Challenges to the consulting pipeline

1. Increased staff utilisation Over the last year, staff utilisation amongst consulting
firms has shown a marked increase, jumping from an average at 65% in the second
half of 2004 to 75% at the start of the same period in 2005. With strong sales growth
projected for the short-medium term many consulting companies are looking for an
annual growth of 10-15%, with some looking to grow as much as 30%+. In view of
the current high utilisation rates, consulting companies will need to hire aggressively
in order to meet these growth expectations.
2. Volatility in consulting demand The level of M&A provides a good overall
indication of firms desire to grow which feeds through into traditional management
consultancy business, as companies spend on business strategy and due-diligence, and
increase marketing consultancy. The European M&A market stood at $1 trillion in
2000, halving in 2001 to 2003 and then recovering dramatically to $1 trillion this
year. Consulting companies focusing on outsourcing, cost reduction or government
work have boomed during the 3 year downturn. These areas have counter-cyclical
qualities as companies seek to reduce costs and government spending counter-acts a
corporate slowdown. In contrast, firms focusing on business strategy have been
seriously weakened by the downward part of the cycle, with some firms off-loading
half or more of their consulting staff after 2000. With the cycle turning up from 2004,
these firms have been re-hiring aggressively to try to meet the surge as companies
focus on growing top-line. This process is disruptive and expensive: having lost some
of their best talent and having destroyed goodwill, firms then need to invest in
recruitment to rebuild. With such volatility in the demand for consulting, firms need
to adopt an intelligent approach to managing their pipeline, an approach which seeks
to balance consulting demand and supply of consulting talent. Effective associate
staffing could be integral to this approach, enabling firms to have the flexibility to
meet demand surges and remain lean during droughts without off-loading core staff.
3. High staff turnover High levels of staff turnover, traditionally associated with
sectors such as retail (42%), present a further challenge to managing the consultancy
pipeline. UK consultancy staff turnover levels rank comparably high, at an annual rate
of 20%. To put it into perspective, this is 2% higher than the staff turnover at UK
private sector call centres - described as having crisis levels of staff turnover - and is
also higher than both the European and US averages. High staff turnover is a major
problem for consulting companies in any business environment although an even
more serious problem for consultancy companies looking to grow their business.
Associate staffing, by offering a flexible resource, could provide the solution to this
problem.
4. Demand for experienced specialists Another potential problem for consulting
companies is the demand for experiencedspecialists due to an increased sophistication
amongst the purchasers of consultancy services. This demand has resulted in a wave
of new consultancy companies in recent years, focussing on particular sectors such as
Troika (financial services) or on a particular consulting skill, such as 7 days
(operational change). These companies succeed by leveraging deep expertise in their
chosen areas, and by being upfront to their clients about their competencies. They are
staffed by people with years or decades of relevant experience in the specific
industries or consulting areas.
The challenge facing consulting companies is how to recruit the specialist expertise
required to win and deliver work in the new consulting environment cost effectively.
It is little surprise that associates are an increasingly important part of the consultancy
staffing mix.
The Future of Consulting Reflects Its Past
By J. Hall Thorp
Over the decades, the management consulting industry has responded
creatively to the changing needs of clients, leading to the growth of a
thriving industry. As we consider the challenges facing clients today
and in the future, it’s helpful to reflect on the historical changes in
focus and methods of management consultants who came before us.
The insights of history provide guidance as consultants seek the
innovations to meet the future needs of clients.
Milan Kubr, an authority on the management consulting industry, reminds us that
“Consultants are inventors and creators of their own markets and their future.” In the
early years of the industry, consultants built highly flexible businesses on two market
realities: the rise of management as a science, and evolving economic conditions.
The result: a human capital-intensive industry with “booms” and few busts.
Consulting firms have readily grown and shrank in response to client demand
The Beginning
Virtually all consulting firms in the United States at the turn of the twentieth century
concentrated on specific technical answers. For example, Arthur D. Little was an MIT
professor and is generally considered the first management consultant to create an
entity that employed other consultants in the U.S. (1890).
At that time, management consultants were not only technically oriented, but tied to
large cities, where a critical mass of clients could be served economically. In 1926,
McKinsey & Company was launched to serve general management clients. McKinsey
was a new type of consulting firm focused on business strategy, while also providing
subject matter experts for technical issues.
The emerging economy of World War II and the post-war economic environment
created new demands for consultants. As the U.S. economy grew, companies such as
the Boston Consulting Group (1963) created new ways of examining industry,
products, and process measures. During the 1970s, accounting firms (e.g., Arthur
Anderson) and high-tech companies developed consulting practices that leveraged
their on-going client relationships and augmented their core businesses.
The revenue growth of management consulting firms correlates with the general
cycles of the U.S. economy. A notable exception to this trend occurred in the 1980s
and 1990s when consulting firms grew faster than the economy. The resulting
overcapacity forced some firms out of the market.
The future of management consulting will likely continue the historical trend of
specialization—with extremely focused expertise. While this specialization has
previously been industry-specific, innovative firms will provide expertise on specific
management issues.
However, unlike consultancies that have historically been referred to as “boutique”
firms, subject-matter expert firms will likely need to cultivate strategic alliances with
other management consultants, so clients can benefit from specialization within a
network of quality providers. This hub-and-spoke model will allow all aspects of
knowledge that clients may need to be "plugged in" with comprehensive quality
assurances.
The history of consulting is very similar to the evolution of legal, accounting, and
other professional service firms. Each of these industries is primarily reactive to client
demand.
Management consulting is also similar to banking. Just as banks provide financial
capital, consulting provides intellectual capital. In addition to expanding product
offerings, consulting firms provide their service in a manner similar to merchant
banking. In merchant consulting, the consulting firm has a “net share” interest in the
client. It becomes an investor. Some venture capital firms are also utilizing this
approach as their investment transcends capital, and provides additional value by
aligning companies in their portfolio of companies while also providing consulting
services.
As inventors and creators of our own markets and future, management consultants
will continue to rely on the delivery of knowledge and general economic conditions.
We can benefit from examining our past to understand the types of expertise our
clients need from us. This is our source of value, and as history indicates, this changes
as our client’s needs change.
Consulting firms that specialize in specific aspects of organizational productivity,
while creating strategic alliances with complimentary organizations (within and
outside of the consulting industry), will be strategically positioned to benefit from
whatever future actually unfolds.
Organizational productivity is likely to continue migrating from process to people
domestically, while being more process oriented in less-developed countries.
Consulting firms that focus on maximizing their clients’ employees will be well
positioned. In addition, those firms willing and able to partner with clients so both
parties have the same interests will likely be well-received by clients.
In conclusion, our past points to our future, but only by pointing out that our future
will require creativity just as in our past. The role of innovation for consulting firms
will continue to increase, not only in how we add value for our clients, but also in
how we structure our practices to implement such innovative strategies.
Today, we should continue to align our firms with others that provide complimentary
services and have the same organizational values and ethics, while maintaining our
flexibility to respond to general economic conditions. Innovative is to the key to our
prosperity.

