What are the main influences on the development of a successful entrepreneur.

University Degree Business and Administrative studies

EH510

Medf2

What are the main influences on the development of a successful entrepreneur

What is an entrepreneur?, “refers to anyone who has responsibility for a firms decisions concerning choices of technology, rates of investment and scrapping, research expenditure etc. The group includes the individual owner-manager, hired managers and individual or groups of corporate officials”(Entrepreneurship 1870-1914, Floud and McCoskey). This statement of what an entrepreneur is a very “catch-all” statement. It sees an entrepreneur as a key person within a company who deals with many decisions. In answering this question I will have to look at the conditions that make a successful entrepreneur with examples.

An entrepreneur needs many different conditions to be a success. The conditions could be split into to sections, firstly internal conditions and secondly external conditions. I will examine the conditions individually looking at the different aspects within them. Once this is done, I will try and establish how important flair and drive are, seeing how important they are to entrepreneurial success. I will finally conclude by seeing which are the most important factors (if any).

An internal factor is a personal aspect of a person’s personality. A person must contain a few aspects of internal strength; otherwise they will unable to be a successful entrepreneur. The first part of this is the person must have imagination. This is the ability to look beyond a problem and solve it. Schumpter recognised this as important and stated “innovation and creative destruction of equilibrium”. If an entrepreneur has imagination, they have the ability see beyond the normal realms of Business and gain an automatic advantage. A fine example of this is ‘dyson’, created by a man called ‘dyson’ who had the imagination to change a basic good i.e. vacuum cleaner and changed it. For years people had been using the same techniques and machinery to build relatively same machines. Dyson had the imagination and innovation to change the vacuum machine to better design. This is a prime example of an entrepreneur (who I will use again), using his innovation/imagination to become a successful entrepreneur. An entrepreneur needs to have the imagination to seize an opportunity, to take a risk. Risk is part of imagination, the belief may be there, but you still have to take the risk to succeed.

A part of imagination, which goes hand in hand, is anticipation. Anticipation is the ability to foresee events within many aspects of the economic world. A successful entrepreneur would try and foresee what is going to happen and change their techniques/plans around this. Anticipation in the economic world covers many areas. A good entrepreneur would try and cover all aspects of this, but often success could be achieved by anticipating one change only. The type of things an entrepreneur would try and foresee are; legislation, technology, change in markets, competitors actions, the economy, products demands. Much legislation affects business and changes markets instantly. An entrepreneur would try and set up a plan to counter act the legislation and maybe even stop it. This could be seen when Eddie Stobbart visited the Prime minister to talk about the price of fuel. By trying to put pressure on the government much negative legislation can be stopped. On the other hand, if legislation actually opens up markets, an entrepreneur needs to act quickly. By being quick off the mark, the entrepreneur is able to be the first in the market. This can be seen recently, when ‘Deutshe Post’ bought 49% of securicor shares. This is not in the anticipation of securicor just doing well through organic growth, its Deutsche Bank knew that the government was going to pass legislation allowing private firms to deliver mail. By Deutche post taking advantage then, they know they can have a ‘piece of the pie’ and the quicker the action the larger the pie can be . French post have also done the same, buying shares in parcel force, anticipating the opening up of a market and taking advantage of this. Both Deutche post and French post have entrepreneurs who have anticipated this change and have taken advantage.

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Anticipation of technology is also another way an entrepreneur can make a success. By anticipating change in technology the entrepreneur can take advantage. A prime example of this is the Internet. Many people predicted the growth of the Internet with the growth of pc’s. People were prepared to pay huge sums to get in on the change. Tesco is a good example of this, being the first supermarket to offer virtual shopping. By taking advantage of this, they can firstly grab the market, and secondly gain some expertise in the new market. In comparison to the advantages of the growth of pc’s, the millennium bug is a prime example of anticipation being used to make huge profits. Entrepreneurs were hyping up the problems of the millennium bug to make huge profits. The entrepreneur anticipated the panic that would set in at the end of December and consequently was able to charge huge amounts for the service.

A good entrepreneur must be able to anticipate a change in markets, to decide whether to enter the market more, or to back off and leave the market. If an entrepreneur is able to anticipate a growth in the market and is able to get into that market before it grows, profit can be gained. On the other hand if a company is in a market that is decreasing and entrepreneur anticipates that there’s no way back, its better to jump ship without losing too much. There are two prime examples of both, getting into a market before it grows and getting out before you lose too much. Rugby for the past 150 years has been an amateur game. But in 1995 it was allowed to become a professional game. Many people anticipated the change before it occurred. An entrepreneur called Barwell bought out Northampton saints before it went professional, to become the chairman. He had an interest in rugby anyway, but new a professional rugby was big money and big profits. On the other hand two people who had no interest in Rugby bought clubs after the professionalisation. Thomas Ray bought Saracens RUFC and Walkinshaw bought Gloucester RUFC. Neither had an interest in Rugby but knew it was a growing sport. Still now, after 8 years of professionalism they are just breaking even, although with the England winning this years world cup the popularity has risen and it will be interesting to see if it follows in the path of professional football in which case these companies profits will sky rocket. On the other hand, cutting your loses before the market shuts is important. Thatcher illustrated this in the 1980’s involving coalmines. Thatcher knew the market for coal was shrinking with alternative power sources being more readily available and foreign competitors had the edge on domestic coal. She shut down 90% of the mines, against popular demand, but in the long run, it has been seen as a good entrepreneurial decision.

The examples I have given all incorporate the last three sectors of anticipation. The three rugby chairman’s is an example of product demand. In this case Rugby being the product demand, anticipating a growth and acting on it. The royal mail example could also be incorporated in this too. The creation of a new market was seen as profitable, and the entrepreneurs anticipated the growth. In relation to competitors, the royal mail example includes this with competition actually being created. Competition could also be related to Thatcher and the coal industry. Foreign producers of coal could produce much cheaper coal than domestic pits, so Thatcher closed down the pits, as they weren’t competitive.

Another aspect of a good entrepreneur is determination/motivation. A good entrepreneur needs to be determined for success. Determination is a key part for success in any business. This could be considered one of the most valuable attributes of any entrepreneur. If this is lacking, none of the other attributes will follow, and thus will not be a successful entrepreneur. It is argued that without motivation, it would be impossible for any person to get into a position to make a decision. In this way, without the motivation to be a success, you can never really be an entrepreneur. Motivation and determination earns respect within any organisation, with these attributes people will naturally follow your lead and listen to you. There would be no point of making any decisions if no one has respect for you as the orders will not follow and people will not have any respect for you. Being an entrepreneur involves risks. Firstly if you lack motivation/determination you will not be prepared to follow through in your decisions if they look like they may not succeed. Also if people see you as determined in a decision and trust you they are more likely to follow your lead and make your decision a success, thus you will be a good entrepreneur.

When taking risky decisions, you need to have backing from other individuals if it has any chance of succeeding. Whether its financial backing or just support of the board of directors, backing is essential. An important factor to stay as a good entrepreneur is a good reputation. This isn’t quite as important if it’s a rich individual compared to an R&D manager. The difference is, the rich individual will often fund his own developments, with only his money at risk. While the R&D manager has to sell the idea to the board, as it’s the companies money that will be lost. The entrepreneur has to convince the board that their idea is a good idea. This is much easier if the individual has a good reputation. But the individual does have to worry, as he has to be able to sell the product to other firms. Although someone may have a great idea, it may not sell well to an industry with an unknown name attached. Although Dyson had a good idea, it was hard to sell initially as people had no idea of him or his products. But now, people know the name Dyson, and his products will be easily endorsed and supported. Another person whose name precedes themselves is Richard Branson. Many people believe that the only reason Virgin trains got the rail contract in the West of England is of Branson’s name. Richard Branson has had many successes in the past and consequently gained a good reputation for doing so. Banks and individual investors would be happy to invest with Branson and so too would the government. Although Virgin trains has been a proven failure so far, people still believe Branson can turn the situation around, living on his reputation. Many people may have good ideas, but are unable to be classified as a good entrepreneur with out the reputation.

