Entrepreneurship as a System

system-integration

Modern business plans usually consider a number of elements such as the management team, financing and risks. However, it’s usually left to the reader to understand the plan as a composite. Business plans writers often develop each component of the plan individually…  here are our founders, here are our financing requirements, etc.

However, in the real world, a management team choice has an impact on investment potential, a financing structure impacts the cash flow and thus length time that the start-up can be in the market, the business model approach impacts the risk structure, etc.

There currently isn’t a standardized accepted way to devise an overall score for an opportunity. Each investor prioritizes business plan elements differently and has their own approach. Indeed, that prioritization also depends on the external environment that the start-up finds itself in.

For the start-up, the founders need to consider how each section of the plan impacts the other sections and whether changing one section will optimize another section while still considering the overall success potential of the plan.

Currently this assessment approach is experience derived, although there are tools to help.

How do we provide this experience derived approach to students?

We can have them listen to experienced serial entrepreneurs, practice in campus incubators and do simulations.

In our simulation (Traction) we have used academic and practical knowledge to develop a model of how some of the business plan elements interact with the purpose of providing students the idea that each section of the plan impacts another and this understanding is a key element to create a start-up that works as a system. Therefore, they need to evaluate their ideas, in part, based on how each section of the plan impacts another.

Risk: Entrepreneur vs Project Manager

Understanding and managing risk in our quickly evolving society is an important skill for individuals in a variety of professions, for example in the stock market, we might look to develop a portfolio with an overall zero correlation between all the investments within, as a way to lower risk. Entrepreneurs and project managers tend to view and manage risk with some similar and different aspects.

Both professions start with the similar perspective that risk can be divided into a number of categories such as foreseeable or not, controllable or not. Risk can be viewed as stemming from the assumptions, inherent or explicit in their plans.  In their business plan, entrepreneurs make assumptions about obtainable market share, competitor actions, customer adoption rates, etc. Project managers make assumptions around schedule, cost, stakeholder needs, etc., for example, that a task will take 10 days to complete.  Both professions then develop plans to deal with risk.

The difference tends to come from the management or use of risks.

A start-up is a risk endeavour.  For entrepreneurs the start-up itself is an attempt to turn assumptions into facts and while attempting to control risk, entrepreneurs are purposively navigating a risk environment to develop a viable company, without risk the company is not an entrepreneurial venture. Indeed, breakthroughs can happen from taking risk and managing it well.

For project managers, risk is to be migrated, reduced or transferred, in other words, the desired approach is a risk free one.

In both professions, risk events happen to disrupt the plan and the ability to detect the risk is going to occur or has, responding to the risk event and adjusting the plan, are skills to be learned.  Such skills can be learned through experience and also by the application of methodologies or frameworks, this approach of learning is something we are implementing in our entrepreneurship and project management simulations see http://www.experientialsimulations.com

Teaching Entrepreneurship as a Profession

A next step in the evolution of entrepreneurship should be to make it a profession. Professional associations tend to have requirements such as:

–         Experience

–         Exams

–         Courses

–         Ethical codes of conduct

–         Continued professional development

–         References

Entrepreneurship, either within a start-up or within a large organization using the concepts, needs to be career option and have the same professional blending of experience and methodologies that other professions do. A profession tends to have a methodology or evolving body of knowledge for its members.

There are arguments against this:

–         Entrepreneurship is experiential and exams/courses aren’t good indicators of potential,

–         Entrepreneurs tend to learn and improve over time which is difficult to measure,

–         Some entrepreneurs were fortunate to be in the right place and time, and, might not be able to repeat their success.

Essentially, because one obtains the requirements is not a strong indicator of their potential. However, it is an indicator that one has the structural foundation to learn and the focus to achieve.

As part of their evolving methodology or body of knowledge, associations tend to employ cases, concepts (both theoretical and practical), and simulations. Indeed, any course that uses business plans or does elevator pitch presentations is using a form of simulation.

One of the areas that I have been focusing on is the development of simulations as a way to get a blending of theory, methodology and practical experience into an interactive environment with iterative decision making.  As well, as using the simulation approach to increase interest in becoming an entrepreneur and indicators of what the player needs to improve upon, See it at: http://www.experientialsimulations.com/Management_Simulations_Traction.html

If entrepreneurship was a profession it would achieve greater recognition as a career path, sharing of best practices should improve, advocacy could improve, and creativity and innovation should increase both in start-ups and in large organizations.

Project Management – Time for Different Metrics

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When reading the project management literature one can often see that high failure rates are associated with projects. There are usually a variety of reasons why projects fail. However, we must also wonder about the definition of failure, for example, if a project is over budget and behind schedule, and, yet has a significant positive impact on the organization and the end-users are happy with the deliverables and use them to their full potential, is that a failure?

From a project management control point of view and apriori project expectations perspective, cost overruns could be viewed as failure, however, when budget estimates don’t align with actuals there could be legitimate and acceptable reasons for that.

Taking a different tack, if we focus on deliverable impact, stakeholder satisfaction and include a metric around usage (adoption) of the deliverables we might get a very different measure of success. One project manager researcher I knew, was attempting to find correlation between end-user perceptions prior to project start and adoption rate after the project closure, his hypothesis was that, if a project is viewed negatively prior to its start by the end-users, then no matter what is delivered, it will be negatively received by the end-user.

Using this set of metrics around satisfaction, we have designed a simulation called Milestone, which provides the players the opportunity to manage 5 very different project types and while focusing on the traditional metrics of cost, time, etc. the simulation also places a great emphasis on stakeholder satisfaction. With the key takeaway being that the mechanical aspects of project management need to be completed such as budget, but a more sophisticated project manager also focuses on people, their perceptions, expectations and needs. Perhaps this approach calls for more emotional intelligence, communication, stakeholder management and leadership from project managers. See it at: http://www.experientialsimulations.com/Ethics_Simulations_PM.html