Prevention of Entrepreneurial Failure

in the start-up phase

Erasmus Intensive Programme:

“Fostering the entrepreneurial spirit in Europe through development of

entrepreneurial sales personality”

Riga, 10 – 23 November 2013

Latvia

Ing. Matthijs H.M. Hammer M.Sc.

Senior lecturer Entrepreneurship

School of Busuness, Builsing & Technology

PhD Researcher

Faculty of Product Innovation Management

Menu

• Introduction

• Recall of last week

• Theoretical background

• Focus on: ‘Entrepreneurial Sales Personality’

• IDP, Business Plan YOU!

• Talent Development

• Your App’s-store

• Application in this week: Business Plan YOU!

Introduction

• Present yourself, maximum 30 seconds

• Present your group, 1 minute

• Present your groups result until now, 1minutes & 30 sec.

• Present your groups ambition, minimum 2 minutes

Recall of last week

• Please tell about:

• IDP

• Effectuation

• Business Plan You!

• Accounting

• Entrepreneurial personality

• Leadership

Recall of last week

• Entrepreneurial process

• Opportunity recognition

• Opportunity preparation

• Opportunity exploitation

• Difficult?

So, what do you want need more ….

A high failure rate

Business closure rates by time trading

(Cressy, 2006)

49,5% 5 year failure rate Insee (Sine)

60 % 5 year failure rate Statistique Canada (PALE)

39 % 2 year failure rate BTS (Tunisian Solidarity Bank )

50 % 5 year failure rate CBS (Statistics Netherlands)

50 % 4 year failure rate U.S. Census Bureau (BITS)

Diversity of proxy measuring failure

(bankruptcy, closure, exit, insolvency, discontinuity, etc.)

Theoretical background

Causes of Entrepreneurial Failure:

• mismanagement, unrealistic expectations, finance

and lack of innovation (Cardon, Stevens, & Potter, 2011).

• Lack of strategic resources (Michael & Combs, 2008),

• planning strategies (van Gelder et al, 2007),

• pride (Hayward et al, 2006),

• not able to cope with uncertainty (Mc Grath, 1999)

• over-optimism and overconfidence (Muir, 2007).

Theoretical background

Prevalence of discriminant approach (positivism) (Cooper et al.,1994 ; Duchesneau & Gartner, 1990 ; Dahlqvist et al., 2000 ; Littunen et al.,

1998 ; Lussier, 1995 ; Lussier & Pfeifer, 2000 ; Reid, 1999 ; Wetter & Wennberg, 2009)

Success/Failure = f(X1,X2,X3,..Xn)

X1 ?

X2 ?

X3 ?

Xn ?

Y

Success/Failure

??? Survivors/Exitors

Entrepreneurship policy of “picking winners”

The “ideal predictive and discriminant factor” opposing successful and failing

entrepreneurs does not exist.

it impossible to predict exactly how the entrepreneurs will fail.

Theoretical background

Questions to address:

• So what?

• How does it imply me?

• How does this affect with the Entrepreneurial Sales

Personality?

• An answer: looking from an interpretative approach. (Askim-Lovseth & Feinberg, 2012; Cardon et al., 2011; Cope, 2011; Crutzen,

2009; Mantere et al., 2013; Seshadri, 2007; Singh et al., 2007; Zacharakis et al.,

1999)

Theoretical background

Dimensions

Theoretical

foundation

Emotive

approach

GAGT

Concept of

failure

Failure

causes

Deception

Entrepreneurial

Motivation

Voluntarist

approach

RBV

Deficiency

Entrepreneurial

Resources

Determinist

approach

PEOT

Entrepreneurial

context

Discontinuity

Source: Khalil, 2010

Voluntary exit

Involuntary exit

ECONOMIC SUCESS

OF THE NEW VENTURE

Positive

Exit strategy

Continuity with

Economic

Difficulties

Exit due to a psychological

distress

Exit to avoid

an increasing

economic losses

Entrepreneur's self satisfaction

Low new venture economic

performance

High new venture economic

performance

Continuity with

Psychological

Distress

ECONOMIC FAILURE OF THE NEW VENTURE

1 3

4

PSY

CH

LOG

ICA

L SUC

ESS

OF TH

E ENTR

EPR

ENEU

R

PSY

CH

LOG

ICA

L FAILU

RE O

F THE

ENTR

EPR

ENEU

R

Entrepreneurs' self Deception

2

Continuity with

Psy-ecomomic

Distress

Continuity with

Entrepreneurial succes

Exit due to a

psy-ecomomic

distress

2’

3’

4’4

IDP, Business Plan YOU!

