26

UNIT II. The Entrepreneurial Process

Introduction

Starting your own enterprise is not easy. It requires a hard task of proper
planning and keen observation. It also needs a lot of guts.

Discussing the issues and challenges of entrepreneurship from the previous Unit,
may discourage others to engage into entrepreneurship while others may still have the
confidence to embark in this worthwhile undertaking.

This unit discusses the steps that an individual may follow in starting a small
enterprise. The aspiring entrepreneur may consider the steps simple but these could be
of help so as to prepare the person to the ins and outs of managing an entrepreneurial
venture.

It also discusses how organizations can improve their systems and processes and
how to introduce innovation in their organization. The characteristics of an intrapreneur
are likewise given emphasis.

At the end of the Unit, the student is expected to:

1) apply the entrepreneurial process in the preparation of a preformatted

business plan;
2) demonstrate creativity and innovativeness in identifying business
opportunities;
3) identify a business idea; and
4) prepare a business model

Lesson 1. The Entrepreneurial Process

For every entrepreneurial endeavor, processes are always observed. These

processes make the undertaking more systematic and organized. The entrepreneur,
before starting the enterprise also needs to follow steps in order to become successful.
No entrepreneur would want to invest on something without thinking on what should
be done and plan how to do it.

The aspiring entrepreneur may follow the identified steps in starting the
entrepreneurial venture:

1. Self-assessment. Carefully evaluating your goals, competencies, skills,

interests and passion. In Unit I, the 10 Personal Entrepreneurial Competencies every
successful entrepreneur must possess were discussed. It is important that you know
which of the competencies you already possess (strengths) so that you will know how to
develop those that you do not possess (weaknesses) and sustain those that you already
have.
 27

Consider other factors. Determining the entrepreneurial qualities that you

possess is not a guarantee for you to succeed. You need to consider some other
factors like:
a. Personal interest. "Am I really interested to go into business?" This is
the first question you should ask yourself before going into business. If
your interest is engaging into business, this could be a good motivation to
pursue this endeavor.
b. Your passion. These are the things that you love doing. Lifestyle
startups started their businesses out from their passion and love for
something.
c. Assess your knowledge and talents. If you are familiar with what you
know, and what your talents are then you are sure that these things
would guide you in choosing what type of business you are going to put
up.
d. Training and work experience. By looking into this aspect, the
aspiring entrepreneur will be able to determine his limitations, thus, will
give him an idea what particular assistance shall he be availing.

2. Opportunity seeking. This is the ongoing process of considering,

evaluating a pursuing market-based activities. After assessing oneself, it is important to
know the business environment better. This business environment is volatile and
dynamic and cannot be controlled by anyone. The business environment may pose
either opportunities or threats. Opportunities are situations which indicate possible
advantages that the entrepreneur can make use of. Threats on the other hand are
situations that may hinder the attainment of business objectives.

The following are the composition of the business environment where possible
opportunities and threats may come from.

a. Political. The political environment refers to Government actions which

affects the operations of a company or business. These actions may be on
local, regional, national or international level.
(http://www.businessdictionary.com/definition/political-environmental.html)

Some factors to analyze:

 Stability of the political system
 Government’s actions in maintaining peace and order
 Government’s view on business organizations
 Government as a consumer
 Government’s initiative of entering into agreements

b. Economic. The term economic environment refers to all the external

economic factors that influence buying habits of consumers and businesses
and therefore affect the performance of a company. These factors are often
 28

beyond a company’s control. (https://www.bdc.ca/en/articles-

tools/entrepreneur-toolkit/)

