The Evolution of Jonathan Clarkes Fitness Platform

Review of Start-up Process

Origin of Ideas

All aspiring entrepreneurs must start with an idea. Although many people believe that entrepreneurs are ‘lucky people’ who had ‘Eureka moments’ research has shown that new venture ideas can originate from varies methods including idea search, experience, and effectuation in action.

Idea discovery is the action of revealing something generally unknown and generating wealth from the idea (Fiet 2007). Idea search is a form of ‘idea discovery’, which involves entrepreneurs searching for their ‘big idea’. Neoclassical and psychological theories believe that opportunity discovery is mechanical, as these schools of thought suggest that all people can identify opportunity and that people’s attributes and willingness to take action determines who becomes an entrepreneur. The Austrian theories does not view idea discovery as mechanical as once the assumption of everyone having the same complete set of information is removed any individual cannot identify all possible opportunities (Shane 2000).

This concept has been developed into ‘alertness perspective’, which involves entrepreneurs accidently identifying a discovery that generates wealth without directly searching for it. This implies that true discoveries are unplanned, cannot be anticipated and therefore occur accidently (Fiet 2007). The major limitation of alertness perspective for aspiring entrepreneurs is that it can not offer them any guidance, other than to remain alert (Fiet 2007). Demsetz (1983) states that “if [alertness] is the essence of [entrepreneurial competence], there is another more familiar name for it – luck”.

After discussing alertness perspective Fiet (2007) discusses the introduction of the ‘constrained systematic search’ concept that he developed. This concept relieves concerns linked to ‘alertness perspective’ by refocusing on the search of known information sources as opposed to the vague search for unknown venture ideas. The basis of this approach is to narrow the search area by focusing on areas the entrepreneur already has knowledge/information and experience. This concept links to Kacperczyk and Younkin’s (2017) discussion in The Paradox of breadth. This article discusses how past studies imply that there is a paradox of functional breadth, where entrepreneurs with a wide range of skills may be viewed as illegitimate as they enter a new market. This article discovered that entrepreneurs with a wide set of skills in a narrow market are viewed as more legitimate. Therefore, focusing on a narrower, constrained area in which the entrepreneur has previous knowledge will increase the likeness of discovering a business idea that they can pursue.

Some entrepreneurial ideas may be a result of a spin off from a previous employment. These are start-ups established by entrepreneurs who have previously worked in the field. Spin-off entrepreneurs can be seen as superior to people setting up ‘de novo’ companies as they have prior experience in the field and may already have contacts in the field (Buendtorf and Costa 2018).

From reading literature on idea generation, I believe that aspiring entrepreneurs should remain alert as they may discover an opportunity and focus on areas where they already have knowledge.

Pre-founding Experience

From my analysis of entrepreneurial literature, I conclude that most ideas and discoveries made by entrepreneurs are due to pre-founding experience or knowledge. This strengthens my opinion that not everybody can become an entrepreneur as discoveries are linked to the information you already possess. An article written by Scott Shane (2000) supports this theory as he states that “People recognise those opportunities related to information that they already possess”. He moves on to discuss how different people comprise of different information due to the different lives the live.

Therefore, only some people will be aware of specific customer issues and gaps in the market. Buendtorf and Costa (2018) also support this concept as they state, ‘knowledge and skills acquired in prior employment are crucial determinants of entrepreneurial performance’. Fiet’s (2007) constrained systematic search concept also considers prior experience, which he defines as “understandings derived from a person’s occupation, on-the job routines, job related technology, specialised education, social relations and hobbies.” Venkataraman (1997) suggests that discoveries are generally a result of knowledge acquired from prior experience. As everybody’s prior experience is different, entrepreneurs are not equally competent to discover a wealth generating venture idea.

Neoclassical economic theories disagree with this concept, and assume that people can discover the same opportunities, irrelevant to the knowledge and experience of the discoverer. This school of thought proposed an equilibrium theory, which does not allow people to an opportunity that others may not. This means that those who identify an idea are individuals that choose to become an entrepreneur. In contrast the Austrian theories believe that different people become entrepreneurs, based on the information that they obtain. People who possess ‘idiosyncratic’ information enables them to identify particular opportunities that others cannot see.

