How successful Entrepreneurs started

how do successful entrepreneurs think and how to interview successful entrepreneurs
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PatrickWood,United Kingdom,Researcher
Published Date:16-07-2017
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Introduction Why This Book, What It Is All About, and Who We Are The Why It is always good to begin at the beginning. First of all we have long loved the field of entrepreneurship. Since 2013 we had wanted to write a new book aimed primarily at would-be entrepreneurs. Then in 2014 we were approached by Charlotte Maiorana, a long-time friend and edi- tor in the publishing world. She asked us if we would consider writing a book for Pearson. She was scouting for a book on entrepreneurship aimed at the would-be entrepreneur, the MBA student, or an executive looking for a career change. She was familiar with many of our more research-oriented books done for other publishers. She also knew of an earlier professional book we had done aimed at the individuals con- sidering starting a new venture. Hers was a challenge that we willingly accepted as we felt most of what was available to the reader was either way too academic, or aimed at undergraduate students as a textbook, or too highly focused on technology entrepreneurship to the detriment of other areas in which entrepreneurship occurs. We also felt that much of what was available in book form did not reflect the current contexts in which most would-be entrepreneurs exist nor did they reflect the latest trends in marketing and finance. We thus accepted her challenge and this book is the result. Unlike many individuals, especially academics, who have written books on entrepreneurship, we have actually started ventures so we have a per- spective different from many of our colleagues and other individuals writing on the topic. Through all this endeavor to write this book, we have been joined together by our mutual love for entrepreneurship and our profound respect for the many entrepreneurs we have met around xi xithe world. The area of entrepreneurship has been our personal passion as teachers, researchers, consultants, and entrepreneurs. We hope in this book that we can bring to the reader a sense of the excitement of creat- ing a new venture, the joy of making your first sale, the challenge of hiring staff, the pains of growing, the fear of failure, the agony of plan- ning, and the ultimate satisfaction when you look at what you have cre- ated as an entrepreneur. This is a journey, like none other. We hope, in the following pages, you will like the adventure we are suggesting you take to become a successful entrepreneur. Remember one of the joys of becoming an entrepreneur is that sometimes you cannot only challenge the rules, but sometimes also get a chance to break them. As Anglican Bishop Alan Wilson has noted: If nobody ever experimented with going ahead of the rules, the rules would never change and that’s the evolutionary process. . . . One of the important reasons we are able to do this book is all of the entrepreneurs and business owning families with whom we have worked over the years. They have shown us how much entrepreneurship has evolved over the last three decades. We want to thank them for the real- ity and practicality they have provided to our thinking. Likewise, we also owe a great deal to our many students around the world who have gone on to create a wide variety of firms and/or to teach entrepreneur- ship. Much of the research work that underpins this book is not just our own, but also the work of hundreds of our colleagues who have built the academic foundation of this field since we first entered it over 30 years ago. Without their research and insights, this book would be just a col- lection of old wives tales. To keep this book from being a boring academic tome, we have chosen not to cite every piece of research work that is meaningful (and useful) in the field. We owe a lot to the research studies that can be found in the primary journals in the field: Journal of Small Business Management, Entrepreneur- ship: Theory and Practice, Journal of Business Venturing, Entrepreneurship and Regional Development, Journal of Small Business Economics, Family Business Review, and Journal of Enterprising Culture. We realize how much this field has grown since we first entered it. Today there are over 100 aca- demic journals in the field and thousands of universities around the world with programs and courses in entrepreneurship. Introduction xii No institution has influenced the field more than a 35-year-old research conference focused on the field. Thus we want to acknowledge the Bab- son College Entrepreneurship Research Conference (BCERC), which has long been the place where the best research and new theories have been presented. In fact, this book is being wrapped up while at the 2015 BCERC meeting in Boston. We are also indebted to the International Council on Small Business, the oldest professional organization for those interested in entrepreneurship, which founded the oldest journal in the field over 50 years ago and remains a significant source