ENTREPRENEURAL SKILLS - II

 ENTREPRENEURAL SKILLS - II

Introduction

    Entrepreneurship remains a new concept in terms of how it can be developed, what is needed to practice entrepreneurship, how it can be beneficial for an individual etc. It is important to understand what defines an entrepreneur. While some qualities and skills are observed in successful entrepreneurs, an entrepreneur has to perform certain functions to form an enterprise. There are pros and cons involved with choosing the entrepreneurial path. There are many myths and fears that deter people from taking the entrepreneurial journey. In this chapter, we will look at how entrepreneurship impacts society and has the potential to bring a difference in the mindset and skill set of an individual.

Entrepreneurship and Society

    While the concept of entrepreneurship has a fairly wide meaning, it is simply described as starting a business using the resources available to a person. An entrepreneur combines factors in a creative manner in order to generate value for customers and create wealth. Society is described as an aggregate of people living together in a community, who associate for various engagements including business. The definitions of the two concepts shows clearly that there is a direct relationship between the two. The beauty of entrepreneurship in a society is that as businesses prosper the impact the businesses create also increases. It is due to entrepreneurial activity that the society is provided with goods and services. In turn, society provides market for products and services provided by the entrepreneur.

Entrepreneurship has some positive impact on society such as:

· Accentuates economic Growth

· Fosters Creativity

· Stimulates Innovation and Efficiency

· Creates Jobs and Employment Opportunities

· Solves the problems of the society

· Encourages welfare of the society

Society plays a role in boosting entrepreneurship by:

· Creates needs and demands

· Provides raw materials

· Enables financial support

· Creates a need for education

· Catalyses policy formation and reform

· Facilitates networking

· Supports infrastructure development

However, entrepreneurship also creates some adverse impact on society sometimes. This happens in the form of environmental degradation, trade imbalance, labour exploitation etc.

Some common entrepreneurship activities related to society include:

Social Entrepreneurship: Social entrepreneurship can be understood as creation of sustainable solutions for social problems that leads to social change by employing entrepreneurial mindset, processes and operations. In social entrepreneurship research is conducted to completely define a specific and core social problem. Many social problems are tackled by social entrepreneurs such as low reach of quality education, health and sanitation, unemployment, child labour etc.

Agricultural Entrepreneurship: Agricultural Entrepreneurship can be defined as being primarily related to the marketing and production of inputs and products used in agricultural activities. Farmers have benefited the most with rise in agricultural entrepreneurship as it has led to low-cost innovations in farming processes.

Women Entrepreneurship: Women entrepreneurship is the process where women organise all the factors of production, undertake risks, and provide employment to others. Government of India has defined women entrepreneurship as “an enterprise owned and controlled by a woman having a minimum financial interest of 51 per cent of the capital and giving at least 51 per cent of the employment generated in the enterprise to women.”

Small Scale Entrepreneurship: Small scale entrepreneurship refers to starting industries in which manufacturing, trading, providing services, productions are done on a small scale or micro scale. These businesses serve as the backbone of many developing countries.

Qualities of an entrepreneur

Hard working: In order to be successful, an entrepreneur must be very hard working. Successful entrepreneurs adapt to the habit of hard work from a very early stage.

Optimistic: Successful entrepreneurs should have a positive approach to life. They should not be afraid of any adverse situations in business. They should think optimistically about the future of the business.

Independent: Successful entrepreneurs like to function at their own will and rules. They dislike being guided by others. They do not prefer working for others and are the masters of their own.

Energetic: Entrepreneurs should possess a high level of energy as they have to put in more hard work and time for making their venture a success.

Self-confident: An entrepreneur should have a strong belief in his/her abilities. He must not deviate from his/her decisions too early in case success is delayed rather he must trust his/her competencies and hard work.

Perseverant: Successful entrepreneurs never quit his/her venture even if s/he fails. They keep on finding ways to succeed. They show perseverance in their pursuit. They never give up easily.

Functions of an entrepreneur

Rajesh Marwaha and J. S. Mehandipur have given a comprehensive classification of the functions of entrepreneurs in their book “Entrepreneurship and Small Business”.

Entrepreneurial functions

Organisation Building and Management: Organisation building is about bringing together different factors of production and allocating these resources to bring down costs and losses. All decisions relating to an enterprise are taken by the entrepreneur. An entrepreneur builds the organization by taking various steps such as hiring employees, organizing the factors of production, sourcing finance etc.

Risk taking: Risk taking is about taking responsibility and planning for a loss or mishap that may occur in the future due to unforeseen contingencies. Some common risks entrepreneurs take are around return on investment, hiring of new employees, working with vendors etc. An entrepreneur plays the function of developing a certain risk-taking appetite and taking calculative risks to reduce adverse consequences.

Innovation: Entrepreneurs innovate by introducing new concepts, products, services, designs, ideas etc. They may introduce something new and innovative in any branch of economic activity. In today’s world, a new business cannot survive and sustain without innovating in some manner. An entrepreneur foresees a potentially profitable opportunity and innovates in the effort to exploit it.

Promotional functions

Idea Discovery: The first step towards entrepreneurship is discovery of a business idea. An entrepreneur comes up with a business idea and thinks about ways to implement it. It is about seeking opportunities for a specific type of business and finding ways to commercialize on it. Usually, entrepreneurs work around the process of idea discovery by exploiting natural resources, finding a market need or calculating the profit potential.

Detailed Investigation: While coming up with ideas can seem like an easy process, the challenge is to understand if the idea has the potential to turn into a viable business venture. For this, an entrepreneur conducts research, investigates and evaluates an idea considering various factors and estimates the total demand for a new product or service.

Assembling the Requirements: Some basic business requirements include infrastructure or office space, human resources, key vendors or partners, working capital etc. In a manufacturing or product-based business, some requirements are selecting the factory site, sourcing plant and machinery, hiring staff, finding the right suppliers etc. No matter what is the type of the business, an entrepreneur has to work towards assembling and organizing all the requirements once he/she is sure about the practicality and profitability of the proposition. Once this function is performed, the project is set to start smoothly.

Financing: Raising capital for a business is one of the core functions that entrepreneurs perform themselves, not just at the initial stage of the business, but even to grow and scale the business. First, the requirements of finances are estimated. Next, the sources from which capital will come are determined. This includes calculating the long-term and short-term financial requirements and considering the debt equity ratio.

Managerial functions

Planning: An entrepreneur documents a business idea in the form of a business plan, to detail each element of the business such as product or service description, operations, marketing, finance, accounting, growth plan etc. A business plan serves as a guide to determine the business objectives and the course of action. It helps to detail the “what, when, how and who” of doing every specific task.

Organizing: Organizing in the managerial context refers to setting specific and attainable goals and objectives to be achieved by different departments and by each employee. It is about arranging, directing, guiding, coordinating and controlling the key business activities.

Directing: Directing is about initiating planned action and ensuring that each employee is performing effectively. This also includes doing continuous performance reviews and organizing tasks according to plans.

Staffing: Staffing refers to different sub-processes around human resource management, such as manpower planning, recruitment, selection, placement, training, transfer, salary, promotion, payroll, appraisal etc. The objective of staffing is to fill a particular position with the right employee at the right time.

Leadership: Leadership is more of a skill than a function for an entrepreneur as he or she has to lead, guide and supervise people who work for the business. It is the process by which an entrepreneur directs, guides and influences the work of others in choosing and attaining specified goals by mediating between the individual and organisation in such a manner that both get maximum satisfaction.

Communication: An entrepreneur has to communicate every single day, in the form of writing, responding, drafting emails, verbal instruction, discussion etc. It has been established that entrepreneurs spend 75% to 90% of their working time communicating with others. It refers to the exchange of ideas, feelings, emotions, knowledge and information between two or more persons. Nothing happens in management until effective communication takes place.

Supervision: After issuing instructions, the entrepreneur has to see that the given instructions are carried out. Supervision refers to the job of overseeing subordinates at work to ensure the maximum utilisation of resources, to get the required and directed work done, and to correct the subordinates whenever they go wrong and ensure each function of the business runs smoothly.

Motivation: Along with guiding employees, an entrepreneur also plays a role of motivating them and encouraging positive behaviour and culture within the organization. It is the psychological process of creating an urge among the employees to do certain things or behave in the desired manner. The importance of motivation can be realised from the fact that the performance of a worker depends upon his/her ability and the motivation. A sound motivational system must be productive, competitive, comprehensive and flexible, and it must consider all needs of the worker.

Co-ordination: Co-ordination between different departments of the business helps to ensure that work happens in a timely manner. It is essential to channelize the activities of various individuals in the organisation, for the achievement of common goals. The entrepreneur has to make sure that the work of different segments is going according to pre-determined targets and corrective measures have to be initialised if there is any deviation.

Controlling: Sometimes controlling enables the entrepreneur to get his/her company’s policies implemented and take corrective action if performance is not according to the pre- determined standards. The process begins with establishing standards of performance, measuring actual performance, comparing the actual performance with the standard, finding variations and finally, taking corrective action.

Negotiation: An entrepreneur negotiates terms and conditions for many parts of the business such as payment terms and timelines, salaries of employees, vendor quotations etc.

Commercial Functions

Production and Operations: Depending on whether it is a service business or product business, an entrepreneur has to perform the function of managing production. It is the key function of an entrepreneur. The activities of production are independent of the size of the undertaking. In a small concern, one person may be undertaking this function whereas, in large organisations, this activity may be undertaken by various individuals or separate teams. It is the creation of goods and services. It consists of manufacturing, ancillary and advisory activities.

