The Entrepreneurial Process

The Entrepreneurial Process Introduction

The entrepreneurial process is defined as the cycle in which mental conceptions and ideas are transformed and translated into business ideas that represent a profitable opportunity for the entrepreneur to harness resources and design an enterprise that allows him/her to exploit the opportunity to make profit - but in the process also taking calculated risk. The final stage of  the process will be the nurturing of the enterprise ente rprise and the process recurs in the bid to grow the enterprise as new ideas are transformed into growth opportunities and the entrepreneurial  process recurs. Various authors and researchers have come up with different models to describe the entrepreneurial process. According to Moore and Bygrave (1994) the entrepreneurial process is built on a cycle of four stages: innovation, a triggering event, implementation and growth. They further argued that during the cycle different variables interact with the environment to influence the entrepreneurial process. The interaction  between the environment and individual, organisational and sociological variables define the  possible path of each specific entrepreneurial event. Hisrich and Peters (2002) identified four  distinct phases of activities in the entrepreneurial process which are: identification and evaluation of the opportunity, development of a business plan, determination of required resources and the management of the resulting enterprise. The entrepreneurial process therefore has some fundamental stages common to all models regardless of the author and a combination of these would give the generic entrepreneurial process. The entrepreneurial  process from literature therefore can be summarised in the model below. To explain the entrepreneurial process better Econet Wireless Zimbabwe will be used as an example to apply the concepts to the real world.

The activity based entrepreneurship process from literature

Business idea development/ opportunity recognition and development

Survival and growth maximisation

Resource configuration and venture creation

Strategic management

Buisness implementaion and opprtunity exploitation

Idea generation

Idea generation is the seed of the entrepreneurial process. According to Cronche et al (2003:50) „establishing a new business usually involves an idea that the entrepreneur pursues enthusiastically‟. Idea generation therefore is the starting point of transforming and translating creativity or innovation into a business opportunity. However, Veerabhadrappa Havinal (2009) argues that the entrepreneurship process starts with some change in the real world. Kruger (2004) expands that “not all ideas are creative, for some innovations are incremental changes or were developed by others and adapted for use locally”. Sources of  ideas usually include prior working experience, understanding the industry, and knowledge of  the market. Scholars have come up with two styles of idea generation that is scientific and artistic idea generation. Scientific idea generation involves a rigorous examination and analysis of the business

environment in which the entrepreneur lives, for patterns and trends that can be capitalised into ideas or business opportunities. Scientific idea generation mainly focuses on the business environment and has the danger of pruning other important factors, like social and political trends, off the idea.

Artistic idea generation on the other hand includes an analysis of not only the business

environment but everything that happens around the entrepreneur. Concentration is given to economic, political, and social trends, fashion, business process, services offered, and manufacturing/production process. This style of idea generation may result in both process and product innovation. It also includes an analysis of the behaviour of intended audiences and competition is identified, compared and contrasted for a niche or business edge. The dangers of idea generation is that the idea might be overrated that is the best idea doesn‟t necessarily guarantee success. Value of the generated idea is embodied in the capability and capacity of the entrepreneur to transform the idea into a product/service that appeals to the customers and hence capturing a significant share of the market. Therefore, the entrepreneurship process depends much on the responsibilities expected of the entrepreneur which prompted Brian Tsuchiya to develop an alternative model of the entrepreneurial process which focuses on the responsibilities of the entrepreneur at each stage. Relating this to Econet, this is the stage where Strive Masiyiwa, came up with the idea of   providing mobile communication services to the market which was pure being serviced by fixed telecommunications network provided by PTC (Post and Telecommunication Company). In this instance work experience become the major source for idea generation as it gave him a better understanding of the telecommunications industry and how best the niche of mobile network services can be exploited. The idea was not to introduce a totally new  product but adopting an already developed product for a new market. Opportunity Evaluation

Whether the opportunity is identified by using input from consumers, business associates, channel members, or technical people, each opportunity must be carefully screened and evaluated. This evaluation of the opportunity is perhaps the most critical element of the entrepreneurial process as it allows the entrepreneur to assess whether the specific product or  service has the returns needed compared to the resources required. This evaluation process involves looking at the length of the opportunity, its real and perceived value, its risks and returns, its fit with the personal skills and goals of the entrepreneur, and its uniqueness or  differential advantage in its competitive environment. Van Vuuren and Nieman (1999:6)  propose that entrepreneurs need the following entrepreneurial skills:

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creativity and innovation

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risk taking

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Ability to have a vision for growth