All organisations rely heavily on individuals; this is the same for the majority of entrepreneurs. The skill of delegation is an important part of all entrepreneurs. All one person(s) idea may be outstanding and will succeed, with no delegation it is likely to fail. A good entrepreneur who comes up with the initial idea has to rely on others to do tasks for them. The skill of delegation is getting the right person to do the right job. If people are in the wrong jobs, the idea/task will be slow and of poor quality. Many good entrepreneurs use the same individuals to carry out tasks for them. They know their ability and trust them to do a good job, this helps to create a smooth completion of the idea. By having a good team around a team makes the job a success and gives the person with the initial a good reputation as a good entrepreneur.

Now that I have looked at the traits that make a good entrepreneur, I will see how important flair and drive are in comparison to the other factors. It could be said that flair and drive help to create many of the other factors, which help to make a good entrepreneur. They are more exact phrases than the other factors but are they just as important. Flair is a term that helps to create a good reputation. It means, to act in a way such as an individual, acting with class and style. If people perceive you as having flair (in a good sense) people are tend to respect you more. You will gain a good reputation, which would enable you to sell your ideas better. Due to this fact, it is easier to become a good entrepreneur with flair than without it. While Drive is a more important aspect than flair. Although flair is an advantage to have, it could be seen that drive is essential in becoming a good entrepreneur. Drive could also be called ambition; it is the ability to self motivate your self and your ideas to make them a success, whatever the consequences. Although people may view too much drive as a negative aspect, it always ends up as a positive aspect in the terms of a good entrepreneur. Good entrepreneurs in the past have stolen ideas off other people/companies and claimed them as their own. Although many people may look down on them as a person, as entrepreneur they cannot be faulted.

So far I have talked about internal aspects of what makes a good entrepreneur, now I will briefly talk about what external influences needed to become an successful entrepreneur. External aspects could be viewed as circumstantial aspects. A good entrepreneur needs to have certain elements to go there way to be a success. It is human nature to trust a winner, the same is in business, and often one fault will damage an entrepreneur for life and will not be put in a position to make decisions again. Theses external aspects vary from being essential to being minor in the search for success. Firstly, the market helps to determine how much of a success someone may be. A good entrepreneur needs to create a market/reason for there idea. Often other markets help to make an entrepreneurs idea a success. An example of this would be, Edison created the light bulb, but without electricity here would be no market. The success of the electricity market helped Edison’s invention to become a success. The market could also be put down to circumstance, whether the timing of a product is correct. But Say’s law says, “supply creates its own demand” a good idea will always sell. Another external factor is the family and youth of the entrepreneur. It is much easier to become a success with a rich family behind you. The financial backing and better education will set you up to become a better entrepreneur. The links of the old tie networks enables people to get into a position to make the decisions and become and entrepreneur. Often reputation may come with a family name and help you to gain success.

In conclusion to the question above, flair and drive are indeed very important aspects in creating a good entrepreneur, but again I agree it’s not enough to rely on these qualities to become a success. All the internal factors I have given are all-important and are needed to become a good entrepreneur. Often many of them are gained once a good entrepreneur status has been recognized. Reputation is the only one, which you don’t essentially need to become a good entrepreneur, but essential once you are. If you don’t have a good reputation as a good entrepreneur, you are not a good entrepreneur at all. It is gained and to be classified as a good entrepreneur you have to be recognized as one. The external factors could be classified as important, if not more important than the internal factors. Often the family and upbringing of an individual opens doors and teaches you the internal aspects. But I would have to say that circumstance is indeed the most important factor. Without this on some ones side, success will never be achieved. Ideas are made a success because they relate to a time when they are needed. Although without any of the internal factors success will never occur. In conclusion I agree flair and drive aren’t enough qualities to become a good entrepreneur. But it could be argued that reputation is the most important as you only a good entrepreneur when people perceive you as one.