Application of the Theory of New Venture Creation to Evolve Skateboards Australia - Case Study Example

Application of the Theory of New Venture Creation to Evolve Skateboards Australia Introduction This essay is based on an application of the theory of the subject of new venture creation to the case of Evolve Skateboards Australia. Evolve Skateboards is an innovative Australian start-up that designs and makes motorised skateboards. Since its establishment, the company has won several awards in Australia as one of the most innovative start-ups in the country (Evolve Skateboards Australia 2016). In this essay, the various aspects of the company, including its history, business model, products and operations, are analysed in light of the different theories associated with the concept of new venture creation. The purpose is to determine the extent to which the story of the company fits into the theoretical perspectives of the process of creating new ventures. The entrepreneurial process: A brief introduction There are many theoretical perspectives about the process of entrepreneurship that have been developed over the course of time (Minniti 2006, p. 11). It has been noted that the different perspectives attempt to explain entrepreneurship regarding how the process is shaped by various factors that include the following: the entrepreneur, opportunities, resources and other factors of the macro environment (Uchino 2009, p. 51). Aidin (2015, p. 105) observes that all the different theories about venture creation can be classified into the following categories: stage models, process dynamic models and static frameworks. Although these different models of entrepreneurship attempt to examine why and how individuals end up creating new business ventures, they vary concerning whether they emphasise on the actual process of creating new ventures or the role of the interaction of social and economic situations in the new venture creation process. One of the most common models of the entrepreneurial process is the Timmons Model of Entrepreneurship process. This model, which falls under the category of the process models of entrepreneurship, emphasises the role that different factors play in initiating, directing and determining the success of any new venture creation process (Uchino 2009, p. 50). The model is founded on the argument that the process of creating new ventures is iterative in nature and that it succeeds regarding creating value because the entrepreneur discovers and takes advantage of opportunities (Minniti 2006, p. 13). Hence, according to this model, the entrepreneurial process is largely shaped by the entrepreneur, the opportunity and the resources that are at the disposal of the entrepreneur. Application of the entrepreneurial process theory to the case of Evolve Skateboards Australia The entrepreneurial process theory of creating new ventures can be applied to the case of Evolve Skateboards Australia. Specifically, the story of the company can be interpreted in terms of the different stages of the entrepreneurial process that are proposed in the model. The following, therefore, is an application of the model of new venture creation to Evolve Skateboards Australia. The importance of opportunity Casson (2003, cited in Rae 2014, p. 6) defines opportunities in entrepreneurship as situations that entrepreneurs can take advantage of to create products and then deliver the products to the market at a profit. This definition emphasises the need for opportunities to lead to profitability or value. Therefore, entrepreneurs pursue situations that promise to be valuable over the course of time. One of the most important characteristics of good entrepreneurial opportunities is that they must be driven by market trends. Good opportunities arise from gaps that exist in the market. Therefore, it can be seen that the development of Evolve Skateboards Australia has its origins in the observation of the founder that gaps were existing in the market at the time. According to the founder of the company, the decision to build the company arose from a personal experience when he was looking for motorised skateboards (Evolve Skateboards Australia 2016). It was at the time that he realised that he could not get good motorised skateboards in the market (Evolve Skateboards Australia 2016). All the products that existed in the market at the time were large, clumsy and of generally poor quality. It was based on this realisation that the founder of the company undertook the project of building a better-motorised product for the market. Therefore, the story of Evolve Skateboards is based on an opportunity that the founder noted existed in the market at the time. The second important characteristic of entrepreneurial opportunity is related to the process of developing a new product or service. Based on the observed opportunity or existing trend in the market that points to the need for a new product or service, entrepreneurs usually develop a product concept that meets the observed need. It is clear that the founder of Evolve Skateboards Australia decided to develop a new product that addressed all the weaknesses of the products that existed at the time. Thirdly, it is necessary for entrepreneurs to develop a method or process of delivering the new product or service to the market (Roberts et al. 2006). It is based on organising all the other entrepreneurial factors that then new company (Evolve Skateboards) managed to develop new products through a process of research and testing prototypes. Creative use of resources One of the things that have defined the success of Evolve Skateboards is the manner in which the company used its limited resources during its initial stages to achieve growth. The company has managed to grow from its initial stages to its current status in which it distributes its products to more than 30 countries using 12 distributors (Evolve Skateboards Australia 2016). Throughout its history, the company has achieved growth through the