Your neighbour’s kid, instead of taking on a 9-5 job, decides to open a restaurant. Would you say that is enterprising? Yes, it is. It takes courage to get off the expected, beaten path and do something different.
Does that make him an entrepreneur though? Umm, not so sure of that. There is a lot more that goes into making an entrepreneur an entrepreneur.
Is the idea or business likely to revolutionise the industry or marketplace? Your neighbour’s kid again, if the restaurant had a theme, like ‘cook with the chef’ or an idea that took it beyond food as we all know it, then perhaps he could qualify as an entrepreneur.
Yes, it can be confusing. Let’s understand this a bit more.
Meaning: what’s in a word?
The dictionary defines the word entrepreneur as ‘a person who sets up a business or businesses, taking on financial risks in the hope of profit.’ So, shouldn’t that mean every businessperson is an entrepreneur, since all people start business to make profit, and they take on financial risks?
An entrepreneur is often seen, and rightly so, as an innovator – one who comes up with new ideas and new business processes. A strong set of management skills and team building abilities are a must-have to become a successful entrepreneur.
As is with many things in the English language, turns out the word ‘Entrepreneur’ is also not an original. This has been borrowed from the 18th century French word ‘Entreprende’, which meant ‘to undertake’. An interesting twist to this is, the word was mainly used to describe a ‘manager or promoter of a theatrical production’. And that’s not too far from the performance of a successful entrepreneur, now, is it?
As the world, and its languages, evolved, so did the word. Through the years, the word ‘entrepreneur’ has seen plenty of changes in its meaning, particularly in relation to business and commerce.
History: how did the term originate?
Much credit goes to Richard Cantillon, an Irishman living in France, who first used the word ‘Entrepreneur’ in his book ‘Essai sur la Nature du Commerce au General (Essay on the Nature of Commerce)’, published in 1755. He uses the term ‘entrepreneur’ to describe anyone who bought or manufactured goods at a certain cost to sell them at an unknown price. It was Cantillon’s usage that established an entrepreneur as a ‘risk-taker’.
This was just the beginning. Soon after, Jean Baptiste Say, a French economist, described an ‘Entrepreneur’ as an ‘adventurer’ or ‘one who undertakes an enterprise, especially a contractor, acting as intermediary between capital and labour’. He even went on to define the entrepreneur as someone who ‘shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.’
It was in 1934 that Joseph Schumpeter, an Austrian American political scientist and economist, gave us a more modern definition of an entrepreneur as ‘the person who destroys the existing economic order by introducing new products and services, by creating new forms of organization, or by exploiting new raw materials.’
And finally it took US business consultant, Peter Drucker, to espouse that an ‘entrepreneur’ should only be that person who creates something new, something different. According to him, an entrepreneur ‘always searches for change, responds to it, and exploits it as an opportunity’.
There you have it, the modern day definition of what started as a manager of a theatrical production.
Rise of the Intrapreneur
Today the word ‘entrepreneur’ is no longer limited really. It is rapidly evolving and starting to mean so many different things for so many different people. In fact, entrepreneurship has gone on to include social entrepreneurship into its for-profit-only folds. Here, companies seek to fulfil social, environment and even humanitarian obligations alongside business goals.
Unlike what you might have been led to believe, entrepreneurship is not just the domain of start-ups. As a trait and a business model, it can be found within an existing firm or large organization as well. Intrapreneurship, as it is called, is when an organisation sets aside substantial funds and even has dedicated talent that focuses on special ideas or projects. These teams are instructed to treat the project like an entrepreneur would, and successful ideas are many times ‘spun-off’ as subsidiary organizations.
Intrapreneurs have all the resources and capital of the firm at their disposal and the environment to think like entrepreneurs, without the typical risks that come with the territory.
Do not confuse the term ‘entrepreneur’ with a ‘small business’ or even used it interchangeably. While it is a fact that most entrepreneurial ventures start out as small businesses, the converse is not strictly true – not all small businesses have an entrepreneurial streak. Many consist only of the owner, or a few employees at best, and most of them might offer an existing product or service. They do not aim at growth or are not looking to change the market.
Entrepreneurial ventures, on the other hand, offer an innovative product or service, and the entrepreneur has plans to scale up by adding employees, looking at international markets, etc. This is made possible through venture capital and angel investments. Successful entrepreneurs must have the ability to steer a business in the right direction through planning, by adapting to changing environments and by building on their own strengths and weakness.