What came into your mind if you were asked to describe a relationship between “network” and “businesses”? This week, I have learned about the network perspective on entrepreneurship. It made me think of one intriguing business in which the success of it has relied heavily on network building!!! It was “Amway”, the business that is originated in the United States, and is well-known in Asia.
Amway has more than 500 lists of consumer products. Its ability to spread the products and access to many customers lies on its network marketing. Let’s look at the picture. In the network, the owner was positioned at the center. Then, he created and maintained direct relationship with some people (alters). Each of these people would store Amway products and create each own network to help spread the products to customers rapidly. The relationship between people in the network could be seen as “up line” and “bottom line”. People might have two positions at the same time. The one who positioned in the bottom line would have to pay to their up line for the products at discounted price, and sell it at normal price. Thus, they gain benefits from the difference. Moreover, the rule of this network is that the more sales you make, the more discounts you will get next time when you pay yours up line for the products. In addition, if you could suggest someone to join this business with you (become a new member of the network), that person will be positioned as your bottom line. Then the same process occurred. That person would have to pay you for the products and get it sold. If he is expert at selling, he would have to get more products from you, which in turn stimulate your sales and make you receive more discount from your up line, and therefore, you would gain more from the difference. Thus, this system motivated person in the network to find customers and to suggest others to become their bottom line. The result is an unending chain!!!
This networking strategy allows the owner to get various benefits from people in the bottom line (sales, feedback from customers), without having to establish a direct relationship. He just contacted someone who could provide that linkage. Importantly, it could be noticed that even his products not yet been sold to customers, the owner could make a lot of sales from product that each person in the network pay to store it for sell. This was the smart way to use network as a strategy!!!
Hi fellow students,
When you have a thought of making a new product or service and see the opportunity it may succeed it is a long way untill it hits the market. When you develop a product in the lab or something like it, a garage just like Steve Jobs. According to this article written by Markhum (2002) you need champions, resources and formal development processes to overcome the valley of death. This valley sounds dangerous but in the end all entrepreneurs who want to achieve succes have to overcome this valley.
Valley of Death is the decision space between existing research resources and commercialization resources. The reason of this gap is the culture gap between the people on the left (research) and on the right (commercialization). Both sides need translation from the other side in order to make the own side succesful.
Like I already mentioned, you need a champion. In this article I don’t mean the German football team but someone who’s in between both sides and is excellent in translating to both sides. Without this champion there is no mutual understanding. The work of a champion is crossing the valley of death, in the following order he discovers that the research has commercial value, manifest the discovery as a product, communicate the potential through a compelling business case, aqcuire resources needed to establish potential than he uses resources to reduce risk. When the champion gets the resources he seeks approval of the project for formal development and translates the project into the criteria used for approval. After setting up the criteria the champion decides to approve or not approve project (the approval itself is not done by champion). When this is al accepted and aprover he and others will develop and launch the product.
Since there is often no reward and little encouragement for championing a project, a champion must be passionate about the project and willing to do the necessary extra work. In addition, a champion needs knowledge and skill about how to promote projects. While some people with raw enthusiasm get a project approved and implemented, those champions who possess developed skills, a strong track record, and years of experience shepherding projects succeed far more often.
Markham, S. K. (2002). Moving technologies from lab to market. Research-Technology Management, 45(6), 31-42.
Joep van Gelder
Introduction to Entrepreneurship
Yet another blog! How exciting! This excitement is because of the challenge at ACE@VU. The Amsterdam Center for Entrepreneurship is an expertise center and network for entrepreneurship in Amsterdam. The first foundations were laid in 2006 and via the name CASE (Center of Amsterdam Schools for Entrepreneurship) it became ACE. It is a collaboration between the UvA, VU, HvA and AHK and it plays an important role when it comes to research and education regarding entrepreneurship. Its target group consists of students, teachers and researchers.
