Entrepreneurship: Successor of Capitalism

Ing. Matthijs H.M. Hammer M.Sc. Senior lecturer Innovative Entrepreneurship School of Commerce & Entrepreneurship Research center of Innovative Entrepreneurship

Introduction

Background

Chemical Environmental Laboratory sciences, Quality Management

Experience

Consulting company, Research centre of coating & surface technology

Saxion, university of applied sciences, Senior lecturer Innovative Entrepreneurship, School of Commerce & Entrepreneurship

Eindhoven university of technology, PhD Researcher, Innovation Technology, Entrepreneurship & Management (ITEM Capacity group)

Venturelab Twente, venture coach

European Council for Small Business and entrepreneurship, Country vice president for The Netherlands

Editorial board of international scientific conferences and journals

Member supervisory committee of social and technology oriented enterprises

Menu

• History of economic eco-systems

• Analysis of last centuries developments

• Next step

• What is Entrepreneurship?

Definitions to start

Organisation and Management = Organisational Behaviour

• Organisational behaviour = an interdisciplinary science that studies the behaviour of organisations and the factors that determine this behaviour, and identifies how organisations can be managed most effectively.

• Organisational behaviour contains both descriptive and prescriptive elements.

• It is interdisciplinary, with elements from other disciplines (eg economics, computer science, marketing, psychology) used to develop a new approach.

• It helps the process of management, providing direction for processes within the organization.

• It is goal orientated, so helps management to be most effective.

First signs of trade

Glass spearhead, 70.000 BC from New Guinea

200 BCE, Trade routes

Develepment of economic eco-systems

• Around Eufrat from 5.000 BC first city arose in Sumeria (Irak) with 50.000 inhabitants and labour division.

• Introduction of a universal change value (rings of silver) named “specie” (2.000 BC).

• 1100 AC, development of the western world.

• 1470, start of the Capitalism: growth of population, cities and (international) trade. The principle of “Dept” was introduced.

• 1820, labour division increase; urge to efficiency.

• 1971, abolition of the system of Bretton Woods; decoupling values money and gold.

The development of trading and the emergence of multinational enterprises

The first international trading companies were set up and funded by national governments with the aim of supporting their colonial trade policies

– examples; English East India Company,

– Dutch East India Company,

– French West India Company

Today, nearly 90% of the world’s 500 largest companies are located in North America, Europe and Japan

– The USA is home to 132 of these, e.g. General Motors

– Japan is home to 68 of these, e.g. Toyota

– France is home to 32, e.g. Carrefour

– Britain is home to 26 of these, e.g. BP

– The Netherlands is home to 12, e.g. Heineken

Multinational enterprises 1600 -2010

1595 VOC

Analysis of last centuries developments

Industrial revolution

Cyber Physical Systems

Waves of innovation

Society is in need of solutions to increasing complexity and technological development ( e.g. Toffler et al., 1981)

What will be the 4th wave?

• Entrepreneurship? (o.a. Mayard, 1996)

• 21st Century Skills (e.g. Brown et al., 2001)

Evolution of Management models

• Abell (Abell & Hammond, 1979)

• Deming (Deming, 1982)

• Mc Gregor (McGregor, 1960)

• Mintzberg (Mintzberg, 1979)

• Porter (Porter, 1980)

Industrial evolution

“Modern” management models

Innovation hero

Joseph Alois Schumpeter (1883 – 1950)

• "creative destruction" in economics

• Business Cycles; Without innovation no new wave: hero is the entrepreneur

Business cycles, 1939

“Creative destruction”

Next step

“Modern” management models

? !

Innovation hero

Joseph Alois Schumpeter (1883 – 1950)

• "creative destruction" in economics

• Business Cycles; Without innovation no new wave: hero is the entrepreneur

Business cycles, 1939

“Creative destruction”

Evolutions in economic development

Herbert Alexander Simon (1916 – 2001)

• A behavioral model of rational choice (1955)

• The Sciences of the Artificial (1969)

• Nobel laureate (1978)

• All impulses (realistic of symbolic) contribute to decision making. • Machines, systems and models can replicate ‘cold’ cognition1,

but not ‘hot’ cognition2.

1: reasoning, planning, observing and decision making. 2: pain, pleasure, desire, and other emotions.

Evolutions in economic development

Scott Shane

Sankaran Ventakaraman

2000: Entrepreneurship as a process

More to come in some slides….

Industrial revolution

Joseph Schumpeter

Herbert Simon

Shane / Venkataraman

Modern management models

Types of Entrepreneurship

In many situations there is a debate about entrepreneurship;

different situations have different dynamics (Wennekers, 2013)

Entrepreneurial process V

AL

UE

C

RE

AT

ION

Opportunity

recognition

Opportunity

preparation

Opportunity

exploitation

Value creation process (Shane & Venkataraman, 2000)

Summary

• Our (capitalistic) economic system emerged from trade and value exchange for fixed values (Monetary values). Based on trust the moment to equalise the transaction may be postponed (debt).

• In the third wave of innovation, scientific models and theories are used to simulate and simplify the increasing complexity of reality to predict the future (positivism).

• Last decade the dislocation of the third wave of innovation seem to be arrived. More and more there is attention to a shift paradigm toward design-thinking (interpretivism / social constructivism); What about (our innovation-hero) the entrepreneur?

Question:

What is Entrepreneurship?

Activity

IDIVIDUAL ASSIGNMENT

DO NOT COOPERATE

• Take a blank sheet of paper.

• Take a pencil.

• Draw an entrepreneur.

results

>99% human being

Where from: >80% Man

Where from: >80% Suite

Where from: >80% Tie

Where from: >80% Smiling / success

Greedy businessman

Examples students give

Baron Charles Louis de Maere 5 december1802 – 8 september 1885

• Entrepreneur, 1832 textile factory Schuttersveld

• Founding father of Saxion, 1833

What do you see?

Prototyping

+ +

Prototyping

Dimensions of a business opportunity prototype

factors

describing

the business idea

1. Solves customer problems

2. Positive net cash flow

3. Manageable risk

4. Superior product

5. Change industry

factors

referring to the feasibility

of business development

1. Overall financial model

2. Advice from experts

3. Unique product

4. Big potential market

5. Intuition

Source: Baron and Ensley, 2006

Entrepreneurial process V

AL

UE

C

RE

AT

ION

Opportunity

recognition

Opportunity

preparation

Opportunity

exploitation

Value creation process (Shane & Venkataraman, 2000)

Example

See possibilities Tackle opportunities

Know where to find it.

Successful application

test

How ventures are build:

Conventional Wisdom (Causal Logic)

Come up

with a

brilliant idea

• Show there is a large market for it

• Write a winning business plan

• Raise money

• Build and grow the venture

• Go public or sell

• Go off to the Bahamas

So how do

Expert entrepreneurs do it?

• At least 15 years experience founding and running

companies

• Multiple ventures including successes and failures

• At least one IPO

They use E f f e c t ua t ion

What is Effectuation?

Work with what’s

already

within your

control

to

co-create

the future

Principles of effectuations

decision making heuristics learned by expert entrepreneurs in uncertain, disruptive situations. (Sarasvathy, 2001)

BLUE = causal; RED = effectual

Means. The basis for decisions

and new opportunities:

– Who I am

– What I know

– Whom I know

Goals vs means

Goals. Given (based on predictions)

Entrepreneurial dynamics

Affordable Loss.

Calculate downside potential and risk no more than you can afford

to lose.

Risk, Return and Resources

Expected Return. Calculate upside

Potential and pursue the

(risk adjusted) best

opportunity.

Risk, Return and Resources

Alternative Own capital Loan bank investment Expected return

1 40 0 35 50

Example

2 40 10 50 75

Alternative 2 Alternative 1

Partnership. Build your “future” together with

customers, suppliers and even prospective

competitors.

Attitude toward others

Competition. Set up transactional relationships with customers and

suppliers.

44

Surprise

• Avoid Surprises.

• Leverage Surprises.

Surprises can present new opportunities.

Underlying logic & what to do

To the extent we can predict the future, we can control it.

PLAN

To the extent we can control the future, we don’t

need to predict it.

CO-CREATE

More information: www.discovereffectuation.nl www.effectuation.org

Principles of Effectuation

Bird-in-hand principle:

• Start with Who you are, What you know, & Whom you know (Not

pre-set goals/opps)

Affordable loss principle:

• Invest what you can afford to lose – extreme case $0 (Not

expected return)

Crazy Quilt principle:

• Build a network of self-selected stakeholders (Not competitive

analysis)

Lemonade principle:

• Embrace and Leverage surprises (Not avoid them)

Pilot-in-the-plane principle:

• Co-create the future (Not find inevitable trends)

Business model canvas

(Osterwalder, 2004)

Summary

• Entrepreneurship is featured by process-oriented operations, executed by people.

• Entrepreneurship is non-linear / predictable.

• Entrepreneurs have a predilection for co-operation (co-creation)

• Entrepreneurs do like a dynamic environment; perceived as risk by non-entrepreneurs.

• Entrepreneurs and managers apply different logics to make decisions.

• Entrepreneurship is not better or worse than managing; different. Both are needed for a sustainable development of a company, economy or society.

THANK YOU FOR YOUR ATTENTION

Thank you for your attention

Knowledge

Application

Behaviour

Talent

Source: N. Vloon, 2002

Structure

Context

The Competent Egg

Difference in development

Falcon Goose

Goose

Conclusion

The adoption of an entrepreneurial approach of the learning process and the knowledge of entrepreneurial methodologies as effectuation seems to be practical aspects to start.

Questions?

Thank you for your attention!