Bahir Dar Institute of Technology (BiT)

Faculty of Mechanical and Industrial Engineering

Entrepreneurship for Engineers

5th year Automotive Engineering

2012E.C.

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Contents
Part 1 Introduction to Entrepreneurship

Part 2 Starting Technology based new venture

Part 3 Process of business development

Part 4 Choosing The Legal Form of Ownership

Part 5 Operations of Business startup

Part 6 Risk and insurance of Business enterprises

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Chapter One
Entrepreneurship
1.1 Meaning and concepts of the terms
entrepreneur, entrepreneurship
1.2 The entrepreneur vs the manager
1.3 Characteristics of Entrepreneurs
1.4. Kinds of Entrepreneurship
1.5. Success factors for entrepreneurs
1.6. Motivation for starting a business
1.7. Ways of going into business
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Introduction

 What is “entrepreneurship”?
 Why be an entrepreneur?
 Are you interested to learn
entrepreneurship? Why?

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Introduction
Who is an Entrepreneur?

• Are Entrepreneurs Born or Made?

• What is the difference between Entrepreneurship and
Entrepreneurs?

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1.1. Meaning of the terms Entrepreneur,
Entrepreneurship
What is Entrepreneur?

• An entrepreneur is a person who starts an enterprise.

 Entrepreneurs are action-oriented, highly motivated individuals

who take risks to achieve goals.

 Entrepreneurs are people who have the ability
 to see and evaluate business opportunities,
 to gather the necessary resources to take advantages
 to initiate appropriate action to ensure success.

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What is Entrepreneurship?
 Entrepreneurship: is a process of action an entrepreneur

undertakes to establish his enterprise.

“Entrepreneurship is the dynamic process of creating incremental
wealth’’.
This wealth is created by individuals who assume the major
risks in terms of equity, time and /or career commitments of
providing value for some product or service.

The product or service itself may or may not be new or unique but
value must somehow be infused by the entrepreneur by securing
and allocating the necessary skills and resources”

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1.2. The entrepreneur versus the owner manager
Entrepreneur
 Entrepreneurial function is the organization of production

 Decision-making and calculated risk bearing

 An entrepreneur has an all-round personality

 High levels of achievement motivation

 Creative, innovative and imaginative soul

 The entrepreneur is the owner of the business who enjoys

the position of an employer.

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Cont’d…
Owner Manager
They may or may not be entrepreneurs.
They own and manage a small enterprise, in a way, which
fits with their personal motivations.
They are more intent on survival than seeking innovative
change and growth.
1. Limited scope for innovativeness, creativity and imagination
2. Managerial jobs are transferable
3. Managers do not bear-risk
-Risk bearing capacity is an entrepreneurial quality

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1.3. Characteristics of Entrepreneurs /personal competencies
1. Need for Achievement:- vision

2. Willingness to take risks:-financial, careers , families

3. Self-Confidence:- internal and external locus of control

4. Innovation

5. Total Commitment

6. All-rounders

7. A need to seek refuge:- escape from environmental factor

a. The Foreign Refugee

b. Corporate Refugee
c. Other Refugees
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Cont’d…
Other types of “ refugees” mentioned are the following:
1.The parental (paternal) refugee
Who leaves a family business to show the parent that “I can do it alone”.
2.The feminist refugee
Who experiences discrimination and elects to start a firm in which she
can operate independently male chauvinist.
3.The housewife refugee
 Who starts her own business after her family is grown or at some
other point when she can free herself from household responsibilities.
4.The educational refugee
 Who tires of an academic program and decide to go into business.

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1.4. Kinds of Entrepreneurship
 Founding Entrepreneurs /Founders

 General managers: As new firms become well established,

founders become less innovators and more administrators.

 Franchisees: A system in which semi-independent business

owners (franchisees) pay fees and royalties to a parent company

(franchiser) in return for the right to become identified with its
trademark, to sell its products or services, and often to use its
business format and system.

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1.5. Success factors for entrepreneurs
Most new ventures succeed because their founders are
capable individuals.
1.The entrepreneurial team
2.Incremental growth of product or services
3.Marketing and timing: Market potential is
critically influenced by timing of new products or
services.

