Management Skills and Entrepreneurship - Essay Example

MANAGEMENT SKILLS AND ENTREPRENEURSHIP By Name Course Instructor Institution City/State Date Table of Contents MANAGEMENT SKILLS AND ENTREPRENEURSHIP 1 Table of Contents 2 1.0 Introduction 3 2.0 Importance of Creativity and Innovation in Entrepreneurship 4 3.0 New Venture Concept 7 3.1 Customer Segments 7 3.2 Value Propositions 8 3.3 Channels of Income 10 3.4 Customer Relationship 10 4.0 Proposed Strategy and Business Model 11 5.0 Avoiding Failure 14 6.0 Conclusion 15 7.0 References 16 Appendix 18 Management Skills and Entrepreneurship 1.0 Introduction Entrepreneurship can be defined as a change process, where partakers take part in a venture with the goal of realising certain aims and ambitions. Innovation is described as implementing ideas that are sourced from creative processes. On the other hand, creativity may be defined as a process of ideas’ generation. Without a doubt, Innovation and Creativity are integral to the life-force of the enterprise; that is to say, performing activities in a different way or performing distinct activities so as to facilitate the entrepreneur to deliver value. Therefore, the value of innovation and creativity is offering a means for astute entrepreneurship by aggressively looking for opportunities. Both innovation and creativity trigger and steer unrivalled entrepreneurship in driving organisational activities regardless of the new directions that are defined by customer preferences and market conditions. According to Babu et al. (2013, p.113) it is the entrepreneur’s responsibility to make sure his/her organisation is flexible, lean, young, and ready for new things so as to unceasingly satisfy the customers. Basically, firms can benefit from their creativity through innovations by offering improved products so as to retain their competitive advantage in the market. The proposed New Venture Concept is akin to Airtasker, a labour sharing financial system that offers both mobile and online marketplace, whereby online users are able to outsource their day-to-day tasks. Through inapp messaging, Airtasker facilitates private communication between the buyer and seller, after they come to an agreement. Imperatively, all users can learn more about the personality of other users by means of their Airtasker’s customised profile. The users’ privacy is protected since Airtasker offers free calls through the apps and the user’s mobile number are not displayed to the public. In this report, an outline of the New Venture Concept that is similar to Airtasker is presented. 2.0 Importance of Creativity and Innovation in Entrepreneurship Drucker (1985) as cited by Rathore (2007, p.1) mentioned that innovation is an entrepreneurship tool and both entrepreneurship and innovation create a need for creativity. Therefore, new machines, new ideas, new songs are examples of creativity; therefore, creativity is about making or bringing about something new. Therefore, creativity is associated with shifting to the unknown. Componential theory of creativity according to Amabile (2012, p.2) is a model of psychological and social components that are needed for a person to generate creative work. The componential theory is based on outcomes or ideas production, which are appropriate and novel to a particular goal. The theory has four components crucial for creative response: intrinsic task motivation, creativity-relevant processes, domain-relevant skills, and the social environment wherein the individual works. Amabile designed the theory so as to become systematically beneficial for both organisational and psychological creativity research. The theory defines the processes of creativity as well as the different effects on the processes together with their outcomes. The creativity level generated by a person according to Amabile (2012, p.3) is the creativity components’ function that operates, then and there, around and within that person. As shown in figure one below creativity surfaces through a confluence of numerous components: Creative Thinking, Knowledge and Motivation: Fig 1: The Three Components of Creativity (Henry, 2006, p.19) Amabile mentions that knowledge is about the information brought about with the goal of bearing on a problem. Creativity needs two form of knowledge: A long-term focus and comprehensive experience about a particular area that enables individuals to develop a technical expertise capable of acting as a basis playground or foundation for creativity in a domain. Simultaneously, creativity depends on a person’s ability to integrate elements that were previously unrelated in a novel way; thus, creating a need for varied interests and wider focus. Therefore, a T-shaped mind is an ideal profile for creativity, with a range of understanding across different disciplines. In terms of creative thinking, Amabile assert that thinking is a crucial feature of the creative process; therefore, crucial aspects of creative thinking as suggested by Amabile include: ability to disagree with others and finding solutions, which deviate from the existing state of affairs; combination of knowledge from fields that were previously disparate; ability to endure dry spells and challenges; and ability to move far from an effort and come back later with a new perspective. Amabile’s work emphasised mainly on the role played by intrinsic motivation and how it can be improved in the workplace as well as the classroom. People are inclined to be more creative when motivated by