Resource Mobilisation

Idea generation is only the first step in an entrepreneur’s journey to success. Once they have developed a viable business idea an entrepreneur must determine how he is going to fund it. Rawhouser, Villanueva and Newbert (2017) subdivide resource acquisition into ‘projective strategy’ and ‘interpersonal strategy’. Entrepreneurs can use different tools to leverage capital; words, actions, associations and in-tangibles.

Projective strategy is orientated around the venture idea. It involves the entrepreneur selling his vision of the business to a resource gatekeeper. The gatekeeper then offers the entrepreneur resources if they believe that they will benefit from the venture (Rawhouser, Villanueva and Newbert 2017). A study carried out in 2003 proves that storytelling can help an entrepreneur secure resources for their venture (Martins, Jennings and Jennings 2007). Effective storytelling will help an entrepreneur succeed if he is attempting to acquire resources through a projective strategy.

In contrast interpersonal strategy focuses on the entrepreneur themselves and their relationships with third parties. They leverage new and existing relationships to acquire capital and other resources for their ventures (Rawhouser, Villanueva and Newbert 2017).

Start-up companies may also leverage their potential consumers to generate resources. If a customer realises the value of the product, they may be willing to help resource it. The leverage assistance value proposition can help clarify what support and resources the customer firm will provide the start-up company and also show what they receive in return. This proposition comes after the start-up company has already convinced the customer of the value of their business proposition (Wouters, Anderson, and Kirchberger 2018).

Resourcing

Entrepreneurs can generate financial resources in several ways, including customer funding, crowdsourcing and venture capitalists. Bootstrapping is a common way for entrepreneurs to start funding their business. It involves starting your business with restricted funds, and possibly sharing workspaces and borrowing equipment.

Customer funding is a beneficial way to fund your start-up as it provides the financial resources you need while allowing you to focus on developing your business idea without the distraction of chasing investors (Mullins 2013). Although it seems like a strange concept to have your customers fund our start-up, when you consider that you already pay certain professional before receiving any product/service, the idea develops into numerous opportunities. Mullins (2013) identified five ways to gather resources using customer funding. The matchmaker model, the deposit model, the subscription model the standardise and resell model and the scarcity model. Each of these models assist an entrepreneur, with restricted funds, in launching their business (Mullins 2013).

Crowdsourcing is another potential avenue to generate resources for a start-up company. Although the concept of having many people funding your start-up is not a new idea there have been platforms developed in recent years to support crowdfunding. It involves numerous investors investing smaller amounts to help a start-up generate financial resources (Mulcahy2013). Companies like Kickstarter have encouraged crowd funding for new businesses, making it cheaper, easier to access and removing the geographical restriction that was there in the past (Fleming, and Sorenson 2016). Unfortunately, there are some drawbacks to crowdsourcing, with the main one being that most start-ups fail within the first four years. Those that have invested in these unfortunate start-ups lose everything (Fleming, and Sorenson 2016).

Venture capitals (VC) have been known to have funded some of the most successful companies worldwide when they were start-ups. Kaplan and Lerner (2010) simply define VC’s as a solution to a problem, “matching entrepreneurs with an idea and no money to an investor with money, looking for a new idea”. However, receiving funding from a venture capitalist is a rare occurrence, and even at that, having a VC fund your company does not guarantee success. There are three activities involved when a VC wants to pursue a start-up. Firstly, they analysis and screen potential business’s, secondly, they draw up a detailed contract and finally they provide start-up companies with advice, contacts and experience in the given field of the new company (Kaplan and Lerner 2010).

Venture Creation Process

In the early stages of a business, the entrepreneur may improvise from time to time. Although improvisation may be a reaction to an unexpected issue, in some occasions an entrepreneur may tactically improvise. Improvisation can be divided into four broad domains; the occurrence of strategic improvisation; tactical improvisation rising to the level of strategy; network bricolage; and improvisational competencies (Baker, Miner, and Eesley 2003).

Improvisation can be essential in some start-ups in markets of high uncertainty as there no previous business to learn from. It can lead to the development of the business idea, contribute to the business’s strategy, network bricolage, which is drawing on the resources already available and finally, improvisational competencies or routines and patterns used to enhance the effects of their improvisation (Baker, Miner, and Eesley 2003).