of information on entrepreneurship of a small business management. These groups are among the academic foundation stones for this book. Next, we feel we must acknowledge the financial support of the follow- ing organizations. First we want to thank the Kauffman Foundation of Kansas City, Missouri, then The Åbo Akademi Foundation, and finally TEKES (The Finnish National Technology Agency) for their support to some of our work over the years. Finally, we want to thank our families (and pets) for their support to our efforts and the reality check they constantly provide us when it comes to what is important in life. This reminds us to say every successful entrepreneur will have to constantly deal with balancing work-life issues. The What We will begin this book by covering in Chapter 1 on what entrepreneur- ship is and its various roles in world’s economy. We look as well at its historical and philosophical underpinnings. We then discuss some of the characteristics of an entrepreneur and the various contexts in which entrepreneurial behavior occurs. This includes some discussion on vari- ous theories about entrepreneurs and entrepreneurial behavior. We do this because we believe challenging your preconceived assumptions with research-based theory will be useful. Using both mini-cases and short vignettes, we provide examples of some of those characteristics and the importance of acting upon the intention to become an entrepreneur. Finally, we provide you with some exercises to do. In Chapter 2 on fundamentals we have a lengthy discussion on what is success and what it means to become a successful entrepreneur. This includes looking simply beyond making money to helping you, Introduction xiiithe reader, to develop your own personal definition of success for the venture. Using a mini-case and several short vignettes, we explore the various meanings of both success and failure in a new venture. We also give you some exercises in the chapters, which we hope will encourage you to action. Sometimes taking action will bring success, and at other times they will bring failure. We try to make it plain that failure does not mean the end of becoming an entrepreneur, but that is only a part of the learning process of creating a new venture. To us, motivation is a key to being a successful entrepreneur and knowing yourself. In this a key task is goal setting, both short and long term. In Chapter 3 we get to the “core” of the new venture creation process. We discuss how you find a good idea and how to exploit an opportunity to create a new venture. We think this is often the most underappreciated aspect of the process. While a poor idea with a great team pushing it can sometimes be a viable business, the better option is a good-to-great idea being led by a great entrepreneurial team. To achieve this business concept requires knowing not only what is happening in the external environment but also in terms of what you bring to the venture as the would-be entrepreneur. We discuss a variety of topics including creativ- ity and innovation, and provide you with some examples via mini-cases and examples. Moving on Chapter 4, we discuss everything we think you ought to know about marketing initially. You will need marketing to develop your prod- ucts and services in terms of characteristics that customers want. We will direct you to understand your market in terms of their needs, wants, and fears. Using a variety of examples, including cases, we talk about how an entrepreneur needs to do market research and effective and inexpensive methods to do this work. We also discuss the feared topic of “how to sell,” something most books on entrepreneurship ignore but which we feel is exceptionally important. If you are afraid to ask for the cash, or the contract, you are going to need to get over that fear. Next we turn to a more detailed discussion in Chapter 5 on your core business concept in terms of what is your product or service and how to develop them. We discuss the importance of using marketing data in the development of your product/service regardless if you are doing a piece of technology or creating a new dish for your eating establishment. Developing a prototype is now so much easier with 3D printers and Introduction xiv menu testing. We think this area, well known in technology entrepre- neurship in engineering schools, is a core skill every entrepreneur needs to know and practice in an ongoing basis. Once again we provide you with some mini-case examples. Then we turn to a discussion in Chapter 6 on fundamentals of building an entrepreneurial organization. We include the seemingly boring, but highly critical, topics of hiring, firing, and retaining your entrepreneurial team and employees. We discuss how organizational structure is built in a new firm, including the pros and cons of outsourcing. We then turn our attention to why every entrepreneur needs to have legal and accounting advice in the process of the formation of the new venture to ensure appropriate tax treatment. We also discuss the role of governance of the firm and the need for buy-sell agreements and intellectual prop- erty protection as well. In