the work’s challenges, satisfaction, and interests, and not by the external pressures. Theory of effectuation according to Nienhuis (2010, p.10) was introduced by Sarasvathy (2001), which is an entrepreneurial expertise logic. Sarasvathy mentioned that effectuation is predominantly the logic used by expert entrepreneurs to make decisions. Sarasavathy, as cited by Nienhuis (2010, p.10), tries to integrate previous models by Weick, March, and Knight so as to introduce an effectual reasoning model, which clearly addresses three issues, a constructed environment, endogenous goal creation, and a logic of control. Imperatively, effectuation upends underlying reasoning to point out a new link between actions, imagination and means that helps in the generation of meaning and intentions endogenously (Nienhuis, 2010, p.10). The figure below id a depiction of the theory of effectuation: Fig 2: The theory of effectuation (Nienhuis, 2010, p.3) According to Bhuiyan and Baghel (2005, p.761) continuous improvement involves initiatives for improvement, which reduce failures and increase successes. Basically, total quality may be realised if a company pursues continuous improvement by involving individuals from every level of the organisation. Innovation and creativity are associated with continuous improvement since they involve making improvements devoid of necessarily investing heavily. Continuous improvement takes place through evolutionary improvement, wherein improvements happen as a result of deep-seated changes attributed to new technology or innovative idea. Therefore, development and growth cannot be achieved without creative or innovative ideas. When new products are introduced, they are normally viewed as part of the innovative process capable of driving continued development and growth. Porter (1985) as quoted by Okpara (2007, p.11) argued that although all successful businesses have their own strategies, they have achieved competitive advantage through innovative and creative acts. Therefore, entrepreneurship can be described as an innovative process, which involves creating an economic enterprise according to the new product which is significantly different from products offered by the competitors. 3.0 New Venture Concept The new proposed venture concept is similar to Airtasker, whereby everyday tasks will be outsourced. In this case, the employer will create a profile describing themselves and the services they offer in addition to their rates. The workers, on the other hand, will register by completing a basic profile and then will bid for the available projects on an hourly rate. Therefore, the employer will post their projects while the freelancers (workers) bid on them. In consequence, this will support a pricing plan that is very flexible. Undoubtedly, e-commerce has turned out to be the biggest revenue sector with a different business model that fits any form of new start-ups. The goal of many brand manufacturers and online merchants is to sell their products/services virtually with the goal of improving their rate of conversion and acquiring reach. The online marketplace will generate an option for the employer to choose the workers depending on their prices. 3.1 Customer Segments The commercial world has become very competitive; therefore, every organisation must satisfy the customers’ wants and needs, and must draw new customers so as to improve its business. Premkanth (2012, p.33) asserts that customer value is believed to be an element of control for every business strategy; therefore, all organisations must focus on the customer satisfaction. The new venture will be a marketplace where tasks are outsourced and the lowest bidder is awarded the task. Therefore, tasks and projects are posted on the website and the employers wait for the bids. Customer segmentation normally is about creating personalities that with different behaviours. The new venture will target low-class, middle-class and upper-class people who have a lot of tasks, but with no time or convenience of doing them. As mentioned by Aljukhadar and Senecal (2011, p.423), personality and psychological attributes have an effect on the internet use. For instance, consumers’ socialisation motivation has an effect on internet users, which improves socialisation. The customers can be segmented in terms of personality traits, demographics, attitudes and experience. People who frequently use the internet are inclined to use online marketplace. Still, the perceived usefulness and ease of use drive the attitude toward using the online marketplace. Imperatively, attitude toward venturesomeness and innovation are some of the factors that which are crucial in finding potential customers. Type of product and shopping orientations (which involves value, enjoyment, convenience, and necessity) will have a significant impact on the intent of using the proposed marketplace. Most of the customers will be younger males, especially those with greater education, high internet experience as well as higher income. Furthermore, the few elderly consumers are likely to spend more money as compared to the younger consumers. 