Entrepreneurship Strategy: Changing Patterns in New Venture Creation, Growth, and Reinvention
Publication Year: 2007
Subject: Entrepreneurial Strategies
In this engaging and practical book, authors Lisa K. Gundry and Jill R. Kickul uniquely approach entrepreneurship across the life cycle of business growth—offering entrepreneurial strategies for the emerging venture, for the growing venture, and for sustaining growth in the established venture. Written from the point of view of the founder or the entrepreneurial team, the book offers powerful and practical tools to increase a venture’s potential for success and growth.
- Front Matter
- Back Matter
- Subject Index
Part I: Entrepreneurial Strategies for the Emerging Venture
- Chapter 1: Entrepreneurship and Strategy: A Framework for New Venture Development
- Chapter 2: Strategies for Opportunity Identification: The Creative Process
- Chapter 3: Strategies for Evaluating Opportunities: The Assessment Process
- Chapter 4: Developing New Venture Strategy: Preparation and Launch
- Chapter 5: Market Entry: Positioning the Firm for Strategic Advantage
Part II: Entrepreneurial Strategies for the Growing Venture
- Chapter 6: Financial Resource Capabilities
- Chapter 7: The Evolving Management Team
- Chapter 8: Building Networks and Strategic Alliances
Part III: Entrepreneurial Strategies for Sustaining Growth in the Established Venture
[Page ii]To Peter, Dylan, and Austin, for your love and support in life's entrepreneurial journey, and to my parents, Helga and Hal, for showing me the world and being my guiding light.—
To my father, Ralph Richard, and mother, Angela Richard. For their relentless pursuit of their own dreams—thank you both for showing me early on your entrepreneurial spirit and passion.—
Copyright © 2007 by Sage Publications, Inc.
All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher.
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Library of Congress Cataloging-in-Publication Data
Gundry, Lisa K.
Entrepreneurship strategy: changing patterns in new venture creation, growth, and reinvention / Lisa K. Gundry, Jill R. Kickul.
Includes bibliographical references and index.
ISBN 1-4129-1656-9, 978-1-4129- 1656-1 (cloth)
1. Strategic planning. 2. Entrepreneurship. 3. Small business—Management.
I. Kickul, Jill R. II. Title.
This book is printed on acid-free paper.
06 07 08 09 10 10 9 8 7 6 5 4 3 2 1
Acquisitions Editor: Al Bruckner
Editorial Assistant: MaryAnn Vail
Project Editor: Tracy Alpern
Associate Editors: Katja Werlich Fried Deya Saoud
Copy Editor: Jacqueline Tasch
Typesetter: C&M Digitals (P) Ltd.
Proofreader: Joyce Li
Indexer: David Luljak
Cover Designer: Edgar Abarca
For me, entrepreneurship is a religion, a way of life, a passion. I think I have always been an entrepreneur at heart, even before I knew what it really meant or had heard the word used in business. In my corporate life, many of my bosses probably thought I was just a pain, the squeaky wheel who was always trying to break, bend, or change the rules. In retrospect, I now realize those are the very same qualities that have helped me succeed as an entrepreneur: the scrappiness, resourcefulness, healthy dose of skepticism, ability to question authority without backing down, persistence, sense of humor, and humility. It takes some of each, I think, to see the world differently, discover new ways to solve old dilemmas, or redefine problems and solutions altogether.
What makes these entrepreneurs tick? Why do they keep picking themselves up when they get knocked down? What causes them to try again? In Entrepreneurship Strategy: Changing Patterns in New Venture Creation, Growth, and Reinvention, you will get to see a range of entrepreneurs in action. Each has a unique style, his or her own journey but there are many traits that are shared. Some entrepreneurs started their companies when another door closed; others had a burning idea that needed a home; all set out to change the world in some important way.
