Photo: Rolf Ă˜rjan Høgseth
isbn 978-82-15-04326-5
9
788215
043265
The Entrepreneurship Handbook
Yngve Dahle is an Associate Professor at the University of South-Eastern Norway. He holds a PhD in entrepreneurship from NTNU (Norwegian University of Science and Technology). He is also a serial entrepreneur and has participated in the development of nine companies in various industries. He therefore combines updated theoretical knowledge and practical experience in a unique way. He is the founder of Entreprenerdy, a company that uses S-E-A-M to help entrepreneurs worldwide.
Based on modern entrepreneurship theory, own empirical findings and feedback from thousands of entrepreneurs, the author, assisted by the professional environment at NTNU, has created a model for how to develop and enhance entrepreneurship projects. The model, called S-E-A-M (Systemic Entrepreneurship Activity Method) consists of seven steps: purpose, resources, business idea, business model, objectives, tasks and forecast.
yngve dahle
The Entrepreneurship Handbook is written for everybody that wants to establish, improve or develop their business. With its theoretical fundament and clear practical advice, the book is indispensable for entrepreneurs, business developers, support programs, banks and investors. It will also serve excellent as a part of the curriculum in any entrepreneurship class.
yngve dahle
The Entrepreneurship Handbook
THE ENTREPRENEURSHIP HANDBOOK
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Yngve Dahle
THE ENTREPRENEURSHIP HANDBOOK SCANDINAVIAN UNIVERSITY PRESS
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© Scandinavian University Press 2021 ISBN 978-82-15-04326-5 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical or photocopying, record ing, or otherwise, without the prior permission of Universitetsforlaget. Enquiries should be sent to the Rights Department, Universitetsforlaget, Oslo, at the address below: Universitetsforlaget AS P.O. Box 508 Sentrum NO-0105 Oslo Norway www.universitetsforlaget.no Cover design: Sissel Tjernstad Illustrations: Audun Røberg Chapter photos: Thomas Morel Prepress: ottaBOK Typeset: Adobe Garamond Pro 11/13,5 Printed in Norway by 07 Media – 07.no
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To Shoni Lethole. Always One of Us!
Contributions and inspiration: Sjur Dagestad, Erlend Bang-Abelsen Gunnar Alskog, Finn Amundsen, Torhild Andersen, Roger Antonesen, Kriss Baird, Anne Grethe Bakken, Paul Brindley, Anna Chizhevskaya, Roman Chizhevskiy, Ståle Christensen, Margit Klingen Daams, Tor Egil Ellingsen, Francois El-Safadi, Martin Foldal, Tove Forså, Pål Frønsdal, Jens-Petter Glittenberg, Jonathan Hall, Ane Marte Hammerø, Ann-Iren Haugen, Anders Haugland, Lars Hedman, Jørn Heggertvedt, Henrik Holm, Henning Holmbakken, Hilde Indresøvde, Bjørn Krag Ingul, Kathrin Jakobsen, Christoffer Jakobsson, Rune Johannessen, Henrik Johansson, Arne Morten Knutsen, Bergljot Landstad, Kristin Langnes, Shoni Lethole, Caspar Macody Lund, Thøger Riis Michelsen, Steve Mayall, Thomas Adriaan Morel, Kelly Moulton, Muzi Mtshali, Paul Hassels Mönning, Vlad Ogay, Annfrid Olsen, Knut Perander, Kevin Reuther, Kristian Riis, May Britt Roald, Bård Sandal, Suzanne De Kok Selstad, Anita Hennie Skog, Ole Smidesang, Erik Solberg, Martin Steinert, Bård Stranheim, Magne Supphellen, Mette Nora Sætre, Bram Timmermans, Trond Tornes, Ben Toscher, Gunnar Tranvåg, Trine Tenvik, Christina Ungerer, Solvor Vermeer, Martin Vesterby, Malene Aaram Vike, Hjørdis Vik, Mathias Wassen, Kurt Ove Østrem, Alfred Øverland, Anne Øvrebø, Steven Åsheim Editing: Kriss Baird
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CONTENTS
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1. BACKGROUND AND INTRODUCTION