careful use of the limited resources that were at the disposal of the founder. The founder did not have access to a lot of financial resources at the time of starting the company. However, he relied on the hope of producing a product that would be revolutionary in terms of design and performance (Evolve Skateboards Australia 2016). Therefore, the initial prospects of the company were banked on developing a product that clients would be willing to pay for. In theory, the approach towards entrepreneurial activity as adopted by Evolve Skateboards Australia (2016) is referred to as bootstrapping. It has been noted that bootstrapping has several benefits (Carsrud & Brannback 2007, p. 124). For example, when an entrepreneur relies on internal sources of finance to fund the venture, the entrepreneur tends to be more disciplined than would the case when the entrepreneur has easy access to external sources of financing (Carsrud & Brannback 2007, p. 124). This implies that when an entrepreneur has limited resources, he or she tends to allocate the resources very wisely to ensure that the venture achieves its specific objectives. Thus, a shortage of financial resources helps a firm to remain highly focused in regard to its specific objectives as the entrepreneur makes wise investment decisions. Another advantage of bootstrapping in entrepreneurship is associated with innovation. Christensen and Raynor (2003, n.pag) argue that innovative businesses should develop products that can effectively beat off the competition. Similarly, Carsrud and Brannback (2007, p. 124) argue that bootstrapping helps companies to be highly innovative in their approach to developing their products and services. Therefore, it can be inferred that bootstrapping can be a source of competitive advantage for new enterprises. For Evolve Skateboards Australia, the limitation in terms of scarce resources that the company faced during its early stages helped the company to focus on developing the right product for the market. This approach formed the foundation for the company’s commercial success. Importance of the entrepreneurial team The entrepreneurial team plays a leading role in the process of building a new venture. Essentially, the vision, actions and direction of the entrepreneurial leader for any new venture determines the extent to which the venture succeeds. Therefore, the personality traits of the founder of any new venture are an important attributes that determine the direction that a new venture takes and the extent to which the venture succeeds. Roberts et al. (2006) note that in the first place, the ability of an entrepreneur to spot opportunities that exist in the market determines the type of venture that finally emerges from the entrepreneurial process. It is also noted that the ability of the entrepreneur to exhibit entrepreneurial cognition influences the type of venture that emerges and the extent to which the new venture succeeds (Roberts et al. 2006). Moreover, studies have sought to profile the personality traits of successful entrepreneurs and how these traits influence the success of the entrepreneurial process. For example, it has been noted that entrepreneurs are driven by a strong sense of vision (Caliendo & Kritikos 2011, p. 8). It is based on the desire to achieve the vision that entrepreneurs are motivated to create and manage new ventures. It has also been observed that entrepreneurs are driven by a sense of determination (Brandstatter 2010, p. 5). Determination, in this case, refers to the ability of the individual to bounce back even after experiencing failure. Therefore, motivation, vision, passion and determination, among others, are important traits that shape the entrepreneurial process. It is instructive to note that the founder of Evolve Skateboards Australia exhibits all the major personality traits of successful entrepreneurs. This was seen during the process of creating the venture during its early stages. For example, he was able to identify a unique opportunity for developing a new type of motorised skateboard for the market. As well, the Evolve Skateboards founder was able to figure out how to develop a revolutionary product that would appeal to the market and create value. By doing so, he exhibited entrepreneurial cognition, which is the ability of entrepreneurs to figure out different methods and strategies that can be used to create products that address specific market needs and prove to be commercially viable. Lastly, throughout the five years during which the new product was being developed, the founder and his team showed the traits of passion, vision and determination. The need for fit and balance For any entrepreneurial process to succeed, it is necessary to achieve a fit and balance among the factors of the entrepreneurial team, resources and existing opportunities. Essentially, the entrepreneur, being the person who is in charge of the process of organising all the factors to make the entrepreneurial process a success, is charged with the responsibility of balancing the resources that are available for the process and the opportunities that exist in the market. The need for an entrepreneur, as the leader of the team, to ensure that resources balance with opportunities, arises out of the relationship between these entrepreneurial factors. On the one hand, a new venture needs resources to pursue opportunities. However, the availability of these resources is often limited and varies. On the other hand, the opportunities that exist in the market vary in terms of their level of feasibility (Bhide 1994, p. 152). It is based on this variation that entrepreneurs have first to sieve opportunities to eliminate those that are not promising, focus on only a few opportunities that are promising and devote a lot of resources to the selected opportunities (Bhide 1994, p. 154). Hence, an entrepreneur has to carefully allocate resources to opportunities that will help the company grow to its next level. A similar approach was