What do we know about the entrepreneurial process and business opportunity recognition? 8 February 2017

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1 What do we know about the entrepreneurial process and business opportunity recognition? 8 February 2017 Hans Landström SKJ Centre for Entrepreneurship Lund University, Sweden hans.landstrom@fek.lu.se Contribution: The entrepreneurial process 1. Activitiy-based approach 2. Business platform approach Paul Reynolds Magnus Klofsten 3. Causation and effectuation 4. Evolutionary approach approach Saras Sarasvathy Howard Aldrich 1

2 The entrepreneurial process (Davidsson, 2006) The discovery process The exploitation process Contribution: The entrepreneurial process 1. Activitiy-based approach 2. Business platform approach Paul Reynolds Magnus Klofsten 3. Causation and effectuation 4. Evolutionary approach approach Saras Sarasvathy Howard Aldrich 2

3 The entrepreneurial process Development of business idea Idea Business Business Business opportunity model plan New venture Careerchoice Decision to start a new venture Development of a new venture Entrepreneurial activities Business start-ups do not all follow one and the same process Any sequence of events is possible There is no right way (but maybe a couple of better ways ) 3

4 Which process is better? It depends on, for example the business idea Product/service Innovative Apple YouTube Existing Craftsman Dell the environment Existing Innovative the individual(s) Way of making business Contribution: The entrepreneurial process 1. Activitiy-based approach 2. Business platform approach Paul Reynolds Magnus Klofsten 3. Causation and effectuation 4. Evolutionary approach approach Saras Sarasvathy Howard Aldrich 4

5 Causation logic (Sarasvathy, 2001) I know what I want the goals! I know how the market looks like! I know what I can do the actual means! I start my business in planned way - in order to fullfil my goals! Effectual logic (Sarasvathy, 2001) Expanding cycle of resources Actual courses of Action possible New means Who I am What I know Whom I know Actual Means What can I do? (Affordable loss) Interactions with other people Effectual stakeholder commitments New goals Converging cycle of constraints NEW MARKETS AND NEW FIRMS 5

6 Causation and effectuation CAUSATION PROCESS Business opportunity 1 Business opportunity 2 EFFECTUATION PROCESS Sankataran Venkataraman and Scott Shane: The domain of entrepreneurship Entrepreneurship is a scholarly field that seeks to understand how opportunities to bring into existence future goods and services are discovered, created, and exploited, by whom, and with what consequences. (Academy of Management Review, 2000) 1. Definition discussion 2. Focus on opportunities 6

7 Constribution: Business opportunties Objective or subjective generated: Opportunities themselves are objective phenomena, but they are not known to all actors at all times some are more able to recognize opportunities than others (perception)(shane & Venkataraman, 2000). Opportunities are made, not found, i.e., opportunities exist in the mind of the entrepreneur as a creative construct it is a question of a subjective sense-making of individuals (Gartner et al., 2003) it is question of creativity. External sources of new ideas Sources New markets emerges New technologies are created Political decisions/regulations Deregulations of systems Changes in consumer behaviour Sudden events Changes in business models Examples Mobile phone industry (end of the 1990s) Digital photography/functional food Changes within EU Financial markets in Sweden during the 1980s Music industry (CD web loading) (in the 2000s)/Health 9/11 Amazon.com 7

8 Individual differences (Ardichivilli et al., 2001) Education Experience Individual experience Work experience Earlier knowledge - market - customers need Entrepreneurial alertness Network (strong vs weak ties) BOR Perception of successful business ideas (Baron and Ensley, 2006) Novice entrepreneurs (first time) How novel the idea is Idea based on new technology Superiority of product/service Potential to change the industry Intuition or gut feeling Thus, focus on: Newness and uniqueness of their product or service, and gut feeling belief in its potential. Experienced entrepreneurs Solving a customer s problems Ability to generate positive cash flow Speed of revenue generation Manageable risk Other in their network with whom to develop the venture Thus, focus on: Factors and conditions related to the start and the running of the venture. 8

9 Business opportunity register 1. Short description of the idea 2. Trends on which the idea are based 3. Key information (e.g. customers, technical solutions) 4. Problems that may occur in the development of the idea 5. Competition (alternative solutions) 6. Sources for more information (individuals, web-pages, books) 7. Timing? 2-3 pages for each business opportunity 9

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