Overview of Industry
According to Wikipedia, "Management consulting refers to both the industry of, and
the practice of, helping organizations improve their performance, primarily through
the analysis of existing business problems and development of plans for
improvement. Organizations hire the services of management consultants for a
number of reasons, including gaining external (and presumably objective) advice,
access to the consultants` specialized expertise, or simply as extra temporary help
during a one-time project, where the hiring of more permanent employees is not
required."

A much simpler definition of what Management Consultants do is analyze, diagnose,

and recommend solutions to business problems across a range of industries, functions,
and organization types. Consulting firms vary in size from huge global organizations
that cover a wide range of issues (examples include McKinsey, BCG, Bain, IBM
Global Services, and Accenture) to smaller boutique shops that specialize in a
particular industry or functional areas. Core skills required in the industry include
structured problem solving, analytical skills, structured communication, ability to
work in teams, leadership acumen, and overall professional presence.
Macro Trends
What current news stories are dominating the industry?

The big news stories dominating the Management Consulting industry are all related
to the current global economic crisis. The recession is the news story in business in
decades and it has produced ripple effects across just about every industry, including
Consulting. Some of the stories resulting from the recession's effect on the Consulting
industry include:

- Negative impact on client companies in several industries (including automotive,

airlines, energy, and retail)

- Consolidation within the Consulting industry as a strategic response to the down

economy

- HR moves at Consulting firms in an effort to "right-size" due to potential pull-back

by existing and propective clients
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What major trends will drive growth in the business over the next 12-24 months?

Some trends that will drive growth in the industry over the next 12-24 months are:

- Consolidation among firms: M&A activities aimed at adding competencies,

leveraging shared industry/functional strengths, promoting efficiency in operations.

- Innovation in solving business problems: The current economic crisis is something

that hasn't been seen for decades. Firms that develop innovative solutions will be
presented with significant growth opportunities as client work toward an economic
recovery.

- Entrepreneurship: Down economies often present the best opportunities for

launching one's own business and that will likely happen in the current case. With so
many talented professionals having been laid off, many people have turned to
independent consulting/contracting as a means to make a living without a corporate
paycheck. Chances are that many of these independent consultants will incorporate
and form small boutique firms that will add to overall industry growth as the global
economy recovers in the next 12-24 months.
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What challenges are facing the industry?

Some of the challenges currently facing the industry are:

- The war for talent between Consulting firms and with companies in other industries
(investment banking, financial services, technology, etc.)
- Opinion among some existing and prospective clients that Consulting fees are a
discretionary, non-core expense that should be reduced or eliminated in the face od a
down economy

- Perception issues for Consulting in the greater overall market related to the current
economic downturn

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Business Fundamentals
Describe the role of each of the major administrative and operating areas of
companies in this industry?

Specific titles vary from firm to firm, but the individual roles are usually as follows:

- Analyst: Entry-level consulting role with candidates usually coming in straight from
undergrad; Often a two-year program with Analysts expected to venture off and get
some other experience (different job, grad school, etc) before coming back as an
Associate; Role involves strategic analyses, participating in team problem solving,
client interaction and leadership, and communication of recommendations and
analyses

- Associate/Consultant: Candidates often come in after business school or some other

graduate program, but there are also cases where Analysts are promoted directly to
Associate and others when candidates come in as experienced hires from other
industries; Role involves the same sort of tasking as the Analyst, but there's an
expectation of greater business knowledge/insight and greater role in client
leadership; People usually stay in this role for 2-4 years, depending on the firm

- Manager: At this point, the consultant start driving the problem solving effort and
leverages the work of the Analysts and Associates to do so; Role involves high-level
problem structuring, resource allocation, process management, direct client
leadership, "managing upward", and providing quality control on final deliverables;
People usually stay in this role for 2-3 years, depending on the firm

- Associate Partner: Transition role between Manager and Partner where a person
begins to add value to multiple teams and/or clients concurrently; At this point, the
consultant also takes a greater role in business development and selling work for the
firm; By this point, the consultant should have developed an area of functional and/or
industry expertise that he/she will leverage as a platform to work toward a promotion
to Partner; Consultants usually stay in this role for 2-4 years, depending on the firm

- Partner: The "mountain top" of the consulting industry; Partners work to balance the
tasks of maintaining the client relationship at the highest levels, working to sell work
at current and prospective clients, and provide value to individual project teams
(which are often geographically dispersed); Partners are relied upon for their industry
and functional expertise often drive the problem solving effort of on-the-ground team
based on their previous experiences in addressing similar client issues
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What are the drivers of profitability for companies in this industry?

