College of Business Administration
CHAPTER 11
ENTREPRENEURSHIP, ORGANIZATION AND INNOVATION
TOPIC HIGHLIGHTS:
1. Definition of Entrepreneurship
2. History of the term ‘Entrepreneur’
3. What is an Entrepreneur?
4. Characteristics of an Entrepreneur
5. Function of an Entrepreneur
6. Importance of Entrepreneurship
7. Organizational Management
8. Necessity of Organizational Management
9. Role of Innovation in Entrepreneurship
10. Stages in Innovation
TOPIC CONTENT:
ENTREPRENEURSHIP
Entrepreneurship is the act of creating a business or businesses while bearing all the
risks with the hope of making a profit.
But as a basic definition, that one is a bit limiting. The more modern entrepreneurship
definition is also about transforming the world by solving big problems like bringing
about social change or creating an innovative product that challenges the status quo of
how we live our lives on a daily basis.
HISTORY
The term entrepreneur is a French word, and is derived from the French word
“enterprendre”. It means “to undertake”. It is commonly used to describe an
individual who organizes and operates a business or businesses, taking on financial
risk to do so.
Around 1700 A.D. the term was used for architects and contractor of public works. In
many countries, the term entrepreneur is often associated with a person who starts
his/her own new business.
ENTREPRENEUR
An entrepreneur is a person who sets up a business with the aim to make a profit.
Entrepreneurs are some of the world’s most powerful transformers. From Elon Musk
sending people to Mars to Bill Gates and Stevxe Jobs making computers part of every
household, entrepreneurs imagine the world differently.
CHARACTERISTICS OF AN ENTREPRENEUR
Entrepreneurship is both a challenge and a great opportunity, and it takes certain
qualities to be successful. There’s no right or wrong way to be an entrepreneur.
Characteristics and behaviors like experimentation, persistence, and innovation can be
developed with time, experience, and training. As long as you possess the
entrepreneurial spirit, you'll be able to seize opportunities and overcome challenges
throughout your journey.
1. Curiosity
Successful entrepreneurs have a distinct personality trait that sets them apart from
other organizational leaders: a sense of curiosity. An entrepreneur's ability to remain
curious allows them to continuously seek new opportunities. Rather than settling for
what they think they know, entrepreneurs ask challenging questions and explore
different avenues.
Without curiosity, entrepreneurs can’t achieve their main objective: discovering new
opportunities. The drive they have to continuously ask questions and challenge the
status quo can lead them to valuable discoveries easily overlooked by other business
professionals.
2. Structured Experimentation
Along with curiosity, entrepreneurs require an understanding of structured
experimentation. With each new opportunity, an entrepreneur must run tests to
determine if it’s worthwhile to pursue.
For example, if you have an idea for a new product or service that fulfills an
underserved demand, you’ll have to ensure customers are willing to pay for it. To do
so, you’ll need to conduct thorough market research and run meaningful tests to
validate your idea and determine its potential.
3. Adaptability
The nature of business is ever-changing. Entrepreneurship is an iterative process, and
new challenges and opportunities present themselves at every turn. It’s nearly
impossible to be prepared for every scenario, but successful business leaders must be
adaptable. This is especially true for entrepreneurs who need to evaluate situations
and remain flexible to ensure their business keeps moving forward, no matter what
unexpected changes occur.
4. Decisiveness
To be successful, an entrepreneur has to make difficult decisions and stand by them.
As a leader, they’re responsible for guiding the trajectory of their business, including
every aspect from funding and strategy to resource allocation.
Being decisive doesn’t always mean being correct. If you want to be an entrepreneur,
it means having the confidence to make challenging decisions and see them through
to the end. If the outcome turns out to be less than favorable, the decision to take
corrective action is just as important.
5. Team Building
A great entrepreneur is aware of their strengths and weaknesses. Rather than letting
shortcomings hold them back, they build well-rounded teams that complement their
abilities.
In many cases, it’s the entrepreneurial team, rather than an individual, that drives a
venture toward success. When starting your own business, it’s critical to surround
yourself with teammates who have complementary talents and contribute to a
common goal.
6. Risk Tolerance
Entrepreneurship is often associated with risk. While it’s true that launching a venture
requires an entrepreneur to take risks, they also need to take steps to minimize it.
