UNIT-4

Entrepreneurship as Innovation and

Problem Solving
 Who is an Entrepreneur?
• An entrepreneur is a person who takes risks and solves problems for
others.
Why are they called Problem Solvers?
• Entrepreneurs find solutions to customer or market problems.
By solving problems, they create value and earn profit.
The bigger the problem they solve, the greater the success and profit
they achieve.
 Innovations Leading to Entrepreneurial Ventures
• An entrepreneur is a person who regularly creates and innovates by finding
opportunities and building something valuable.
• Creativity and innovation are the main qualities that make entrepreneurs
unique. They often bring new ideas that can change markets and even
challenge big, established companies.
• For entrepreneurs, creativity is a continuous process — they always look for
new and better ways to do things without worrying too much about the
difficulties or lack of resources. However, creativity alone is not enough;
entrepreneurs also know how to turn their ideas into practical results
through innovation.
• Once they complete one project, they look for the next challenge, because
creativity and innovation are a natural part of their lives and something they
enjoy doing again and again.
 Who is a Social Entrepreneur?
• According to Martin and Osberg, a social entrepreneur is someone who
works to bring large-scale positive change that benefits a big part of society
or even the entire community.
• A social entrepreneur focuses on helping people who are poor, neglected, or
disadvantaged, and who do not have enough money or power to improve
their lives by themselves.
• Their main goal is not personal profit, but to create social value and make a
lasting difference in people’s lives.
 Difference between Entrepreneurship and Social
Entrepreneurship
• Entrepreneurship:
The main goal of an entrepreneur is to earn profit and create wealth
through business activities.
• Social Entrepreneurship:
A social entrepreneur may also earn profit, but their main goal is to
solve social problems and help the community. They use the money
earned from business to support social causes rather than for
personal gain.
Why is there a Growing Need for Social Entrepreneurs?

• In today’s world, financial crises have made social problems like

poverty and unemployment even worse.
• As many people face job losses and pay cuts, the world now needs
new ideas, innovations, and creative solutions that can meet
changing market needs and support the growth of emerging
economies.
• Social entrepreneurs play a key role in building a better and more
balanced economic and social order.
 Characteristics of Social Entrepreneurs
• Social Catalysts:
They are visionaries who bring major social changes and improve systems in
areas like education, healthcare, environment, and economy.
Even if they work locally, their actions can create a global impact.
• Socially Aware:
Their main goal is social improvement, not profit.
The success of their work is measured by how much it helps society, not by
money earned.
• Opportunity-Seeking:
They never give up on their goals.
They see challenges as opportunities to improve their ideas and projects.
Characteristics of Social Entrepreneurs
• Innovative:
They are creative thinkers who use new and unique ideas to solve
problems.
They learn from failures and keep trying until they succeed.
• Resourceful:
They do not let a lack of resources stop them.
They use available resources wisely and build partnerships to gather more
support.
• Accountable:
They take responsibility for their work.
They ask themselves if their actions are truly helping the people they
serve.
They are also answerable to investors and supporters who expect real
social change.
 Examples of Social Entrepreneurs in India
1. Dr. Verghese Kurien – Founder of Amul
Known as the Father of the White Revolution in India, he empowered
rural farmers through dairy cooperatives, making India the largest milk
producer in the world.
2. Dr. Devi Shetty – Founder of Narayana Health
A cardiac surgeon who made healthcare affordable for the poor by
creating low-cost, high-quality hospitals.
3. Harish Hande – Co-founder of SELCO India
He promotes solar energy solutions to provide electricity to poor
households in rural areas.
Concept of Risk Taking
• Business risk means the possibility of loss or an unfavorable event
in business.
 Types of Risk Taking
• Business risks arise due to many factors and can be divided into two main
types:
• Insurable Risks:
These are risks that can be covered by insurance.
The chances of these risks can be measured or predicted.
Examples: Losses due to fire, theft, accidents, or riots.
• Non-Insurable Risks:
These are risks that cannot be measured or insured because their chances
are uncertain.
Examples: Changes in market price, demand, or consumer preferences.
 Types of Internal Risks
Internal risks are the risks that arise from events within the business itself.
They occur during the normal course of operations and can usually be predicted
and controlled by the entrepreneur.