Consulting is a "people business" and, as such, the majority of each firms cost
structure goes toward salaries and benefits for staff. So, on the cost side, the primary
drivers of profitability are compensation/benefits expenditures and utilization of
consulting staff. Compensation can vary from person to person, but usually stays
within a certain range for staff in a given role. The utilization point is a key one
because the goal should be to have consultants staffed on projects more often than not
so they can generate revenues to account for their individual people costs. That said,
consulting firms usually keep a close watch to make sure consultants don't end up
with utilizations that are too high, which brings about the risk of burnout.

On the revenue side, companies focus on the number and duration of projects and the
pricing of each of those projects. The goal of the Partners (and often the Associate
Partners) is to strike a balance between these factors to maximize revenue to be
booked while concurrently building a backlog of work that will generate more
revenues in the future. Also, an important issue on the revenue side is the length of
relationships with clients, which reduces the effort to sell new project work and
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Competition
Who are the major industry participants and what are their strengths & weaknesses?

According to Wikipedia, "Currently, there are four main types of consulting firms:

1. Large, diversified organizations that offer a range of services, including

information technology consulting, in addition to a strategy consulting practice (e.g.
Accenture, Capgemini, Deloitte, IBM). Some very large IT service providers have
moved into consultancy as well and are also developing strategy practices (e.g.
Wipro, Tata, Infosys)

2. Medium-sized information technology consultancies, that blend boutique style with

some of the same services and technologies bigger players offer their clients (e.g. IDS
Scheer, arinso).

3. Large management and strategic consulting specialists that offer primarily strategy
consulting but are not specialized in any specific industry (e.g. Bain & Company,
Booz & Company,McKinsey & Company, The Boston Consulting Group, Oliver
Wyman, A.T. Kearney).

4. Boutique firms, often quite small, which have focused areas of consulting expertise
in specific industries, functional areas or technologies (e.g. Heidrick & Struggles,
Towers Perrin, the Avascent Group, Newton Industrial Consultants, Kaiser
Associates) . Most of the boutiques were founded by famous business theorists. Small
firms with less than 50 employees are often referred to as niche consultancies (e.g.
Agility Works, iProCon HCM). If they have a unique concept and market it
successfully, they often grow out of this segment very fast or are bought by larger
players interested in their knowhow."

It's difficult to provide strengths and weaknesses of all of the players in the industry
because I've only worked at two of the large consulting firms. Also, the determination
of strengths and weaknesses for specific firms are rather subjective. When evaluating
a firm, a prospective hire should look at several factors that could be indicators of job
satisfaction and interest in the role, including company culture, specific area(s) of
focus, growth potential and advancement opportunities within the firm, brand in the
overall marketplace, and methods used in completing projects. less

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Research
What are the best ways to get smart about this industry (i.e. websites, books, people,
exercises)?

Some good ways to get smart about this industry are as follows:

- Review the Management Consulting sections of general business sites, like

Vault.com

- Visit sites or read periodicals devoted to the Consulting industry to learn about
industry, such as ConsultingMagazine.com and its companion periodical

- Read case interview prep guide books to get an idea of the type of problem solving
and issue analysis used at Management Consulting firms (examples include "Case in
Point" and "Ace the Case")

- Review corporate websites of a range of consulting firms across specializations and

company sizes

7 daily challenges for every entrepreneur

October 20, 2006 14:32 IST

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You had a great idea, a well-drafted business plan, some cash to begin with,
a talented team and you managed to rake in more funds. Now, you are running your
own business. So far, so good. But, are you equipped for the challenges that lie
ahead? I share with you my entrepreneurial experience of six years in the form of
seven daily challenges that every entrepreneur-in-action faces, more as a routine than
an exception.
1. No rules protecting employers
There are rules, the world over, upholding the interests of employees. But there is
little an employer can do, if at the receiving end. For example, if you discover that an
employee has secured a job with your company by means of duplicate certificates or
fake experience, all you can do is to ask them to leave with full pay. You hired
him/her and it is solely your mistake!
Similarly, there are instances where you hire someone at a very handsome package
for a crucial position. But, by the time you train him/her to understand the
responsibilities, you are gifted with such a beautifully crafted resignation that you
wonder why the artist didn't try a hand at creative writing for Bollywood.
What takes the cake is a situation where, on the second day of the month, you realise
a person performing a highly skilled task decides to quit for a better paying job and
doesn't have time for the handover. Be prepared for such situations and ensure there
are some multi-taskers in the organisation to come to the rescue.
2. Global competition

You submit a proposal for a requirement to a prospective customer, after taking into
account the cost of your employee, his allowance, certain percentage of the money
that has gone into building the product and a little margin. You do the best costing
possible, as you want to penetrate this account and have a long-term association with
the client. You'd think your price would be best, considering the Indian advantage of
labour, materials, etc.
Then comes the bid award day and the contract goes to some other company in some
part of the world, ready to deliver what you promised, in a similar aggressive
timeframe, similar reference customer base, at half the price you quoted. Yes, you
heard it right -- half the price! This is a reality you have to live with. So, when you
submit a proposal to one of your prospects, keep in mind not only your country, but
also the rest of the world. After all, the world is a global village now, thanks to the
Internet revolution.

3. Changes around the globe

You have made some profit, and plan to use it to fuel your global expansion. You hire
the best man, train him and get him stationed in another country to give a local
presence and comfort factor to your prospective customers. You are burning a lot of
money on a daily basis with a hope that, sooner or later, you will start getting returns.
But, something happens and you have to shut shop. No questions asked.
The reasons vary, from political changes in the target country to a failed feasibility
study. Now, considering you are not a topnotch multinational able to hire a big
consulting company to advise you, be prepared to burn some money here and there.
There are similar situations, for example, in my company, which depends heavily on
the Middle East market -- all our support departments (sales, pre-sales, recruitment,
operations, etc) are idle for the entire month of Ramadan [ Images ] every year. Such
changes have to be managed with a positive attitude.
4. Balance between projects and personnel