While many things can go wrong when launching a new venture, many things can go
right. According to Entrepreneurship Essentials, entrepreneurs who actively manage
the relationship between risk and reward position their companies to “benefit from the
upside.”
Successful entrepreneurs are comfortable with encountering some level of risk to reap
the rewards of their efforts; however, their risk tolerance is tightly related to their
efforts to mitigate it.
7. Comfortable with Failure
In addition to managing risk and making calculated decisions, entrepreneurship
requires a certain level of comfort with failure. It’s estimated that nearly 75 percent of
new startups fail. The reasons for failure are vast and encompass everything from a
flawed business model to a lack of focus or motivation. While many of these risks can
be avoided, some are inevitable.
Despite this, successful entrepreneurs must prepare themselves for, and be
comfortable with, failure. Rather than let fear hold them back, they allow the
possibility of success to propel them forward.
8. Persistence
While many successful entrepreneurs are comfortable with the possibility of failing, it
doesn’t mean they give up easily. Rather, they see failure as an opportunity to learn
and grow.
Throughout the entrepreneurial process, many hypotheses turn out to be wrong, and
some ventures fail altogether. Part of what makes an entrepreneur successful is their
willingness to learn from mistakes, continue to ask questions, and persist until they
reach their goal.
9. Innovation
Many ascribe to the idea that innovation goes hand-in-hand with entrepreneurship.
This notion is often true. Some of the most successful startups have taken existing
products or services and drastically improved them to meet the changing needs of the
market.
Innovation is a characteristic some, but not all, entrepreneurs possess. Fortunately, it’s
a type of strategic mindset that can be cultivated. By developing your strategic
thinking skills, you can be well-equipped to spot innovative opportunities and position
your venture for success.
10. Long-Term Focus
Finally, most people think of entrepreneurship as the process of starting a business.
While the early stages of launching a venture are critical to its success, the process
doesn’t end once the business is operational. Entrepreneurship is a long-term
endeavor, and entrepreneurs must focus on the process from beginning to end to
ensure long-term success.
FUNCTIONS OF AN ENTREPRENEUR
(i) Innovation and Creativity – Innovation generally refers to changing processes or
creating more effective processes, products and ideas. For businesses, this could mean
implementing new ideas, creating dynamic products or improving your existing
services. Creativity is defined as “the tendency to generate or recognize ideas,
alternatives, or possibilities that may be useful in solving problems, communicating
with others. Creativity and innovation have always been recognized as a sure path to
success. Entrepreneurs think outside of the box and explore new areas for costeffective business solutions.
(ii) Risk taking and Achievement – Entrepreneurship is a process in which the
entrepreneur establishes new jobs and firms, new Creative and growing organization
which is associated with risk, new opportunities and achievement. It results in
introducing a new product or service to society. In general, entrepreneurs accept four
types of risks namely Financial Risk, Job Risk, Social & Family Risk & Mental &
Health Risk,
(iii) Organization and Management – The entrepreneurial organization is a simple
organizational form that includes, one large operational unit, with one or a few
individuals in top management. Entrepreneurial management means the skills
necessary to successfully develop and manage a business enterprise. A small business
start-up under an owner-manager is an example of an entrepreneurial organization.
Here, the owner-manager generally maintains strict control over business operations.
This includes directing the enterprise’s core management functions. According to
Mintzberg, these include the interpersonal roles, informational roles and decisionmaking roles. The smaller the organization, the more concentrated these roles are in
the hands of the owner-manager. The entrepreneurial organization is generally
unstructured.
(iv) Research – An entrepreneur is a practical dreamer and does a lot of ground-work
before taking a leap in his/her ventures. In other words, an entrepreneur finalizes an
idea only after considering a variety of options, analysing their strengths and
weaknesses by applying analytical techniques, testing their applicability,
supplementing them with empirical findings, and then choosing the best alternative. It
is then that he/she applies the ideas in practice. The selection of an idea, thus, involves
the application of research methodology.
(v) Overcoming Resistance to Change – New innovations are generally opposed by
people because it makes them change their existing behaviour patterns. An
entrepreneur always first tries new ideas at his/her level. It is only after the successful
implementation of these ideas that an entrepreneur makes these ideas available to
others for their benefit. His/her will power, enthusiasm and energy help him/her in
overcoming the society’s resistance to change.
