Revisiting Entrepreneur and Entrepreneurship

In recent decades the role of an entrepreneur has been considered of very great significance in accelerating the pace of growth and economic development in both the developed and developing countries. An entrepreneur is a person who perceives opportunities, organizes the resources needed to exploit the opportunity and sets up an enterprise. The process of setting up an enterprise is called entrepreneurship. An enterprise is a business venture. It is an undertaking that involves uncertainty and risk as well as innovation. An individual has the right to choose any income generating activity or self-employment or entrepreneurship as a career option. Functionally income generating and self-employment activities are the initial sages of entrepreneurship.

The qualities of entrepreneurship and management are present in varying degrees in both managers as well as entrepreneurs. Yet entrepreneurs are different from managers. They create opportunities for innovation, experimentation and production. Once production begins managers take over. They are more concerned with organizing the routine day-to-day jobs. They do not prefer to take risks.

Entrepreneurship is a discipline with a knowledge-based theory. A person can learn and acquire the competencies of becoming an entrepreneur and start a venture and make it grow. So the myth that entrepreneurs are born and not made can safely be dispelled.

The most important functions of an entrepreneur are innovation, risk and uncertainty bearing and organization building. An entrepreneur usually has to perform all the functions of production, marketing, finance, human relations etc. especially at the time of start-up and establishing an enterprise. Most entrepreneurs usually start a small venture and then make it grow.

Taking up a career in Entrepreneurship

To take up a career in entrepreneurship you have to feel the desire as well as perceive the feasibility of entrepreneurship as a career option. Fortunately it is no longer believed that entrepreneurs are born with certain traits. The emphasis is now on the competencies, which provide the know-how of how to engage in entrepreneurial behavior. Knowledge, skills and abilities for undertaking a particular task can be learnt. A list of general competencies, which play an important role in entrepreneurial success include work commitment self confidence, systematic planning, concern for quality etc.

A change in perspective- an ability to perceive opportunities and to think of innovative ways of exploiting opportunities is a right step in thinking like an entrepreneur. Experience in that particular field will go a long way in providing you the know-how and confidence that you can launch and successfully run an enterprise. Many motivators for taking the plunge into entrepreneurship have been identified by McClelland among others. Of these the Need for Achievement plays a very crucial role in entrepreneurial motivation. It encompasses defining a problem, organizing the means of solving it, setting goals, seeking challenges and taking moderate risks. Desire for autonomy also spurs people to start their own ventures, as they do not want to work as subordinates who have to follow instructions all the time. Entrepreneurial performance can be measured in physical, financial, market or stakeholder basis. While the age of enterprise, sales, profits, increase in market share/scope etc. are important, the rewards of entrepreneurship can be intrinsic. The joy of creating ones own organization, or extrinsic-profits or being part of the ET Top 50 or part of the Forbes List of Billionaires. Whatever be the personal agenda for taking the plunge into entrepreneurship the intricacies of identifying the product or service, its feasibility analysis, decisions regarding plant location, financing, marketing etc. have to be taken. You will learn about these in the subsequent lessons.

Entrepreneurial performance and Rewards

Entrepreneurial performance may refer to measure (s) of business success and the rewards may refer to the recompense- financial or psychic accruing to the entrepreneur. The convergence is attained when and where the success of the venture itself is perceived as a personal reward.

ENTREPRENEURIAL PERFORMANCE

The various measures of business performance include, longevity of survival or more popularly ‘age of the enterprise,’ sales growth, growth in market share, growth in market scope (local, national or international), growth in investment (in the same unit), additional units created via acquisition & diversification growth in number of employees, profits and so on. Most of these are physical growth and financial growth parameters and have been the traditional measures of entrepreneurial performance. Of late, other measures of performance such as customers’ satisfaction, employee satisfaction, image, credit rating, etc. are also becoming increasingly relevant. These measures are typically referred to as ‘stakeholder-based’ parameters. As the small firms grow into acquiring corporate identities, ‘market’ based parameters such as stock price, EPS etc. may also be the relevant measures of entrepreneurial performance. Figure 3.1 provides a look into the classification of the measures of entrepreneurial performance.