Usually, with startups or in the early stages of expansion, you have a project but no
one to execute it. And, if the founders are techies, you have no choice but to burn the
midnight oil and finish it somehow. Most likely, if this is the first assignment with the
customer, you cannot afford to compromise on quality -- after all, you are expecting
bigger business from the same customer. Such an experience makes you wise enough
to do some advance hiring the next time around and, guess what -- this time, the
opposite happens.
The project that was supposed to come in yesterday now lingers for months. Every
time you pay those salaries, you think, 'Did I make the right decision? Am I doing
justice to my investors' money?' Over time, you will learn to balance the two
situations by pitching for regular work to help you tide over.
5. Delayed payments

You finished the work as planned and it is now time to collect payment. You have
made plenty of plans for that money, from hiring more people in sales, to acquiring
another office, to investing in a new idea. But, for no apparent reason, the money is
delayed, especially if you are dealing with a large customer. The only thing you hear
is 'Sorry, it is just a procedural delay', or 'You will receive your payment soon.' But
nobody knows when.
So, how do you pay your employees and vendors? This, I must confess, is one of the
toughest parts of being an entrepreneur. The only option you have is to forego your
salary. In fact, pull out all your savings and put them in the company to bridge the
gap. If still does not suffice, go to the bank with some 'tangible' property. That means,
if you have a flat, you mortgage it. In most cases, the family is not even made aware
of this, because it is a short-term problem and you do not want to scare them.
6. Return to the investor

So far, you may have heard stories of successful entrepreneurs becoming venture
capitalists to help budding entrepreneurs. You may also have been advised not to be
'sticky' and to try and have a smaller pie of a bigger cake, rather than a bigger pie of a
smaller cake. Sounds great! But, in reality, let's admit, these 'mother hen'
entrepreneurs are successful because they are smart. They know how to grow their
money and that is precisely the reason why they have so much money under their belt
to manage.
So, if you end up taking money from them, be prepared to answer many a difficult
question on a daily basis. If you can't manage that, you are out -- of the very own
company you built! Remember, a bigger pie of a small cake is any day better.

7. How society perceives you

As an entrepreneur, I remember approaching a leading Indian bank [ Get Quote ] for a

home loan, where I was rejected for being "self-employed." And, believe it or not, a
software engineer working in my own company got his loan sanctioned. If you are an
Indian, an entrepreneur and unmarried, I give you my best wishes, because there is
slim chance that a typical Indian middle-class parent will select you for his or her
daughter.
You are perceived as a person without job security, unlike your classmates or ex-
colleagues, who are sought after for being placed in well-known multinationals.
Surprisingly though, if there is a natural calamity or any other cause needing
attention, society expects successful entrepreneurs to donate generously, and they do.

So, if you thought being entrepreneur is fascinating and fun, yes, it is, but it comes
with its own set of problems. However, once you learn the ropes, you start enjoying
the ride. Once an entrepreneur, always an entrepreneur.
 The author is Director of the Bangalore-based TechUnified, which provides
software products to banking and telecommunication customers globally. He
is an alumnus of NIT, Surathkal.

What is Entrepreneurship?

The definition of entrepreneurship has been debated among scholars, educators,

researchers, and policy makers since the concept was first established in the early
1700’s. The term “entrepreneurship” comes from the French verb “entreprendre” and
the German word “unternehmen”, both means to “undertake”. Bygrave and Hofer
in1891 defined the entrepreneurial process as ‘involving all the functions, activities,
and actions associated with perceiving of opportunities and creation of organizations
to pursue them’. Joseph Schumpeter introduced the modern definition of
‘entrepreneurship’ in 1934. According to Schumpeter, “the carrying out of new
combinations we call ‘enterprise’,” and “ the individuals whose function it is to carry
them out we call ‘entrepreneurs’.” Schumpeter tied entrepreneurship to the creation of
five basic “new combinations” namely: introduction of a new product, introduction of
a new method of production, opening of a new market, the conquest of a new source
of supply and carrying out of a new organization of industry. Peter Drucker proposed
that ‘entrepreneurship’ is a practice. What this means is that entrepreneurship is not a
state of being nor is it characterized by making planes that are not acted upon.
Entrepreneurship begins with action, creation of new organization. This organization
may or may not become self-sustaining and in fact, may never earn significant
revenues. But, when individuals create a new organization, they have entered the
entrepreneurship paradigm.

The Supply of Entrepreneurship and Economic Development :

British economists such as Adam Smith, David Ricardo, and John Stuart Mill briefly
touched upon the concept of entrepreneurship, though they referred to it under the
broad English term “business management”. Whereas the writings of Smith and
Ricardo suggest that they undervalued the importance of entrepreneurship, Mill goes
out of his way to stress the significance of entrepreneurship for economic growth. In
his writings, Mill claims that entrepreneurship requires ‘no ordinary skill”, and he
laments the fact that there is no good English equivalent word to encompass the
specific meaning of the French term ‘entrepreneur’.

The necessity of entrepreneurship for production was first formally recognized by

Alfred Marshall in 1890. In his famous treatise Principles of Economics, Marshall
asserts that there re four factors of production: land, labour, capital and organization.
Organization is the coordinating factor, which brings the other factors together, and
Marshall believed that entrepreneurship is driving element behind organization. By
creatively organizing, entrepreneurs create new commodities or improve “the plan of
producing an old commodity”. In order to do this, Marshall believed that
entrepreneurs must have a thorough understanding about their industries, and they
must be natural leaders. Additionally, Marshall’s entrepreneurs must have the ability
to foresee changes in supply and demand and be willing to act on such risky forecasts
in the absence of complete information.

Marshall also suggests that the skills associated with entrepreneurship are rare and
limited in supply. He claims that the abilities of entrepreneur are “so great and so
numerous that very few people can exhibit them in all in a very high degree”.
Marshall, however, implies that people can be taught to acquire the abilities that are
necessary to be an entrepreneur. Unfortunately, the opportunities for entrepreneurs are
often limited by economic environment, which surrounds them. Additionally,
although entrepreneurs share some common abilities, all entrepreneurs are different,
and their success depend on the economic situations in which they attempt their
endeavors.