12
2. HOW MUCH THEORY DO YOU NEED?
22
3. S-E-A-M
46
4. PURPOSE
78
5. RESOURCES
92
6. BUSINESS IDEA
100
7. BUSINESS MODEL
120
8. OBJECTIVES
158
9. TASKS
178
10. FORECAST
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188
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CONTENTS TERMS AND ABBREVIATIONS
10
3.6
Objectives
67
1
12
3.7
Tasks
71
3.8
Forecast
71
BACKGROUND AND INTRODUCTION
1.1
What exactly is entrepreneurship?
15
1.2
The importance of entrepreneurship
18
1.3
Why do you need a software tool?
18
PART II A SIMPLE METHOD FOR DEVELOPING YOUR PROJECT
77
4
PURPOSE
78
PART I THE ENTREPRENEURSHIP THEORY YOU WILL NEED
21
4.1
Motivation
79
2
HOW MUCH THEORY DO YOU NEED?
22
4.2
Core values
85
2.1
The exploitation of opportunities
24
4.3
Vision
88
2.2
Resource based view and core competence
27
5
RESOURCES
92
2.3
Effectuation
30
5.1
Human resources
94
2.4
Bricolage
33
5.2
Physical resources
95
Marketable resources
96
Financial resources
98
2.5
Business modelling
35
5.3
2.6
Lean start-up and Design Thinking
40
5.4
2.7
Summarizing the six pillars
44
6
BUSINESS IDEA
100
S-E-A-M
46
6.1
Core competence – what makes you unique?
103
Key contribution – what problem will you solve?
107
3
3.1
How is S-E-A-M anchored in theory?
48
6.2
3.2
Purpose
54
6.3
Key market: Who will have the problem?
109
3.3
Resources
55
6.4
Template for formulating the business idea
112
3.4
Business idea
57
6.5
3.5
Business model
58
Problem interview – Have you found a solution to the problem?
115
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7
BUSINESS MODEL
120
8.3
Marketing and sales objectives
167
7.1
Co-creators: Who will be your first customers?
123
8.4
Sustainability objectives
170
7.2
Unique value proposition: What will be your value proposition?
127
8.5
Financial objectives
173
7.3
Product features: What features will your product or service have?
9
TASKS
178
129
10
FORECAST
188
7.4
Ecosystem: Who can help you?
133
10.1 Revenues and grants
192
7.5
Sales model: How should you market and sell?
137
10.2 Recurring costs
195
7.6
Price model: How should you charge?
145
10.3 Task costs
197
7.7
Solution interview: Do your customers think you solve the problem?
10.4 Funding
201
151
10.5 Rules and regulations
203
OBJECTIVES
158
REFERENCES
212
8.1
Competence and capacity objectives
164
INDEX
218
8.2
Product development objectives
165
8
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TERMS AND ABBREVIATIONS Entrepreneurship We define entrepreneurship as:[1] “finding and utilizing opportunities to create goods and services”. This is in line with the fact that studies of entrepreneurship should focus on activities or processes rather than on the personal characteristics of the individual entrepreneur.[2] This also means that the establishment of companies is not a prerequisite for entrepreneurship. Entrepreneurial project (or just “project”) In literature, the entrepreneur, the company and the project are often used interchangeably. We separate the project from both the entrepreneur / entrepreneurs and the company or firm (the registered legal entity of the project). The project is the concept that contains all the activities structured around the business idea of an entrepreneurship initiative. A project can be linked to a company, but it can also be in the pre-registration phase, or it may never end up being a company. A project can also be part of a larger company. In that case, we often call it “intrapreneurship”.[3] Solution A collective term for everything that can solve a problem, including a product, a service or any combination of a product or a service. Activities An activity is described as:[4] “engagement of human, physical and / or capital resources to serve a specific purpose towards the fulfilment of the overall goal”. S-E-A-M
The systemic entrepreneurship activity method or just “the activity method”
An activity method is a set of interdependent activities that is centred around an entrepreneurship project. S-E-A-M is a normative method for the development of entrepreneurship projects based on understanding and improving the activities carried out in the project and between the project and the project’s helpers. S-E-A-M is based on systems theory and systems thinking, plus a selection of modern entrepreneurship theory. S-E-A-M consists of 7 steps and 29 elements. An element can be described using three variables: Content describes which activities each element contains. Structure describes how the elements relate to each other, and governance describes who performs the activities.[4, 5] The first version of S-E-A-M was developed at the Norwegian University of Science and Technology, Department of Industrial and Mechanical Engineering, between 2012 and 2020. Entreprenerdy EMS
Entreprenerdy Entrepreneurship Management System
This is a software tool based on the systemic entrepreneurship activity method (S-E-A-M). The tool is designed to manage and document activities both in a project and in the surrounding ecosystem, especially the communication between the project and the project’s helpers.