Measures of Entrepreneurial Performance

Measures of Entrepreneurial Performance may relates to the following-

1.     Market Based

2.     Physical

3.     Financial

4.     Stakeholders based

Linking the entrepreneurial performance to entrepreneurial behavior and the rewards, one may posit that because the entrepreneur is interested in feedback on the performance, one is always trying to compare how one is doing in relation to others. Of course, if there is no one to compete, the entrepreneur seeks to improve upon his previous record! It is in this context that the entrepreneurial performance becomes a source of personal reward.

ENTREPRENEURIAL REWARDS

The personal rewards of entrepreneurship extend beyond business performance. Do the rewards inhere in the outcomes of the activity or the activity itself? Often one draws a distinction between extrinsic rewards and intrinsic rewards.

·         Intrinsic Rewards: As the names would suggest, intrinsic rewards vest in the activity itself- ask a musician the joy of making music, the craftsman or the artist the joy of creative work or a cricketer the joy of playing the game! Likewise, the entrepreneur enjoys the creativity and innovativeness that he brings to his venture. This aspect of entrepreneurship may be so dear to the entrepreneur, that he may happily forgo other commonly perceived physical and financial parameters of performance. Many entrepreneurs, even as they welcome the prosperity and flourish of business miss “those momentous” days of bringing their dream project alive. Such rewards inhere also in the pleasure that one is creating an organization/institution that would outlive one’s lifespan. Every business is a source of livelihood to many employees and their families. Thus, the entrepreneurs derive immense satisfaction in their ability to ‘touch’ other’s lives. This they can do also by introducing products and services that bring about improvement in others’ lives, be it a pharmaceutical formulation, daycare, home entertainment, leisure and so on. Even the entire business concept may be based on the intrinsic aspects of personal satisfaction. For example, there are many entrepreneurs who are operating, in their own words, “laboratories” where they design and develop solutions! There is an entrepreneur in cast cutlery that mobilized wandering iron smiths (Gypsies) into manufacturing the products that grace almost every world-class hotel/ restaurant. There are businesses that encourage woman employment. There is, of late, talk of all ‘Dalit’ business.

·         Extrinsic Rewards: One reason an individual may desire to be on one’s own could be that one is looking for the profit pie rather than mere a share in it! The logic is simple-the payoff to the employer is greater than the salary to the highest paid employee! Apart from income and wealth that business ownership may bring forth, it may also be source of career continuity for family members. Small entrepreneurs may have regretted the hike in executive compensation in the post liberalization India and the squeeze on the margins owing to increasing competition; yet extrinsic awards are far from a passé, never before we celebrated wealth so much. The euphoria surrounding the ‘billionaires’ is a testimony to our increasing acceptance of entrepreneurship and prosperity. Even you would aspire to become another Narayanamurthy, Aziz Premji, Aditya Birla, Sunil Mittal, Kiron Mozumdar Shaw, Shehnaz Hussian, Vijay Mallaya, won’t you?

What we have provided is a brief recount of various intrinsic and extrinsic rewards perceived by the entrepreneurs. They say that the taste of the pudding lies in its eating. So venture out. The road may not be easy. It is when the going becomes tough that the tough get going!

Entrepreneurial Skills and Competency Requirement

You are already aware of the roles and functions that the entrepreneurs play in relation to the process of economic development and in relation to the enterprise.

Every role has a skill and competency requirement. For a teacher or a performing artist, for example, it is the skill to communicate that plays a decisive role in their effectiveness besides, of course, their knowledge. For a craftsman or an artist, it is the creativity and skill in the chosen craft. Talking about entrepreneurship, you need to have a knack for spotting business opportunities and creativity and innovation in developing and delivering a product or service.

It is hoped that after reading this chapter you will actually see the potential of a career in entrepreneurship, and experience a desire to start a venture of your own .At the same time there might be certain inhibitions in your mind whether such a task is feasible, practical and sustainable. For every task one needs certain competencies. In this Blog post, we would be talking about the entrepreneurial competencies. Whereas competencies reinforce a person’s perception of feasibility of a career option, there also has to be the will and urge, a ‘perception of the desirability.’ Is it not paradoxical that entrepreneurship has a key role to play in economic development, yet there are very few who ever think of it as a career option? And, it is not that they may be lacking in skills. What one often finds is the lack of motivation!

