Entrepreneurship, Technology, and the Rise of New Ventures

The Entrepreneurial Environment and Technology Growth

The volatile changes occurring in the entrepreneurial environment are influencing the development of a new type of entrepreneur. New business ideas concentrating on the use of new technology are enhancing the implementation of business plans. The purpose of this paper is to research an entrepreneur whose business practice fits the framework of this "new type of entrepreneur" and to explore the practices used to gain success in today's entrepreneurial business environment.

A culture defined by "risk-taking," being "tolerant of mistakes," and containing within its scope "individuals who are willing to put it all on the line to start new businesses" is what has been termed the "entrepreneurial culture."

According to the Technology Alliance report, the factor most inhibiting to high-tech growth is the "lack of appropriately trained workforce." The report states that "technical and top managerial talent is in extremely short supply worldwide… some regions are so short on workforce that they recruit heavily from other markets."

Regions that have been successful are those that have brought together business, academia, and government to accomplish shared economic development goals. The Research Triangle in North Carolina exemplifies this approach, describing its model as "the partnership between business, government and academia."

Rapid growth has been observed in technology-based industries compared to the broader economy. Expanding technology jobs in the State of Washington grew from 95,910 in 1974 to 274,989 in 2000 — an increase of 187%. Technology-based employment in Washington paid 87% above the state average, with technology workers earning $61,330 annually compared to the state average of $32,740, as reported in 2000.

According to a report entitled "Managing Competencies in Entrepreneurial Technology Firms," the United States and United Kingdom, with their liberal market economies, do not contain "institutional arrangements that are conducive to the development of project-based entrepreneurial technology start-ups focusing on discontinuous radical innovation." However, there are other emerging industries where more complex and stable organizations are effective. "Success in such segments is strongly advantaged by institutional structures that create competence-enhancing human resource structures."

Elements of Success for the Modern Entrepreneur

The question of what it takes to achieve success as an entrepreneur in today's business environment is one that demands answering. Change and the reasons for change are the focus of certain studies. According to Casper, "recent studies of sectoral specialization and technological development across market economies have shown how contrasting patterns of technical change can be explained by the different institutional frameworks that have become established in distinct types of economy" (Casper, 2000; Casper et al., 1999; Soskice, 1997; 1999).

According to a report entitled "Firms of the Future," the 1970s witnessed the arrival of a new type of business client: "the high-tech entrepreneur." In 1965, Stinchcombe identified the challenges facing entrepreneurs, including the acquisition of necessary resources for production and distribution, the need to establish relationships of trust, and the requirement to overcome what he called the "liability of newness." Specifically, Stinchcombe identified:

"the high costs of creating internal roles, relationships, and operating routines in new organizations; the time and investment required to establish external relationships that are conditioned on experience, reputation, and trust; competition, often with very limited resources, with mature organizations that already have goods or services in the marketplace and that enjoy established customer relationships." (Stinchcombe, 1965)

Success Story: Brian Scudamore and 1-800-GOT-JUNK

Brian Scudamore is making it big in the junk business. Just out of high school in 1989, with total start-up assets of an old pickup truck and $700 in cash, he created a company that now boasts 95 franchise partners with a national presence in 47 of the 50 U.S. states. Scudamore started his company, 1-800-GOT-JUNK, with what he described as "a vision of creating the FedEx of junk removal."

Scudamore has also noted that he "dropped out of [university] with just one year left to become a full-time Junkman," adding that "my father, a liver transplant surgeon, was not impressed to say the least." He hired his first employee just one week after starting the business. The business model he chose allowed for rapid growth without requiring outside investment or external funding sources. Scudamore took a fragmented industry and, with a high-tech spin on operations, managed to leave the competition far behind. Brian retains 100% ownership and ran his bootstrap operation entirely on cash flow.

1-800-GOT-JUNK expected to generate approximately $32 million in 2004 — an astronomical return on investment given the initial outlay of just $700. Brian set a goal of $100 million in revenue and 250 franchise partners by 2006. The company's growth has firmly established Brian as a "risk-taker," and he is clearly seeing the rewards of having taken that risk.

The franchise model Scudamore used is a well-documented path to rapid scaling. By allowing franchisees to bear the costs of local expansion while maintaining brand standards, the company could grow its national footprint without requiring significant capital from the founder. This approach is a practical illustration of how a bootstrap entrepreneur can leverage a replicable business model to overcome the "liability of newness" that Stinchcombe identified decades earlier.

Conclusion

There are many businesses that have made the high-tech adjustment in order to streamline operations and maximize profits. From law firms to boutiques to real estate agencies, the high-tech business model is considered an integral part of many classic business types. It is easier for older, established businesses to hold their own in the technological environment because the risks are not as extreme. Data indicates that because new ventures "have neither roots nor resources, they face unique challenges in the development of cooperative relationships and the assembly of goods and services."

However, for those such as Brian Scudamore who are willing to take the risks necessary to find success, the new environment of technology in business promises many challenges and the possibility of great reward for the "risk-taker."

Bibliography

Casper, Steven (2000). "Institutional Adaptiveness, Technology Policy, and the Diffusion of New Business Models: The Case of German Biotechnology." Organizational Studies 21: 887–914.

Casper, Steven, et al. (1999). "Can High-Technology Industries Prosper in Germany: Institutional Frameworks and the Evolution of the German Software and Biotechnology Industries." Industry and Innovation 6: 6–23.

Casper, Steven (2002). "Managing Competencies in Entrepreneurial Technology Firms." University of Cambridge Working Paper No. 230.

Stinchcombe, A. (1965). "Social Structure and Organization." In Handbook of Organization, ed. J.G. March, 153–193. Chicago: Rand McNally & Company.

"Firms of the Future" (2004). Available at: www.gesmer.com/publications/lawecon/1.php

"Lessons Learned from Study Missions to the Silicon Valley; the Research Triangle Technology Alliance." Available at: