Starting any business is not entrepreneurship

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Very often, I am asked these questions:

  • “What is entrepreneurship”?
  • “Is starting any sort of business entrepreneurship”?
  • “Is starting a small business entrepreneurship”?
  • “Can we call self employed people entrepreneurs”?

The list could go a little longer. But you get the question. Even since entrepreneurship has become the coolest thing to do, the boundary conditions of entrepreneurship phenomenon has continuously been pushed to accommodate the other forms of human occupation into the umbrella of entrepreneurship. One student in a MBA class asked me, “So, would you say that the mom and pop store is not entrepreneurship”?

I looked at him and said, “No”! This was not to discourage him or anybody, but emphasise the importance of a vital dimension of entrepreneurship. It is well acknowledged that there is no entrepreneurship without the entrepreneur, i.e. the lone ranger who sets out to set up his venture, initially all alone, bearing all or most of the risk. However, in its true form, self employment may not have the element of being a lone ranger, rather it could be a case of life not providing sufficient employment opportunities, thus pushing a man to undertake an avocation. Often, these self employments can turn into a small business, a mom and pop store, a coffee shop or a trading office.

According to Michael Paul, University of Wisconsin, an entrepreneur is a person who creates small businesses. He further explains, entrepreneurs are “calculated” risk-takers—as they strive to maximize potential opportunity while simultaneously minimizing risk. This brings in the sustainability dimension. A new enterprise has to be sustainable for substantial duration. This means entrepreneurial ventures also have to deal with the competitive forces. Michael Porter identified five essential forces – buyer power, supplier power, threat of substitution, threat of new entrant and degree of competitive rivalry as a tool to understand industry level profitability. He later realised, that the profitability also gets affected innovation. This is nothing else but an entrepreneurs ability to create new products or services, improve on current products or services, or simply find a new way to market existing products or services.

Joseph Schumpeter, an economist, identified “Creative Destruction” as one of the essential conditions of entrepreneurship. Creative destruction manifests itself in the form of emergence of new order changing the old. Essentially this implies presence of “innovation” in the pursuit of human endeavour.

For example, the steam engine rang the death bell for agriculture, a computer causing the obsolescence of a typewriter or a Cafe Coffee Day ringing death bell for old coffee homes. This dimension of entrepreneurship has been researched Magnus Henrekson and Tino Sanandaji at Swedish Institute of Industrial Economics. They found that high impact entrepreneurship is inversely proportional to self employment and small business. Their research showed that countries with high impact entrepreneurship had lower share of people and income coming from self employed and small businesses.

Howard Stevenson, the famous Professor of Entrepreneurship at Harvard has succinctly defined entrepreneurship as “pursuit of opportunity beyond resources controlled”. The essence here is pursuing opportunities where the resources required to work for those opportunities are beyond the ordinary access of entrepreneur. Such pursuits of opportunities could come from starting a new business or even expanding an existing business. As in the case of Indigo airlines, where the ticketing agency run by Bhatia’s worked to move into airline business and make it one of the largest and most well run airline in India.

Thus the hallmark of entrepreneurship is entrepreneurial leadership generally provided by a lone ranger standing up with an innovative idea, trying to punch far above his weight by being resourceful or Jugaadu, having the ability to manage risk and the discipline of execution. In the words of Steve Jobs, “The ones who think are crazy enough to change the world, are the ones who actually do”.

by Sanjeeva Shivesh