Chapter 7 we turn to entrepreneurial finance and the search for capi- tal. While everyone thinks this is the most critical part of creating any new venture, we argue that it is only after you understand what you are doing other things first. Do you really understand your business con- cept? What are your markets? How to reach these markets? Then and only then can you discuss how much money you need and where to get it. We put emphasis on the use of bootstrap financing and achieving profitability as frankly this is what 98 percent of all entrepreneurs will ultimately use to start their venture. We then discuss the importance of cash-flow management as the very essence of entrepreneurial finance. We acknowledge and discuss angel, venture capital, and hedge fund financing but note the true rareness of these as tools. We acknowledge that most entrepreneurs will have little or no access to significant outside resources in starting their ventures. Next we turn to the fundamental area of growing your new venture and managing that growth in Chapter 8. We spend some time discussing the myth of high growth firms and why profitability is the primary financial goal for any new venture if success is a goal. We also discuss further issues of having family members in the business. We examine the issues of growing beyond one location and moving into international markets. Once again we provide examples and mini-cases to show the issues that are encountered in growing a business and managing it. We believe you have to learn to manage growth or it will kill your venture. Introduction xvFinally, we turn to the fundamentals of planning in Chapter 9. We explore the planning process for the venture and the execution of your intentions regarding the business. We discuss when you need to have an actually written plan. We discuss when you do planning in the process of creating a new venture and what should be included in those plans or parts of plans. We comment on who will most likely want to see your business plan and why they want to see it. We then discuss why concept pitches to investors are a form of plan and why impression management in plans is important. In this final chapter we go through the planning process in some detail along with examples and how to see plans as a roadmap through the uncertainty of starting a new venture. We also address some of the ongoing issues you will have in running an entre- preneurial venture, be it for-profit or not-for-profit. The Who Before moving on the topic of entrepreneurship, we feel it may help you understand our position on topics by knowing more about the two of us. Collectively we have been involved in entrepreneurial activities for nearly 60 years and family businesses for over a half century. We have worked together as colleagues over 15 years, despite being separated by thousands of miles, living on two different continents, and having two different native tongues. Malin’s first language is Swedish, her second is Finnish, and she is highly fluent in English. On the other hand, Alan’s only language is a strange form of English, known to some as Texan. Despite the translational issues (wink), we have managed to overcome the barrier of being divided by the common language of English (a chal- lenge Winston Churchill often mentioned). Both of us are only chil- dren and are very familiar with each of us having our own way. This has meant that if we were to be successful as research and writing colleagues, we had learned to cooperate, a skill we find every entrepreneur needs to learn if it is not already a part of their personality. So that you have some further idea of who we are, you will find in the following text some information about our individual professional cre- dentials and careers. Hopefully this information will let you understand how we blend in this book our experiences with entrepreneurial ven- tures with a rigorous understanding of the research that underpins this book. As we have said earlier, we want to thank our families for being Introduction xvi supportive of our collaboration over the years. We have seen kids and pets grow up in our families and we sometimes think of each other as siblings as much as research colleagues. Yes that sometimes means we sometimes fight and frequently disagree, but from those interactions come clarity of thinking we have found useful. Malin Brännback, D.Sc., is Chaired Professor of International Business and Dean at Åbo Akademi University from where she also received her doctoral degree in management science in 1996. She also holds a B.Sc. in pharmacy granted in 1986, also from Åbo Akademi University. After she completed her doctoral degree, she was appointed Associate Professor in Information systems at University of Turku. In 2000 she was recruited to Turku School of Economics and Business Administration as Professor in Marketing and became the founding head of the Innomarket research group. Innomarket’s focus was to support start-up biotechnology com- panies in their commercialization processes. In 2003 she was appointed Chaired Professor in International Business at Åbo Akademi University. She has served as Vice-Rector