THE ROLE OF ENTREPRENEURSHIPS IN SMEs:Focus and Perseverance Guide the Entrepreneur

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SME Management (MGT-601)

Lesson 3

THE ROLE OF ENTREPRENEURSHIPS IN SMEs:

This lecture will define the modern concepts of enterprise, entrepreneurship and will establish the

relationship between an enterprise and an entrepreneur. It will also relate the SMEs advancement

with entrepreneurship.

The modern civilization is the industrial system and the directing force that animates this framework is

the business enterprise. In the current economic theory "the businessman" is called entrepreneur.

History

A French baker Cantilon identified the first definition of entrepreneur function in the mid-18th century

to mean, a person who is "uncertainty bearer" the same term appeared in Adam Smith's writings but not

very clearly. J.B Say regarded entrepreneur to be an organizer who combines various factors of production

to produce a viable project. The famous economist Joseph Schumpeter defined the theory of

entrepreneurship with a new perspective and regarded the entrepreneur as an innovator who has the

potential of doing things in a new way. He subdivided this innovation process into following five forms.

Introduction of new goods

Introduction of new methods of production

Finding of new product

Discovery of new sources of supply of raw materials.

The organization of industry in a new way.

But, the concept of innovation has been criticized by the developing countries who need "imitating

entrepreneurs" capable of implementing innovation made in the developed countries. According to

Peter Kilby, an entrepreneur in an underdeveloped country performs a wide range of activities including

perception of market opportunities, combining and managing factors of production, introduction of

production techniques and products etc

This conflict was solved by defining innovation entrepreneur as "independent entrepreneur" and the

person who carried out new combinations in order to meet perceived opportunity " corporate

entrepreneur"

The concept of entrepreneur was referred to a generic type of operator who bought at fixed prices in order

to sell at prices, which were uncertain at the time of purchasing. Entrepreneurship was defined by Cole

(1959) "a purposeful activity (including an integrated sequence of decisions) of an individual or group of

associated individuals who undertake to initiate, or organize a profit oriented business unit for the

production or distribution of economic goods or services". In the year1959 her bison and Meyers replaced

the terms with "management" and "organization" for entrepreneurship.

The entrepreneurship played a very vital role in the small and medium sized industries. The new

innovations, courage to face the risk of uncertainties and qualities of entrepreneur to act as a leader gave rise

to more than seventy percent of new innovations and new combination of skills like Microsoft, Yahoo, and

Linux etc. The major developments in the computer industry, bio- informatics, medicine, electronics,

telecommunications and hundreds of other things are the result of such entrepreneurships in the medium

and small industrial sector.

Sources:

Aitken, Huge J.(ed.), Exploration in Enterprise, Cambridge, Harvard University Press, (1965)

p. 46.

The Theory of Economic Development; Harvard University Press (1959), pp. 89-105.

Mc Clelland, David C., The Achieving Society, collier Mac Millan, N.Y. (1967)

SME Management (MGT-601)

Entrepreneurship

By Reggie Aggarwal and Mark Esposito:

Entrepreneurship is a way of life. It is a driving force that compels you to do more, move

Faster, and go farther than anyone else, even in the face of high risk and uncertain

Outcomes. Unmistakably, the rewards of entrepreneurship, especially in the technology

Arena can be great. But it is not an easy road to travel. Consider the following five facts:

1. Only 1 in 6,000,000 high-technology business ideas wind-up in an IPO;

2. Less than one percent of business plans received by venture capitalists get

Funded;

3. Founder CEOs typically own less than 4 percent of their high tech

Companies after an IPO;

4. 60 percent of high tech companies that are funded by VCs go bankrupt.

And

5. Most high tech companies that succeed in having an IPO take between

Three and five years to get there.1

Clearly, it is not easy to be a technology entrepreneur. Many successful entrepreneurs have failed at one

point or another. And most have experienced a healthy dose of frustration, burnout, and sorrow along the

way.

So why become an entrepreneur? For the true entrepreneur, that is a rhetorical question.

For the emerging entrepreneur, there are at least three major reasons.

