SPIRIT
INCUBATION PROCESS FINANCE BUSINESS DEVELOPMENT IC MARKET ACCESS NETWORKING ACCELERATION
VIABLE FIRM
BUSINESS DEV LAB BUSINESS EDUCATION MARKETING SUPPORT FINANCIAL SUPPORT EQUITY FACILITY SHARING NETWORKING 08/06/2009
YRS8 Antti Paasio I/2009
22
IPO
Acquired
Close Doors Walking Dead
Self-Growth
Formal Capital Close Doors
Acquired
Walking Dead
Acquired
Grow Close Doors
Walking Dead
Rough Stages in the Entrepreneurial Period of a High-Growth Company
Grow Close Doors Stay Small
08/06/2009
YRS8 Antti Paasio I/2009
Source: Von Bargen
23
Growth ingredients • Willingness – Owners’ commitment, growth in evidence, management commitmet, risk taking ability, international outlook
• Ability – Strategic competence, innovativity, resources, plan, networks
• Recognised competitiveness – Innovation, knowledge, cost effectiveness, brand, proximity to market, key strategic partnerships
• Market opportunity – Focus, demand, solution to customer need, growth potential, competitive situation 08/06/2009
YRS8 Antti Paasio I/2009
24
GROWTH IN VARIOUS INDUSTRIES TRADITIONAL
LIFE SCIENCE GROWTH
ICT FAST GROWTH
• TURNOVER FAST GROWTH • MODERATE/LOW PROFIT G • RAPID INVESTMENT G • FAST SOLIDITY DECLINE • PARTLY INCOME FINANCE • SEVERAL EQUITY ROUNDS • IPR GROWTH
GENERIC GROWTH •TURNOVER GROWTH • PROFIT GROWTH • EMPLOYMENT GROWTH • INVESTMENT GROWTH • NET WORKING CAPITAL • SOLIDITY DECLINE • INCOME FINANCE GROWTH THROUGH M&A TRADITIONAL VALUE MEASURE
SIZE, PROPERTY CUSTOMERS... 08/06/2009
• NO TURNOVER • MONEY BURNED • SEVERAL EQUITY ROUNDS • 7-10 YEARS NO SALES • IPR GROWTH EXPECTATIONS TRADITIONAL+EXPECTATIONS VALUE VALUE MEASURE MEASUREMENT NETWORKS INNOVATIVITY SPEED PIPELINE PEOPLE EXPECTATIONS YRS8 Antti Paasio I/2009
25
Organizational Evolution towards Entrepreneurship MANAGEMENT Planning
INSTRUCTIONS AND RULES PLANNING REPORTING BUDGETING COST ACCOUNTING RESOURCE DRIVEN OWNERSHIP/POWER WEAK CUSTOMER INFLUENCE
+
LEADERSHIP
+
Efficiency
STRATEGIC MANAGEMENT CORE BUSINESS ONLY RETURN ON INVESTMENT PRODUCTIVITY: MACHINES/HUMAN MARKET-DRIVEN MARKET PRICE DRIVEN ACQUISITION DRIVEN PSEUDO CUSTOMERS
ENTREPRENEURSHIP Networks
GENUINE CUSTOMER-DRIVEN KNOWLEDGE AND COMPETENCE LOW HIERARCHY EMPOWERMENT INNOVATIVITY INCENTIVES STRUCTURES PROCESSES VIRTUALITY, PROSUMERISM EXPECTATIONS-DRIVEN
Innovative/entrepreneurial company • Goes beyond products to rewiring themselves • Apple, Google, 3M, Toyota, Microsoft, GE, Procter&Gamble • …Nokia…Virgin…BMW… • How – – – – –
bring them together encourage initiative (really!) promote young talent tell stories of old achievements get involved on the ground
Business Competence in the Networking organization • Ability to lead a fast-changing organisation in an innovative and entrepreneurial way • Ability to extend leadership into multi-cultural (international) networks • Deep understanding of market, competition, and competitors • Ability to integrate technology and business into new business models
It does NOT have to be big!!
Enemies of Innovation • • • • • • • • •
Slow idea-to-market process Lack of coordination Risk-averse culture Limited customer insight Poor ideas Inadequate measurement, too much measurement Lack of ideas Marketing or communication failure Too much tech is TOO MUCH
Entrepreneurship and Learning • Basic goal of knowledge-intensive education: Increasing the amount of systematic knowledge reduces uncertainty and increases success: – I know more and therefore perform better
• Basic idea of entrepreneurial education: we cannot remove uncertainty, therefore we must learn to cope with it through entrepreneurial learning – I understand better, therefore I am better able to cope with increasing uncertainty – Ability to regard uncertainty as an opportunity – It is essential to fail and thus find one’s limits
Entrepreneurship
IS A MINDSET