I took one entrepreneurial management class in business school, and we reviewed case studies of entrepreneurs in all shapes and sizes. There was no textbook for the class, only their personal journeys and stories of their successes and failures from which to draw lessons. Some entrepreneurs were self-trained; others had degrees; all were passionate about what they were doing. Whether you are an entrepreneur yourself, have one in your family, or just wondered what all the hype was about, it is reassuring to see that there is some science behind the art of entrepreneurship. Although it may seem very “seat of the pants” at times, there are stages and common themes most entrepreneurs address as they are taking their vision from concept to reality. Drs. Gundry and Kickul's book shows many entrepreneurial paths, starting from very different places. There is no single way to be an entrepreneur; lots of roads can get you there.
Each entrepreneur had to validate his or her idea with the target audience, whether through formal market research or not. All had a defining moment when they knew their business was “real” or had to course-correct to survive. Once the market is validated, competitors start to pay attention so entrepreneurs have to stay [Page xiii]relevant and ahead of the pack to have a competitive offer. An entrepreneur never sleeps long enough. The wheels are always turning, but that is what makes it so fun and exciting; entrepreneurs never get bored.
Entrepreneurship is part art, part science, always intoxicating. Once you get bitten, it is hard to go back to a desk job. Corporate America has its perks, but entrepreneurs tend to upset the apple cart in most corporations—unless they started the company as did Richard Branson, Donald Trump, Oprah Winfrey, the list goes on. What makes people successful, inspiring, and magnetic entrepreneurs also makes them tough to manage and direct as employees. At some point in their careers, entrepreneurs put their money where their mouth is and do it their way. Whether they are motivated by fear, guilt, greed, or passion, they are indeed motivated to succeed, and the real ones don't stop until they do.
From the very first chapter of this book, you will find an underlying model to help budding entrepreneurs add to their skills by using the Innovator's Toolkit exercises. Understanding the book's Strategic Reflection Points and completing the Strategy in Action checklist help to increase the probability of the new venture becoming a success. These things take time, however, and Drs. Gundry and Kickul's book gives you the framework, tools, pitfalls, and success stories to help navigate and demystify the process. Entrepreneurship is a journey that lasts a lifetime for many of us who were bitten by the bug. I have never met an overnight sensation, but I know plenty of entrepreneurs who perfect their craft over and over again. It permeates every aspect of their lives in most cases. The motivation must come from within to be authentic. In my experience, if you don't have it on the inside, you cannot make it on the outside.
Every person spotlighted in this book had days, weeks, months, or in some cases years when no one else saw the potential in the opportunity they could envision. Sometimes, all it takes is reconnecting the dots in a different way to show others the path. Having a road map to get those creative juices flowing can be just the thought-starter to get the engine fired up again. Drs. Gundry and Kickul's book may just be that kick in the pants needed for your entrepreneurial wheels to turn faster or in a different direction. You'll be inspired by the entrepreneurs showcased, and if you pay attention, you can learn from their mistakes so that you can make other higher quality ones along your entrepreneurial journey.
So join the conversation, grab a seat at the table, and let your mind wander with all the possibilities among us to leave the world better than we found it with our unique mark. I truly believe entrepreneurship could solve many of the world's biggest problems. People who are excited to get up in the morning and think about new products or services or innovative techniques to deliver them to new audiences will have more energy, healthier habits, sharper minds, and more optimistic outlooks, I think. They will create opportunities for others and constantly challenge the status quo so that inertia will not kick in. So my recommendation: Take two books, read one, pass along the other to someone you care about, and call me in the morning!
—Paige Arnof-Fenn, Founder and CEO, Mavens & Moguls, http://www.mavensandmoguls.com
The writing of this text was in itself an entrepreneurial journey, and without the key support we received from many people professionally and personally, this work would never have come to life.