Factors:
 Inflation - national
 Interest rate – national/local
 Unemployment and employment - local
 Exchange rate - national
 Size of the available market - local
 Level of competition – local
 Availability of suppliers – local

c. Socio-cultural. It consists of the customs and traditions of the society in which

the business exist.
Social factors:
 Population size and growth rate – local
 Age distribution – local
 Wealth and income disparities – local
 Social mobility -
 Health and education levels -
Cultural factors include language, religion, values and attitudes, customs,
traditions – local

d. Technological. Technological environment refers to changes taking place in the

method of production, use of new equipment and machineries to improve, the
quality of product. – local; provincial

e. Legal. Legal environment constitutes the laws and various legislations passed in
the parliament. – laws and ordinances (provincial and local)

f. Environment (natural). The “natural environment” is defined as the natural,

physical surroundings in which human life takes place. Some would call it nature,
our living planet, life on Earth or the geophysical world.
(https://link.springer.com/referenceworkentry/) -

Use the link below for additional information on opportunity seeking (Lecture on
the Seven Sources of Innovative Opportunities delivered by Prof. Armie C.
Sabugo)

https://drive.google.com/file/d/14uCIaOOUMCWXkRQ-1WMaXhDjPNlQ-
Yrc/view?usp=sharing

3. Business idea generation.

 29

Idea generation or ideation is the act of forming ideas. It is a creative process that
encompasses the generation, development and communication of new thoughts and
concepts, which become the basis of your innovation strategy(https://ideadrop.co/top-
five-favourite-idea-generation-techniques/)

The following are the steps of generating business ideas:

(https://www.grfcpa.com/resource/five-steps-to-generate-new-ideas-2/)
a. Create an opportunity statement. An opportunity statement refers to a brief
evaluation of a product concept or idea to determine if the idea is worth pursuing,
especially within the context of many other ideas and opportunities.
(https://medium.com/@soninkec/what-are-opportunity-statements)

Below is a template which you can use in writing your opportunity statement:

https://www.ibm.com/garage/method/practices/discover/business-opportunity-statement/

Sample Opportunity statement:

We will improve the experience of enjoying desserts for people who love eating
cakes but worry much on their health. These people struggle today because they
cannot satisfy their cravings of eating cakes. Our business is motivated to solve
this problem because entering in this niche market could lead to the development
of products that may boost sales and revenue.
 30

b. Gather raw materials. In this stage, the entrepreneur will do a little research by
asking other people or other sources in order to support the opportunity and that
the idea could be realized.
c. Work on the idea/s. In this stage, the opportunity and the gathered information
will be put together to generate more ideas. The use of idea generation
tools/techniques is advised.
Below are some examples of idea generation techniques:
(https://magazine.startus.cc/7-creative-idea-generation-methods/)
1. The 5W+H Method
The technique represents basic questions you need to ask when thinking about a
specific topic: Who, what, where, when, why, and how?

2. Social Listening
Idea generation doesn’t mean you have to come up with a great suggestion
single-handedly. On the contrary, sometimes it’s enough to do a little bit of social
listening and see what the target audience has to say about a certain topic. You
can use social networks like Facebook or Twitter to find precious ideas coming
from end-users.

3. Brainstorming
Brainstorming is a well-known method that people all over the world use for
decades already. What makes this tactic so popular? Well, it’s the fact that no
one gets laughed at for proposing out of the world idea. There is no right or
wrong here – you just need to say the first thing that comes to your mind. After a
quick brainstorming session, you just need to filter through all suggestions and
find the ones that have the biggest potential to succeed.

4. Role Playing
Walking in someone else’s shoes is everything but easy, but sometimes it’s the
only way to break the barrier and think of a brilliant idea. The process is simple:
you just need to switch places with your colleagues and try to embrace their
point of view. It doesn’t guarantee immediate results, but it often leads to
interesting conclusions and brand new ideas.

5. Use Online Tools

The Internet is filled with interesting tools that can assist you in identifying
alternative ideas. You can choose between many different options, but the final
decision usually depends on the nature and peculiarities of your business.
feedough.com/startup-resources/idea-generation-validation-tools/
6. Mind Mapping
Mind mapping is another method to get through the creative drought
successfully. By definition, a mind map is a diagram for representing tasks,
words, concepts, or items linked to and arranged around a central concept or
 31

subject using a non-linear graphical layout that allows the user to build an
intuitive framework around a central concept.