One school of thought on entrepreneurship suggests that role of the entrepreneur is

that of a risk-bearer in the face of uncertainty and imperfect information. Knight
claims that an entrepreneur will be able to bear the risk of a new venture if he believes
that there is a significant chance of profits. Although many current theories on
entrepreneurship agree that there is an inherent component of risk, the risk-bearer
theory alone cannot explain why some individuals become entrepreneurs while others
do not. Thus, in order to build a development model of entrepreneurship it is
necessary to look at some of the other characteristics that help explain why some
people are entrepreneurs; risk may be a factor, but it is not the only one.

Modern school of thought claims that the role of the entrepreneur is that of an
innovator; however, the definition of innovation is still widely debatable. Kirzner
suggests that the process of innovation is actually of spontaneous “undeliberate
learning”. Thus, the necessary characteristics of the entrepreneur is alertness, and no
intrinsic skills-other than that of recognizing opportunities-are necessary. Other
school of economists claims that entrepreneurs have special skills that enable them to
participate in the process of innovation. Leibenstein claims that the dominant,
necessary characteristics of entrepreneurs is that they are gap-fillers i.e. they have the
ability to perceive where market fails and to develop new goods or processes that he
market demands but which are not currently being supplied. Thus, entrepreneurs have
the special ability to connect different markets and make up for market failures and
deficiencies.

Though the idea that entrepreneurs are innovators is largely acceptable, it can be
difficult to apply this theory of entrepreneurship to less developed countries (LDCs).
Often in LDCs, entrepreneurs are not truly innovators in the traditional sense of the
word. Entrepreneurs in LDCs rarely produce brand new products: rather they imitate
the products and production processes that have been invented elsewhere in the world
(typically in developed countries). This process, which occurs in developed countries
as well, is called “creative imitation”. Creative imitation takes place when when the
imitators better understand how an innovation can be applied, used, or sold in their
particular market niche (namely their own countries) than do the people who actually
created or discovered the original innovation. Thus, the innovation process in LDCs is
often that of imitating and adapting, instead of traditional notion of new product or
process discovery and development.

By combining the above thoughts it can be generalized that entrepreneurs are risk-
bearers, coordinators and organizers, gap fillers, leaders, and innovators or creative
imitators. Thus, by encouraging these qualities and abilities, governments can
theoretically alter their country’s supply of domestic entrepreneurship.

Basic Types of Entrepreneurship

Apparently, it can be said that the starting point of entrepreneurship would define its
type. The two types of entrepreneurship may be classified as:

1. Opportunity-based entrepreneurship- an entrepreneur perceives a business

opportunity and chooses to pursue this as an active career choice.

2. Necessity-based entrepreneurship- an entrepreneur is left with no other viable

option to earn a living. It is not the choice but compulsion, which makes him/her,
choose entrepreneurship as a career.

Creating Indian Entrepreneurs

A recent Mckinsey & Company-Nasscom report estimates that India needs at least
8,000 new businesses to achieve its target of building a US$87 billion IT sector by
2008. Similarly, in the next 10 years, 110-130 million Indian citizens will be
searching for jobs, including 80-100 million looking for their first jobs. This does not
include disguised unemployment of over 50% among the 230 million employed in
rural India. Since traditional large employers- including the government and the old
economy player-may find it difficult to sustain this level of employment in future, it is
entrepreneurs who will create these new jobs and opportunities.

Today’s knowledge based economy is fertile ground for entrepreneurs, in India. It is

rightly believed that India has an extraordinary talent pool with virtually limitless
potential to become entrepreneurs. Therefore, it is important to get committed to
creating the right environment to develop successful entrepreneurs. To achieve this,
India must focus on four areas.

1. Create the Right Environment for Success: Entrepreneurs should find it easy to
start a business. To do so, most Indians would start slow with capital borrowed from
family and friends, the CEO playing the role of salesman and strategist, a professional
team assembled months or perhaps years after the business was created, and few, if
any, external partners. Compare this with a start-up in Silicon Valley: a Venire
Capitalist (VC) or angel investor would be brought in early on; a professional
management team would drive the business; a multifunctional team would be
assembled quickly; and partnerships would be explored early on to scale up the
business. A major challenge for India is to create a handful of areas of excellence- the
breeding ground where ideas grow into businesses. Fr example, Gurgaon and
Hyderabad for remote services, or Bangalore for IT. One way of strengthening these
areas is to consider the role of universities and educational institutions-places where
excellence typically thrives.

2. Ensure that Entrepreneurs have access to the Right Skill: A survey conducted by
McKinsey & Company last year revealed that most Indian start-up businesses face
two skill gaps: entrepreneurial (how to manage business risks, build a team, identify
an get funding) and functional (product development know-how, marketing skills,
etc.) India can move toward ensuring that the curriculum at universities is modified to
address today’s changing business landscape, particularly in emerging markets, and to
build ‘centres of entrepreneurial excellence’ in institutes that will actively assist
entrepreneurs.

3. Ensure that Entrepreneurs have access to ‘Smart Capital’: For a long time, Indian
entrepreneurs have had little access to capital. It is true that in the last few years,
several Venture Funds have entered the Indian Market. And, while the sector is still in
infancy in India (with estimated total disbursement of less than US$0.5 billion in the
year 2003), VCs are providing capital as well as critical knowledge and access to
potential partners, suppliers, and clients across the globe. However, India has only a
few angel investors who support the idea in the early stages before VCs become
involved. While associations such as TIE are seeking to bridge the gap by working at
creating a TIE India Angel Forum, this is India’s third challenge creating a global
support network of ‘angels’willing to support young business.

4. Enable Networking and Exchange: Entrepreneurs learn from experience-theirs and

that of others. The rapid pace of globalization and fast growth of Asian economies
present tremendous opportunities and challenges for India. Through planning and
focus, India can aspire to create a pool of entrepreneurs who will be the region’s –and
the world’s-leaders of tomorrow.