First, we owe a debt of gratitude to our gifted editorial team at Sage Publications. Al Bruckner, Senior Acquisitions Editor, gave us the encouragement to write a textbook founded on the spirit of innovation and creativity that drives entrepreneurship around the world. Al's leadership of this project was outstanding, and we thank him for all his efforts along the way. In addition, Katja Fried and Deya Saoud, our Associate Editors, and MaryAnn Vail, Senior Editorial Assistant, guided a smooth review and revision process that helped us create a much-improved final manuscript for which future students will surely be grateful. We feel much appreciation for the anonymous reviewers who provided extensive feedback on each chapter. Their perspectives, drawn from years of classroom and research experience, were of great value in shaping this book for multiple audiences and cultures. Tracy Alpern, our Project Editor, and Jacqueline Tasch, Copy Editor, came on board, and we are grateful for their efforts to take this book from paper to press, and we extend our heartfelt thanks for all the hard work that our publication team exerted on our behalf.
Many of the theories and practices that unfold in this book grow out of the work of our academic colleagues and entrepreneur-practitioners we have come to know. Our work has been influenced by entrepreneurship and management scholars who deserve recognition: Professors Jerry Katz (Saint Louis University), Teresa Nelson (Simmons School of Management), and Norris Krueger (TEAMS/ Entrepreneurship Northwest). Special thanks to Professors Vipin Gupta and Cynthia Ingols (Simmons School of Management) and to Professor Laurence Weinstein (Sacred Heart University) for permitting us to reprint their cases. Special thanks to DePaul Professors Scott Young, Harold Welsch, Gerhard Plaschka, Patrick Murphy, Raman Chadha, and Br. Leo V. Ryan, C.S.V., Professor Emeritus, for creating and sustaining an environment in which entrepreneurship thrives—inside and outside the classroom. Thank you to the entrepreneurial leadership at Simmons College, including Dean Deborah Merrill-Sands and Professor Fiona Wilson.
Many entrepreneurs gave generously of their time and knowledge and deserve special recognition. Paige Arnof-Fenn, who kindly contributed the Foreword and [Page xv]allowed us to reprint one of her columns from Entrepreneur magazine, lent her expertise to this book to enhance its relevancy to the complex and dynamic world of the entrepreneur. Other entrepreneurs graciously allowed us to enter inside the world of their businesses and to interview them for cases and vignettes. They include: Lisa Santos, Southport Grocery and Café; Jacqueline Corbett Cyr, Corbett Cyr Consulting; Matthew Hinson, Wakeworks Staffing; Andy Szatko, Grassroots Landscaping; Adam Makos, Ghost Wings; Joseph Keeley, College Nannies & Tutors; Julie E. LeMoine, U C How Technologies; Gretchen Fox, FOX Relocation Management; Joyce Amaral, Yomega Corporation; Laura McCann, Zweave; Annette Ricci, Reel-EZ Display; Charles (Chuck) Stack and Prasad Kodukula, Constant Compliance (2Ci); Carolyn Sanchez Crozier, CS&C-Julex Learning; and Addie Swartz, B*tween Productions, Inc. Special thanks to Kathleen Elliott, Angel Investor; Andrew J. Sherman, Partner, Dickstein Shapiro Morin & Oshinsky LLP; and Marianne Hudson, Kauffman Foundation, for use of materials, and to Sharon Bower (Saint Louis University), who put us in contact with the winners of the Global Student Entrepreneur™ Award Winners interviewed for this book.
Laurel Ofstein, Assistant Director of the Leo V. Ryan Center for Creativity and Innovation at DePaul University, contributed to the formation of this book in extraordinary ways. Her impeccable assistance in interviewing some of the entrepreneurs profiled and in writing the JetBlue and Netflix cases clearly shows in this book, and she did much of the work while she was completing her MBA at DePaul. She served ever patiently as our third set of eyes as we prepared the final manuscript. Thank you, Laurel, from the bottom of our hearts. Thank you to the following students at DePaul University: Bodee Kittikamron, for help organizing permissions needed and passing them on to Laurel and us; and Andres Ayala, Arby Gonzalez, Maria Mendoza, and Anastasiya Oliyar, who allowed us to include the strategic plan they wrote for a course in this book, confirming our belief that students learn much from other students. We are grateful to Raman Chadha, Executive Director of the Coleman Center at DePaul University, for allowing us to reprint entrepreneurial stories from the Coleman Center Newsletter as vignettes. At Simmons School of Management, we are grateful for our aspiring women entrepreneurs and for the many insights and perspectives of the Coleman Foundation and John Hancock Financial Fellows, namely Laney Whitcanack and Maureen Vasquez, as well as graduate assistants, Mandy Osborne and Sandra Pomerantz. Finally, a special thanks to Stephen and Carolyn McCandless who in memory of Stephen's sister, Elizabeth J. McCandless, have dedicated and provided continual support to the Simmons entrepreneurship program.