Finance and Accounting: While finance is more focused on raising funds and managing them, accounting helps to record and analyse the financial position of the business. Thus, an entrepreneur has to prepare and analyse cash flow statements, income sheet, balance sheet etc.

Marketing: Marketing refers to promoting products and services. It is primarily concerned with the movement of goods and services from the producer to the ultimate consumer. It is directed towards the satisfaction of consumer wants. Marketing plays a significant role in promoting the well-being of the business enterprise. An entrepreneur has to perform this function to make people aware about the offerings of the business and makes sales.

Human Resource Management: Human Resource Management (HRM) refers to recruitment, employment, selection, training, development and compensation of the employees with an organization. An entrepreneur performs this function as no business can function without people.

 

Role of Entrepreneurs

· Coordinating role: An entrepreneur has to coordinate the various factors for production. It involves selection of the best possible combination of factors.

· Agent’s role: Entrepreneurs are perceived as ‘Agents of Change’. They identify the opportunities, establish enterprises and build-up industries which in turn lead to overall development of the economy.

· Innovator’s Role: Entrepreneurs as innovators bring new products or service to the market or improve existing products or services. They act as market leaders and play the role of pioneers. Innovation in the industry results in higher production efficiency which has led to an increase in employment and income levels.

· Risk assumption role: A risk is involved in every venture. The economic reward of risk bearing is profit. Entrepreneurs retain some amount of the profits earned and put it back in business. This ultimately leads to the capital formation which is necessary for economic development. Therefore, by assuming risk entrepreneurs contribute to the economy.

· Imitating role: In developing nations, entrepreneurs usually imitate or adopt the innovations done by the entrepreneurs of the developed nations. By doing so, they adapt these innovations to the local conditions and hence work towards overcoming the entrepreneurial challenges.

· Capital formation role: Entrepreneurs enable the formation of capital by mobilising the idle savings for the purpose of carrying on business. The mobilisation of wealth leads to an increase in capital of company and development of assets. This helps in carrying on trade and development of the economy.

· Balancing role: Entrepreneurs provide for the regional developments by starting small-scale industries. India needs the decentralized structures to remove regional imbalances in the economic development.

· Status transformation role: Entrepreneurs generate employment, income and wealth which improves the overall standard of living in the society. Improved standard of living leads to economic development as it reduces the disparity in income.

· Employment Generation role: Establishment of business enterprises leads to the generation of employment opportunities as various human resource professionals are needed to run the business effectively. Thus, entrepreneurship leads to the  reduction in unemployment levels which is a known cause for hindrance in the development of the economy.

Importance of Entrepreneurs

Free market evolution: Entrepreneurs are important in a free market because they help the market respond to changing prices and consumer preferences. For example, with the rise in the use of internet, an entrepreneur may see the potential to set up a new home delivery service which uses an app for consumers to buy. Without entrepreneurs, product markets would become static and be slow to changes in new technology and trends.

Efficiency improvements: A successful entrepreneur tends to adapt in an established business and increase their own efficiency. Entrepreneurs can make radical changes and introduce new technologies which significantly move on an industry Hence, during any major changes in the economy, entrepreneurs adapt and do not have to go out of business.

New markets: Entrepreneurs can often ‘redefine the rules’ of an established industry. They do this by creating new markets for existing products and slightly innovating in small ways to suit the needs of a new target market.

New values. An entrepreneur is not just about price and profit. An entrepreneur may be motivated to enter an industry to offer a more ethical product or provide a service to a community. For example, Anita Roddick set up Body Shop at a time when many cosmetics were tested on animals. Her new set up eschewed animal testing. It proved a successful business strategy and it soon became the industry standard. In other situations, entrepreneurs may take a risk and provide a community service such as a volunteer led railway – offering steam trains for tourists and locals.

 

Myths of Entrepreneurship

There are many myths about characteristics and traits of entrepreneurs. With the set of activities, they perform, entrepreneurs start to be described in a certain way. However, these descriptions and conclusions are made after the entrepreneur is already successful. It might not apply when a person starts from scratch to move towards entrepreneurship. It might not apply universally to all entrepreneurs. Let us look at some of these myths in detail.

· Entrepreneurs are born that way

Many people assume that entrepreneurial qualities are innate and that only people who have certain natural talents can be entrepreneurs. However, the truth is that almost anyone can become an entrepreneur if they can learn the necessary skills. Entrepreneurs may be gregarious extroverts or quiet introverts; they may be “big picture” thinkers or more focused on the details of executing an idea. Entrepreneurship is a learned skill, not a natural-born ability.