of the university as well. Currently she is Docent at the Turku School of Economics where she taught prior to returning to Åbo and she is Docent at the Swedish School of Econom- ics and Business Administration in Helsinki (Hanken). She has been Visiting Professor in Entrepreneurship at Stockholm Business School (Stockholm University) since 2012. She has been on the boards of several biotechnology and IT start-up firms. She has held a variety of teaching and research positions in such fields as information systems, interna- tional marketing, strategic management, and pharmacy. She has 200 publications in areas such as entrepreneurship, biotech- nology, marketing, and knowledge management. She has co-authored seven books with Alan Carsrud, some of which are Entrepreneurship (2007) Greenwood Publishing; Understanding the Entrepreneurial Mind: O pening the Black Box (2009) Springer Verlag; Understanding Family Businesses: Undiscovered Approaches, Unique perspectives, and Neglected Topics (2012) Springer Verlag; and Handbook of Research Methods and Applications in Entrepreneurship and Small Businesses (2014) Edward Elgar. In addition, she has published three case books with Alan Carsrud on family business with Springer Verlag. She, Alan, and Niklas Kivi- luoto recently published Understanding the Myth of High Growth Firms: The Theory of the Greater Fool (2014) with Springer Verlag. She is on Introduction xviithe review board of Journal of Small Business Management. Her current research interests are in entrepreneurial intentionality, entrepreneurial cognition, and entrepreneurial growth and performance in technology entrepreneurship, as well as use of social media and the role of culture and language in business. Malin resides just outside Åbo (Turku), Finland, in the south-west Finn- ish archipelago with her husband (Patrik), their three children (Anton, Anna, and Axel), and their two dogs. She is an avid and accomplished chef along with her husband. She enjoys any food with lemons and wine (especially Italian). She loves to knit, can throw a mean clay pot on a wheel, and enjoys working in her garden when it is not freezing (yes there are hot summers in Finland). She adores sitting in the sun on San- torini in the summer as well as enjoying a long weekend in Rome with her husband. Alan L. Carsrud, Ph.D., Ec.D., was reared in his family’s Texas and Ohio ranching and farm business. His father was a clinical psychologist and Alan followed initially in his footsteps. He holds a Ph.D. and M.A. in Social Psychology from the University of New Hampshire, a B.A. in Psy- chology and Sociology from Texas Christian University. He did postdoc- toral work in Applied Industrial Psychology at The University of Texas at Austin. He holds an honorary doctorate in micro-economics from Åbo Akademi University in Finland. Today he is Managing Director of Carsrud & Associates, a consulting firm for entrepreneurs and family- owned and managed firms. His consulting clients have included govern- ment agencies like NASA and the Republic of Palau, the Los Angeles Unified School District, large firms like IBM and Ernst and Young, as well as numerous family and entrepreneurial firms in the United States, Finland, Australia, Turkey, India, Mexico, Japan, and Chile. He has been involved in over 200 start-ups in industries such varied as retail, winer- ies, accounting, food, airlines, biotechnology, the Internet, computer technologies, and even university-based entrepreneurship programs. His current academic position is Visiting Research Professor and Docent at Åbo Akademi University in Turku (Åbo), Finland. His prior aca- demic positions include holding the inaugural Loretta Rogers Chair in Entrepreneurship at the Ted Rogers School of Management at Ryerson University in Toronto, Canada; Clinical Professor of Entrepreneurship, Professor of Industrial and Systems Engineering, Professor of Hospitality Introduction xviii Management, and Founding Executive Director of the Eugenio Pino and Family Global Entrepreneurship Center at Florida International Uni- versity. He has been Senior Lecturer and Academic Coordinator of the Price Center at the Anderson School at UCLA and Senior Lecturer in Electrical Engineering at the Samueli School at UCLA. He has also been on the graduate faculties of the Australian Graduate School of Manage- ment, Bond University (Australia), Durham University (UK), Anahuac University (Mexico), Nanyang Technological University (Singapore), University of Southern California, Pepperdine University, The Univer- sity of Texas at Austin, Texas A&M University, and the State University of New York at Brockport. He is a Fellow of the Family Firm Institute (FFI) and has served on the board of directors of FFI and the United States Association for Small Business and Entrepreneurship. He is Associate Editor of the Journal of Small Business Management, and co-founded Entrepreneurship and Regional Development. He also is on the Review Boards of the Family Business Review and the International Journal of Entrepreneurship and Innovation. He founded the UCLA Venture Development and Global Access Programs, which help create