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FIGURES
Figure 1.1: The personality of an entrepreneur
17
Figure 6.1
The questions of the business idea
102
Figure 2.1
Six pillars of modern entrepreneurship theory
24
Figure 6.2
Yao Ming
104
Figure 2.2
The VRIO-model
29
Figure 6.3
Milkshake
107
Figure 2.3
Effectuation and causation
31
Figure 6.4
Sam McCracken and Nike Air Native N7
110
Figure 2.4
Five principles of entrepreneurship
32
Figure 6.5
The Problem Interview
115
Figure 2.5
Three preconditions for bricolage
34
Figure 7.1
The Chasm
124
Figure 2.6
Business model templates
37
Figure 7.2
Dimensions in the sales model
138
Figure 2.7
The customer development model
42
Figure 7.3
Three types of sales focus
140
Figure 2.8
Design thinking
43
Figure 7.4
Six different ways to price your product or service
145
Figure 3.1
UN’s sustainable development goals
51
Figure 7.5
Solution interview
152
Figure 3.2
S-E-A-M. The systemic entrepreneurship activity method
53
Figure 7.6
Zappos
156
Figure 3.3
Triple helix
61
Figure 8.1
Measurable, time specific and dynamic
161
Figure 3.4
Seven steps describing an efficient support program
62
Figure 9.1
Gantt-diagram
180
Figure 3.5
The customer factory
64
Figure 9.2
Example of KanBan
182
Figure 3.6
The five categories of objectives
69
Figure 4.1
Get, give, make, live
80
Figure 4.2
Combinations of get, give, make, live
82
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1  BACKGROUND AND INTRODUCTION
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1 BACKGROUND AND INTRODUCTION
T
he author of this book has an unusual background. I received a PhD in entrepreneurship at the Norwegian University of Science and Technology when I was 52 years old. I accomplished this after being involved in nine different entrepreneurship projects of which eight have been sold. The ninth is Entreprenerdy, which we will return to later in this book.
13
This makes me a strange hybrid of academic and entrepreneur. This is where I may have something to contribute. In my experience, getting researchers, entrepreneurs, and everyone else who helps and advises entrepreneurs to work together better, will be very beneficial. This project started at the beginning of 2010, when I was asked to teach a university course in practical entrepreneurship. The idea was that the experiences of a person who had not spent his entire life in a classroom could be refreshing. The only problem was that I could not find a useful textbook. The ones I found were American bricks that talked about small and medium-sized companies with less than 200 employees, or self-help books that proclaimed how to “get rich and happy without even trying.” When I complained about this, the only sympathy I got was a challenge to write my own book, “if I thought it was that simple.” So I gathered all the potential contributors I knew and got started. This effort realised into three textbooks,[6, 7, 8] and a computer software system to make the content of the books more accessible and available to entrepreneurs and their helpers. At the time of writing, this system has been used by more than twenty-two thousand entrepreneurs and many entrepreneurship helpers such as innovation incubators, municipalities, universities and commercial companies in several countries. The experiences from this work eventually became the PhD “Design and implementation of an entrepreneurship system”,[9] which was completed in April 2020. In connection with the PhD, the Systemic Entrepreneurship Activity Method, or just S-E-A-M, was developed and tested on thousands of entrepreneurship projects.