The market size and the length of the window of opportunity are the primary basis for  determining the risks and rewards. These risks reflect the market, competition, technology, and amount of capital involved. The amount of capital needed provides the basis for the return and rewards. The methodology for evaluating risks and rewards frequently indicates that an opportunity offers neither a financial nor a personal reward commensurate with the risks involved. Opportunity evaluation involves a lot of Research and Development for instance extensive market research which requires the entrepreneur to be abreast with the current activities in the market. The opportunity should be sufficiently compelling for it to be chosen or capitalised on. The focus of the entrepreneur should be on the opportunities presented to him and their  net worth and this is the stage where he asks whether it is an opportunity worth investing in. Finally, the opportunity must fit the personal skills and goals of the entrepreneur. It is  particularly important that the entrepreneur be able to put forth the necessary time and effort required to make the venture succeed. Although many entrepreneurs feel that the desire can  be developed along the venture, typically it does not materialize. An entrepreneur must  believe in the opportunity so much that he or she will make the necessary sacrifices to develop the opportunity and manage the resulting organization. It is helpful to think of the evaluation step as continually asking the question of whether the opportunity is worth investing in. You are actually constructing and then continually revising an "investment prospectus." Five basic questions are asked in evaluating an opportunity. 1. Is there a sufficiently attractive market opportunity? 2. Is your proposed solution feasible, both from a market perspective and a technology  perspective? 3. Can we compete (over a sufficiently interesting time horizon): is there sustainable competitive advantage?

4. Do we have a team that can effectively capitalize of this opportunity? 5. What is the risk / reward profile of this opportunity, and does it justify the investment of time and money? If one can answer all of these questions affirmatively, there is reason to persuade oneself that the opportunity is worth investing in. This is the first step toward being able to convince others, whether they are prospective customers, employees, partners or providers of capital. An opportunity evaluation centres on considering both sides of the coin; in this case the entrepreneur should consider the benefits derived against the costs entailed in undertaking the  business idea. The entrepreneur in simple terms should carry out a cost-benefit analysis to find out how much funding or capital is required to start the project against the possible  benefits to be derived. Opportunity evaluation is a necessary in identifying a business project that gives high returns or a high net payoff. The entrepreneur should consider the risk-reward profile. According to Forlani and Mullin, entrepreneurs consider both variability in anticipated outcomes and the degree of hazard in a decision alternative to be major sources of risk. The entrepreneur should assess the possible risk he will expose himself to by undertaking the project. Possible risks could range from financial risk, credit risk, liquidity risk, career risk, Opportunity analysis, or what is frequently called an opportunity assessment plan, is one method for evaluating an opportunity. It is not a business plan. Compared to a business plan, it should be shorter; focuses on the opportunity, not the entire venture; and provides the basis for making the decision of whether or not to act on the opportunity.

An opportunity assessment plan includes the following: 

A description of the product or service

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An assessment of the opportunity

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An assessment of the entrepreneur and the team, specifications of all the activities and resources needed to translate the opportunity into a viable business venture, and the source of capital to finance the initial venture as well as its growth.

The assessment of the opportunity requires answering the following questions: 

What market need does it fill?

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What personal observations have you experienced or recorded with regard to that market need?

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What social condition underlies this market need?

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What market research data can be marshalled to describe this market need?

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What patents might be available to fulfil this need?

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What competition exists in this market? How would you describe the behaviour of  this competition?

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What does the international market look like?

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What does the international competition look like?

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Where is the money to be made in this activity?

The opportunity evaluation for Econet concentrated much on the feasibility of the opportunity considering the legal repercussions of a mobile operator that would compete with a strategic government institution in the form of PTC. On the evaluation Strive Masiyiwa realised the following benefits attached to perusing the opportunity: 

There was a sufficiently large market in Zimbabwe to generate adequate cash flows that would support a big enterprise

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The fact that his organisation would be the first to provide mobile telecommunication gave him the monopoly power and the benefits that can be enjoyed in high prices in monopolistic economies

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There were viable growth prospects in the opportunity. By acquiring a mobile operator licence he would be acquiring a licence to grow his business into any other  services that can be provided on the mobile network not only of voice calls and text messaging.

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The organisation would have a competitive advantage over PTC its sole competitor in that mobile technology had greater opportunities for expansion that fixed networks and mobile technology have a better status compared to fixed networks which would give the resulting organisation a strong brand name and derive customer loyalty.

The major risk/challenge that was inherent in the opportunity was the acquisition of a mobile operator licence as the government would try by all means to restrict entrance by a private firm into the telecommunications industry  –  a strategic sector of national significance. This resulted in the legal battles that ensued before a mobile operating licence was given to Strive Masiyiwa.