· All entrepreneurs have great ideas

Some people may not attempt to start their own business because they don’t have a unique idea. It is not needed to reinvent the wheel to be an entrepreneur. There is nothing wrong with taking an existing idea and making your own business out of it.

· The only requirement is a good idea

Even the very best ideas, ones with the potential to disrupt an entire industry, need proper execution to become reality. Ideas are important, but so are planning, talent, leadership, communication, and a host of other factors.

· Businesses either flourish or fail

Because the select few start-ups that skyrocket out of the gate receive the bulk of the media, it’s easy to adopt an all- nothing outlook on entrepreneurship. While many ventures make it big and many fail, a lot of businesses are run with patience and strategy with a focus on self-sustenance and gradual growth.

· Entrepreneurs take lots of risks

Entrepreneurs take risks. With that said, they don’t necessarily take lots of risks or put themselves in high-risk situations all the time. Entrepreneurs learn how to take calculated risks. It is all about balancing the risk and reward.

· One must know everything before starting a business

Real entrepreneurs thrive on being in a constant state of learning. They enjoy creating, improvising and pushing boundaries. Being new and even somewhat naïve can be an asset in today’s rapidly changing world. That’s because succeeding at entrepreneurship requires energy, innovation and the ability to push yourself outside your comfort zone. It’s often not what you know, but how fast you learn, that counts.

· A lot of money is required to start any business

While certain amount of capital is required for take a business off the ground, it varies depending on the business. The key in entrepreneurship is to start with resources available and grow slowly and steadily. It is not necessary that one should fear or deter from entrepreneurship due to lack of financial resources.

 

Entrepreneurship as a Career - Why entrepreneurship for you?

Being an entrepreneur may appear as though an implausible profession to numerous youngsters. A few people are not even aware that having their very own business or independent work can be a choice. Other people who are aware, never at any point think about it in their whole lifetime. This is on the grounds of an imperfect perception that we were destined to work for big companies.

While there is nothing wrong with working for any organisation, it is basic for youngsters to be educated that they have two options – they can be job creators or job seekers. Once the awareness of the two career choices comes in, it is important to understand how taking the route of entrepreneurship benefits an individual.

Nurtures development of entrepreneurial skills and capabilities: Entrepreneurship cultivates unique skills and encourages outside the box thinking. Moreover, it creates opportunity, instills confidence, ensures social justice and stimulates the economy. Entrepreneurship education also provides with the skills and knowledge to come up with business ideas and develop own ventures. This includes learning about core business areas such as finance, sales, marketing, management and accounting, and developing broader ranging skills such as adaptability, effective communication, and confidence.

Enables application of an entrepreneurial mindset: The advantage of working towards developing an entrepreneurial mindset and learning entrepreneurial skills over more traditional subjects is that they are not necessarily only relevant to becoming an entrepreneur. The mindset and skills are relevant in any field and are be desirable attributes for being an employee as well. In fact, having an entrepreneurial mindset and wide range of business-relevant skills acquired through studying entrepreneurship would make one an ideal candidate in most fields.

Develops the ability to handle failure and ambiguity: In the Indian culture, since childhood failure is looked upon as something intolerably bad. However, a critical part of learning in the entrepreneurial process is to learn from failure. Hence, going through this process helps to learn from mistakes, take failure positively and stay motivated to work towards achieving the goal. Similarly, just like life is uncertain, business is full of ambiguity. While actually finding solutions to deal with ambiguity, one develops certain traits such as risk management, perseverance and persistence.

Enhances critical thinking and problem-solving ability: The ability to think critically and solve problems is essential to succeed in the world of business. The focus of learning is not on these aspects during our school years. Learning entrepreneurship exposes one to numerous opportunities that force one to think critically, analyze all alternatives and consider possible solutions.

Provides early exposure to the real world: Ultimately, working professionally in the real world requires one to collaborate, think creatively and demonstrate proficiency. In most cases, real life exposure during educational years remains limited. Entrepreneurship practice at an early stage in one’s career encourages activities such as going out and interacting with customers, creating tangible concepts and ideas, preparing detailed documents, working with investors etc., which gives great exposure and knowledge about the trends and needs of the real world.

Inspires to think about one’s career differently: Many students do not even consider that they can try to work on business ideas, take up entrepreneurial projects, take the initiative to impact society etc. Thus, they tend to develop a certain trail of thought about their career – from graduating high school to college to looking for a job. If entrepreneurship exposure is given at the first point when one starts thinking towards building a career, it can help them to think of different career options and exploring what they are actually passionate about.

Leads to creating difference in society: Entrepreneurs not only economically impact society but they also work on identifying the real needs and problems of people and solving them. Learning entrepreneurship encourages one to find problems that need to be solved, invent a solution for them, and ultimately, make the world a better place.