[Link] Factors:
2. Technological Factors
3. Physical Factors:
1. Human Factors:
These risks are caused by people working in or associated with the
business.
Examples:
• Strikes or lockouts by workers
• Negligence or dishonesty of employees
• Death or accident of key staff
• Inefficiency or poor decision-making by managers
• Delay in supply of materials or non-payment by debtors
• ➤ Example: If workers go on strike, production may stop, leading to
financial loss.
[Link] Factors:
These risks arise due to changes or failures in technology used for production
or distribution.
Examples:
• Machines becoming outdated (technological obsolescence)
• Competitors introducing better-quality products using new technology
[Link] Factors:
These involve damage or loss to business property or assets.
Examples:
• Machinery breakdown
• Fire or theft in the factory
• Goods damaged during transportation
• Compensation paid to third parties for damages caused by the firm
 External Risks
➢ External risks are those risks that arise due to factors outside the business
organization.
They are beyond the control of the entrepreneur and cannot be predicted or
prevented easily.
Types of External Risks
[Link] Factors:

These are risks caused by changes in the overall economy or market conditions.
They include:
• Fluctuations in demand and price of products
• Changes in consumer tastes and preferences
• Variations in income levels or trade cycles
• Increased competition, inflation, or unemployment
• Global economic fluctuations
• Such risks are called Dynamic Risks because they result from continuous changes in
the economy.
➤ Example: The shift from black-and-white TVs to flat-screen HD TVs changed the
market demand.
• 2. Natural Factors:
These are caused by unpredictable natural events over which
humans have no control.
Examples:
• Earthquakes
• Floods
• Cyclones
• Lightning and tsunamis
• ➤ Example: The Gujarat earthquake and the Tsunami caused severe
damage to lives, property, and businesses.
3. Political Factors:
Political instability or policy changes can also create risks for businesses.
Examples:
• Change or fall of government
• Communal violence or riots
• Civil wars or conflicts between nations
• Changes in industrial, trade, or tax policies
• Amendments in laws or annual budget announcements
• ➤ Example: In 1977, when political power changed in India, the policy for
MNCs (Multinational Companies) was altered, affecting foreign businesses.
4. Social and Cultural Factors (Change in Taste and Preference):
Society and lifestyle changes can also create business risks.
➤ Example: Earlier, people mostly ate homemade food.
Today, there is a huge rise in fast food outlets due to changing tastes
and busy lifestyles.
 Role of Technology and Social Media in Creating New Forms of
Business
• Information Collection
• Business Intelligence (BI)
• Smart Mobility
• Cloud Computing
• Data Analytics
1. Information Collection
• Modern businesses collect detailed customer information such as age,
preferences, and buying habits.
This helps companies understand their customers better and design products
or services that meet their needs.
• Example: Online stores track customer purchases and show personalized ads
and offers.
• Result: Increased customer loyalty and satisfaction.
2. Business Intelligence (BI)
• Business Intelligence means collecting and analyzing data to make better
decisions.
Companies use BI tools to study sales patterns, customer behavior, and market
trends.
• Example: Analyzing sales during a discount season to plan future promotions.
• Benefits:
• Better decision-making
• Risk reduction
• Improved performance
• Discovery of new business opportunities
[Link] Mobility
• Smart mobility means using mobile devices (smartphones, tablets, etc.) to
conduct business anytime, anywhere.
Mobile technology allows businesses to reach more customers and operate
efficiently.
• Example: Smartphones with internet access and high-quality cameras help
companies promote products instantly.
• By 2014, more people used mobile devices to access the internet than
traditional computers.
5. Cloud Computing
• Cloud computing allows businesses to store and access data online
instead of using physical devices.
It reduces IT costs and improves flexibility and collaboration.
• Example: A student saves his notes in Google Drive using his mobile
phone. Later, he can open and edit the same notes from his laptop or
tablet anywhere — without using a pen drive or transferring files.
• Benefits:
• Lower cost
• Easy access to information anywhere