Planning

The development of a business plan is a more standardized product scope. A business plan is a written detail of a new business venture. According to (Hirsh, Peters, Sheppard, 2005)  business plan should not be too narrow. An effective business plan consists of several components. The first component is a core strategy which can be described as the unique part of a product, or the delivery of a product of service that will make it stand out. For example, Econet, when it wanted to start the company, the product of mobile telecommunication was unique by then  because Zimbabweans were only familiar with fixed telecommunication which was solely supplied by PTC (now Tel-One). A core strategy must be broad to avoid limiting the growth of a start-up, but encourage growth for instance, in the case of Econet, their core strategy was not limited as it later expanded into internet business, telebanking and multimedia messaging. After satisfying the core strategy, one can assess the need for resources. The next part of an effective business plan is the written summation of necessary strategic resources and how to acquire and use them (Hirsh, Peters, Sheppard, 2005). Strategic resources will include personal and human characteristics needed for the venture launch as well as the necessary money. After identifying key strategic resources, one can assess how the business will interact with clients and other business peoples. The next component of an effective business model is the compilation of partnership networks (Hirsh, Peters, & Sheppard, 2005). For instance, the Eco life product in which Econet partnered with FML to  provide the product. These are the relationships needed to launch a new venture successfully. How to structure the nature of business relationships should be identified and characterized. After satisfying the relationships of partnership networks, one can advance to the final stage of a business model, which is how to reach the customers. The final component of a successful business plan is the written summation of the customer  interface (Hirsh, Peters, & Sheppard, 2005). The customer interface is how the business will interact with clients. The interface may include how to reach a particular audience, and the nature of that contact. Once the components of a successful business model are satisfied, one is ready to advance to the next phase of the entrepreneurial process, which is to determine the resources. In relation to Econet planning entailed the description of the product which in this case was mobile voice call and text messaging. To achieve this there was need for a mobile

operator licence which had to be acquired as part of the planning process. A public limited company was then chosen as the ideal organisational structure as it would harness a lot if  capital form initial public offering and has the capacity to expand with growth in market share. Because the Zimbabwe technological environment was a step behind compared to the developed world, there was need to hire experts from other countries to propel the launch of  the services and install required machinery and technology for its provision.

Company Launch

Launching a new venture and becoming an entrepreneur is an exciting and challenging task. This is the stage where the dream can first become reality. The builder then literally turns the dream into reality marking a critical juncture of the venture. The determination of strategic resources is the last step before launching the venture and once the venture is launched, initiation of the last phase begins, managing the enterprise. Entrepreneurs learn mainly from experience, so the only real way to become an entrepreneur  is to get out there and do it. One can start from scratch and learn it all by him or herself or  look at what others have already done and hope to profit from their experiences. There are three crucial steps to be taken to start a new venture and attempts to make short cuts and avoiding some of these steps can be disastrous. There is, however, no need to take the steps in the same order as suggested below but one will need to take them during the launch of the enterprise. The process of launching a new venture can be divided into three key stages of: 1. Forming the enterprise to create value  –  involves setting up a business entity and

 protecting any intellectual property. Here the entrepreneur gets ready to launch the venture in a way that minimises risk and maximises returns. Once there is a sufficiently compelling opportunity and a plan, the entrepreneurial team will go through the process of choosing the right form of corporate entity and actually creating the venture as a legal entity.

2. Implementing the entrepreneurial strategy  –  involves activating the marketing,

operating, and financial plans. After resources are acquired, the entrepreneur must use

them to implement the business plan. The operational problems of the growing enterprise must also be examined. This involves implementing a management style and structure, as well as determining the key variables for success. A control system must be established, so that any problem areas can be quickly identified and resolved. Some entrepreneurs have difficulty managing and growing the venture they created.

3. Planning the future  – involves looking ahead and visualising where the entrepreneur 

wants to go setting the foundation for growth. This sets the mood for managing the enterprise leading the growth stage of the entrepreneurial process. Growth

This stage refers to a period in which the entrepreneur decides on the venture‟s future growth, development, or demise. It is often referred to as the closing window. It must be closed  because if it is not, competitors will be able to move in after the entrepreneur and exploit the opportunities themselves. Closing window refers to building in competitive advantage, in short ensuring that the venture‟s customers keep coming back, so that competitors are locked out. It is the last stage of the entrepreneurial process and relates to that which facilitates the continued survival of the firm, which may lead to its expansion to some optimum size determined by the market demand (Glancey, 1998; 18). Growth is critical to the entrepreneurial success and distinguishes the entrepreneurial venture from small business (Wickham, 2001:303; Rwigwema and Venter, 2004:36). Perks and Struwig (2005:171), alerts to the problem of defining growth of a business because uncertainty exists about growth comprises. The Oxford dictionary defines growth as “An industry that is developing particularly rapidly; a company stock that to increase in capital value rather than yield high income. Synonymous with growing are terms booming, rising, increasing, maturing and developing. There are five indicators for growth and these are; financial, strategic, structural, organisational and image indicator (Wickham, 2002; 304) as briefly described below. F inancial growth 