(vi) Catalyst of Economic Development – An entrepreneur plays an important role
in accelerating the pace of economic development of a country, by discovering new
uses of available resources and maximizing their utilization. Today, when India is a
fast developing economy, the contribution of entrepreneurs has increased multi-fold.
IMPORTANCE
1. Creation of job opportunities
Entrepreneurship firms contributed a large share of new jobs. It provides entry-level
jobs so necessary fur training or gaining experience for unskilled workers. The small
enterprises are the only sector that generates a large portion of total employment
every year.
2. Innovation
Entrepreneurship is the incubator of innovation. Innovation creates disequilibria in the
present state of order. It goes beyond discovery and does implementation and
commercialization, of innovations.“Leapfrog” innovation, research, and development
are being contributed by entrepreneurship.
Thus, entrepreneurship nurses innovation that provides new ventures, products,
technology, market, quality of good, etc. to the economy that increases Gross
Domestic Products and standard of living of the people.
3. Impact on community development
A community is better off if its employment base is diversified among many small
entrepreneurial firms. It promotes abundant retail facilities, a higher level of
homeownership, fewer slums, better, sanitation standards and higher expenditure on
education, recreation, and religious activities. Thus, entrepreneurship leads to more
stability and a higher quality of community life.
4. The consequence of business failure
The collapse of the large industry almost has irresistible damage to the development
of the state and the state of the economy and the financial condition of the relevant
persons. The incumbents lost their jobs: suppliers and financial institutions face a
crisis of recovery.
Customers are deprived of goods, services, and government losses taxes. This could
not happen in the case of failure of entrepreneurship. There shall be no measurable
effect upon the economy and no political repercussions too.
5. Enhances the standard of living
The standard of living is a concept built on an increase in the amount of consumption
of a variety of goods and services over a particular period by a household. So it
depends on the availability of diversified products in the market. Entrepreneurship
provides enormous kinds of a product of various natures by their innovation.
Besides, it increases the income of the people who are employed in entrepreneurial
enterprises are also capable employed persons to consume more goods and services.
In effect, entrepreneurship enhances the standard of living of the people of a country.
6. Promotes research and development
Entrepreneurship is innovation and hence the innovated ideas of goods and services
have to be tested by experimentation. Therefore, entrepreneurship provides funds for
research and development with universities and research institutions. This promotes
the general development, research, and development in the economy.
Entrepreneurship is the pioneering zeal that provides events in our civilization. We
are indebted to it for having prosperity in every arena of human life- economic,
technological and cultural.
ORGANIZATIONAL MANAGEMENT
Organizational Management is a discipline that encompasses the entire organisation.
It is a practice that requires various people within an organisation to work together
towards a common goal.
Efficient Organizational Management requires optimal use of certain resources. This
is made possible through careful planning and monitoring of the workplace. An
important characteristic of organisational management is the guidance it provides for
employees. Through Organizational Management, individuals can become aware of
their roles and responsibilities and know exactly what they need to do. Effective
management is a crucial part of a profitable organisation.
HIERARCHY
All the managers described above are ranked hierarchically based on authority and
responsibility. They each perform various tasks. The different roles within an
organisation are often shaped like a pyramid: the lower the level, the more managers,
and vice versa.
IMPORTANCE
Firstly, effective organisational management helps in the development of a clear goal
and understanding of the objective of the organisation, and the course which needs to
be set. It helps managers of all levels to divide the roles over the departments, and to
gather a broad understanding of the various necessary functions and resources.
Additionally, a good organisational structure helps the various departments within a
company to work together efficiently and reach common goals. The sharing of
information and internal communication becomes easier, both within a department, as
the organisation as a whole.
INNOVATION
Innovation refers to an individual or organization creating new ideas, such as new
products, workplace processes and upgrades to existing services or products. In
business, innovation can promote growth, help ensure the organization can compete
with new market trends and help generate profit. Implementing innovative ideas can
help a business become a successful organization in its industry.
ROLE OF INNOVATION IN ENTREPRENEURSHIP
With the rising competition, many entrepreneurs have started discussing innovation.