The Future of Entrepreneurship

Both the Central Government and various State Governments are taking increased
interest in promoting the growth of entrepreneurship. Individuals are being
encouraged to form new businesses and are being provided such government support
as tax incentives, buildings, roads, and a communication system to facilitate this
creation process. The encouragement by the central and state governments should
continue in future as more lawmakers are realizing that new enterprises create jobs
and increase the economic output of the region. Every state government should
develop its own innovative industrial strategies for fostering entrepreneurial activity
and timely development of the technology of the area. The states should have their
own state-sponsored venture funds, where a percentage of the funds has to invested in
the ventures in the states.

Society’s support of entrepreneurship should also continue. This support is critical in

providing both motivation and public support. A major factor in the development of
this societal approval is the media. The media should play a powerful and
constructive role by reporting on the general entrepreneurial spirit in the country
highlighting specific success cases of this spirit in operation.

Finally, large companies should show an interest in their special form of

entrepreneurship-intrapreneurship-in the future. These companies will be increasingly
interested in capitalizing on their Research & Development in the hyper competitive
business environment today.

Conclusion

The definition of entrepreneurship has evolved over time as the world’s economic
structure has changed and become more complex. Risk taking, innovation, and
creation of wealth are the criteria that have been developed as the study of new
business creations has evolved.

The decision to start an entrepreneurial venture consists of several sequential steps (1)
the decision to leave a present career or lifestyle. (2) the decision that an
entrepreneurial venture is desirable ; and (3) the decision that both external and
internal factors make new venture creation possible.

There are both pushing and pulling influences active in the decision to leave a present
career: the “push” of job dissatisfaction or even layoff, and the “pull” toward
entrepreneurship of seeing an unfilled need in the market place. The desirability of
starting one’s own company is strongly influenced by culture, sub-culture, family,
teachers, and peers. Any of these influences can function as a source of
encouragement for entrepreneurship, with support ranging from government support
that favour business to strong personal role models of family or friends, Beyond the
stage of seeing entrepreneurship as a “a good idea”, the potential entrepreneur must
possess or acquire the necessary education, management skills, and financial
resources for launching the venture.

The study of entrepreneurship has relevance today, not only because it helps
entrepreneurs better fulfill their personal needs but because of the economic
contribution of the new ventures. More than increasing national income by creating
new jobs, entrepreneurship acts as a positive force in economic growth by serving as
the bridge between innovation and market place. Although government gives great
support to basic and applied research, it has ot had great success in translating the
technological innovations to products or services. Although intrapreneurship offers a
promise of marriage of those research capabilities and business skills that one expects
from a large corporation, the results have not been spectacular. This leaves the
entrepreneur, who frequently lacks both technical and business skills, to serve as the
major link in the process of innovation development, and economic growth and
revitalization. The study of entrepreneurship and
education of potential entrepreneurs are essential
parts of any attempt to strengthen this link so
essential to a country’s economic well-being.

The Challenges of Entrepreneurship

Employees get by while entrepreneurs get rich.

Which would you rather be?
It happens every day, and probably more frequently
now than ever before.
Maybe it follows that groan of despair as the gas

Steve Coerper
tank and the checkbook balance both approach ‘E’ and its still four days before
payday. Perhaps it’s a layoff or a pay cut. Maybe it’s just a feeling of urgency or
uncertainty when a close friend loses a job, or an evening news report of another plant
closing.
Whatever triggers it, you decide it’s time to break out of the 8-to-5 rat race, quit
punching someone else’s clock, and “go into business for yourself.”
“Look,” you explain to your spouse, “the home-based business industry is booming.
Did you see those folks on TV? They only work a few hours a day, from home, and
they are already debt-free. We can start our own business and eventually quit our
jobs.”
I’ve felt your pain … and your enthusiasm. Yes, you CAN do this. But there will be
some unexpected challenges, and you will be more likely to succeed if you prepare
for them in advance.
The challenges are often not at all what one might expect. The biggest challenge, by
far, is the paradigm shift from ‘employee’ mindset to ‘entrepreneur’ mindset. This
won’t happen overnight; nor will it happen automatically. You must self-consciously
recondition the way you think.
How DO you think?
This article contrasts two mindsets, that of ‘employee’ and that of ‘entrepreneur.’
Bear in mind that the discussion is on the way people think, not what they are doing.
An employee is used to thinking of value in terms of time and effort. For instance, if
an employee takes an hour to create a tool or device, he would sell his creation for the
value of the hour he spent making it, plus the cost of materials and “a little extra” for
profit. If he thinks of himself as worth $25/hour and raw materials cost $10, then $40
would probably be close to his asking price.
An entrepreneur would realize that his device can save someone five hours of work.
So the value he perceives for his device is attached to its utility. How long it took him
to create it would be irrelevant. An entrepreneur might see the same device as worth
$200 if the person using it is able to avoid $250 or $300 of expenses he would
otherwise incur.
For an employee, time is money. For an entrepreneur, leverage is money. Employees
‘work hard,’ and their efforts and rewards are linear. Entrepreneurs ‘work smart’ and
their efforts and rewards are exponential. For instance, an employee makes a widget
in an hour, two widgets in two hours, ten in ten hours. An entrepreneur would be
more inclined to sell widgets or teach people about widgets, because these activities
are scalable. That is, he can teach just one person about a widget in an hour, or in that
same hour he could teach a thousand people the same thing. It takes no more effort to
teach a thousand people than it does to teach just one. However, with more students
comes greater benefit. The entrepreneur understands these economies of scale and
takes advantage of them. Employees don’t, and may even think that this sort of
leverage is, somehow, dishonest or immoral. He might reason that since the effort of
the teacher didn’t change with the size of the class, the benefit to the teacher shouldn’t
grow with the number of students.
Employees tend to think win-lose. There’s a saying, “Employees work just hard
enough to not get fired, and employers pay them just enough to keep them from
quitting.” An attitude of ‘just getting by’ is common for someone in the employee
mindset, but is unthinkable for the successful entrepreneur. Unfortunately, many
budding entrepreneurs are deceived by unrealistic promises and projections, and they
may expect their new venture to run on auto-pilot after they get a web site up and run
a few ads. Doing as little as possible, and doing as much as possible, are polar
opposites. Successful entrepreneurs are always in the latter group.
Employees tend to think of getting, where entrepreneurs tend to think of giving.
What are the main concerns that a prospective employee brings to the interview?
“How much will you pay me, what are the medical benefits, how much time for
vacation?” Entrepreneurs are more focussed on, “What are your needs? How can I
help you? How can I help you save money?” Again, these are polar opposite ways of
thinking. Entrepreneurs hire employees, not the other way around. And employees
get by while entrepreneurs get rich. Which would you rather be?
Finally, employees tend to think short-term, and entrepreneurs think long-term. An
employee wants to get paid this week, and an entrepreneur realizes it may be months,
or maybe even years, before his business is paying well enough to support him. It’s
the difference between pumping water and planting seeds. If you start pumping, you
will get water quickly, but the flow stops when you stop working. If you plant seeds,
you will eventually get fruit. And you will continue to get fruit long after you’ve
planted your last seed.
There are other challenges, to be sure: uncertainty, financial struggles during start-up,
long hours, non-supportive spouse or friends, changing markets, etc. But the biggest
single reason that entrepreneurs struggle is because they haven’t learned to think like
entrepreneurs. It’s not technique, or the ‘opportunity’ or the market. It’s attitude.
Fortunately, there is no great mystery in overcoming this one major challenge. It’s a
matter of desire and discipline. Simply find successful entrepreneurs and ask them
what books they recommend. Then, turn off your TV and start reading. Saturate your
mind with the wisdom of those who have already succeeded. Read about what they
have done and how they did it, then model your own efforts after theirs. At the same
time, shield yourself as much as possible from the ‘employee’ mindset. Be aware that
your thinking habits are deeply entrenched, and it will take consistent effort over time
to change.
The Bible speaks directly to this when it says, “For as he thinketh in his heart, so is he
,” and “Keep thy heart with all diligence; for out of it are the issues of life.” Many are
the testimonies of people who thought success was “out there” – some goal to be
reached or thing to be obtained, and then discovered afterward what God has been
telling us all along.
In short, if you think like a successful entrepreneur, and work like a successful
entrepreneur, you will be a successful entrepreneur. The only person standing in your
way is you.