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Drawbacks of entrepreneurship
a. Limited resource
b. Lack of experience
c. Disagreement between member
d. Uncertainty of income
e. Risk
f. Lower quality of life until the business gets
established

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1.6. Motivation for starting a business
The reason for small firm formation can be divided between
“pull” and “push” influences.
I.“Pull” Influence
 Some individuals are attracted towards small business
ownership by positive motive such as a specific idea
which they are convinced will work. ”Pull” motives
include:
a. Desire for independence
b. Desire to exploit an opportunity
c. Turning a hobby or previous work experience in to a business
d. Financial Incentive
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“Push” Independence

Many people are pushed into founding a new enterprise by

variety of factors including:

1.Redundancy==>Being without a job (idleness)

2.Unemployment (or threat of)
3.Disagreement with previous employer==>Uncomfortable
relation at work has also pushed new entrants into small
business.

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1.7. Way of going into business & becoming an
entrepreneur
Finding a good idea is the first step in transforming the
entrepreneur’s desire and creativity into a business
opportunity.
Creativity, Innovation and Entrepreneurs

 Creativity is thinking new things, and

 innovation is doing new things.

 Researchers believe that entrepreneurs succeed by thinking

and doing new things or old things in new ways .

17 Entrepreneurship = creativity + innovation
The end

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Chapter Two

Starting Technology Based New Venture

Outlines:
2.1. Introduction to technology and business
2.2 Important aspects of Technology in Business
2.3. Formation, development, and growth of technology-
based new enterprises
2.4. Technology transfer for business development
2.5. Innovation in Technology based business
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2.1. Introduction to technology and business

Introduction: What is technology?

Technology is a body of knowledge devoted to creating tools,

processing actions and extracting of materials.

Technology is also an application of science to solve a problem.

We apply technology in almost everything we do in our lives, we

use technology at work, we use it to , extract materials ,

Technology also used for communication, transportation, learning,

manufacturing, creating artifacts, securing data, scaling businesses

and so much more.
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Advantages and Disadvantage of Technology in Business
 Advantages  Dis advantages
 Increases production
 If technology is wrongly
 It saves time
applied, it can be harmful in
 It accelerates innovation
so many ways.
 It improves sharing of
 It’s expensive
information
 Not Safe
 It improves on data storage
 Disconnectedness
 Technology simplifies

business communication

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Cont..
 Advances in technology are the only source of permanent

increases in quality and productivity.

 Technological changes are basically the results of innovations

which in turn are the outputs of innovative Entrepreneurs.

 Firms become innovative when they successfully incorporate a

technological change new to enterprise as well as to the economy,

and a change has diffused into the economy in addition to being
adopted by the firm.

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2.2. Important aspects of Technology in Business
Technology Intelligence for Business
 is an activity that enables companies to identify the technological

opportunities and threats that could affect the future growth and
survival of their business.
 is a technology-related information that is useful and utilized by

firms during strategic decisions.

 As technology life cycles shorten and business become more

globalized having effective capabilities is becoming increasingly

important.

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Important aspects of Technology in Business …
Intelligence gathering may be deployed at the macro level, industry
or business level, and/or at the program or project level. The
process of gathering external data and analyzing it to derive
intelligence for major strategic decisions is referred to as
mapping the technology environment.

Conceptually, this process consists of four interlinked steps:

1. scanning the environment,
2. monitoring specific environmental trends,
3. forecasting future environmental changes, and
4. assessing current and future environmental changes for their
impact on organizational strategy.
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Important aspects of Technology in Business …

Appropriation of Technology
 Appropriate technology has been used to cover a wide range of
both technologies and lifestyles including sustainable living,
alternative fuels, and ethical technology transfers.
 A technology is considered appropriate if it solves a social
problem without many adverse negative effects.
 Choosing to adopt a portfolio of technology appropriation
projects involves some basic principles.
 First, technological opportunity and appropriable of the project
are determined by the competitive impact of technology.
 Second, firms should undertake projects only in areas where
they are competitively strong.
 Third, risks and rewards need to be considered in terms of the
portfolio.
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Important aspects of Technology in Business …

Development of New Products

 The development of new products has always been a
considerable generator of sales and profits for businesses.
 New products range from products that are entirely new to the
world to repositioning of already-existing products.
 The process of developing new products is characterized by two
phases:
I. The strategic phase is critical in the process in that it
determines the profit potential and ultimate success of the
product.
II. The operational phase is just as crucial in that it results in the
actual production of the new product.

