What is entrepreneurship? It might seem like a simple question, but the definition of entrepreneurship can be both flexible and unpredictable. According to Mark Zuckerberg, the successful co-founder, and CEO of social networking site Facebook, “Entrepreneurship is about creating change, not just creating companies.”
While the term entrepreneurship has been around for decades, its basic definition has remained the same. However, the possibilities and opportunities have evolved over time. Options to become a successful entrepreneur and start your venture are inexhaustible these days. This increased opportunity is due to many factors, including technology.
In this guide, we will study the characteristics of entrepreneurship. Our study will ask what entrepreneurship is and what role it plays within our society. Let’s get started.
The Definition of Entrepreneurship
One of the definitions of entrepreneurship is that it is the process of developing and managing any small business. Some also define it as the willingness to create venture capital-backed startups by executing their business ideas. In spite of the differences in definition, all experts agree that the key components of entrepreneurship are leadership and innovation.
Entrepreneurship has played a vital role in the economic growth of the global marketplace. We all know about innovations like railroads, electric service, and the computer. Who knows what else the future will bring as technology advances. All these changes are the result of entrepreneurship.
Even though the concept of entrepreneurship has existed for centuries, there used to be less room for risk-taking or discovery. Modern entrepreneurship is a risky business venture, but it is also highly rewarding when it pays off. Businesses created to enhance society and make the world a better place fit the definition of entrepreneurship.
Who is an Entrepreneur?
An entrepreneur is a person who focuses on starting a business venture to make a profit. Another entrepreneur’s definition is that they are innovators who invest time, money, and resources in bringing a fresh idea to the market. Over 400 million entrepreneurs exist in the world. Around 27 million entrepreneurs are based in the United States today, according to a recent report.
However, being an entrepreneur is much more than being a business founder. For example, take Steve Jobs or Bill Gates. They are the best examples of entrepreneurs because they have made an enormous impact on the world by seeing the world differently. Where most people see problems, entrepreneurs see solutions and opportunities. They see a need that can be met with the products and services they provide.
The Difference between Entrepreneurship and Business
Nevertheless, it is essential to note that there is a difference between entrepreneurship and business. Not every business creator or business owner is an entrepreneur. Starting a business to provide existing products or services similar to offerings already in the market is not considered entrepreneurial. The entrepreneurial business venture needs to offer an original process, product, or idea to fill an unmet need. Entrepreneurial opportunities are endless because our evolving society demands innovation to keep up with modernization. Without this originality, our world would not be as advanced as it is today, especially in the fields of technology, culture, and science.
Creative Destruction
Successful entrepreneurs have the power to change the world by inventing new products, processes, and services. Their contributions cause creative destruction and enable economic growth. Destroying smaller, less efficient businesses to expand their companies to a larger scale is inevitable. In other words, entrepreneurs with ideas and skills ensure that their ventures and products replace existing businesses that are no longer creating value for customers.
An example of modern creative destruction is the internet. Many industries were profoundly affected by the arrival of the internet. It destroyed a lot of small local businesses but created many new ones online. The need for skills, talents, and products remained the same or even increased. Let’s take the example of Amazon. This bookselling enterprise thrived while driving thousands of local booksellers out of business. In this way, the old ways of selling books had to be destroyed to free up resources and utilize them for innovation. And by supporting new ways of doing things, entrepreneurs create new markets and employ thousands of people.
The term “creative destruction” was coined by Joseph Alois Schumpeter (1883-1950), the prominent Austrian-American economist. According to Schumpeter, the process of evolution praises innovation and entrepreneurship and penalizes less efficient ways of organizing resources. The ultimate goal is progress and growth.
Types of Entrepreneurship
The definition of entrepreneurship is often vague. One of the main reasons for this is that there are different types of entrepreneurship:
- Small Business Entrepreneurship
- Scalable Startup Entrepreneurship
- Social Entrepreneurship
- Serial Entrepreneurship
- Large Company Entrepreneurship
Let’s discuss each of these, one at a time.
Small Business Entrepreneurship
The majority of businesses today are still small businesses. A small business is any business that has less than 500 employees. These can include sole proprietors, partnerships, corporations, and LLCs. Most small businesses are barely profitable, and they cannot provide the scale to attract venture capital. Examples of small business entrepreneurship include mom-and-pop shops that will stay in the family and local businesses. These can include consultants, hair salons, grocery stores, plumbers, and other small industries.
Scalable Startup Entrepreneurship
In scalable startup entrepreneurship, individuals start a business believing that their idea can make a massive impact on the world. They have the entrepreneurial spirit needed to be successful. Their financial investments come from venture capital, and they hire the most brilliant and capable employees. Over time, their goal is to find a scalable business model and grow the company. However, not many businesses are scalable startups because there is too much risk capital involved. An excellent example of this type of entrepreneurship is Facebook.
Social Entrepreneurship
Social entrepreneurs are individuals who create products and services to solve social problems and needs. Their goal is not to make money, but to create positive changes and make the world a better place. Social entrepreneurship can be non-profit, for profit, or hybrid.
A great example of social entrepreneurship is Scott Harrison, the founder and current CEO of the non-profit charity Water. He has been very successful in delivering clean drinking water to more than a million people in 17 different countries around the world.
Serial Entrepreneurship
A serial entrepreneur is someone who has a lot of business ideas and who is consistent at starting new entrepreneurial ventures and implementing those ideas. After they achieve success with the previous venture, they move on to a new one, or they run multiple businesses at the same time.
