Prelims 4/12/04 15:20 Page i Entrepreneurs Prelims 4/12/04 15:20 Page ii Prelims 4/12/04 15:20 Page iii Entrepreneurs Talent, Temperament, Technique Second edition Bill Bolton and John Thompson AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD PARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO Prelims 4/12/04 15:20 Page iv Elsevier Butterworth-Heinemann Linacre House, Jordan Hill, Oxford OX2 8DP 200 Wheeler Road, Burlington, MA 01803 First published 2000 Second edition 2004 Copyright © 2000, 2004, Bill Bolton and John Thompson. 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Ltd, Pondicherry, India www.integra-india.com Printed and bound in Great Britain Prelims 4/12/04 15:20 Page v Contents About the authors vii List of figures ix List of tables xi Preface xiii Introduction 1 Part One: Entrepreneurs and the person 11 1 Defining the entrepreneur 13 2 Identifying the entrepreneur 43 3 Entrepreneurs and strategy 82 Part Two: Entrepreneurs in action 115 4 Classic entrepreneurs 117 5 Business entrepreneurs 137 6 The new Internet entrepreneurs 163 Interlude: An introduction to social, financial and aesthetic capital 179 7 Social entrepreneurs 189 8 Artistic and aesthetic entrepreneurs 209 9 Entrepreneurs in the shadows 231 Part Three: Entrepreneurs and enterprise 255 10 The entrepreneur’s world 264 11 How the entrepreneur operates 287 12 How the entrepreneur can be helped and supported 315 13 How the entrepreneur survives and wins 344 14 The entrepreneurs of Silicon Valley 360 15 Techniques for the entrepreneur 380 Index 402 Prelims 4/12/04 15:20 Page vi Prelims 4/12/04 15:20 Page vii About the authors Bill Bolton Dr Bolton is an international consultant in enterprise development and entrepre- neurship. He has held a personal UNITWIN (UNESCO) Chair in Innovation and Technology Transfer. Dr Bolton was the Founding Director of the St John’s Innova- tion Centre in Cambridge and taught engineering at Cambridge University. His twenty-five years’ experience in business and industry has ranged from a Senior Executive role in a multi-national to starting a number of new enterprises. Dr Bolton is a Visiting Professor at the University of Huddersfield. His other publications include The University Handbook on Enterprise Development (1997) and, jointly with John Thompson, The Entrepreneur in Focus: Achieve Your Potential (2003). John Thompson John Thompson is Roger M Bale Professor of Entrepreneurship and Director of the Enterprise Network at the University of Huddersfield, as well as a Visiting Professor in Finland and New Zealand. Prior to this post, he was Head of the Department of Management at the same University, and he has previously held management posts in retailing and the steel industry. He has written a number of books and papers on strategy and entrepreneurship, including his textbook Strategic Management, which is now in its fourth edition. He raised the money to open the Huddersfield Business Generator for embryo businesses in the creative industry sector, and he plays an active role in supporting social enterprises in Yorkshire. Prelims 4/12/04 15:20 Page viii Prelims 4/12/04 15:20 Page ix Figures I.1 The well of talent 8 1.1 The entrepreneur process diagram 33 1.2 The entrepreneur, the opportunity-spotter and the project champion 34 1.3 The Gallup model 36 2.1 The Nature–nurture model 47 2.2 The Performance triangle 47 3.1 The general business entrepreneur 84 3.2 The corporate entrepreneur 85 3.3 From an idea to an opportunity 86 3.4 The entrepreneur, the opportunity-spotter and the project champion revisited 87 3.5 The entrepreneur: seeing and activating opportunities 88 3.6 E-V-R congruence 93 3.7 Entrepreneurship, opportunity and risk 98 3.8 Four dimensions of entrepreneurship 100 3.9 Strategic change 107 Int.1 Financial, social and artistic capital 183 P3.1 Creativity, innovation and entrepreneurship 260 P3.2 The enterprise paradigm 261 10.1 Linked perceptions 265 11.1 The enterprise process model 287 11.2 Entrepreneur and leader envelopes 289 11.3 The elements of the getting ready stage 297 11.4 People/idea combination 301 11.5 Enterprise start-up activities 303 11.6 Building and growing 307 11.7 Growth stage criteria 310 12.1 The entrepreneur axis 316 12.2 Releasing entrepreneurial potential 317 12.3 Premises requirement 330 12.4 Science or technology park model 332 Prelims 4/12/04 15:20 Page x x List of figures 12.5 Risk and investment curves 337 13.1 Adoption S-curve 349 13.2 Adoption profile 350 15.1 The life-cycle curve 381 15.2 The break-even model 382 15.3 The cash demand curve 383 15.4 The soft–hard model 384 15.5 Evaluating the opportunity 386 15.6 The planning gap 390 15.7 A simple growth vector 391 15.8 Hitting the bulls-eye 395 15.9 Market share and margin 399 Prelims 4/12/04 15:20 Page xi Tables 1.1 A selection of Gallup’s life themes 38 1.2 The Gallup entrepreneur themes 40 3.1 Business failures 109 10.1 Two management paradigms 273 11.1 What entrepreneurs, managers and leaders do 291 12.1 The support infrastructure 318 12.2 Mechanisms and support facilities 331 12.3 Venture capital categories 339 13.1 The operational environment 345 13.2 The market and the business 348 14.1 Silicon Valley venture capital funding, 1995–2002 377 15.1 Breakdown of restaurant costs 382 15.2 Gross margin 388 15.3 The business plan 393 15.4 Assessing business risks 394 15.5 The banker likes his CAMPARI 396 15.6 The pieces of the jigsaw 397 Prelims 4/12/04 15:20 Page xii Prelims 4/12/04 15:20 Page xiii Preface Why do a few people make it as entrepreneurs, whilst many of those who try, fail – often losing the family home and their marriage in the process? What distinguishes growth-oriented entrepreneurs from the enterprising people who run successful micro businesses? Why do well-intentioned programmes to promote high-growth businesses in a region have such uncertain results? Is the high failure rate of new businesses something that we just have to accept as a fact of life? Why do so many people believe entrepreneurs are only to be found in the world of business? Understanding and identifying the entrepreneur is the most important key to answering all these questions, and it is the primary theme of this book. It is the entrepreneur who builds and grows the enterprise, often starting from almost noth- ing. It is the entrepreneur who transforms economies, when all seems lost. There are, of course, other support factors involved and, indeed, these are covered in Part Three of this book – but the over-riding consideration in matters of success or failure is the entrepreneur. Research about entrepreneurs has told us that many are first-born males from families with some business background and a strong work ethic. Though these and other findings are reviewed in Chapter 1, they bring us no nearer to knowing whether anyone might have the potential to be a successful entrepreneur. There is little doubt that we know an entrepreneur when we see one, or more accurately, when we see what they have achieved, and Part Two is full of examples which demonstrate this point. Even so, the question of how to pick out those with entre- preneurial potential still remains open. Since completing the first edition of this book in 2000, we have been working on this question. We have sought to find a way of identifying those with the potential to make it as entrepreneurs. We have considered how it might be possible to take a group of people, and find out those within that group, who should be encouraged to consider starting an entrepreneurial venture. In Chapter 2, we describe the results of this work and present a methodology for identifying a person’s entrepreneurial potential. It is based around the measurement of six character themes which conveniently form the acronym FACETS – these themes are Focus, Advantage, Creativity, Ego, Team and Social – the latter being a character theme exclusive to the social entrepreneur.