7. Think In Reverse
This technique is very amusing. Instead of thinking about how to reach your goal,
you can think about how not to achieve it. For example, you can make a plan on
how to reduce the number of Instagram followers instead of increasing it. The
so-called negative thinking often leads people to unbelievable conclusions, which
in turn brings them a bunch of new ideas.

8. SCAMPER Technique (https://www.viima.com/blog/idea-generation)

The SCAMPER technique is created by Bob Eberle, and is a method used for
problem-solving and creative thinking. It’s a holistic way of applying critical
thinking to modify ideas, concepts or processes that already exist.

The purpose of the SCAMPER is to make adjustments to some parts of the

existing idea or process to reach the best solution. It consists of seven actions
that can be used to replace parts in the process:
 32

1. Substitute – Substitution technique refers to replacing a part of your product,

concept or process with another to achieve even better outcome.

2. Combine – The combine technique explores the possibility to combine two

ideas into a single, more effective solution.

3. Adapt – Adaptation analyses the possibilities to make the process more

flexible and focuses on other similar incremental improvements to the idea,
process, or concept.

4. Modify – Modifying the idea looks at the problem or opportunity from a bigger
perspective and aims for improving the overall results, not just the idea.

5. Put to another use – This approach focuses on finding ways to use the idea or
existing solution for another purpose and analyses the possible benefits if
applied to other parts of the business.

6. Eliminate – The elimination technique is quite straightforward: it examines the

possible outcomes if one or more parts of the concept were eliminated.

7. Reverse – This action focuses on reversing the order of interchangeable

elements of an idea.

4. Business Idea screening.

Idea screening is the stage in the new product development process which
follows idea (or concept) generation. It often involves use of scoring models, checklists,
or personal judgments and is based on information from experience and market
 33

research (https://marketing-dictionary.org/i/idea-screening/) Examples of idea

screening criteria are enumerated below.
Screening Tool 1
Busi Busi Busi
Weig
ness ness ness
Criteria hts*
Idea Idea Idea
(%)
1 2 3
Personal 30 25 20 25
Preference
Education/t 30 30 20 20
raining
Work 20 10 10 10
experience
Business 10 10 5 5
contacts
Family 10 10 10 10
support
Total 100 85 65 70

*weights may vary

Screening Tool 2
Weights* Business Business Business
Criteria
(%) Idea 1 Idea 2 Idea 3
Market demand 20 20 15 10
Technology 10 10 5 5
Availability of 10 10 10 10
labor/skills
Availability of raw 10 10 10 5
materials
Financial or capital 20 20 15 5
requirement
(more expensive
to establish means
lower point)
Profitability 20 20 15 10
Government 10 10 5 5
Support
Total 100 100 75 50

*Weights may vary

 34

5. Business idea selection.

Business idea selection takes place after evaluating all the ideas based on the
criteria. Your personal judgment backed up by reliable information may also be
considered.

Screening Screening
Business Ideas Total Rank
Tool 1 Tool 2
Business Idea 1 85 100 185 1
Business Idea 2 65 75 140 2
Business Idea 3 70 50 120 3

Business Model and Business Model Canvas

The term business model refers to a company's plan for making a profit. It
identifies the products or services the business plans to sell, its identified target market,
and any anticipated expenses. Business models are important for both new and
established businesses. They help new, developing companies attract investment,
recruit talent, and motivate management and staff. Established businesses should
regularly update their business plans or they'll fail to anticipate trends and challenges
ahead. Business plans help investors evaluate companies that interest them.
(https://www.investopedia.com/terms/b/businessmodel.asp)

1. Identify your specific audience.

Targeting a wide audience won’t allow your business to hone in on customers who truly
need and want your product or service. Instead, when creating your business model,
narrow your audience down to two or three detailed buyer personas. Outline each
persona’s demographics, common challenges and the solutions your company will offer.
As an example, Home Depot might appeal to everyone or carry a product the average
person needs, but the company’s primary target market is homeowners and builders.