Today we met our guide for this gazelle challenge. He is a very nice man and he is as enthusiastic as we are. He told us that we will start next week. We are going to start with literary research on gazelle entrepreneurs, people who represent fast growing enterprises. One good example of a gazelle entrepreneur is Mark Zuckerberg, who created the hugely popular Facebook and became the second youngest billionaire at the age of 23. After the research we will create a survey or test for participants of the master study entrepreneurship. With help of this survey or test, we will try to predict which of the participants of the master study have potential to be a gazelle entrepreneur. This is going to be a very challenging task, but we believe we could be able to do a good job.
If rumors are correct, we will have our own office spaces at the fifth floor of the W&N building at the VU campus. How exciting! We will look like professionals and we should act accordingly. For me, this means coming with a good model to predict which persons will become a gazelle entrepreneur. It is a long term project, however, and we will meet again in ten years to see whether our predictions were correct. Hopefully I have a job by that time. More about the internship and the gazelle spotting challenge soon! See ya!
Joep van Gelder
Because of information asymmetry, SMEs seek advice, as this will probably lower their search and decision costs. Entrepreneurs of these SMEs are actively seeking information about products, customers and costs in the market. By using marketing techniques, more entrepreneurial firms benefit from it more than less entrepreneurial firms. It is therefore that diverse informational sources, both external and internal, are used. Furthermore, there is not one single approach for defining the phenomenon of entrepreneurship. It is very complex and insights from several academic disciplines exist. This characterizes divergent thinking, whereas convergent thinking can be used to measure non-entrepreneurial thinking.
SMEs often interact with advisers and they both want to maximize the outcome of their relationships. It is therefore that Day and Reynolds have proposed a matching matrix for matching SMEs and advisers, which considers relative entrepreneurial abilities of both parties. This should lead to better understanding of what each party needs and therefore a successful outcome.
The above mentioned matching matrix is conceptual. However, it might be important and interesting for professionals when it comes to creating more transparency. This is because of the different perspectives from several academic disciplines. It also may increase the effectivity of advising significantly, as appropriate matches can be made because of their respective entrepreneurial capacity and the situation for which advise is sought. It furthermore is a possibility to link theory and practice and bridge the gap between them. This means that it might lead to a better understanding of what entrepreneurship is, as well as the higher ability to measure entrepreneurial behavior. When this is possible, it might be possible to create more accurate information that can be used in practice. This may lead to more efficiency and efficacy in practice. It stimulates both theoretical and practical work. Who doesn’t want that?
Theoretical credits go to:
Day, J. & Reynolds, P. (2006). Entrepreneurship and the small to medium-sized enterprise: A divergent convergent paradox in thinking patterns between advisers and SME owner-managers. Management Decision, 44(5), 581 – 597.
This week I have read the article about the Knowledge Economy by Powell and Snellman (2004). The aim of the article is to provide an overview of the literature on the knowledge-based economy. A knowledge economy is defined as production and services based on knowledge-intensive activities, such as Internet and computer-technologies, that contribute to an accelerated pace of technical and scientific advance. In a knowledge economy we see the shift from reliance on physical inputs or natural resources to a greater reliance on intellectual capabilities, this combined with effort to integrate improvements in every stage of the production process.
In general the article is very valuable for entrepreneurial professionals because the evolution described in this article, is an important change in how we shape our business. As stated in the article there is an emergence in new industries, and a decline in traditional sectors (based on the patent-trends). An important fact to take in account for investors, as an investor wants to make sure he invests in an profitable-company. The changes in the technologies of knowledge and information production makes collaborations easier, according to Powell and Snellman, which may be an important fact to point out to existing entrepreneurs, by advisors or mentors. This may opens new possibilities and a way to keep up with developments. A last important fact is that technology investment has found to gain productivity, only if they are accompanied with organizational changes.There is an important task for consultants in this, because they can advice entrepreneurs to make these organizational changes and in what way.
As we see, the article shows trends about the Knowledge Economy. For entrepreneurial professionals these trends are important to follow, because it influences the way entrepreneurs should behave in the world of entrepreneurship!
Annabel Lemkes (2520051)
Powell, W.W. & Snellmann, K. (2004) The knowledge economy. Annual Review of Sociology, 30, 199 – 220.