Developing Innovative Ideas for New Companies3

7/29/2019 Developing Innovative Ideas for New Companies3

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Entrepreneurs andstrategic decisions


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Objectives

Discuss the fundamental elements ofentrepreneurial decision-making

Connect cognition to the

entrepreneurial process

Examine strategic decision-making as

a unique and significant tasks for

entrepreneurs


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Decision making is a cognitive process.

Cognitive = Thinking Cognition involves individual decision-making

involving the selection of a specific course of

action that is supposed to bring a certain result.

Decision-making implies choice. Alternative are available is a decision exists.

Exact outcomes are unknown, albeit estimated.


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Reducing uncertainty is critical to effective

decision-making.

How to reduce uncertainty? Gather information

Primary

Secondary Leveraging experience

Past personal experiences

Direct or indirect experiences


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Strategic decisions typically share the same

process.

1. Recognizing a problem situation

2. Generating alternatives

3. Evaluating the various alternatives

4. Selecting the alternative that best

satisfies our evaluation criteria


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What strategic options make sense to enter

the home video rental market?

Source http://www.filmsavior.com


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What strategic options make sense to enter

the home video rental market?


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Source http://tommytoy.typepad.com


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What strategic options make

sense to enter the home

video rental market?

Source http://www.fastcompany.com


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Study of entrepreneurial decision-making

leads to better decisions.

Decisions of entrepreneurs differ from companymanagers

Operate with limited information

Must be action-oriented and decisive Accept risk

Involve major consequences


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Decision-making is a strategic activity.

Setting specific courses of action to reach strategicgoals.

Revenue and profit goals

Market share and competitive advantage Product superiority and technical advantage

Strategic decisions involve critical analysis, resource

investment, and company commitment.


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Strategic decisions share four fundamental

characteristics.

Complexity: facts, variables, and contingencies relevant for thedecision at hand

Uncertainty: all possible outcomes are not known and are

difficult to forecast

Rationality: a specific goal is intended by making a decision

Control: intentional and deliberate actions are made by

decision-makers


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Environment of entrepreneurs is uniquely

challenging.

Source: M.C. Escher


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challenging.

Source: M.C. Escher


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challenging.

Entrepreneurs are doing new things. Entrepreneurs are without the resources and

relationships typical of established

companies.

Uncertainty and complexity levels are high.

Consequences of failed decisions include failed

businesses; significant financial and emotional

pain.


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Summary

Understanding entrepreneurial decision-making critically important for earliest

stages

Without opportunity discovery, theres no

venture

Decision-making is a unique and significant

tasks for entrepreneurs

Requires quick, high-stakes decisions with

incomplete information in a dynamic market

Documents

Developing Innovative Ideas for New Companies3