First,

Objective of creating something novel and useful. "To be on the cutting edge" is a

necessary mantra. A technology entrepreneur generally seeks to solve a problem that exists in the market.

Whether that means developing a better communications resource tool, a better optical switching device, or

a better bioinformatics system, a void is always identified and then attempted to be filled.

To many people confuse this process with the process of identifying hot technology companies in the

market and building new companies that mimic them. The hot technology companies are hot because they

seek to solve a

problem. Those that mimic them neither identified a problem nor created a solution; they simply found a

new trend that they wish to follow.

The ability to maintain a sustainable competitive advantage over others is what brings rewards to the

entrepreneur. The reason for taking risks fundamentally is tied to this concept. That is why being on the

cutting edge is so critical to the entrepreneur.

Reggie Aggarwal is the CEO of Cvent, Inc., a premier online registration, e marketing, and data analysis

company dedicated to maximizing the return on meetings and events. He also is the co-founder of the

Indian CEO High Tech Council, the largest and most influential CEO organization on the east coast. Mark

Esposito is the Vice President of Global Sales and Business Development for the NASDAQ Stock Market,

the

most influential stock exchange in the technology world

Second,

a second objective of the technology entrepreneur is to build long-term value.

Sustainability is crucial. The would-be entrepreneur often confuses this concept with building "valuation."

Those who build companies for the primary purpose of attracting investment dollars at high premiums are

opportunists, not entrepreneurs. The entrepreneur always is focused on creating something of lasting utility.

This does not mean that the entrepreneur is not concerned with attracting investment dollars or creating

wealth. Rather, the entrepreneur's strategy is to create long-term value and thereby ensure wealth. The trick

is to not put the proverbial cart before the horse. Concentrating on long-term value can create wealth;

concentrating on wealth typically creates neither value nor wealth.

Third,

a third objective of the entrepreneur is to have freedom. Being your own boss has definite appeal. Glass

ceilings cease to exist and achievement is limited only by imagination. Entrepreneurs are motivated by

SME Management (MGT-601)

having control over their work and the flexibility to pursue their dreams. But freedom always has a price.

With greater personal freedom, comes greater uncertainty about the future, particularly in relation to

finances. Greater personal freedom also means a less structured environment, in which greater self-

discipline is required in order to thrive. Entrepreneurs are willing to accept these risks, though, because of

their absolute conviction that they have what it takes to overcome any odds.

If achieving these three objectives is not of basic interest, then the very thought of becoming an

entrepreneur should be extinguished. If a big personal cash payout seems to be glaringly missing from the

list of major objectives, it is because it is not a primary motivating factor. These three major goals are not

objectives to be self-evident should embrace entrepreneurship. But what makes an entrepreneur special,

besides believing in major common objectives?

There are several characteristics that define the entrepreneur. For example,

Entrepreneurs always have passion. Entrepreneurs live and breathe their business enterprises. They are

zealots about their business models and are evangelical about their products or services. They have to be. If

they weren't, the stress and financial pressures of running a fledgling business would completely wipe them

out. The sheer magnitude of the odds that are stacked against entrepreneurs requires a special kind of

irrational exuberance to overcome.

Entrepreneurs have unshakable confidence in and enthusiasm for their business ventures that contagiously

spreads to their business team. Laser focus is another feature of entrepreneurs. There are many people that

are creative, but lack discipline. Entrepreneurs, on the other hand, have both qualities. An entrepreneur

identifies a path towards a solution and follows that path, notwithstanding the frequent temptation to take

side roads leading to seemingly newer, more exciting destinations. The entrepreneur knows that most of the

journey down the chosen path is checkered with drudgery, yet continues down the path unswervingly,

confident that there will be a reward at the end. The entrepreneur also knows that the side roads

encountered along the way may appear appealing at their start, but will quickly become as checkered with

drudgery as the originally chosen path and likely lead to a dead end.

Focus and Perseverance Guide the Entrepreneur

Courage is a defining trait of entrepreneurs. To understand the odds against success and still

forgeahead, knowing that many battles will be lost along the way, requires a certain amount of

fearlessness. Entrepreneurs are purposeful in their tactics and can think on their feet. Yet they

regularly face daunting challenges whose failure to overcome will spell certain disaster for their

business ventures. Their ability to face these challenges without fear enables entrepreneurs to

succeed where others cannot.

Entrepreneurs also are leaders. Contrary to the popular belief those entrepreneurs are

Mavericks who prefer to be lone wolves, entrepreneurs are visionaries that can inspire and lead their

colleagues. There are few things more compelling than people who are Passionate about their work, have

the discipline to achieve success, and are fearless in their outlook. An entrepreneur builds teams and instills

confidence in others.

Finally, an entrepreneur always is thinking ahead, perpetually in motion towards well-defined goals. In the

end, entrepreneurs can best be described as ocean waves, existing only so long as they move forward.

CHARACTERISTICS OF ENTREPRENEURS

Studies have established the existence of some common personal characteristics amongst entrepreneur like

high level of energy, desire to pursue innovation goals, desire for achievement, a deep involvement in work,

optimistic believe in work etc.

Let's discuss the resume some of the important studies relating to characteristics profile of entrepreneur by

David Mecleaaland

1. Need for achievement

2. It is the prime psychological derive that motivates the entrepreneur it brings behavior motivation

towards accomplishment, i.e. in achieving a goal that possesses reasonable challenge to an individuals

competence such an entrepreneur is energetic but not a gambler. His motivation is the product of a

scientific assessment of his energies and the challenge.

SME Management (MGT-601)

3. Desire for Responsibility

4. Entrepreneur prefers to use his own resources and to be personally responsible for the results. He

can perform well in groups particularly when he can influence the results in some specific way.

5. Preference for Moderate Risk

6. Seeking high level of performance consistent with the possibility of achievement.

7. Perception for the Probability of Success

8. This consists in collecting and analyzing facts and thereafter falling upon his own self-confidence for

accomplishing the task.

9. Future Oriented:

10. He plans and thinks in the future. He anticipates possibilities that lie beyond the present.

11. Stimulated by Feedback

12. Irrespective whether the signals about his performance are good or bad, he draws his inspiration

from the feedback.

13. Energetic Activity

14. He exhibits a high level of energy than an finding out novel ways of getting task done.

15. Skill in Organizing

16. Entrepreneurs have remarkable skill in organizing work and people. They make objective

selection of individuals in conformity with their skill in solving a specific problem.

17. Attitude Towards Money

His attitude towards money is cavalier, i.e. money is not a principal obsession. He values

money but not for itself. Money acts as a measure of his accomplishment, a token of his

achievement rather than a commodity to be hoarded.

Qualities of an Entrepreneur

1. Mental Ability: it consists of :(a) overall intelligence, (b) creative thinking, i.e. the ability to adapt

to various situations, (c) analytical ability, i.e. ability to systematically analyze the business problems.

2. Human Relation Ability: it is demonstrated by emotional stability, skill in interpersonal relations,

sociability, tactfulness, empathy (to put oneself to another's place).

3. Communication Ability: it is the skill in conveying information to others so that understanding is

created.

4. Technical Knowledge: the expertise in such areas as personal selling techniques, operating a

complex piece of equipment, analysis and interpretation of financial records etc.

5. Decision Making Ability: the skill in selecting satisfactory course of action from among various

alternatives.

6. Conceptual Ability: the ability to comprehend the organizational structure and how each units fits

into the whole. It enables him to recognize opportunities.

REFERNCES

1-ENTREPRENEUSHIP by Reggie Aggarwal and Mark Esposito MIT (Massachusetts institute of

technology, Harvard USA) center for entrepreneurial skills.

2-The theory of leisure class by T.Veblen

3-Entrepreneurship and small business management by C L BANSAL

(This is also the recommended book.)

Key Terms:

Bio-informatics (The branch of electronics dealing with life or biology)

IPO (A public issue of shares on stock exchanges)

Venture Capital (VC) Money invested in a business or firm but with high risk factor

NASDAQ (National association of dealers in securities automated quotations)

Mavericks (individualists)

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