? 5 minutes break for chemical dependencies and biological necessities.

Resume

• To reduce failure-rates in the start-up phase, compose

the best entrepreneur(ial team) available.

How?

• Talent Development

WHAT IS A TALENT?

Give examples!

A talent is:

• Old Greek: a weight or sum of money of that weight.

Later the disposition or ´gift of God´. (van Dale, 2009)

• Best & Brightest. (Knegtmans, 2009)

• Exceptional disposition (Wikipedia, 2010).

• Relative.

• Talent (Dutch, English, French, African, Catalonian, Russian, German,

Romanian, Icelandic, Czech, Danish, Polish, Estonian, Norwegian)

• Fi: lahjakkuus, Lv: Talants, Lt: Talentas

Facts

• Be willing to is more important than be able to. (Knegtmans, 2009)

Example See possibilities Tackle opportunities

Know where to find it. Successful application

Facts

• Training has more effect than Genetic factors.

• Top talent = (talent * mentality) / ego (T. van het Hek, 2000)

• Talent is gained by internal motivation and long,

effective and focused training.

• Be willing to is more important than be able to. (Knegtmans, 2009)

How to develop?

What to develop?

• Your talents! Exercise 1a

• But: what are Your talents?

• How to distinguish them?

Exercise 1a: Write down YOUR talents.

The Competent Egg

Knowledge

Application

Behaviour

Talent

Source: N. Vloon, 2002

Structure

Context

What suites You?

• What do You like?

• What distinguishes You?

• What is appreciated?

• Problem:

You don´t know for yourself.

Identify Your talents

• Use tools as:

– 360° Feedback

– Personal SWOT

– Explicit Your context

Exercise 1b: Describe Your context.

Exercise 2 5 minutes each

You: tell Your Neighbour about your job (or sports).

Neighbour: write down where he is positive, explores

fun, smiles, is exciting, etc. Ask for examples, achieved

goals, feedback from colleagues.

At the end, ask for his perceived personal strong points

and weak points (about 3 aspects each).

Exercise 1 b and 2, are determining your

relevant talents.

How to develop?

Difficulties

• SME-issues:

– No HRM-department

• job coach

• assessment centres

– No broad scope of specialists

– Limited places to work (fte)

• job rotation

• spare time for development

• exemplary roles

Talent development in SME´s

Today

Near

Future

Pers. SW

360° feedback

context

far

Future

Talent

Talent

needed

Pers. goals

Business goals

Talent

development

Different ways of development

Falcon

Source: N. Vloon, 2002 Goose

Development in SME´s

• Training in the same context, maintain the talent.

• Training in a different (future orientated) context,

increase the talent, makes it more valuable.

Exercise 3

Exercise 3:

1. Write down your talents today

2. Write down your personal goals and objectives

3. Determine one of your talent to develop

4. Describe a way to practice that talent (knowledge, skill,

behavior) in another context then your current

professional activity.

5. Do it, with motivation and drive!

Summery

1. Determine what your motivation is; what make you

have fun.

2. Determine your relevant talents.

3. Determine what is your goal.

4. Create training activities in another professional

context.

5. Do it! (with motivation and drive)

Your App’s store

1. What is an App’s?

Applicability Approvals (2 * App = App’s)

2. What are they?

Proof of successful application of your talents /

competencies.

3. How do they look?

Your App’s store

Status Name Description

C Concept No evidence of competence

B Believe Poor evidence of competence

A Awareness Some evidence of competence

AA Applicability Approvals Proofed evidence of competence, in

simple, single context

AAA Advanced Applicability

Approvals

Proofed evidence of competence, in

complex, multiple context

Source: Vloon & Hammer, 2013

Lessons learned

1. Determine what your motivation is; what make you

have fun.

2. Determine your relevant talents.

3. Determine what is your goal.

4. Create training activities in another professional

context.

5. Do it! (with motivation and drive)

6. Make your improvements App’s store ready

7. Sell yourself to the winning team of stakeholders

Thank You

for your

Attention