Large Company Entrepreneurship
Large company entrepreneurship is the process of developing new ideas and opportunities within a large company. Innovation is the core of this type of entrepreneurship. These businesses continuously work on improving their position among the competition, offering new products to meet changing technology and customer needs. These companies choose to either partner with another innovative business, or buy them to acquire the intellectual capital they developed.
The Importance of Entrepreneurship
Entrepreneurs are business leaders responsible for radical innovations, and who are not afraid to take action on their own to improve society. The goal of entrepreneurial activity is transforming people’s lives and creating higher standards of living overall. Here are a few reasons why entrepreneurship is essential in society.
Entrepreneurship Drives Innovation
Entrepreneurship and innovations go hand in hand. The process of innovating might be related to the progress of new technologies, the creation of new or improved goods and services, or doing something revolutionary. Innovation improves productivity while keeping capital and labor requirements consistent. Increased productivity contributes to economic growth because some changes create entirely new markets. The result is improved standards of living.
Entrepreneurship Creates Jobs
Entrepreneurial ventures lead to the creation of new jobs. Entrepreneurs with successful business ideas first employ themselves. As their company grows, more jobs are created, and they employ more people. As a result, these businesses are lowering the unemployment rates in their communities. That’s because, with more people employed, the number of people actively seeking work is lower.
Entrepreneurship Creates Social Change
By offering a unique product or idea, entrepreneurs break away from the established social practices. They indirectly support economic freedom by providing individuals with choices, so they no longer have to rely on outdated technologies and systems. These entrepreneurial activities result in an improved quality of life. Some entrepreneurial businesses dedicated to creating solutions help more impoverished communities have access to necessities like drinking water. Others inspire by donating to charities and non-profit organizations, thereby making a long-lasting impact on the human race.
Characteristics of an Entrepreneur
Although entrepreneurial ventures have their path, entrepreneurs share many common traits and characteristics. They follow recommended standard business practices by building their entrepreneurial business around their idea, creating a business plan, researching the market needs, and assuming the risk for its success. They usually finance their operations with their own money, venture capital, or obtain funds from angel investor resources.
Some people believe that entrepreneurs are born with entrepreneurial traits, while others think that anyone can become an entrepreneur. Either way, they all have a few personality traits in common.
Self-confidence
Believing in yourself is crucial in this career. You need to trust your decisions and skills, and truly believe that you can achieve your goal. Self-doubt happens, but an entrepreneur will overcome it.
Passion
As Steve Jobs once said, “People with passion can change the world.” Entrepreneurs are passionate, and they are extremely dedicated to the businesses they create. That’s one of the main reasons for their success. If there is a passion, there is success.
Optimism
Entrepreneurs are dreamers, and for them the glass is always half full. They believe in their ideas, even when the chances for success are minimal. Unlike others, they see problems as business opportunities. With their businesses, entrepreneurs always focus on moving forward and doing more than ever before.
Resourcefulness
An entrepreneur knows how to make the most of what they have. Lack of resources, knowledge, and assets won’t stop them from achieving their goals. They do not quit when they hit an obstacle. Instead, they face challenges head-on and work hard to overcome the barriers to success.
Vision
Entrepreneurs are visionaries who see opportunities everywhere. They are constantly looking for ways to develop an idea or improve existing products. Above all, they envision the future, which is why they know how to reach their end goal.
Flexibility
As an entrepreneur, you need to be flexible to a certain degree. To stay on top of your industry, you need to be able to adapt to changes and challenges. Entrepreneurs need to be willing to make adjustments and manage a business according to market needs.
Creativity
Entrepreneurs think outside the box and don’t see things in the same way as everyone else. It is the big ideas that come from this way of thinking. Creativity is using your imagination to put your plans into motion.
Risk-Taking
Entrepreneurship involves having the courage and ability to take risks. If you don’t take your chances, you won’t get anywhere. An entrepreneur thinks of risks as opportunities. Potential failure does not scare or stop them. And what’s more, they see tasks as rewards. One of the most famous risk-takers is Richard Branson, the founder of Virgin.
Reasons Why People Become Entrepreneurs
They Want to Change the World
Entrepreneurs are passionate about changing the world for the better. They want to do something meaningful and build social value, so they develop their business as a service to others. They drive innovation, create jobs, and give back to their communities. For them, success is about bringing changes to the world, not merely changing their own life for the better. Some examples of entrepreneurs who changed the world include:
- Henry Ford, the founder of Ford Motor Company
- Jeff Bezos, founder of Amazon
- Larry Page, co-founder of Google
- Nikola Tesla
- Oprah Winfrey
They Want Autonomy
An entrepreneur wants to run their businesses how they see fit. They want to control their progress, have the freedom to take risks, and succeed on their own terms. Entrepreneurs prefer to be their own bosses.
They Want Flexibility
An entrepreneur doesn’t prefer the typical 8-5 work schedule. They want flexibility, and they are always looking to free themselves from these constraints. For them, it will make all the difference. However, this doesn’t mean entrepreneurs are working fewer hours. Instead, they often work more or longer hours, but flexibility gives them more control. It also doesn’t restrict them from shaping their life how they see fit.
They are Ambitious
Another reason why people become entrepreneurs is that they love reaching challenging goals. And in entrepreneurship, there is no limit to what they can achieve.
They Want to Leave a Legacy
Entrepreneurs often want to create an idea, product, or service that will outlast them. Some want to build a brand that will become an institution, while others want to secure the future for their heirs. Ultimately, they all want to leave behind an innovation that impacts others and improves their lives in some way.