This is concerned about increases in turnover, costs and investment needed to achieve the turnover, profits, business assets and all related value added. Econet achieved this by expanding into rural areas and trying to improve the network over all of Zimbabwe to increase revenue, in the process increasing investment in equipment and manpower. Strategic growth 

This relates to changes taking place through mergers and acquisitions, exploiting

new

markets, new products and new opportunities. Econet added a subsidiary, Eco web now Liquid Telecoms, which would concentrate on providing internet services for corporates and other organisation. This gave it a competitive edge to compete with Tel-one in the internet service provision for corporate organisations at the same time harnessing extra turnover for  the organisation Stru ctural gr owth 

Relates to changes taking place in the way the business organises its internal systems with regard to managerial roles, increasing employees and their responsibilities, reporting relationships, communication links and increased use of internal s ystems to control resources. Or ganisati onal growth 

This relates to changes taking place in terms of processes used, organisation‟s culture, management attitudes towards staff, as well as changes regarding the entrepreneur‟s role as the business moves from small to large. I mage growth 

This relates to changes taking place in the small business such as becoming more formal (such as having formal business premises), moving to newly built premises, redecorating the  premises and moving to a new environment. The activities undertaken in the growth process are linked to five strategic growth intentions, market expansion, technological change, garnering resources, operations and organisational development(Man et al, 2002;127). To grow its image Econet has introduced the Joshua Nkhomo and Capernaum Scholarships, Econet shops, and had been used a motto that promotes image growth  –  the world in your   pocket. This motto give a status to the organisation and the customer receiving the services.

M ark et expansion 

For businesses to grow, they have to reach a wider business environment by expanding existing opportunities, discovering of new ones, selling to new markets, expanding distribution channels, expanding advertisement and promotions as well as continuous adapting products to changing tastes. Discovery of new opportunities depends on continually scanning the changing business environment and preparing to exploit these opportunities ahead of, or not far behind competitors. Econet expanded its market by launching its product its different countries including Botswana, Nigeria, Kenya, the United Kingdom and Malta. Technol ogical change 

This includes acquiring new equipment, computerising current operations, upgrading computer systems, replacing present equipment. It also includes keeping up with increases in technological knowledge. With the introduction of the internet service Econet has installed new state-of-the-art base stations nationwide – a technological growth. Garn er in g r esour ces 

Growth h is dependent on the venture‟s ab ility to attract new resources for this stage. Garnering resources includes evaluating whether the company has resources to fund the growth strategy, taking action, taking risks, setting linkages with external factors, consolidating available cash on hand, seeking additional financing and seeking professional advice. It also includes exploring a wider range of financing resources, applying for a loan, securing a loan, distributing finance for financing resources. Operations 

This is where the team is continuously revisiting and streamlining every operational aspect, from service quality to public relations. Operations aimed at growth include being  product/service- focused and growing the firm‟s specific competences and skills to overcome constraints and complacence and deploy resources optimally. Organisational Growth 

Growth is dependent on the company structure and the development of the organisation towards increasing the firm‟s competitive advantage. The venture cannot afford to acquire asset and set up structures and systems that are incapable of evolving as the organisation develops. As a venture grows, so does the structure, until a complex structure emerges. The growth stage entails a recurrence of the entrepreneurial process as new ideas have to generated, evaluated, planned for and pursued to realised growth opportunities. The entrepreneurial cycle then repeats itself within the enterprise giving rise to the concept of  managers being entrepreneurs. Econet continued its entrepreneurial process by pursuing new growth opportunities in the form of internet services, mobile personal insurance (Eco life), mobile money (Eco cash) and multimedia messaging. Therefore in trying to nurture and grow the enterprise management reinforces the entrepreneurial process and the entrepreneurial cycle recurs. Conclusion

The entrepreneurial process therefore is a function of individual‟s abilities, social, cultural,  political, psychological, and legal variables interacting with the environment to give a specific trajectory for each entrepreneurial idea to be pursued. Enterprises are as different as the entrepreneurs that form them and as well different entrepreneurship models can be adopted depending on the entrepreneur‟s ability and the environment the entrepreneur  operates. The model from the Duke‟s manual is a generic model that captures the concepts from all the different entrepreneurial models. This implies that there is no universally accepted model and all models are applicable in different environments.

BIBLIOGRAPHY: 

Asian Perspective Volume 27, No 3, 2003 pp 125-175.Entreprenuers and the Entrepreneurial Processes: Historical and theoretical perspectives on entrepreneurship in the Japanese contexts.

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University of Pretoria etd – Kruger ,M E (2004).Chapter 3 :Entrepreneurship Process

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Cronche et al (2003), Introduction to Business Management