2. Establish business processes.

Before your business can go live, you need to have an understanding of the activities
required to make your business model work. Determine key business activities by first
identifying the core aspect of your business’s offering. Are you responsible for providing
a service, shipping a product or offering consulting? In the case of Ticketbis, an online
ticket exchange marketplace, key business processes include marketing and product
delivery management.

3. Record key business resources.

What does your company need to carry out daily processes, find new customers and
reach business goals? Document essential business resources to ensure your business
model is adequately prepared to sustain the needs of your business. Common resource
examples may include a website, capital, warehouses, intellectual property and
customer lists.
 35

4. Develop a strong value proposition.

How will your company stand out among the competition? Do you provide an innovative
service, revolutionary product or a new twist on an old favorite? Establishing exactly
what your business offers and why it’s better than competitors is the beginning of a
strong value proposition. Once you’ve got a few value propositions defined, link each
one to a service or product delivery system to determine how you will remain valuable
to customers over time.

5. Determine key business partners.

No business can function properly (let alone reach established goals) without key
partners that contribute to the business’s ability to serve customers. When creating a
business model, select key partners, like suppliers, strategic alliances or advertising
partners. Using the previous example of Home Depot, key business partners may be
lumber suppliers, parts wholesalers and logistics companies.

6. Create a demand generation strategy.

Unless you’re taking a radical approach to launching your company, you’ll need a
strategy that builds interest in your business, generates leads and is designed to close
sales. How will customers find you? More importantly, what should they do once they
become aware of your brand? Developing a demand generation strategy creates a
blueprint of the customer’s journey while documenting the key motivators for taking
action.

7. Leave room for innovation.

When launching a company and developing a business model, your business plan is
based on many assumptions. After all, until you begin to welcome paying customers, you
don’t truly know if your business model will meet their ongoing needs. For this reason,
it’s important to leave room for future innovations. Don’t make a critical mistake by
thinking your initial plan is a static document. Instead, review it often and implement
changes as needed.

Types of Business Models

There are 12 types of business models:

1. Subscription
2. Bundling
3. “Freemium”
4. Razor blades
5. Product to service
6. Leasing
7. Crowdsourcing
8. One-for-one
9. Franchise
10. Distribution
11. Manufacturer
12. Retailer
 36

This link will provide you with an in-depth discussion of the types of business
models. Visit to appreciate. https://www.justbusiness.com/operations/what-is-a-
business-model

The Business Model Canvas

Business Model Canvas is a strategic management and lean startup template for
developing new or documenting existing business models.[1][2] It is a visual chart with
elements describing a firm's or product's value proposition, infrastructure, customers,
and finances.[3] It assists firms in aligning their activities by illustrating potential trade-
offs. (https://en.wikipedia.org/wiki/Business_Model_Canvas)

The Nine building blocks

● Infrastructure
○ Key Activities: The most important activities in executing a company's value
proposition.
○ Key Resources: The resources that are necessary to create value for the
customer. They are considered assets to a company that are needed to sustain
and support the business. These resources could be human, financial, physical
and intellectual.
○ Partner Network: In order to optimize operations and reduce risks of a business
model, organizations usually cultivate buyer-supplier relationships so they can
focus on their core activity. Complementary business alliances also can be
considered through joint ventures or strategic alliances between competitors or
non-competitors.
● Offering
○ Value Propositions: The collection of products and services a business offers to
meet the needs of its customers. According to Osterwalder (2004), a company's
value proposition is what distinguishes it from its competitors. The value
proposition provides value through various elements such as newness,
performance, customization, "getting the job done", design, brand/status, price,
cost reduction, risk reduction, accessibility, and convenience/usability.
■ The value propositions may be:
■ Quantitative – price and efficiency
■ Qualitative – overall customer experience and outcome
● Customers
○ Customer Segments: To build an effective business model, a company must
identify which customers it tries to serve. Various sets of customers can be
segmented based on their different needs and attributes to ensure appropriate
implementation of corporate strategy to meet the characteristics of selected
groups of clients. The different types of customer segments include:
■ Mass Market: There is no specific segmentation for a company that follows
the Mass Market element as the organization displays a wide view of
potential clients. e.g. Car
 37