Technology can be a very valuable tool for business owners trying to streamline their
businesses and increase productivity--and just make their lives easier--but it’s a tool
that's multifaceted, complex and just a plain mystery to some. If used effectively,
you'll reap huge benefits for your business, but using it improperly may mean more
inefficient systems, lost customers and a host of other problems.
When it comes to managing your technology needs, there are a number of challenges
facing business owners today. The four biggest ones are a lack of education about
technology options, an inability to prioritize which technologies are most important at
what time, how to go about integrating technology into your business and, finally,
how to protect it. Let's talk about that lack of education first.
Lack of Education
Although it seems that technology gets easier and easier to use every year, for many,
technology is still a “closed box.” And this closed box creates a digital divide. Take
your website, for instance. It’s pretty easy to create one, but the digital divide part
comes into play when your competitor has features on their site that enables them to
provide better customer service than yours does. And while it's easy to blame your
weaker site on a lack of money, that's most likely not the reason your competition has
a feature that your site doesn't. The real reason is that they had the vision (or
education, if you will) to hire an expert or do it by themselves using a low-cost hosted
application.
Content Continues Below
What it comes down to is this: Because you didn't know you could add an instant chat
tool to your website for just a few dollars per month--and probably didn't even know
such a service existed--you didn’t have it on your website and your competitor did.
So how can you educate yourself about what's out there that you should have?
• Set a goal to read the technology sections of a few small-business-focused
magazines on a weekly or monthly basis, or subscribe to a few free online
newsletters focused on small-business technology.
• Regularly keep in touch with your local tech advisor and let them know you
want them to keep you informed about the technologies you should know
about that could help your growing business.
• Take advantage of free and/or low-cost technology seminars offered by your
local chamber of commerce, the SBA or other business organizations.
Inability to Prioritize
Maybe you know about the latest and greatest technologies already and have a super
consultant to guide you. Since you most likely have a limited amount of time and
money to implement the technology you need, it’s important to have a technology
plan in place to prioritize what technology you decide to implement and when.
Let’s say, for instance, that your company’s sales force is growing and you need to
consider implementing a wireless e-mail system. Then your marketing manager tells
you that you have to expand your marketing department and need to consider adding
WiFi in your office to accommodate the new employees. About this time, you also
realize that more and more sales are happening outside your local region and you
should expand your website to include better customer service and sales features.
In this kind of scenario, it's vital to work within a technology plan (just like your
business plan) and consider what your goals are for the near, mid-term and long-range
future. Using a technology plan will help you wisely invest in the right technology for
your business at the right time. Without a technology plan, you’ll always feel like
you're running after the “technology train” instead of managing it.
Integrating Information
When you first started out, it's likely that you began using Microsoft Excel to store
critical facts and figures. As your business grew, you might have then begun using a
PDA and Microsoft Outlook to store customer information. A number of your
employees now use ACT! to manage customers while your marketing manager uses a
hosted application. Congratulations! You've now graduated to multiple silos of data,
not one of which is connected or integrated.
As your business grows, it's absolutely essential that you ensure your business’s data
is integrated as much as possible. Your inventory, sales data and marketing
information need to be linked to together to best serve your customers and increase
your profitability.
When inventory levels are low, you don’t want to promise a customer you can get
them something you really can’t deliver. If a very important customer regularly buys
from you, you should know about it and be able up-sell them on another product to
compliment their purchase.
Integrating your company’s information is critical to growing your business, and you
need to find a way to do that. Whether you figure it out yourself or hire an IT person
to help out, don't neglect this critical part of your technology plan.
Data Protection & Security
Another critical challenge to your business is how to protect your data from any
number of internal and external threats. Hackers want to steal it. Floods, fire,
earthquakes and storms can destroy it. Disgruntled employees want to erase it (after
selling it to your competition). You might accidentally delete it.
In order to ensure your data is as protected as possibly, you must do three things: 1)
protect it from hackers and others who shouldn't have access to it; 2) install a well-
thought-out backup plan to ensure your data is backed up should it get lost; and 3)
ensure you can recover your data in a timely fashion.
In this article, I won’t go into the details of data security, but these two articles offer
suggestions on how to handle it:

David Finkel
Become a Blogger

For the past decade I’ve worked with hundreds of thousands of entrepreneurs and
businesspeople, helping them grow their businesses and invest their wealth. Over that
time I’ve watched so many of these intelligent and hardworking people get stuck by
the same three pitfalls that once upon a time trapped us in the stressful,
underperforming, frustrating world of the self-employed.
The goal of this short article is to highlight these three challenges so that you know
what you’re up against. Half the battle is accurately framing the question: What
challenges will I encounter? This short article will help you do just that — frame the
challenges you face.
The first challenge to overcome is what I call the Self Employment Trap™. That’s
when instead of creating a business, most entrepreneurs merely create a job for
themselves. They have achieved the satisfaction that comes along with their own
businesses, only to find that this freedom has its price: Daily attendance is mandatory
in order for the business to succeed and be profitable. In a sense, rather than creating
their own business these entrepreneurs have instead created their own jobs, with all of
the responsibilities that go along with it.
The second challenge successful entrepreneurs face is that while they have developed
the business skills they need to grow their business, very few of them have cultivated
the personal wealth skills they need to build their wealth independent of their
business. This is extremely shortsighted and risky. They have all their economic eggs
in the basket of their business. Plus, they lack the financial fluency to intelligently and
effectively manage their wealth and invest it wisely.
For this group, a lack of financial fluency often leads to poor decisions after they no
longer have their businesses. They wake up one day without their business, and with
nothing to show for their years spent building their business.
To create the wealth you truly desire, you must understand that your business is a
piece of the puzzle, an important piece, but not the only piece. You must develop
your wealth skills in parallel with your business skills.
The final challenge you face comes years into your successful business when you
wake up one day and ask yourself the painful question: Is this all there is? To truly
be successful your business must be about more than the money. You must find a
deeper meaning, and to have a sustainable business, you must help your employees
and customers find that deeper meaning
Again my goal in this brief article was to frame out the big three challenges you will
need to face as you grow your business and your wealth. The work of overcoming
these challenges will occupy much of your focus in the years ahead.
http://www.allbusiness.com/territories-dependencies/disputed-areas/11484171-1.html

Today, with the internet boom, entrepreneurs have become one of the most dynamic
forces in the economy. Entrepreneurs are now driving the technology boom, which is
itself driving much of the world's economic growth. This makes entrepreneurs very
important from a macro-economic perspective. They have become a broader
economic phenomenon that has a major impact on the economy. As the globalism of
business becomes even more widespread, this impact will be felt even more deeply.
Entrepreneurs are already becoming a major force in developing nations and in the
economy worldwide.
The scope of what entrepreneurship involves will continue to change and evolve as
the world continues to change and evolve, and yet there are some common issues of
how to start a business, how to finance the business, how to run the business that
within this community we can share and learn from each other. While we still have
many heroes and stories, entrepreneurism is an established field with a wide range of
issues at all stages of the enterprise.
A common denominator for all entrepreneurs is the challenge of starting a business,
be it through inventing something, looking for a new idea within a business, finding
the right opportunity to break into a business or buying into a franchise. And all of
these take planning - organizing all the aspects so that you reach your goals. All
entrepreneurs are also faced with financing their entrepreneurial venture. Even
intrapreneurs usually are faced with financial hurdles within corporate rules. So
unless the venture comes from your own pocket getting money is a challenge that
requires preparing funding proposals or applications to be written and/or presented for
loans, venture capital, angel investors or even IPO's. There is so much information
written about these stages of an entrepreneurial venture that sorting the good from the
bad is an overwhelming challenge in and of itself.
Once past those challenges, however, one would think there would be smooth sailing.
Given the business has a good plan, everything should proceed with minor glitches.
However, the implementation stage seems to be the real make-or-break point of an
entrepreneurial venture. There are hypotheses that part of the problem is that idea
people and implementation people are very different breeds of people, but there are
enough exceptions to that rule that is a difficult position to defend. More realistic,
perhaps, is that there are such a wide variety of skills needed at the implementation
stage, that no one person can have the skills to manage all the functions well. The real
talent is for entrepreneurs to recognize what they do well and then find employees or
subcontractors who can fill the gaps.
One way to look at this implementation stage is to look at how many different skills
are involved in operating a business. Operating a business involves employees,
marketing, advertising, sales, communications, public relations, legal needs,
government regulations, equipping the office, risk management, disaster planning,
crisis management, insurance, technology, hardware, software, the internet, and the
financial aspects of the company - bookkeeping, managing debt, taxes, and barter.
Without a strong technical basis, there is no business. Above and beyond this,
however, is the conceptual aspect of management: ethics, leadership, growth
philosophy, and even the exit strategy of the company. These are much less tangible,
yet set the overall theme and direction that the business will take.
How is an entrepreneur to deal with all this overload of challenges? The good news is
that there are plentiful resources: discussion groups, educational resources,
professional associations, and publications to turn to for support and counsel. One
could also say that having so many available resources is also bad news because one
other element that entrepreneurs have in common is lack of time -- sorting through
those resources to find the ones that work for you can be an arduous and painful
process. That is what this site is really about -- a place that helps people running small
businesses find the valuable information they need to find solutions for their
particular needs and interests.