new, technology-based ventures in Australia, Chile, Finland, France, Italy, Mexico, and the United States. In addition, he created the Family and Closely Held Business Program at UCLA. He has published over 230 articles and chapters on entrepreneur- ship, family business, social psychology, mental retardation, and clinical psychology. He has co-authored with Dr. Brännback seven books on entrepreneurship and family business, and they have three additional books under contract. Alan resides outside Austin, Texas, in the Texas Hill Country with his husband of 14 years, Danny, and their three cats (no he is not a cat lady yet as that takes four cats) and a half dozen hummingbirds. He and Danny are an avid collectors of Australian aboriginal art, Cuban sur- realist paintings, Mexican cubist works, Chinese and Japanese antiques, various antiquities, as well as African sculptures and masks. When not working with Malin on various books and research articles, he is usu- ally found on the patio tending his rose bushes with a glass of wine, or a Chilean pisco sour, in hand. Introduction xixThis page intentionally left blank 1 What Is This Thing Called Entrepreneurship? 1.0 Introduction Pick up any newspaper or business publication anywhere in the world today, such as the Financial Times, New York Times, Singapore’s Straits Times, the Sydney Morning Herald, or the Economist, and you are likely to find an article in which a politician or an economist is stating how important entrepreneurship is to the nation and that we need more entrepreneurs to ensure economic growth and prosperity. In these same publications you will also find other stories about entrepreneurs themselves. Most of us will ignore the economist’s or politician’s pon- tifications and focus our attention on those compelling stories about the valiant entrepreneurs and their uphill battles to create successful ventures. We also sometimes enjoy the stories of the great failures as well. These are also the stories that frequently are seen as documenta- ries on TV and even award-winning movies (e.g., The Social Network in 2010 about Facebook or Jobs in 2013 about the founder of Apple). As the Kauffman Foundation of Kansas City, Missouri recently has stated: We have a myth in our heads of what the prototypical startup founder is, and that myth is an early- to mid-20s white male who studied computer science at an elite school and dropped out. 1.1 The Entrepreneur These myths and stories usually come in two forms. One story type is a tale of somebody who had an idea that very few understood or believed in, but who with determination and perhaps sheer luck was in the right spot at the right time and voilà What a wonderful success story, with 1 1some drama thrown in for good measure Quite often, it is a story on a successful entrepreneur who has traveled from rags to riches through hard work and an ability to make the right decisions at the right time. But the college dropout has not always been the entrepreneurial myth. We will explore some other models of the would-be entrepreneur. For example, Hollywood has found great movie scripts in the entrepreneur- ial tales of the lives of Henry Ford and Thomas Alva Edison. Yet Hol- lywood has yet to tell the stories of some famous female entrepreneurs like Madam C. J. Walker who turned her homemade recipes for hair and scalp care products into a business empire that made her the United States’ first self-made black female millionaire in the early 1900s. The alternative story type is the story of a local or national entrepreneur celebrating an anniversary for being in business half a century and now handing over the firm to the next generation. You most likely will read these two types of stories because they are spectacular and entertain- ing. We may also be personally familiar with their products or services. You may even know these entrepreneurs personally. These stories are intriguing because they often capture some of “how dreams come true.” Have any of these entrepreneurs served as personal role models? Ask yourself whether reading any of these stories or seeing these movies made you dream that you could be an entrepreneur? You do not have to be a dropout of a top college to have these dreams. Nor do you have to be under 60, or be independently wealthy to be an entrepreneur as we demonstrate in this book. 1.2 Entrepreneurial Dreams and Their Outcomes Even Sigmund Freud would admit that both dreams and words can have various meanings. As with all words and dreams, they come with both good and bad connotations. The word “dream” is most likely related to the Germanic draugmus, (meaning deception, illusion, or phantom) or the Norse draugr (ghost, apparition), or even the Sanskrit druh (seek to harm or injure). Have you ever wondered whether your entrepreneurial dream could become one of these stories? Elias Howe (1819–1867) was reported to have said that the inspiration for his invention of the sewing machine came from a dream about being attacked by cannibals bearing spears that looked like the needle he then designed for his machine. Similarly Nikola Tesla is said to have been able to imagine a device in his