used for Evolve Skateboards Australia. The founder of the company noted that the need to develop a perfectly designed motorised skateboard formed a great opportunity for the company (Evolve Skateboards Australia 2016). He then marshalled all the resources that were available to the new venture towards designing the new skateboards. It was based on this approach that he was able to allocate limited resources to a promising opportunity, thus achieving balance and fit for the new venture. Sustainability Sustainability refers to the ability of business organisations to achieve their economic, social and environmental goals without compromising the ability of future generations to achieve their goals (Butler 2014, p. 74). The concept of sustainability is premised on the observation that organisations usually have an impact on the societies in which they exist and the physical environment (Butler 2014, p. 74). Furthermore, it has been observed that new business ventures are better placed to address sustainability issues as opposed to established organisations because established organisations have to change their culture to be sustainable (Marvel 2012, p. 435). Therefore, entrepreneurs can easily incorporate sustainability in the process of creating new ventures. One of the important aspects of new ventures that helps them to become sustainable is the business model. Magretta (2002, p. 89) states that for new ventures to be successful, they have to be based on a sound business model. A sound business model is one that answers the fundamental questions about the new product that needs to be introduced, how the product will be introduced and how the business will make money from the product (Roberts et al. 2006). In the case of Evolve Skateboards Australia, the founder developed a business model that addressed all the fundamental issues of a sound business model. For example, after identifying a clear need for a perfect motorised skateboard in the market, the founder sought to develop a product that leveraged on advanced technology (Evolve Skateboards Australia 2016). As a result, the new brands of the products of the company addressed the market need and helped the company to achieve economic and environmental sustainability. Timing Minniti, Zacharakis and Spinelli (2006, p. 10) observe that timing is a crucial aspect of the entrepreneurial process. The same authors observe that for a new venture to succeed, the entrepreneur needs to carefully balance the different competing variables of the process of creating a new venture. In practice, the availability of resources, the existence of opportunities and the availability of teams vary with time (Roberts et al. 2006). Therefore, entrepreneurs have to carefully balance these competing variables by choosing times that present the most appropriate periods to launch a new venture. Another way of looking at the concept of new venture creation is that at any given time, it is possible for a new business venture to be overtaken by the competition. Therefore, an entrepreneur has to carefully choose a period that the new venture can be implemented successfully. In this case, the challenge was for the founder of Evolve Skateboards to develop a revolutionary motorised skateboard before another new venture did it. It was based on the urgency to develop a perfect product that addresses the gap in the market that the founder of the company embarked on the project of designing, testing and refining the product while assembling the entire team of the organisation. Conclusion In conclusion, the case of Evolve Skateboards Australia represents all the basic elements that form the theory of the process of creating new ventures. In short, the process reflected the need to strike a balance between the three competing entrepreneurial drivers of the need to create an effective team, obtain resources and take advantage of existing opportunities in the market. Moreover, the founder of the company had to develop a sustainable business model and work to implement it within the shortest possible time to take advantage of the window of opportunity that existed at the time. Therefore, the story of Evolve Skateboards Australia perfectly meets the process of new venture creation that is described in the Timmons Model of the Entrepreneurial Process. References Aidin, S 2015, ‘New venture creation: controversial perspectives and theories,’ Economic Analysis, vol. 48, no. 3-4, pp. 101-109. Bhide, A. 1994, ‘How entrepreneurs craft strategies that work’, Harvard Business Review, March-April, pp. 150-161, viewed 16th December 2016, . Brandstatter, H 2010, ‘Personality aspects of entrepreneurship: a look at five meta-analyses,’ Personality and Individual Differences, pp. 1-9, viewed 18th December 2016, . Butler, D 2014, Business planning for new ventures: a guide to start-ups and new innovations, Routledge, London. Caliendo, M & Kritikos, A 2011, ‘Searching for the entrepreneurial personality: new evidence and avenues for further research,’ IZA Discussion Paper no. 5970, viewed 18th December 2016, . Carsrud, AL & Brannback, ME 2007, Entrepreneurship, Greenwood Press, London. Christensen, C and Raynor, M 2013, The innovator’s solution, Harvard Business School Press, Boston, MA. Evolve Skateboards Australia 2016, Our story, viewed 16th December 2016, . Magretta, J. 2002, ‘Why business models matter’, Harvard Business Review, May, pp. 86-92, viewed 16th December 2016, . Marvel, MR 2012, Encyclopedia of new venture management, Sage Publications, London. Minniti, M 2006, Entrepreneurship, Greenwood Publishing, New York. Minniti, M, Zacharakis, A & Spinelli, S 2006, Entrepreneurship: the engine of growth, Greenwood Publishing, London. Rae, D 2014, Opportunity-centered entrepreneurship, Palgrave Macmilan, London. Roberts, MJ, Stevenson, HH, Sahlman, WA, Marshall, PW & Hamermesh, RG 2007, New business ventures and the entrepreneur, McGraw-Hill, Singapore. Uchino, K 2009, Entrepreneurship for engineers, CRC Press, Boca Raton. Read More