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1 BACKGROUND AND INTRODUCTION
14
This book is an attempt to share the experiences from this decade of entrepreneurship, and to give you an introduction to S-E-A-M. I have tried to summarize my own work together with the best contributions I have found, read and been told. The structure is very simple, and comes in two parts: Part I is an attempt to give you, the entrepreneur, a brief insight into the most modern theory within the field of entrepreneurship – and an overview on how you can use this theory to improve and develop your project. First, I have tried to select all the tens of thousands of articles and books that one really should read before starting an entrepreneurship project. Based on this, I (together with a large group of colleagues and co-researchers) have developed the theoretical basis for S-E-A-M. It consists of six theoretical “pillars” that satisfy three requirements: First and foremost, each pillar must contain relevant and modern theory that is central to the subject of entrepreneurship. This means that the theories are cited in virtually all the important articles written within the field. The second requirement is that these theories are widely used by practical entrepreneurs. This means that the theories focus on how to improve entrepreneurship projects, and that the theories are well known by practitioners. The last requirement is that the six pillars are connected to each other in a clear and coherent way. Meaning that together they constitute a comprehensive theoretical paradigm of entrepreneurship theory. This paradigm can be found in Chapter 2 of the book. In Chapter 3, you will find an overview of the activity method that I have called S -E-A-M. This method is based on the six theoretical pillars. S-E-A-M is a complete and comprehensive method of entrepreneurship. The method consists of seven steps of activities that any entrepreneur should undergo to increase the chances of achieving her goals. Part II is a detailed review and description of each of the seven steps. In total, the seven steps consist of 29 elements. This detailed description of the seven steps can be found in Chapters 4–10 of the book. Here you will also find a story about
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Part I contains Chapters 2 and 3 and is the overall overview of the S-E-A-M activity method. Part II consists of Chapters 4 to 10 and tells you how you can practically use the method in your project. If you are only interested in using the S-E-A-M methodology on your project, you can skip directly to Part 2. However, I strongly recommend that you read Part I as well. My experience is that building on the thinking of researchers who have dived deep into the subject is both inspiring and helpful.
1.1
1 BACKGROUND AND INTRODUCTION
Maria and Tom, who use the method to realize their dream of starting an Italian restaurant.
15
WHAT EXACTLY IS ENTREPRENEURSHIP? The original meaning of the word comes from French and is almost 1000 years old. The scientific definition of entrepreneurship[1] is: “to find and utilize opportunities to create goods and services”. This means that entrepreneurship does not have to involve starting new companies. The mentioned opportunities can just as easily be found and used in established companies, or even before one has started a company. In this sense, the term “start-up” does not describe the same thing as entrepreneurship. When someone talks about a “start-up”, they often mean someone who is about to start, or has just started, a new company. This is not necessarily the same as an entrepreneur. Entrepreneurship also differs from innovation. Admittedly, “finding and utilizing opportunities to create goods and services” very often requires creativity and innovation. However, it is entirely possible to develop an entrepreneurship project without being innovative. If you start operating a Starbucks franchise in the city where you live, it will be stipulated in the contract that you do the same thing thousands of franchisees around the world have done before you. Still, no one will dispute that starting this franchise qualifies as entrepreneurship.