But what is the meaning of innovation, and why is it important for entrepreneurs? So,
innovation is basically the replacement or improvement of something. Innovation is
the particular instrument of entrepreneurs with the help of which an individual
exploits the changes as a chance for a different business. An Innovative Entrepreneur
is one who has the ability to tackle to produce innovative products to meet the
market's demands and trends.
Innovative entrepreneurship is the practice of establishing creating new business ideas
intending to generate profit, assist their community and accomplish company goals.
Innovative entrepreneurs develop business models to identify to meet the needs of an
organization and improve their competitiveness in the market. Most entrepreneurs use
innovative ideas to help create these business models or make upgrades to their
current model. They can use this motivation to design innovative strategies for
business success.
STAGES OF INNOVATION
There are six stages in the process of innovation: generating ideas, capturing ideas,
beginning innovation, developing a business-effectiveness strategy, applying business
improvement, and decline.
1. Generating Ideas
Generating ideas is the exhilarating part of the process. It is best to do this in teams,
rather than individually. Innovative ideas generally come from a vision, an
unreasonable demand, or a goal.
2. Capturing Ideas
Capturing the ideas from the first stage is done by means of team discussion or
discussion among peers. It is important to record the ideas.
3. Beginning Innovation
Review the list of ideas and develop them into a series of statements of ideas. Next,
quantify the benefits of each idea to be pursued. Do this in reference to the
department, the organization, and/or the customer. Describe how the statement fits
with the organization’s strategy, mission, and objectives. Finally, estimate the
business potential—the expected outcomes of implementing the idea. These steps are
designed to capture the idea and have the team members agree on a statement of
feasibility before presenting the suggested innovation to management.
4. Developing a Business-Effectiveness Strategy
Innovation implementation begins here. It usually means rethinking an existing
process, product, or service. This is not the same as looking at an existing process and
improving it. It is describing what a future process (such as building a house in three
hours) will look like.
The team first develops this “picture of the future.” This usually is where the
innovation resides. The easiest way to start is to have the team members list their
basic assumptions about the way things are now done (which the innovation is
intended to overcome). Then they brainstorm, record, and discuss every idea that
arises about a possible future process. It helps to use yellow self-stick notes to record
ideas individually and then to consolidate them all. The team concludes by writing a
paragraph that describes the innovation and illustrating it on a flowchart. This
provides the team with a look at the entire future process.
5. Applying Business Improvement
Once the innovation is applied, it is necessary to continuously examine it for possible
improvements (to the process or product or service). In the example of building a
house in three hours, how could the team improve the process by using fewer people
or less money?
The team starts this process by identifying the business-process gaps between what is
done in the present and what is done in the innovation. This is followed by identifying
the blockages and barriers to implementing the innovation.
Estimating the difficulties, benefits, costs, support required, and risks is necessary
before the team can refine the innovation process. Then it will be ready to apply the
improvements identified.
6. Decline
In time, it often becomes obvious that what was once an innovation no longer fits.
Continuous improvement of the existing process, product, or service is no longer of
value; the former innovation has become outdated or outmoded. It is time to let it go,
abandon the existing thinking, and set a new goal to start the innovation process once
again. It is time for new innovations in response to external pressure.
REFLECTION:
Entrepreneurship is what people do to take their career into their hands and lead it in
the direction they want. Entrepreneurs see possibilities and solutions where the
average person sees only annoyances and problems. Understanding what an
entrepreneur is can help more people recognize the value they can—and already—
contribute to the world.
Entrepreneurship is a gap filling function. The gap between the human needs and the
available products and services gives rise to entrepreneurship. An entrepreneur
identifies this gap and takes necessary steps to fill the gap. He introduces new
products and services, new methods of production or distribution, new sources of
inputs and new markets for this purpose.
Entrepreneurship is an organising function as it brings together various factors of
production i.e., land, labour, capital and other resources. An organisation without
leaders is like a ship without a captain, it will most likely sink. And when done
properly, organisational management is cost beneficial. There are various ways
organisations benefit from a good management structure consisting of competent
leaders.
Entrepreneurship is an innovative function as it involves doing things in a new and
better way. It may be in the form of a new product, a new source of raw material, a
new market or a new method of production.
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