Competencies equip you with the knowledge of how to do (‘know-how’) of entrepreneurial behavior and motivation provides answers to why to do (‘know-why’) of entrepreneurial behavior. You would also be learning about why people opt for entrepreneurship. The question of ‘why entrepreneurship’ is also linked to reward expectations, be these financial, social status or psychological satisfaction. In case of entrepreneurship, successful performance of the venture itself becomes a reward for the entrepreneur.

As noted in above, every career draws on the competencies of an individual. Some of these competencies may be general and some peculiar to the chosen career. You may understand competencies to mean abilities and skills. However, we would desist from calling these as personality traits as such a conceptualization only reinforces the mistaken belief that entrepreneurs are born rather than made. We believe that recognition of these competencies as abilities and skills makes entrepreneurship as a teachable and learnable behavior. In this blog post we would discuss about a set of entrepreneurial competencies developed by the Entrepreneurship Development Institute of India (EDI) Ahmadabad. These competencies were identified by a thorough research procedure based on critical analysis of the case studies of the successful entrepreneurs. We also annex a questionnaire that you can use to evaluate your score on each of these competencies. We would also suggest how you might improve on your scores.

ENTREPRENEURIAL COMPETENCIES IDENTIFIED BY THE EDI

·         Initiative- acting out of choice rather than compulsion, taking the lead rather than waiting for others to start.

·         Sees and Acts on Opportunities- A mindset where one is trained to look for business opportunities from everyday experiences. Recall ‘oranges’ example.

·         Persistence- A ‘never say die’ attitude, not giving up easily, striving Information seeking continuously until success is achieved.

·         Knowing- Knowing who knows, consulting experts, reading relevant material and an overall openness to ideas and information.

·         Concern for High Quality of Work- Attention to details and observance of established standards and norms.

·         Commitment to Work Contract- Taking personal pains to complete a task as scheduled.

·         Efficiency Orientation- Concern for conservation of time, money and effort.

·         Systematic Planning- Breaking up the complex whole into parts, close examination of the parts and inferring about the whole; e.g. simultaneously attending to production, marketing and financial aspects (parts) of the overall business strategy (the whole).

·         Problem solving-Observing the symptoms, diagnosing and curing.

·         Self-confidence- Not being afraid of the risks associated with business and relying on one’s capabilities to successfully manage these.

·         Assertiveness- Conveying emphatically one’s vision and convincing others of its value.

·         Persuasion- Eliciting support of others in the venture.

·         Use of Influence Strategies- Providing leadership.

·         Monitoring- Ensuring the progress of the venture as planned.

·         Concern for Employee Welfare- Believing in employee well being as the key to competitiveness and success and initiating programmes of employee welfare.

The self-administered questionnaire in the annexure to this chapter would help you measure where you stand on these competencies. Given that these competencies matter in entrepreneurial success. EDI estimates that development of these competencies can substantially (as much as 33%) bring down incidence of business failures/industrial sickness.

DEVELOPING COMPETENCIES

‘Awareness,’ they say, is the first step towards ‘improvement’ and ‘success.’ Now that you are aware of the critical competencies for entrepreneurial success and also have a measure of your scores on these, it is appropriate that you also think in terms of how to improve your scores. Suppose, you find yourself lacking in the competency- ‘opportunity spotting,’ you may start practicing to think like an entrepreneur (See Box entitled ‘Thinking like an Entrepreneur’). With just a little change in perspective, the world changes for you. Similarly you may work on the other competencies as well.

The role of Prior Work Experience

Project work, summer training as well as prior work experience hone the entrepreneurial competencies. Whichever area you might decide upon to start a venture be it a school, restaurant, garments, courier service, interior decoration etc. along with the educational qualifications, if any, you need to acquire practical experience in that field. For it is while you get on the job training/experience that you familiarize your self with all aspects of the venture. You can learn as to how to handle customers, suppliers, and government officials, financiers. You will also be able to acquaint yourself with the nitty-gritty’s of the production process, bottlenecks like power disruptions, delay or non-availability of raw materials and a host of other things. Day to day dealings of the various facets of business will equip you to handle your own venture deftly, with confidence and with minimal of costly mistakes.