Fundamentals for Becoming a Successful Entrepreneur 2 mind’s eye and then build it without ever having to write anything down, certainly an interesting form of “day dreaming.” Biographies of entrepreneurs who became self-made billionaires are frequently best sellers much for the same reason. They tell stories of dreams coming true. One only needs to think of the recent biography on Steve Jobs and the dramatic events at Apple or the movie about Mark Zuckerberg and the drama behind the founding of Facebook. We also see many of these stories focused on men, but one cannot ignore the stories of famous women entrepreneurs like Coco Chanel (fashion), or Madame C. J. Walker, Elizabeth Arden, Dame Anita Roddick, and Estée Lauder (cosmetics), or Olive Ann Beech (aircraft), Oprah Winfrey and Martha Stewart (media), or Ruth Handler (who gave us “Barbie” and co-founded Mattel Toys). How many of you are familiar with famous entrepreneurs from around the world who you most likely don’t know that you know? Consider Sweden’s Ingvar Kamprad (retail), or the Netherlands’ Gerard Adriaan Heineken (brewing), or Chile’s Don Melchor de Santiago Concha y Toro and his wife Emiliana Subercaseaux (wineries), or Japan’s Takeshi Mita- rai (electronics). In all these men and women one sees a picture of the entrepreneur as a person who is visionary, hardworking, risk taking, ambitious, having exceptional leadership skill, one who never gives up, and a great source of inspiration. We like to describe them as having an entrepreneurial mindset (Brännback and Carsrud 2009). What all these men and women have done is to show that these qualities, in combina- tion with a brilliant idea and the ability to market, results in a great com- pany that ultimately made the entrepreneur very wealthy. However, is wealth the only definition of success? For many of these people, success was changing an industry or creating something that was sustainable and enduring as a business over generations. To most of us, many of the companies cited are examples of successful entrepreneurs and entrepreneurship. They are enduring brands created centuries ago that we still use. Successful entrepreneurship is not only about what is created here and now. It is not only about computers and Internet business (Apple, Dell, Amazon, or eBay). It is also about sus- tainability over time. For a thorough discussion on lasting brands and their entrepreneurs, one needs to read Koehn (2001). Chapter 1 What Is This Thing Called Entrepreneurship? 31.3 There Is No One Narrative The great engineer and scientist Nikola Tesla, who gave away many of his patents and was often a “loner,” is also a great example of someone using his own unique definition of success. While making money is one way you know that selling that idea is creating value for customers, it is not the only definition of success. There are many ways to spell S UCCESS. This is what we consider successful entrepreneurship and how we often describe a successful entrepreneur. Success is very much in the eye of the beholder and depends on the goals the entrepreneur has set for them- selves. We have more to say about both the entrepreneurial mindset and success later in this book. If you were to name a few successful entrepreneurs today, you are likely to mention Steve Jobs, Michael Dell, Martha Stewart, Mark Zuckerberg, Oprah Winfrey, and perhaps Henry Ford because you know or even own and use their products. Not all of you will know who Peter Th orwöste, Josiah Wedgwood, Erling Persson, Billy Durant, or Anita Roddick are. However, many of you know or own products from companies for whom these were the founders: FISKARS scissors, Wedgwood china, H&M clothing, General Motors, or the Body Shop cosmetics. Consider Peter Thorwöste, who founded Fiskars Ironworks in 1649, which today is known as FISKARS, the global company manufactur- ing not just of the scissors with the orange handles (see Figure 1.1) but also garden tools, ceramics, and boats. Fiskars is today a leading global supplier of branded consumer products for the home, garden, and out- doors. Brands like Fiskars, Iittala, Royal Copenhagen, Rörstrand, Arabia, Buster, and Gerber all belong to the Fiskars brand palette. Figure 1.1 Fiskars scissors. Fundamentals for Becoming a Successful Entrepreneur 4 Figure 1.2 Wedgwood pottery. Then there is Josiah Wedgwood, an English potter who founded the Wedgwood pottery firm in 1759. This firm’s products are still sell- ing, and the brand Wedgwood china (along with its Waterford Crystal line) is known worldwide for its quality (see Figure 1.2). While writing this book, we learned that Fiskars on May 11, 2015 agreed to acquire the WWRD group. In addition to Wedgwood, other luxury brands in WWRD include Waterford, Royal Doulton, Royal Albert, and Rogaška. These brands are now part of this very same Finnish family firm. This is a great reminder of how successful entrepreneurs can create ventures and products that continue to impact business and the lives of consum- ers several hundred years later. So is Heinz, today most well-known for its ketchup. Few of us may know that their breakthrough product was pickled horseradish. Their well- known logo ‘57 Varieties’ created in 1896, and was the first electric sign on Manhattan lit in 1900. Recently H. J. Heinz has been purchased from the founding family by Warren Buffett’s Berkshire Hathaway and 3G Capital. Then there is the Henry Ford and the Ford Motor Company that changed not only manufacturing processes but also the automo- tive industry. The firm still remains largely in family control through a complex ownership structure. Chapter 1 What Is This Thing Called Entrepreneurship? 