Role Of Entrepreneurship In The Society – Summary. Diversify your product line. Stick to your knitting. Book a professional driver. Track fixed costs. These are some of the suggestions that entrepreneurs arrange when they try to get their businesses off the ground. Why all the conflicting advice? Because in a young company all decisions are at stake. Based on his observations of several hundred startups over eight years, Amr Behid developed a three-step series of questions that all entrepreneurs should ask themselves to prioritize among the vast array of opportunities and problems they face: What are my goals? Do I have the right strategy? Can I execute the strategy? Before entrepreneurs can set business goals, they must articulate their personal goals. For example, they may want to achieve a certain lifestyle, experiment with technology, or build an institution that can last. Only when entrepreneurs decide what they want from their ventures can they determine what kind of company they need to build, what they are willing to risk and whether they have a well-defined strategy. However, good strategies do not guarantee good execution. A business can fail if its founders do not hire the best people, attract capital, invest in organizational infrastructure and shape a culture that fits the company’s strategy. The founders must also consider the evolution of their individual roles. Entrepreneurs cannot build self-sustaining companies by simply “letting go.” When imagining the future, entrepreneurs must manage as if the company had failed. They must constantly learn new skills – and constantly ask themselves where they want to go and how they will get there.
Of the hundreds of thousands of business ventures launched every year, many never get off the ground. Others riot after spectacular rocket launches.
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Why such sad prospects? Entrepreneurs – with their bias for action – often overlook essential elements of business success. This includes a clear strategy, right workforce talent and organizational controls that drive performance without stifling employee initiative.
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Furthermore, no two factories take the same path. Therefore, entrepreneurs cannot look to formulas to navigate the multitude of choices that arise as their business evolves. A decision that suits one company can be disastrous for another.
Entrepreneurs continue to ask tough questions about where they want to go – and whether the path they’re on will get them there.
Of the hundreds of thousands of businesses that entrepreneurs launch every year, many never get off the ground. Others riot after spectacular rocket launches.
A six-year-old spice company attracted loyal customers but generated less than $500,000 in sales. The company’s gross profitability cannot cover its overheads or provide sufficient income to the founder and family members participating in the business. Further growth will require a major infusion of capital, but investors and potential buyers are not keen on small, profitable businesses on the margins, and the family has exhausted its resources.
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Another young company, profitable and growing rapidly, imports new products from the Far East and sells them to large American chain stores. The founder, who has a paper value of several million dollars, was nominated for entrepreneur of the year awards. But the company’s spectacular growth forced it to reinvest most of its profits to fund the business’ growing inventory and members. Furthermore, the company’s profitability attracted competitors and enticed customers to deal directly with the Asian suppliers. If the founder doesn’t do something soon, the business will evaporate.
Like most entrepreneurs, the spice manufacturer and novelty importer receives some very confusing advice: diversify your product line. Stick to your knitting. Raising capital by selling shares. Don’t risk losing control just because things are bad. representative. Act decisively. Book a professional driver. Track your fixed costs.
Why all the conflicting advice? Because the range of possibilities – and problems – faced by startup founders is enormous. A manager of a mature company may ask: What business are we in? Or how can we utilize our core competencies? Entrepreneurs must constantly ask themselves what business they are doing
Develop. Similarly, the organizational weaknesses and flaws that entrepreneurs face every day would cause managers of a mature company to panic. Many young organizations simultaneously lack coherent strategies, competitive strengths, competent employees, adequate controls and clear reporting relationships.
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The entrepreneur can only deal with one or two opportunities and problems at a time. Therefore, just as a parent should focus more on a toddler’s motor skills than his social skills, the entrepreneur should distinguish between critical issues and normal growing pains.
Entrepreneurs cannot expect the kind of guidance and comfort that an authoritative parenting book can offer parents. People go through physiological and psychological stages in a more or less predetermined order, but societies do not share a developmental path. Microsoft, Lotus, WordPerfect and Intuit, although competing in the same industry, did not evolve in the same way. Each of those companies has its own story to tell about the development of the strategy and organizational structures and the development of the role of the founder in the business.
The options suitable for one entrepreneurial venture may be completely unsuitable for another. Entrepreneurs have to make a bewildering number of decisions, and they have to make the right decisions for them. The framework I present here and the accompanying rules will help entrepreneurs analyze the situations they find themselves in, prioritize the opportunities and problems they face, and make rational decisions about the future. This framework, based on my observation of several hundred startups over eight years, does not prescribe answers. Instead, it helps entrepreneurs ask useful questions, identify important problems, and evaluate solutions. The framework applies whether the business is a small print shop trying to stay in business or a catalog retailer seeking hundreds of millions of dollars in sales. And it works at almost every stage of a company’s development. Entrepreneurs should use the framework to assess the position and trajectory of their companies often—not just when problems arise.
The framework consists of a three-step series of questions. The first step clarifies the entrepreneurs’ current goals, the second assesses their strategies for achieving those goals, and the third helps them assess their ability to execute their strategies. The hierarchical organization of questions requires entrepreneurs to confront the basic and big problems before thinking about refinements and details. This approach does not assume that all companies – or all entrepreneurs – develop in the same way, so it does not establish a one-size-fits-all methodology for success.
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An entrepreneur’s personal and business goals are inextricably linked. While a public company manager has a fiduciary responsibility to maximize shareholder value, entrepreneurs build their businesses to achieve personal goals and, if necessary, seek investors with similar goals.
Before they can set business goals, entrepreneurs must be clear about their personal goals. And they should ask themselves from time to time if those goals have changed. Many entrepreneurs say they start their businesses to gain independence and control their own destiny, but these goals are too vague. If they stop and think about it, most entrepreneurs can identify more specific goals. For example, they want an outlet for artistic talent, an opportunity to experiment with new technology, a flexible lifestyle, the stress that comes from rapid growth, or the immortality of building an institution that embodies their deepest values. Financially, some entrepreneurs are looking for quick profits, some want to generate sufficient cash flow, and others are looking for capital gains from building and selling a company. Some entrepreneurs who want to build sustainable institutions do not see personal financial returns as a high priority. They may reject takeover offers regardless of price or sell equity cheaply to employees to ensure their loyalty to the institution.
Only when entrepreneurs can say what they personally want from their businesses does it make sense to ask the following three questions:
Long-term sustainability is not about entrepreneurs looking for quick profits from trades in and out. Also, so-called lifestyle entrepreneurs, who are only interested in generating enough cash flow to maintain a certain lifestyle, should not build businesses that can survive without it. But sustainability—or the perception of it—is very important to entrepreneurs hoping to eventually sell their businesses. Sustainability is even more important for entrepreneurs who want to build an institution capable of renewing itself through changing generations of technology, employees and customers.
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The personal goals of entrepreneurs should also determine the target size of the businesses they launch. The business of a lifestyle entrepreneur does not have to be very large. In fact, a business that gets too big can prevent the founder from enjoying life or staying personally involved in all aspects of the work. Conversely, entrepreneurs seeking capital gain must build companies large enough to support an infrastructure that will not require their day-to-day intervention.
Building a sustainable business – that is, one whose main productive asset is not just the skills, contacts and efforts of the founder – often involves risky long-term bets. Unlike a solo consulting practice—which generates cash from the start—sustainable businesses, such as companies that manufacture branded consumer goods, require ongoing investment to build sustainable advantages. For example, entrepreneurs can