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Cont.…
 There are many different types of new products. “ newness” can be

defined in terms of:

 New to the company

 New to the market or innovative

In general a total of six different types or classes of new products are

identified:

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Categories of new products

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Product development success
What makes a success of a new product? And what can be
done to improve the odds of winning?
There are two fundamental ways of succeed in product
innovation:
1. Efficiency: doing projects right
2. Effectiveness: doing the right projects.
Project selection decisions and portfolio management
techniques become critical facets of a successful new product
effort.

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Product development success: EXERCISE
BACKGROUND: Rahel intends establishing a small manufacturing
business in A.A. Her competitors manufacture two types of ceramic
or brass base-fittings for domestic type electrical bulbs/globes,
namely the screw type and the bayonet type.
Rahel identified the opportunity of developing a hybrid light fitting
(one that can take both the screw and bayonet type) electrical globes,
as a market opportunity.
She proceeded in designing a prototype from plastic (PVC). She has
tested the prototype and registered a patent for the innovation with the
Ethiopian Intellectual Property Office. She has not shared the new
innovation with many people as she fears that someone could “steal”
and copy the hybrid fitting before she can introduce it to the market.
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Cont..
However, all her friends who have seen the innovation have
reacted positively. The product will be a world-first. She is now
approaching the Commercial Bank of Ethiopia for financing to
the amount of ETB 4 million to establish her factory for
manufacturing the hybrid light fittings.
Task 1: Is Rahel on the right track by following the correct
approach in developing, manufacturing and launching her new
product on to the market? Please motivate:
Task 2: If you were to advise Rahel, list the events and actions
in the order as they would happen, from idea generation to
launching the new product on to the market.

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Important aspects of Technology in Business …

 A continuum of research and development is an important

process before new products are physically exist for the market.
Figure 2.1 Development Continuum

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2.3. Formation, development, and growth of technology-
based new enterprises

2.3.1. Introduction
 The innovative capacity of an entrepreneur and more accurately,

of companies operating in that field, is a key determinant of its

capability to;
 enhance the economic development and

 upgrade the standard of living of a country.

It is widely accepted that one of the indicators of this innovative
capacity is the rate of creation of New Technology-Based

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firms (NTBF).
Introd.Cont’d…
 The nurturing of small firm formation and growth has become
increasingly important to the health of developed economies in
general, and to the creation of new innovative industrial sectors in
particular.
 Technology incubators, which play a role in accelerating the
commercialization of R&D outputs and the transfer of technology,
have contributed to startups of high technology-based enterprises in
the newly industrializing economies of developing and developed
economies of the world.
 Strengthening and promoting technology based ventures through
incubation programs for new technology based enterprises is
necessary for them to survive in a competitive society.

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2.3.2. How to form and develop Technology based
ventures?

 Entrepreneurship studies have identified three critical factors

linked to successful creation of technology ventures:
 technology,
 talent and
 capital.
 The strategic focus of new ventures is to
 facilitate the effective fusion of innovative technology,
 strong scientific, entrepreneurial and management talent,
 investment capital to create a successful venture.

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How to form and develop Technology based ventures? …
 There are different support activities for enterprises

with both public and private sector involvement,

include:
 Government policies
 Business consulting services
 Technical consulting services
 Financing support activities
 Intellectual property assistance
 International assistance
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2.3.3. Factors contributing to the Success of High
Technology based Enterprises
The main catalytic factors for the success of high technology-
based enterprises are:
 national policies,
 research and development institutions
 technological entrepreneur development
 innovative finance support systems & protecting intellectual
property
 science and technology parks
 promoting and developing strategic business alliances and
networking
 standardization, quality control and marketing.