Effectuation is another method of venture creation. Similar to network bricolage it involves using resources that are already available to develop your business. These resources may be capital, skills or connections. With effectuation the means available are considered instead of the end result. Due to this plans and goals can change and the entrepreneur is always improvising (Sarasvathy 2001).

The opposite of effectuation is causation. Causation focuses on the end goal and selects the means or resources necessary to achieve this goal. This method may be used where the future is more predictable. Entrepreneurs have been known to successfully use both causation and effectuation in their businesses (Sarasvathy 2001).

Effectuation has four main principles that contrast with causation. Effectuation is focused around affordable loss rather than causations expected return. When using effectuation, a business considers strategic partnerships as opposed to competitive analysis. They leverage contingencies to generate profit, instead of using pre-existing knowledge. Finally, they aim to take control of an unpredictable future as opposed to predicting an uncertain future (Sarasvathy 2001).

Evolution of Ventures

Scaling a business can be very difficult for many entrepreneurs. In the early days, the company may have little, or very liberal strategy. As the company grows a management system needs to be introduced, and the entrepreneur needs to develop some strategy for the company so that employees can remain focused.

As the company grows the entrepreneur will need to introduce a more structured management system. Studies have proven that there is a link between an established management system and company growth (Davila, Foster and Jia 2010). The introduction to an established management system can help establish focus with the company. Hamm (2002) wrote that entrepreneurs need to learn to focus on crucial tasks. Focusing on smaller, less important tasks can skew the focus of the whole company. Having a defined management team focus on specific goals can help the company grow.

When scaling a business, entrepreneurs need to understand that their own ways may not be enough, and they need to develop their skills to help the company grow. They need to learn to put the company first and not let loyalty affect the company. If an employee that they were friends with prior to employing them is not a correct fit with the company the entrepreneur needs to let them go. They can’t choose friendship over the scaling of the company (Hamm 2002).

When an entrepreneur scales it is important to consider their past experiences and life issues, as they may subconsciously link to their decision making. This is known as the psychodynamic school of thought and it maintains that’s a person’s past experiences and life issues may contribute to their personal and professional life decisions (Kisfalvi 2002). In the early days of the start-up this personal aspect is what gets the company started. However, as the company scales, the entrepreneur’s own experiences and decisions may not be what is best for the company (Kisfalvi 2002). That is why it is essential for entrepreneurs to be openminded and willing to learn about all aspects of the company when they scale. Being single-minded and solely focusing on the product, and not the business as a whole could jeopardize the whole company (Hamm 2002).

Review of entrepreneurs

There is no definite answer to the question ‘Are Entrepreneurs born or made?’. If entrepreneurs are born it would linked to traits that they have grown up with, confidence, social skills and determination. In contrast, if entrepreneurs are made, they are made up of skills they have acquired through their life.

Although I can not answer the question are entrepreneurs born or made, I can conclude that I believe that not everyone can become an entrepreneur. Robert Baron (2004) supports this by writing that individual mental processes contribute to everything we think, say and do. Optimistic bias, entrepreneurial alertness and systematic processing are all mental processes that vary from person to person. These contribute to how people can analyse situations, identify business ideas and remain optimistic when pursuing a business idea (Baron 2004). Not all people will have the correct frame of mind to carry out these processes.

An entrepreneurial idea is not worth anything unless people are willing to invest and or purchase the product or service. Having people believe in your entrepreneurial idea is a major contribution to the success of the idea and I firmly believe that social capital and social skills can help to enhance this success. Social capital is actual and penitential resources generated from an individual’s relationships with others. Reputation, social class and referrals are all examples of social capital. Social skills are how an individual acts and behaves around and with others.These two combined in my opinion are crucial traits for successful entrepreneurs. (Baron and Markman 2000).

Many people view entrepreneurs as creative risk-takers, who have a high need for achievement. Although these seem like daring, striving characteristics, they can also be deemed as negatives. Kets de Vries (1985) wrote an article on “The dark side of entrepreneurship”, which details how some entrepreneurs are the cause of their own demise. The need for control, sense of distrust and need for applause can engulf some entrepreneurs and skew their focus from developing their own businesses.

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