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1 BACKGROUND AND INTRODUCTION
16
All this means that entrepreneurship is an independent field of study. It is not a scaled-down version of strategic management or economics. You cannot shrink General Motors and come out with a typical entrepreneurship project. The fact that some advisors use theory from the field of entrepreneurship, while others use theory from finance and strategic management, is often confusing for entrepreneurs. In the next chapter I will try to explain these differences. “Most of what you hear about entrepreneurship is wrong. It’s not magical, it’s not mysterious and it has nothing to do with genetics. It is a subject and like all other subjects it can be learned.” Peter Drucker
For now, we can take in this insight from Peter Drucker.[10] The fact that entrepreneurship is a subject means that it can be handled like any other subject. It does not require any magic formula or a completely unique set of superhuman qualities. You do not have to be Elon Musk, Richard Branson or Mary Kay Ash to become an entrepreneur. In fact, most entrepreneurs are relatively ordinary people. They are not particularly young, fame-driven or risk-seeking. An average entrepreneur is in his forties and has a below average willingness to take risks or seek fame. On the other hand, they are often good at understanding the customer’s situation. And although entrepreneurs are often passionate about what they do, purposeful and have a high ability to execute – they do not like to work for the work’s own sake.[11]
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1 BACKGROUND AND INTRODUCTION
17
Figure 1.1: The personality of an entrepreneur (Source: Barringer and Ireland).
You do not need to have a fool-proof business idea from the outset. Most successful projects started as something completely different from what they ended up being. Starbucks sold coffee beans and coffee machines, Slack started as an online game, and Twitter was originally a database for keeping track of podcasts. Eventually, these companies learned that the true value they could provide lay a little on the side of the original idea, and the second, third, or fourth version of their business idea laid the foundation for success. So – anyone can become an entrepreneur! You too! In the next section, we will look at why people should engage in entrepreneurship, and why entrepreneurship is important for both individuals and for society as a whole.
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1 BACKGROUND AND INTRODUCTION
1.2 THE IMPORTANCE OF ENTREPRENEURSHIP First and foremost, entrepreneurship greatly contributes to the economic growth of the world. An increase in entrepreneurship projects creates more economic growth than an increase in general business activity,[12] and economic growth in developed countries strongly depends on the degree of entrepreneurship.[13] A good example here is that the strong economic growth we saw in the United States at the end of the nineteenth century largely consisted of entrepreneurship projects.[14]
18
In addition to creating growth, innovative entrepreneurship will also help ensure a sustainable world economy. OECD[15] puts it this way: “There is a growing certainty among decision-makers that innovative activity is the largest contributor to economic value creation and prosperity, in addition to being an important factor in meeting global challenges in environmental protection, health, climate change and sustainability development”. We also see a tendency for self-employed people to be more satisfied with their jobs than regular employees are.[14, 15, 16] Moreover, many people are not able to get a regular job because of where they live, or because of the qualifications they possess at that time. Thus, they have no choice but to become self-employed. This may be especially true in emerging economies or for artists or other people who have skills that are usually traded in a freelance market.[19]
1.3
WHY DO YOU NEED A SOFTWARE TOOL? To be able to make the S-E-A-M methodology available to you, I have chosen to integrate it into an digital technology solution. There are three reasons why I have chosen to do this: First and foremost, it is much easier to use a method if it is built into a technology-based solution. For example, you can do your accounts using only a textbook, pen and paper – but it is much more convenient to use an
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Photo: Rolf Ă˜rjan Høgseth
isbn 978-82-15-04326-5
9
788215
043265
The Entrepreneurship Handbook
Yngve Dahle is an Associate Professor at the University of South-Eastern Norway. He holds a PhD in entrepreneurship from NTNU (Norwegian University of Science and Technology). He is also a serial entrepreneur and has participated in the development of nine companies in various industries. He therefore combines updated theoretical knowledge and practical experience in a unique way. He is the founder of Entreprenerdy, a company that uses S-E-A-M to help entrepreneurs worldwide.
Based on modern entrepreneurship theory, own empirical findings and feedback from thousands of entrepreneurs, the author, assisted by the professional environment at NTNU, has created a model for how to develop and enhance entrepreneurship projects. The model, called S-E-A-M (Systemic Entrepreneurship Activity Method) consists of seven steps: purpose, resources, business idea, business model, objectives, tasks and forecast.
yngve dahle
The Entrepreneurship Handbook is written for everybody that wants to establish, improve or develop their business. With its theoretical fundament and clear practical advice, the book is indispensable for entrepreneurs, business developers, support programs, banks and investors. It will also serve excellent as a part of the curriculum in any entrepreneurship class.
yngve dahle
The Entrepreneurship Handbook