The process of writing, with its continual “visions and revisions,” had a way of consuming the hours of our days. Heartfelt thanks, much gratitude, and big hugs go out to our families and dear friends, whose support pushed us, lifted us, and enabled us to create this work: Peter, my sons, Dylan and Austin, and Helga and Hal (for Lisa), and Ralph and Angela Richard (for Jill).
To all those mentioned here and to the many others whose presence has touched our lives and our classrooms, including former and present students, colleagues, mentors, and friends:
Thank you. We remember you always….
The entrepreneurship journey is one of the most exciting ones on which you will ever embark. In our combined years of experience teaching students in the United States and several other countries, working with entrepreneurs inside and outside our classrooms and starting and running our own businesses, we have observed that the entrepreneurship start-up and growth process is dynamic and evolutionary. Strategies that have worked in the pre-start-up stage and during the launch of the business will not be satisfactory as the business encounters the challenges of growth or the need for reinvention. We write this book out of the perspective and belief that entrepreneurial strategies evolve and change just as the businesses for which they have been designed grow and change. We also want this book to be a companion for you as you consider entrepreneurship as a career. The first sentence of this Introduction contains the word exciting, and, yes, a book on entrepreneurship can—and should—be as exciting and interesting as the process it purports to teach. So, why should you read this book as part of your entrepreneurial studies?
This book presents a framework for strategy in entrepreneurial organizations, a framework that incorporates new venture emergence, early growth, and reinvention and innovation in established ventures. The focus of the text is on entrepreneurial strategies that can be crafted and implemented within small and medium-size organizations as these firms proceed through the stages of development. You will not find it helpful to read about strategies deployed in large organizations and then try to “size the strategy down” to fit your small company. In this book, you will learn strategies that fit your business as it starts and grows.
The unique approach of this book is its segmentation of entrepreneurship strategies across the life cycle of business growth. Most books on strategy present content that is segmented by the type or level of strategy (e.g., marketing, human resources, production strategies) rather than the changing pattern of strategic needs faced by the new venture.
The book is written from the point of view of you, the founder, and the entrepreneurial team. Increasingly, entrepreneurs are relying on the expertise and input of key stakeholders as they launch and develop their businesses. Whether these stakeholders are outside the firm in the role of advisers or inside in the roles of investors and employees, the entrepreneur's ability to create a powerful and agile [Page xvii]team capable of breakthrough thinking shapes the new venture s potential success and growth.
All businesses start with an idea. Ideas grow out of creative inspiration coupled with sound and rigorous analysis. A unique feature of this book is its emphasis on the key strategic roles of creativity, opportunity identification, opportunity evaluation, and innovation in the emergence and growth of entrepreneurial firms. It's not just about creativity in the early days of business start-up; rather, this book will help you maintain the innovative edge throughout the life of the business. Today, this is not just a way to differentiate your business; it's a way to ensure your very survival.
Each chapter contains the following features to enhance learning and application so that you can take the material and use it easily. Here is what you will find in each chapter:
- Contemporary Cases—Include several Global Student Entrepreneurs of the Year award winners who launched businesses as college students, cases that are especially relevant for college students.
- The Innovator's Toolkit—Designed to enable students to learn and use innovative techniques as they design and implement strategic decisions in organizations.
- Strategic Reflection Points—Exercises and discussion points that give students the opportunity to reflect on the material presented and to engage in meaningful discussion with other students or teams.
- Strategy in Action—Theme-based vignettes in each chapter that emphasize topical areas and showcase entrepreneurs around the world doing what it is you have just read about.