■ Niche Market: Customer segmentation based on specialized needs and

characteristics of its clients. e.g. Rolex
■ Segmented: A company applies additional segmentation within existing
customer segment. In the segmented situation, the business may further
distinguish its clients based on gender, age, and/or income.
■ Diversify: A business serves multiple customer segments with different needs
and characteristics.
■ Multi-Sided Platform / Market: For a smooth day-to-day business operation,
some companies will serve mutually dependent customer segments. A credit
card company will provide services to credit card holders while
simultaneously assisting merchants who accept those credit cards.
○ Channels: A company can deliver its value proposition to its targeted
customers through different channels. Effective channels will distribute a
company's value proposition in ways that are fast, efficient and cost-effective.
An organization can reach its clients through its own channels (store front),
partner channels (major distributors), or a combination of both.
○ Customer Relationships: To ensure the survival and success of any businesses,
companies must identify the type of relationship they want to create with their
customer segments. That element should address three critical steps on a
customers relationship: How the business will get new customers, how the
business will keep customers purchasing or using its services and how the
business will grow its revenue from its current customers. Various forms of
customer relationships include:
■ Personal Assistance: Assistance in a form of employee-customer
interaction. Such assistance is performed during sales and/or after sales.
■ Dedicated Personal Assistance: The most intimate and hands-on personal
assistance in which a sales representative is assigned to handle all the
needs and questions of a special set of clients.
■ Self Service: The type of relationship that translates from the indirect
interaction between the company and the clients. Here, an organization
provides the tools needed for the customers to serve themselves easily and
effectively.
■ Automated Services: A system similar to self-service but more personalized
as it has the ability to identify individual customers and their preferences.
An example of this would be Amazon.com making book suggestions based
on the characteristics of previous book purchases.
■ Communities: Creating a community allows for direct interactions among
different clients and the company. The community platform produces a
scenario where knowledge can be shared and problems are solved between
different clients.
■ Co-creation: A personal relationship is created through the customer's
direct input to the final outcome of the company's products/services.
● Finances
 38

○ Cost Structure: This describes the most important monetary consequences

while operating under different business models.
■ Classes of Business Structures:
○ Cost-Driven – This business model focuses on minimizing all costs and
having no frills. e.g. Low-cost airlines
○ Value-Driven – Less concerned with cost, this business model focuses
on creating value for products and services. e.g. Louis Vuitton, Rolex
■ Characteristics of Cost Structures:
■ Fixed Costs – Costs are unchanged across different applications. e.g.
salary, rent
■ Variable Costs – Costs vary depending on the amount of production
of goods or services. e.g. music festivals
■ Economies of Scale – Costs go down as the amount of goods are
ordered or produced.
■ Economies of Scope – Costs go down due to incorporating other
businesses which have a direct relation to the original product.
○ Revenue Streams: The way a company makes income from each customer
segment. Several ways to generate a revenue stream:
■ Asset Sale – (the most common type) Selling ownership rights to a
physical good. e.g. retail corporations
■ Usage Fee – Money generated from the use of a particular service.
e.g. UPS
■ Subscription Fees – Revenue generated by selling access to a
continuous service. e.g. Netflix
■ Lending/Leasing/Renting – Giving exclusive right to an asset for a
particular period of time. e.g. Leasing a Car
■ Licensing – Revenue generated from charging for the use of a
protected intellectual property.
■ Brokerage Fees – Revenue generated from an intermediate service
between 2 parties. e.g. Broker selling a house for commission
■ Advertising – Revenue generated from charging fees for product
advertising.

The Business Model Canvas Template

 39

Advantages of Business Model Canvas

1. Determines what are the most essential activities.

2. It is a good basis for brainstorming.
3. It brings your idea into a clearly structured form.
4. It shows dependencies or conflicting objectives.
5. A structure for your detailed business plan.

SAMPLE BUSINESS MODEL CANVAS

40