3.2 Value Propositions The new proposed venture is expected to grow and succeed by providing lots of value to all users. The economic success of the online marketplace as emphasised by Walden (2000, p.2) is based on the social aspects of the Internet. Essentially, the main drivers of value in the online marketplace are the online communities; therefore, disregarding the very different sociological and psychological context involved in this domain can result in business failure. Generating an electronic value plan cannot recognise the business if it is not memorable. Therefore, in order to become memorable, the value proposition must articulate the core elements (price, quality, service and image). When the value proposition’s message is more memorable, the likelihood of success is very high. The value will be created from innovation, complementariness, efficiency and lock-in. The proposed business will use the service, quality, image, and price (S-Q-I-P) approach, which will be aligned with the strategic goals so as to bring about measurable success. Importantly, success can be established by observing the company's values, which have aligned the business strategy (Murphy & Narkiewicz, 2010, p.103). The figure below shows the Customer Value Funnel model that will be espoused by the proposed business: Fig 3: Model of Customer Value Funnel (Murphy & Narkiewicz, 2010, p.101) The new venture seeks to generate a global platform, which offers people as well as businesses of all sizes and types with access to different expertise. The main components of the business philosophy will be to maintain open and honest marketplaces and making sure individual users are treated with respect. The new business seek to maintain the loyalty and satisfaction of all users by providing different support and community features, like customer support boards, bulletin boards, as well as personal pages. 3.3 Channels of Income Similar to Airtasker, the new business will not charge any money for posting the Tasks, but when the task has been completed, the worker will be charged a 12 per cent fee. Basically, this will enable the platform to run smoothly and facilitate the introduction of new remarkable features. Besides that, there will be a membership fee and an additional fee for purchasing ‘connects’ that will be utilised for bidding on projects. The freelancers can as well choose to subscribe to the new business’ premium membership plans for a certain fee. Such membership plans will enable the freelancers to access some of benefits such as to submitting proposals for open jobs; these fees will be the source of the incomes. 3.4 Customer Relationship The relationship that the new business will create with the customers will depend on the communities, automated services and co-creation. The business will embrace communities and create a discussion boards for topics related to the services provided. There will be private and public forums for sharing interests. Importantly, the communities will make discussions about the services provided very easy. The everyday operation of the business, the posting, bidding and sending completed tasks will be an automated service. The tasks posted in the new business website will not be owned by the company, but instead, they will be created by the employers. All parties, the business and the employers (sellers), will need each other so as to create a value proposition. Managing customer relationship is very important because it will improve and sustain the relationship between the business and its customers. Therefore, customer relationship management (CRM) will become the strategic tool of the business for improving the productivity of the business and sustaining the customers’ relationship. CRM will undoubtedly improve the business reputation since it will ensure that the right task goes to the right freelancer at the right time. Jalal and Ibrahim (2012, p.364) argued that CRM improves the perception of the customers on the products and services provided by the firm in the marketplace. Furthermore, CRM can help the company get crucial information required for the values of the customers and also serve as tools for improving trust. 4.0 Proposed Strategy and Business Model The proposed business model is the Transaction Fee approach, whereby the marketplace will take a cut of all the transaction that the platform will generate. This is considered to be a rational monetisation model for both the employers and freelancers, since they are charged after the completion of the tasks. This model will encourages more employers to join the platform; and consequently, improving the supply of the marketplace. Importantly, the transaction fee model will enable the platform to generate more tasks; this, leading to more revenue. A transaction fees based business model will be the most effective and simplest approach for this type of marketplace. As stated by Wen et al. (2001, p.7), a transactional strategy always offers an electronic catalogue of services or products on the market. In this regard, freelancers will look through the catalogue before bidding. Even though this model has numerous hidden hurdles such as transaction security, the company is likely to gain from this model. Basically, the business transaction will involve a process of interaction between market participants such as the employer and the freelancer. Normal transactions will involve the outsourcing of tasks/projects and transfer of money to settle the contracts after the completion of the tasks. As shown in the figure below, transaction can be divided into three phases; the information, the agreement phase, the fulfilment phase (Zumpe & Madlberger, 2007, p.103). Fig 4: Three Phases of Business Transaction (Zumpe & Madlberger, 2007, p.109) A number of strategies will be used; the first strategy will involve the creation of a customer