- Speaking of Strategy—Brief interviews and stories of entrepreneurs across industries and stages of growth related to some aspect of the chapter topic.
- Failures and Foibles—A box in each chapter that describes mistakes, faulty assumptions, and misperceptions of entrepreneurs related to the chapter theme and highlights the learning that grew out of the failure. We all want to learn from others' experiences.
- Research in Practice—A summary of recent research on the chapter topic, stimulating interest in the material and providing linkages to scholarship for the assignment of research papers and topical reviews.
The book is organized into three distinct sections reflective of the entrepreneur's needs and the entrepreneurial firm's stages of development.Part I: Entrepreneurial Strategies for the Emerging Venture
Part II: Entrepreneurial Strategies for the Growing Venture
- Entrepreneurship and Strategy: A Framework for New Venture Formation—You will be introduced to the strategic roles of creativity, opportunity identification, opportunity evaluation, and innovation in the emergence and growth of entrepreneurial firms. This strategic approach examines three distinct stages of the entrepreneurship process and provides you with strategies you can use to launch, grow, and revitalize your new venture. [Page xviii]
- Strategies for Opportunity Identification: The Creative Process— Creative thinking and behavior are vitally important to discovering and refining entrepreneurial opportunities. Becoming more “idea prone,” learning how to conduct an effective opportunity SEARCH (a process described in this chapter), and designing an environment for your venture that supports creativity will help you launch and sustain an innovative organization.
- Strategies for Evaluating Opportunities: The Assessment Process—Evaluating opportunities and undertaking a feasibility analysis help entrepreneurs determine the new venture's chance to succeed. Several areas for assessment are provided, and you will learn methods to evaluate the initial idea as well as later innovative ideas for the business.
- Developing New Venture Strategy: Preparation and Launch—Strategic planning should be an ongoing activity in the new venture. Your strategic vision for the new venture enables you to launch a business with a purpose, and it helps you prepare for crises that can occur in the early stages of new venture development. The vision, and ultimately the strategic plan, should include strategies to manage ethical behavior, of increasing importance today. This leads to several positive outcomes, including building employee and customer loyalty, reducing hiring costs, driving sales, maintaining loyal vendor relationships, and lessening the risks of loss of suppliers and unexpected cost increases. Learn how to construct a code of ethics that supports the business' strategic vision.
- Market Entry: Positioning the Firm for Strategic Advantage—Determining your new venture's value solution is an important strategy that will help you keep track of the key drivers in your industry that drive buyer behaviors. You should also construct a perceptual map for your venture that helps you position your products and services competitively within your industry. You will also learn how to develop your go-to-market strategy, which delivers your value solution to your target market in the most creative and effective way possible.
Part III: Entrepreneurial Strategies for Sustaining Growth in the Established Venture
- Financial Resource Capabilities—It's critical to the success of the venture for the entrepreneur to understand financing needs for all stages of the life cycle and to make effective choices regarding debt and equity financing. Venture capital and angel investors have different needs and requirements that should be well understood in order to form appropriate financial partnerships. This involves learning how to conduct a due diligence analysis for your venture.
- The Evolving Management Team: Capabilities for Nurturing Growth—Building an effective management team requires entrepreneurial leadership skills that fit the needs of your growing venture. These include the ability to select and retain team members and employees, identify an appropriate set of advisers and directors, and choose the right legal structure for the growing business. [Page xix]
- Building Networks and Strategic Alliances—Developing strategic alliances of good “fit” helps you facilitate your business's initiatives, capabilities, and resources. Social capital, acquired through personal and professional networks, is an especially valuable type of resource; it includes ideas, knowledge, information, opportunities, contacts, and referrals.
- Innovative Strategies for Entrepreneurial Growth—Keeping the established business on the innovative edge involves consideration of the strategic scope and capabilities of the venture, avoiding common innovation mistakes, developing a portfolio of initiatives, and creating an environment that supports innovation and change.
- Strategies for the Growing Venture: Mergers, Acquisitions, Franchising, and Exit Strategies—Navigating the decisions that come with growth can include the choices of mergers, acquisitions, and franchising. It is also important to carefully evaluate the range of exit strategies available to you as part of the planning for growth.