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Factors to success of TBNE …
Some methods of ensuring such catalytic factors for developing
economies are:
a. Technocratic leadership should be given, a national vision on the creation
of knowledge-based enterprises should be boldly articulated and incentives
for innovation and risk-taking should be provided;
b. The microeconomic framework, together with a master plan prepared in
consultation with local communities, entrepreneurs and stakeholders, should stimulate
innovation and markets for new goods and services;
c. Commensurate investments should be made in scientific research and technology
development, engineering and management consultancy, technical education and
continuous learning, entrepreneurial development, quality assurance and environmental
preservation, transport and communications infrastructure;
d. Long-term plans should be formulated for developing convergent
enterprise support systems encompassing the full range of small business
development services, anchored possibly in a business incubator and
technology park;

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How to form and develop Technology based ventures? …

e. A proactive supervisory board and a carefully selected

and trained management team are critical to success.
They should make efforts to mobilize broad
community support and networks of external
professional service providers;

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How to form and develop Technology based ventures? …
Although there are different ways to formulate the formation
and development process of a NTBF, there are four
fundamental growth stages that most entrepreneurs should focus
on:

Stage 1: Conception and development

The primary focus of the entrepreneur is on the product
development, the securing of adequate financial backing and
the identification of market opportunities.
Dominant problems of NTBF at this point include construction
of a product prototype and selling of the business idea to
investors.
In this stage, there are many problems or barriers related to
conception that reduce the chance for new ventures. Barriers
related to: Lack of opportunities , Lack of well qualified
40 entrepreneurs and Lack of entrepreneurial culture.
How to form and develop Technology based ventures? …
Stage 2: Commercialization
In this stage, the major focus of new ventures is
on commercializing the product itself. The
dominant problems at this point include:
o acquiring adequate facilities,
o establishing a vendor network, and
o developing product support capability.

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How to form and develop Technology based ventures? …
Stage 3: Growth
This stage is characterized by high growth in both sales
and employees.
The major problems of the firm at this stage are to
produce, sell, and distribute the product in volume
while attaining profitability.
Important barriers are related to the lack of financial
resources to maintain the rapid growth of the enterprise
and difficulties in managing internally the effects of the
growth.

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How to form and develop Technology based ventures? …
Programs to overcome above-mentioned problems have to do
with:
 Training entrepreneurs in new managing techniques; special attention to
internationalization.
 Processes of clustering companies of the same industry in order to facilitate the
interchange of experiences and best practices
 Access to financial resources

Stage 4: Stability
 The growth rate of the firm slows to a level consistent with market
growth. The major problems of the firm at this point are to maintain
growth momentum and market position. Therefore, the entrepreneur
should focus on the introduction of second-generation product for
acquiring new opportunities and the expansion of the business into
new geographic territories and markets. Therefore the programs that
can be carried out have to do with:
 Enhancing the innovative capacity of firms.
43  Facilitating their internationalization
Drive for acquire new technology
Cost: Technology can cut costs in many ways: reducing material,
labor or distribution costs. Example: material costs can be reduced by
replacing lower cost material or by reducing the material required to
make a product.
Speed of delivery: The key competitive priority may be the speed of
delivery, as measured by lead time required to deliver a product.
Example, Automated guidance vehicle(AGV), Electronic Data
Interchange(EDI)
Quality: Technologies help to improve the quality and reduce the production
costs.
 Flexibility and customization: The global market place of 1990s is
characterized by short product lifecycles, increased product variety, and extensive
customization. To retain and increase market share in such competitive environment,
firms have to be more flexible in their operations.
* Increased production volume
44 *Higher living standards
Examples:
Technology in manufacturing Technology in service

Numerically controlled (NC) machines Office automation

Industrial robots Image processing system
 
Computerized Aided Design (CAD) Electronic data interchange
Computer Integrated Mfg (CIM) Decision support system and
Automated Materials Handling (AMH) expert system
Flexible Manufacturing System (FMS) Networked computer system and
expert system