• Increased efficiency and teamwork
6. Data Analytics
• With advanced technology, businesses now collect massive amounts of data
(Big Data).
Analyzing this data helps companies predict trends, understand customer
needs, and improve products.
• Example: GPS and telemetric systems(remote measurement system) collect
data about vehicle movements or patient health remotely.
 The power of Social Media
• Social media and digital technologies like Google, Facebook, Twitter,
smartphones, and tablets are transforming business communication.
• These tools help companies connect and collaborate better with employees,
partners, and customers.
• Through social listening, businesses can understand customer needs and
preferences more effectively.
• The new generation, familiar with technology and instant information, will
bring greater changes to the business world.
• Overall, social media is driving the creation of new business models and
reshaping the future of how businesses operate.
1. Economic Factors
• These are the fundamental resources and conditions required for economic and
entrepreneurial development.
• Key Elements:
• Land
• Labour
• Capital
• Raw materials
• Market availability
• Impact:
• When these factors are available in sufficient quantity and quality, entrepreneurship
grows.
• When they are scarce or inadequate, they become barriers.
• Example:
Lack of financial resources (cash) can prevent an entrepreneur from starting a new
venture.
2. Social Factors
• Social structures, values, and attitudes greatly influence business activities and
entrepreneurship.
• Important Aspects:
• Caste structure
• Labour mobility
• Customer needs
• Cultural heritage
• Social values and respect for elders
Impact:
• Industrialization, women’s employment, and education have changed social
attitudes.
• This has led to new entrepreneurial opportunities in food, clothing, and lifestyle
sectors.
• Example:
Growth of ready-made garments, instant foods, and vending machines for tea
and snacks.
3. Cultural Factors
• Culture refers to the shared values, beliefs, and norms of society.
• Impact:
• If a culture encourages creativity, risk-taking, and innovation,
entrepreneurship flourishes.
• A restrictive or risk-averse culture can discourage new ventures.
• Example:
Entrepreneurs should consider regional cultural preferences while
designing products for quicker acceptance.
4. Political Factors
• The political environment provides the legal and regulatory framework for
businesses.
Key Influences:
• Political stability
• Government policies and interventions
• Legal framework and constitutional provisions
• Relations between countries
• Impact:
• A stable political system supports entrepreneurship.
• Political instability, excessive regulation, or war can hinder business growth.
• Example:
War tension between two countries can stop trade between them.
5. Personal Factors
• Not everyone in society becomes an entrepreneur.
Only a few individuals have the interest, skills, and courage to start
their own ventures.
• Impact:
Personal ambition, confidence, and decision-making ability determine
entrepreneurial success.
6. Perceptual Factors
• These relate to how entrepreneurs perceive opportunities and
challenges.
• Barriers:
• Lack of clear vision
• Misunderstanding of situations
• Prejudices or preconceived notions (belief about something)
• Example:
Entrepreneurs should not choose a business based on gender bias —
today, both men and women succeed in almost all fields.
7. Motivational Factors
• Motivation drives entrepreneurs to start and continue their ventures.
• Impact:
• High motivation helps overcome challenges.
• Lack of sustained motivation can lead to early failure.
• Example:
Many entrepreneurs start enthusiastically but lose interest after
facing difficulties or failure.
 Business Incubation
Meaning
• Business incubation refers to programs designed to support new and
small entrepreneurial companies by helping them grow successfully
through various support services and resources.
A Business Incubator is an organization created to accelerate the growth
and success of startups by providing essential facilities and guidance.
 Ways Incubators Help Start-ups Obtain Funding
Method Explanation

Incubators introduce start-ups to angel investors — wealthy

1. Connecting with Angel Investors individuals who invest personal funds in promising early-
stage companies.

They help start-ups develop strong presentations and

2. Preparing for Venture Capital (VC) business plans for venture capitalists and arrange meetings
with potential VC firms.