base that is insurmountable by establishing a good customer relationship. Another strategy is focussing on international and domestic trading by ensuring different regional flavours are considered and users are offered the convenience of posting tasks regardless of the language. Besides that, the new business will ensure it maintains a strong community affinity by ensuring there is a direct interaction between the employers and the freelancers in order to create a community of users that is active and loyal. The business will continuously improve the site functionality and features so as to offer the users an open and reliable way of managing the processes on their own. In order to make the marketplace successful, the offerings provided will be enthralling so as to differentiate it from competitors such as Airtasker, Upwork, Elance and others (see appendix one). Furthermore, the business will offer more payment options so as to ease the process of paying for the completed tasks. The Blue Ocean strategy will be convenient for the new business, since it involves a consistent strategic thinking pattern with regard to creating a new market where demand is not fought for, but instead it is created. For that reason, the Blue Ocean strategy will offer the new business with a course of action that will help it avoid intense competition. Imperatively, Blue Ocean Strategy is concerned with how uncontested market spaces are created by companies, which consequently makes competition inappropriate. There are two forms of markets; red and blue oceans, but only firms from the blue ocean markets can realise the actual success. The figure below shows the difference between red and blue oceans: Fig 5: Red Ocean versus Blue Ocean (Rawabdeh et al., 2012, p.392) The blue oceans signify opportunities and markets that are completely new devoid of competition, new customer bases as well as new value creations. In the Blue Ocean strategy, growth is rapid and profitable, demand is generated, competition is inappropriate, and market space has a wide deep potential which has not been explored yet. Chakrabarti (2014, p.70) outlines six principles that all company may utilise in order to effectively devise and execute blue ocean strategy with the goal of improving marketing. The strategies have been divided into two groups, Formulation principles that include four principles and execution principles that include two principles as shown in the figure below: Fig 6: Six Principles of Blue Ocean Strategy Formulation (Chakrabarti, 2014) As mentioned by Chakrabarti (2014, p.71), the blue ocean may be utilised as a new technique for improving the company’s revenue because a new environment has emerged. A number of tools such as Product data management (PDM), Customer relationship management (CRM) and Supply chain management (SCM) may be utilised to generate competitive advantage. Therefore, implementing blue ocean strategy successfully is very important and no business can afford to disregard it in today’s competitive business world. With the view to Porter's Generic Competitive Strategies, Wit and Meyer (2010, p.338) posits that the position of the company depends on whether the firm’s profitability is below or above the industry average. Basically, when a firm’s profitability is above average, then it is considered to be sustainable competitive in the long run. The proposed business will strive to gain a competitive advantage both through differentiation and low-cost. In order to achieve improved performance, the firm will have to pursue three generic strategies; differentiation, cost leadership as well as focus. In terms of cost leadership, the company will strive to become the low-cost platform in this type of industry. For this reason, the company will pursue proprietary technology, economies of scale and will also look for sources of cost advantage. Porter observed that when a company is able to realise and maintain overall cost leadership, then it will achieve sustainable competitive advantage as long as the prices are maintained within the industry average. Based on differentiation, the company will strive to become unique along the dimensions, which are extensively esteemed by the users. With regard to the generic strategy of focus, the company will focus mainly on outsourcing of tasks. 5.0 Avoiding Failure Basically, the long-term advantage will be derived from the use of dynamic capabilities in configuring the firm’s resources. Although the dynamic capabilities are needed, lack of proper organisational processes and resources will make it hard for the firm to create a competitive advantage. Failure can be avoided if the needed skills are used together with other firm’s capabilities and assets. Importantly, the firm’s innovation capacities can help the firm to avoid failure since it facilitates the creation of new capabilities. Knowledge Management Capabilities together with the Technological capabilities are some of the capabilities that determine the firm’s innovative outcomes. Furthermore, marketing capabilities are crucial since they offer input for the process of innovation. Importantly, cooperation capabilities will enable the new business to avoid failure. Cooperation between companies has recently increased, especially in the domain of innovation; therefore, cooperation will be a vital strategic weapon for competing with other firms. The company will pursue strategic alliances so as to be able to improve its market share and realise its strategic goal