Successful innovation depends on the development,

acquiring and integration of new knowledge in the
innovation process. In order to successfully innovate, a firm
usually combines different innovation activities.
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2.4. Technology transfer for business
development
Technology transfer is the process by which existing
knowledge, facilities or capabilities are utilized and marketed
to fulfill public and private needs.
 It is the process by which basic science research and
fundamental discoveries are developed into practical and
commercially relevant applications and products.
Technology transfer processes constitutes technology
transfer, technology promotion, technology deployment,
technology innovation, technology development, technology
research, technology assessment, technology information and
communication, technology investment, technology
collaboration and technology commercialization
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Steps in Technology Transfer
It has three parallel components that need to be taken into
consideration.
 Science and Technology
 Marketing:
 Financing:

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Steps in Technology Transfer…

Each of the above components requires the inputs of different

organizations in a market, bringing to the process different
resources and skills that will eventually lead to the success of
the technology and product being developed.
Figure 2.4 Process of Technology Transfer

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2.5. Innovation in Technology based Business
 Innovation refers both to the output and the process of arriving at a technically

feasible solution to a problem triggered by a technological opportunity or

customer need.
 Innovations are new ways to achieve tasks. It is useful to distinguish between

process innovation and product innovation.

 Product innovation: results in new or improved products.
 Process innovation: occurs when the manufacturing processes are improved to
make the production of existing products cheaper, or when new processes are
developed specifically for making a new or improved product.
 Service innovation: occurs when new ways of delivering services are
developed.

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Innovation in Technology based Business …
 The process of innovations can also be classified as Market-pull

and Technology-push innovation:

a. Market-pull innovations: advancement of technology oriented
primarily toward a specific market need
 a) Occur when customers are technologically sophisticated
 b) Occur more frequently with older technologies
 c) Tend to be incremental innovations
b. Technology-push innovations: advancement of technology
oriented primarily toward increased technical performance
 a) Require that the firm’s scientists, engineers, and inventors have
direct experience with users
 b) Occur more frequently with new and emerging technologies
 c) Tend to be the major source of breakthrough innovations
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Innovation in Technology based Business …

The

Figure 2.6 Market-pull and Technology-push innovation processes

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Figure 2.6. the relationship of technology, market and product
Promotion and Commercialization of technology-
based innovation
 The process of taking an invention from idea to business concept and

then to market is called technology commercialization.

 Consequently, products must be developed faster, prototyped earlier,

and brought to market in record time.

 The promotion of technology appears to be essential to the process of

industrialization. Though transfers of technology can temporarily be

beneficial, potentialities of technology promotion are believed to lie in
a systematic utilization of research and development.

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Cont.…
Establishing a technology's prospects for commercial
success depends largely on five factors:
Technical Development
Regulatory Clearance
Manufacturing Requirements
Market Development
Financial Feasibility

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Entrepreneurship and Technological Change

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Summary… Technology, Entrepreneurship and
Innovation
The role of the Engineer in Entrepreneurship

 Engineers drive technological entrepreneurship, as

inventors, researchers, designers, and as managers
 Engineers make up the largest percentage of:
 Most start-up founders and early employees
 Chief Executive Officers

 Engineers are often the first hires and an important part of

the technical (and management!) team
 “Technically, engineers are well-qualified in many respects
for this activity, but often lack the necessary business skills
and entrepreneurial mentality.”
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Summary questions
1. What is technological entrepreneurship?
2. What is the impact of entrepreneurship on society?
3. What is the role of the engineer in new ventures?
4. What is technological innovation?
5. Describe Creativity, Innovation, Technology and
entrepreneurship
6. Discus The process of innovation (market pull and
technology push innovations)
7. Discuss technology transfer, promotion and
commercialization of technology based innovation
8. What are the Drives for acquiring new technology
9. Factors contributing to the Success of High Technology
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based Enterprises
Reading assignment
*Promotion and Commercialization of technology-based innovation

Assignment-1
 Write about Intellectual Property Rights (min 2pages)

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The end

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