- Beyond the Strategic Entrepreneurial Model: Learning From Failure—Entrepreneurs who have experienced failure often describe it as the downside of rapid growth. Gaining a perspective on failure through research, along with valuable lessons from those who have failed, increases your chance of entrepreneurial success.
It is our intent that as you work through the start-up and growth process, you will be able to integrate theory with the practical experiences of all the entrepreneurs and firms profiled, greatly increasing the likelihood of success in your entrepreneurial career. So fasten your seat belt, and let the journey begin….[Page xx]
About the Authors[Page 400]
Lisa K. Gundry is Professor of Management in the Charles H. Kellstadt Graduate School of Business at DePaul University, where she teaches courses in Creativity in Business and Entrepreneurship Strategy. She is Director of the Leo V. Ryan Center for Creativity and Innovation at DePaul. The Ryan Center offers programs on creative discovery and business innovation to the academic, business, and nonprofit communities. The Ryan Center's Idea Clinic program was recognized by Fortune Small Business magazine as being one of the Top 10 innovative programs for business owners. She has also received the Innovation in Business Education Award by the AACSB's Mid-Continent East Association, and the DePaul University Excellence in Teaching Award.
Dr. Gundry has coauthored books, including Breakthrough Teams for Breakneck Times: Unlocking the Genius of Creative Collaboration (2001, with L. LaMantia), Blueprints for Innovation (1995, with C. W. Prather), and Field Casework: Methods for Consulting to Small and Start-up Businesses (Sage, 1996, with A. Buchko). She has published more than 40 articles and book chapters, some of which have appeared in Journal of Business Venturing, Journal of Management, Journal of Business Ethics, Human Relations, Journal of Small Business Management, Journal of Enterprising Culture, Journal of Developmental Entrepreneurship, and Organizational Dynamics. She conducts research on issues related to innovation in organizations, entrepreneurial growth strategies, and creativity in business. Her work has been featured in media such as The Wall Street Journal, Newsweek, Business Week, Chicago Tribune, Grain's Chicago Business, NBC News, and ABC News. She received her Ph.D. from Northwestern University.
Jill R. Kickul is the Richard A. Forsythe Endowed Chair in Entrepreneurship in the Thomas C. Page Center for Entrepreneurship at Miami University (Ohio) and Professor in the Management Department in the Richard T. Farmer School of Business. Prior to joining the faculty of Miami University, she was the Elizabeth J. McCandless Professor in Entrepreneurship at the Simmons School of Management. She has taught courses on Entrepreneurship Strategy, Entrepreneurship and New Venture Management, Management of Fast-Growing Firms, Strategic Analysis for Competing Globally, and Management Strategy. She has also taught entrepreneur-ship internationally for the Helsinki School of Economics and for the International [Page 401]Bank of Asia (Hong Kong MBA Program), and she has delivered research seminars at the Stockholm School of Economics and the Jonkoping International Business School.
Dr. KickuPs research interests include entrepreneurial intentions and behavior, strategic and innovation processes in start-up ventures, and, most recently, women in entrepreneurship. She was awarded the Cason Hall & Company Publishers Best Paper Award as well as the Coleman Foundation Best Empirical Paper and the John Jack Award for Entrepreneurship Education. She has many publications in entrepreneurship and management journals, including Journal of Management, Journal of Small Business Management, Journal of Organizational Behavior, Frontiers of Entrepreneurship Research, International Journal of Entrepreneurship and Innovation, International Journal of Entrepreneurial Behavior and Research, and Academy of Management Learning and Education Journal. Her work on entrepreneurship education development and curriculum design of the Simmons Post-MBA Certificate in Entrepreneurship has been nationally recognized and supported through the Coleman Foundation Entrepreneurship Excellence in Teaching Colleges Grant and has been named by Fortune Small Business as one of the Top 10 Innovative Programs in Entrepreneurship Education. She received her Ph.D. from Northern Illinois University.