6-Schematic of The New Venture's Environment

SCHEMATIC OF THE NEW VENTURE’S
ENVIRONMENT
WHAT does the world look like to the entrepreneur? What parts of that world
are important for making entrepreneurial decisions and finding opportunities
for the new venture?
This is the macrO environment
in which the firm operates. This domain has the most uncertainty. Uncertainty is
a barrier to entrepreneurship, but some people are willing to bear this uncertainty.1
There are six identifiable, though overlapping, segments within the macro environment:
1. Politics and government
2. Stakeholders
3. Macro economy
4. Technology
5. Socio demography
6. Ecology
PROCESSES OF BUSINESS ENVIRONMENT
ANALYSIS
Most of the time, we think and analyze very
quickly, and we are quite unaware that we are
doing so. Sometimes, though, we must be more
conscious of our thinking, and do our analyzing
in systematic ways. This is the case when we are
thinking about the environment for
entrepreneurship. We want to make sure we are
being comprehensive and analytical.
Scanning
How does this comprehensive process begin? It begins by looking around.
Scanning
the environment is the process by which the entrepreneur first identifies
the environment’s key elements and their characteristics. It is a surveillance
system for early detection. The goal of scanning is to detect change that is
already underway. Successful scanning catches important changes early,
giving the new venture enough lead time to adapt. The prospective
entrepreneur scans innumerable sources of data. The Wall Street Journal,
Business Week, and the Economist are solid sources for obtaining the broad
picture. Television provides a general and continual source of data through
Cable News Network (CNN), network news, special reports, and
documentaries. More specialized business programming is becoming
increasingly popular on cable channels like MSNBC. Surfing the Internet has
become an important scanning activity.
Monitoring
Monitoring is the process of tracking the evolution,
development, and sequence of critical
events that affect the future business’ survival and
profitability. Data from the scanning
process are used in the monitoring process. Specific
trends and events are monitored
in real time to confirm or disprove predictions about how
they will affect the firm.
Monitoring is less general and therefore more focused
than scanning.
Forecasting
Forecasting enables the entrepreneur to develop plausible projections for the future. These can be
projections for elements such as price level, the direction of interest rates,
or future scenarios for cause and effect. For example, a typical forecast might be: If the money supply grows
at above-target rates, inflation will occur. Thus, inputs for forecasts are the data collected from monitoring.
Forecasting includes a series of techniques that provide insight into the future. The
specific techniques chosen for a task should correspond to the type of data used as input, and the nature of
the desired forecast.
• Choose the macro environmental variables that are critical to the new venture. These will probably relate
to the firm’s resource base.
• Select the sources of data for the forecast. These will probably be those the entrepreneur has been
monitoring. Data sources can be found in many places, including the local university or library. Internet
searches can also produce forecasts.
• Evaluate various forecasting techniques. Forecasters use different techniques and therefore sometimes
produce different forecasts. For example, a firm might see a forecast that says the stock market is going
up, and therefore conclude that this is a good time to go into business.
• Integrate forecast results into a plan for the creation of the new venture. These results will probably
include resource levels, resource availability, and sales forecasts.
• Keep track of the critical aspects of the forecast, meaning compare actual results with forecasted results.
Assessing
Assessing the environment is the most difficult and important of the
four environmental analysis tasks. Here the entrepreneur has to
answer that most difficult of questions: What does it all mean?
Interpretation is an art form, and so is assessment. In a poker game,
players can agree on what cards are showing, the previous bets
made, and the value of the cards they are holding. Some players
hold, some fold, and others raise their bets. Because their
assessments are different, their behavior is different. In assessing
most entrepreneurial opportunities, there are few facts that people
would agree can be generalized. Although the four-part process
described in this chapter seems quite analytical, it actually takes
place over time in a mode that is more intuitive than rational.

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SCHEMATIC OF THE NEW VENTURE’S

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