51.4 Collective Dreams We all dream and some of us even hallucinate. Dreams are a part of many inventions. If we think of technology, then Thomas A. Edison often comes to mind. He was an “inventor” and entrepreneur who brought electric lights into homes and founded electric generation companies that still bear his name, even General Electric (GE) was founded by Edison. However, the story of electricity would not be complete without acknowledging Nikola Tesla who many say was the first to develop alter- nating current (among many other numerous breakthrough inventions) while Edison’s team focused on direct current. As with all breakthrough inventions, many people are involved. For exam- ple, there were 22 others ahead of Edison in inventing the light bulb, but it was Edison who knew the power of marketing and branding. That is, pio- neers in an industry like Tesla are often not the ones who win the prize or the wealth and acclaim, but those who came after them and understood how to develop a business model to exploit that invention. Success is not always about being first, or as some say, one gets “shot by other pioneers coming up behind you.” Part of the task of any entrepreneur is to get those on their teams to have similar dreams, if not buy into the one of the founder(s). 1.5 Why Entrepreneurship Became Important Here we are going to get a bit academic, so forgive us. You should realize that the terms entrepreneurship and entrepreneur have been around for centuries. Some consider Cantillion in 1755 as having been the first to mention the phenomena in a published work. Still others claim Say (1803) was first. Regardless, Hoselitz (1951) finds early traces in historical dic- tionaries to the Middle Ages in the normal course of development of the French language. The most general and probably the earliest meaning is “celui qui entreprend quelque chose,” which literarily means “he who gets things done,” in other words an active person. The preceding discussion shows that the term has stirred up considerable academic debate for quite some time even though Schumpeter (1934) is often considered to be the intellectual father of the modern field of entrepreneurship. It is our considered opinion that entrepreneurship became important in contemporary life in 1987 to be precise. In that year entrepreneurship came to be regarded as a significant factor in national wealth creation, Fundamentals for Becoming a Successful Entrepreneur 6 not just personal wealth creation. It thus entered the awareness of the wider, modern, audience. In 1987 David Birch published his book Job Creation in America. This book was the result of a longitudinal study carried out at MIT (Massachusetts Institute of Technology) between 1969 and 1986. The study traced 12 million individual business estab- lishments during this period of time. The raw data was from Dun and Bradstreet (D&B), single unit stand-alone companies; a store, a small plant or a law firm. In 1986 the establishments employed 95% of all non- governmental workers in the United States. The complete files of D&B were tapped regularly during this time period. The files had information on employment rolls, age, and location of each establishment. Birch’s study showed that small start-up firms were responsible for more than 80% of all new jobs created in the United States and that large cor- porations in fact decreased employment. Small firms are more likely to expand than large organizations. If large firms were to create new jobs that would take place through a new business unit, not a new firm. To be blunt: large firms create new jobs through the formation of new business units. Mom and Pop Delis open up a second store managed by the owner’s daughter. Statistics from the U.S. Small Business Adminis- tration has over the years remained fairly stable and the same holds for most Western countries; 99.5% of all firms in a country are classified as small firms. This holds for the United States, Australia, Chile, India, or Finland. In 2015 there is evidence from the United States that 310 new entrepreneurs per every 100,000 adults were added each month. This is up from a monthly average of 280 in 2014. This indicates entrepre- neurial levels have returned to a more normal pattern since the great recession of 2008. Of equal interest is that in 2013, 23 million people were self-employed, according to the U.S. Census Bureau. For whatever reason, more and more individuals are choosing different paths to being an entrepreneur. 