by combining activities and resources. Cooperation is considered important because the company is in the start-up phase. Therefore, creating and sustaining alliances will be very important since it will enable the firm to get a hold of to the needed complementary assets. As cited by Faria and Dolfsma (2011, p.6), cooperative strategies provide crucial advantages to companies with no resources or competencies since cooperation enables them to connect with companies that have complementary assets or skills. Besides that technological capabilities will enable the company to prevent failure since when a company is more innovative, it is likely to embark on innovation avenues which are technologically viable. Basically, being able to integrate the existing technological knowledge with those emerging can enable the company not just avoid failure, but also become successful. When the firm has technological capabilities, it is likely to come up with new products that can improve the competitive position of the firm. Besides that, Knowledge Management (KM) capabilities can also help the firm avoid failure since they normally result in innovative prowess. Imperatively, the KM capabilities will prevent the firm from focussing on innovative projects that are non-beneficial. Having proper KM procedures and capabilities will definitely reduce the likelihood of failure. Having marketing capabilities can also prevent failure. Marketing capabilities enable a company to effectively market their products or services; thus, leading to improved performance. The likelihood of the new business to grab a substantial market share soon depends on the marketing capabilities of the firm considering that when the firm understands the market, it is able to choose the products or services that can succeed in the market. 6.0 Conclusion In conclusion, this report has offered an outline of the New Venture Concept that is similar to Airtasker. As mentioned in the report, developing and implementing strategy will be important for the proposed business so as to be able to grow and become competitive. In order to be successful, the business will have to offer different payment methods so as to protect the business bottom line. Innovation and creativity will enable the business to create new demand and through entrepreneurship, the novel product or service will be brought to the market. Imperatively, for companies to gain competitive edge they must be innovative; therefore, innovation is without a doubt the key to entrepreneurship. Innovation and creativity as argued in the report will be the life-force of the proposed business. The business will strive to do things in a different way than its competitors such as Airtasker and Elance. Therefore, the value will be generated from innovation and creativity, which will also act as an opening for astute entrepreneurship. As evidenced in this report, firm uses different business models so as to be innovative and successful. In view of this, companies that operate in blue ocean environments are mostly inclined to attract new groups of customers. As a blue ocean company, the new proposed business will achieve things by simultaneously pursuing low cost and differentiation. As a result, it will generate a number of capabilities that would most likely prevent the firm from failing. 7.0 References Aljukhadar, M. & Senecal, S., 2011. Segmenting the online consumer market. Marketing Intelligence & Planning, vol. 29, no. 4, pp.421-35. Amabile, T.M., 2012. Componential Theory of Creativity. Working Paper. Boston, MA: Harvard Business School. Babu, R.R., Krishna, M.M. & Swathi, A., 2013. Role Of Creativity And Innovation In Entrepreneurship. Innovative Journal of Business and Management, vol. 2, no. 5, pp.112 - 115. Bhuiyan, N. & Baghel, A., 2005. 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Effectuation and Causation: The Effect of Entrepreneurial Logic on Incubated Start-up Performance The predictive value of effectuation in business plans. Master's Thesis. Enschede, Netherlands: University of Twente. Okpara, F.O., 2007. The Value Of Creativity And Innovation In Entrepreneurship. Journal of Asia Entrepreneurship and Sustainability, vol. III, no. 2, pp.1-14. Premkanth, P., 2012. Market Segmentation and Its Impact on Customer Satisfaction with Especial Reference to Commercial Bank of Ceylon PLC. Global Journal of Management and Business Research, vol. 12, no. 17, pp.32-40. Rathore, N., 2007. Creativity, Innovation And Entrepreneurship: Potential Partners Or Distant Cousins? Abhinav Journal , vol. 1, no. 10, pp.1-6. Rawabdeh, I., Raqab, A., Al-Nimri, D. & Haddadine, S., 2012. Blue Ocean Strategy as a Tool for Improving a Company's Marketing Function: The case of Jordan. Jordan Journal of Business Administration, vol. 8, no. 2, pp.390-407. Walden, E., 2000. Some Value Propositions of Online Communities. Electronic Markets, vol. 10, no. 4, pp.1-6. Wen, J., Chen, H.-G. & Hwang, H.-G., 2001. E-commerce Web site design: strategies and models. Information Management & Computer Security, vol. 9, no. 1, p.5±12. Wit, B.d. & Meyer, R., 2010. Strategy Synthesis: Resolving Strategy Paradoxes to Create Competitive Advantage : Text and Readings. ‎Boston: Cengage Learning EMEA. Zumpe, S. & Madlberger, M., 2007. A transaction-based Framework for Business Models in Electronic Commerce. In 11th Pacific-Asia Conference on Information Systems. Auckland, New Zealand, 2007. University of Auckland. Appendix Competitors and Pricing Strategy Read More