The venture team seeks to build a plan that will mitigate the associated risks while using innovation to increase the chances of success. If possible, a business design will achieve economies of scale and scope as growth is experienced. The creation of a formal business plan will provide a valuable tool for investors, the venture team, and allies. This plan is a description of the opportunity, product, strategy, team, needed resources, and potential financial outcomes. The venture techniques described in this book can be used by entrepreneurs to build an independent business as well as a corporate venture eme rging within an established firm. Large corporations can learn to confront the innovators' dilemma and build a viable corporate venture. Knowledge management is a powerful tool for an entrepreneur building an important, innovative new business. Furthermore, product design and prototype methods can foster the creation of outstanding products. The new venture organization carefully selects its legal form and protects its intellectual property.

What determines the success of entrepreneurial efforts and how can risks be managed?

A new venture that creates a novel solution to a problem will be subject to uncertainty of outcome. An action in an uncertain market is sure to experience a risk of delay or loss. It is the entrepreneur's task to reduce and manage all risks as much as possible. Attractive new ventures can be designed to grow as demand for their products increases. Furthermore, it is hoped that economies of scale will be experienced so that as demand and sales grow, the cost to produce a unit of product declines. Additionally, it is desirable to have economies of scope so that costs per unit decline due to the spreading of fixed costs over a wide range of products. Many industries established on a network format exhibit network economies resulting in a reinforcing characteristic leading to the emergence of an industry standard.

How are ventures actually formed and what is the role of the business plan?

Entrepreneurs respond to attractive opportunities by forming new ventures. In this chapter, we consider the five-step process for establishing a new enterprise. One particularly noteworthy step in the process is the development of a story and business plan. The story is a compelling synopsis of why this venture is needed at this moment of time and how it can achieve success. We then detail the task of writing a business plan, which is a significant and challenging effort for entrepreneurs.

What forms do new businesses take and what are corporate ventures?

The appropriate legal and organizational format used to establish a new venture will vary according to several factors such as context, people, legal and tax consequences, and cultural and social norms. In this chapter, we consider the various organizational and legal forms that entrepreneurs employ to achieve their objectives. New ventures can range from small business or consulting services to high-growth, high-impact enterprises. Other organizations start out operating in a niche market and grow into a broader one. Important social enterprises are often established as nonprofit ventures. Two other forms include family owned businesses and franchises. An important contrast to these independent ventures is the corporate new venture. It emerges within larger existing enterprises and is granted autonomy so it can fulfill its promise. Corporate new ventures are an important part of the entrepreneurial world and account for many new innovations. Often constrained by existing commitments and capabilities, corporations can fail to respond to significant new opportunities. Well planned corporate ventures, however, help refresh and strengthen large corporations.

How can a new organization access and use knowledge in order to build its new venture?

Knowledge is power. Knowledge assets and intellectual capital are potential sources of wealth. The creation and management of knowledge can lead to new, novel applications and products. Sharing knowledge throughout a firm can enhance the firm's processes and core competences, thus making the firm more innovative and competitive. Most technology ventures are based on knowledge and intellectual property that must be enhanced and managed. A learning organization is skilled at creating and sharing new knowledge and uses this knowledge to do a better job. Product design and development, which is concerned with the concrete details that embody a new product or service, can add significant value to what is offered to the customer. Prototypes are models of a product or service and can help a new technology venture to learn about the right form of the product for the customer. Scenarios are used to create a mental model of a possible sequence of future events or outcomes. Knowledge acquired, shared, and used is a powerful tool for the entrepreneur to build a new venture organization.

What early decisions should an entrepreneur make about legal and intellectual property issues?

When entrepreneurs establish a new business, they must make some critical decisions about the detailed elements of the firm. The choice of a legal form, name, logo, and other formal elements is critical to a successful future. The right name and logo can be the key to building a significant brand. Consider Sony, Intel, and IBM as examples of firms that built a notable brand.

The legal form of the venture should match the objectives of the entrepreneurs, customers, and investors of the enterprise. Furthermore, there should be a plan to build and protect the intellectual property of the new venture. The proper array of trade secrets, patents, trademarks, and copyrights can add up to a set of very valuable proprietary assets. For many new firms built on innovation and technology, intellectual property can provide a competitive advantage in the marketplace.