1.6 Challenging Assumptions—Entrepreneurship Is for All That is, the results from the study by Birch challenged the long-held assumption that large organizations were the engines and drivers of a national economy in terms of job creation, innovation, and growth. A follow-up study to Birch’s was presented by Bruce Kirchhoff and Bruce Chapter 1 What Is This Thing Called Entrepreneurship? 7Philips in the same year, but with different data. That study confirmed the findings by Birch. Both studies included recessions. Kirchhoff and Philips discovered that during recessions the job creation effect was extremely high, in fact 100% during 1980–1982. While we know that it is during recessions that large organizations lay off people, this evidence seems to have come as news to the general public and to politicians in particular. These results caught the attention of politicians and legislators and as pointed out by Brännback et al. (2014) that each president since Ronald Reagan has endorsed growth and entrepreneurship in major addresses. The European Union (EU) signed the Lisbon treaty in 2001, which spe- cifically states that the EU will provide substantial support to entre- preneurship as a way to create economic growth within EU. The word entrepreneur has been so widely used in recent years in the United States and in Europe that you often wonder who is not included. We discuss who is an entrepreneur later in this chapter. One of the myths that we want to challenge at the very front of this book is that entrepreneurship is only for a few, or that it is a male career, or that most entrepreneurs are wealthy to before they start a firm. Another myth is that successful entrepreneurship only happens among those with a technology background. While there is some evidence to support that men outnumber women as entrepreneurs, that statistic is rapidly chang- ing in the United States and worldwide. Likewise, the number of entrepreneurs among the poor and disabled has been increasing in recent years. One reason is reflected in the work of Noble Peace Prize winner Dr. Muhammad Yunus, a Bangladeshi economist from Chittagong University. Professor Yunus created the Nobel Peace Prize winning Grameen Bank (www.GrameenFounda- tion.org) with the focus on women. He recognized that women were the ones usually in charge of the family’s money and were far more likely to repay loans than were men who typically would waste money on drink and other women. What Yunus was building on was the fact that women are less likely to waste money on highly risky ventures and as evidenced by Grameen’s success. However, they were more likely to create sustainable businesses and support their families. Another group that has exploited the same concept is Women’s World Bank- ing (www.womensworldbanking.org). Interesting immigrants in the Fundamentals for Becoming a Successful Entrepreneur 8 United States have a higher incidence of new venture creation than nonimmigrants. Technology entrepreneurship has been all the rage for decades and increasingly more and more women are becoming involved in start- ing technology firms. There are programs to foster technology firms and these exist worldwide. These programs have fostered firms like Google that came from work done at Stanford and fostered by the Stanford Technology Ventures Program (www.stvp.stanford.edu). In the United States there are programs for returning military veterans at Syracuse University and UCLA, for social and “green” entrepreneurs at Colorado State University, and for the disabled at the University of Illi- nois at Chicago, to name just a few. The point we want to make here is that entrepreneurship is for everyone regardless of gender, race, sexual orientation, location, personal wealth, or physical health. In this chapter we hope we will challenge you to think of people from all walks of life who have chosen an entrepreneurial path for their lives and have made a difference. Perhaps what these programs show is that there are a vari- ety of environments in which entrepreneurship can exist and in which entrepreneurs can thrive. 1.7 Entrepreneurial Environments Birch’s study also showed that new firms, which take the place of older ones, tend to relocate and use a different workforce, and other resources such as needs of capital, transportation, governmental services, educa- tion, recreation, and energy. In fact, Birch’s study offered a preview of where next “business hot beds” were likely to emerge. One such was Austin, Texas, which discuss later in this chapter regarding an interest- ing mix of technology and artistic entrepreneurship. Birch showed that small firms and entrepreneurs were important for economic develop- ment of regions and subsequent studies confirmed this finding as well. Some of the best known examples are Silicon Valley and Route 128 that became models for similar examples worldwide. We are seeing entrepre- neurial revival in rust belt cities like Detroit who have had to reinvent themselves. For a thorough discussion encounter of the importance of regional developments in these areas, please read Saxenian’s (1994) book Regional Advantage: Culture and Competition in Silicon Valley and Route 128. Chapter 1 What Is This Thing Called Entrepreneurship? 9

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