Incubators guide start-ups in applying for bank or

3. Assistance with Loans institutional loans, ensuring all financial documents and
proposals are properly prepared.

They help entrepreneurs apply for government assistance or

4. Access to Government Grants
grant programs.
 Schemes Implemented by the Ministry of MSME (Micro, Small and Medium
Enterprises)or Government
• SIDBI Micro Finance Programme
• Memorandum of Understanding (MoUs) with Foreign Countries
• MSME National Award Scheme
• NSIC Schemes (National Small Industries Corporation)
• SIDBI Schemes
• Tax Holiday Scheme
• Composite Loan Scheme
• Industrial Estate Scheme
• Factoring Services
• Small Industry Cluster Development Programme (SICDP)
• National Equity Fund (NEF) Scheme
1. SIDBI Micro Finance Programme
• Full form: Small Industries Development Bank of India (SIDBI)
• Objective: To provide financial assistance to micro and small
entrepreneurs, especially in rural and semi-urban areas.
• Key Feature:
• Provides loans to Micro Finance Institutions (MFIs), which then lend small
amounts to individuals or self-help groups.
• Encourages women entrepreneurship and self-employment.
• Benefit: Promotes financial inclusion by reaching unbanked
entrepreneurs.
2. Memorandum of Understanding (MoUs) with Foreign Countries
• Objective: To promote international cooperation and business
collaboration in MSME development.
• Key Areas Covered:
• Exchange of technology, expertise, and best practices.
• Joint ventures, skill development, and trade promotion.
• Example: India has signed MoUs with countries like Japan, South Korea,
and the UK for MSME development and innovation.
3. MSME National Award Scheme
• Objective: To recognize and reward outstanding MSMEs for their
performance and innovation.
• Categories:
• Manufacturing and Service sectors.
• Awards for innovation, entrepreneurship, and quality products.
• Benefit: Encourages competitiveness, productivity, and excellence
among MSMEs.
4. NSIC Schemes (National Small Industries Corporation)
• Objective: To promote, aid, and foster the growth of small-scale
industries.
• Major Schemes:
• Single Point Registration Scheme:
• Credit Facilitation: Helps MSMEs get loans from banks.
• Marketing Assistance: Provides exhibition and tender support.
• Raw Material Assistance Scheme: Helps MSMEs procure raw materials at
reasonable rates.
• Benefit: Improves access to finance, markets, and materials.
5. SIDBI Schemes
• Objective: To provide direct and indirect financial assistance to
MSMEs.
• Main Schemes:
• SIDBI Revolving Fund for Technology Innovation (SRIJAN): For modernization
and technology upgradation.
• SIDBI Make in India Soft Loan Fund (SMILE): For startups and new
manufacturing units.
• Credit Guarantee Fund Scheme: Provides collateral-free loans to MSMEs.
• Benefit: Encourages entrepreneurship and modernization.
6. Tax Holiday Scheme
• Objective: To encourage new entrepreneurs by providing tax
exemptions for a specific period.
• Key Feature:
• Newly established MSMEs are exempted from paying income tax for a few
initial years.
• Helps businesses reinvest profits for growth.
• Benefit: Reduces the financial burden on startups and promotes
industrial development.
7. Composite Loan Scheme
• Objective: To simplify access to credit by providing term loan and
working capital through a single window.
• Eligibility: Small-scale industries and tiny units(very small divisions)
• Loan Limit: Up to ₹100 lakh.
• Benefit: Saves time and reduces paperwork by merging two loans into
one process.
8. Industrial Estate Scheme
• Objective: To develop industrial areas or estates with necessary
infrastructure for small industries.
• Features:
• Provides land, sheds, power, roads, and water supply.
• Encourages cluster-based development.
• Benefit: Promotes balanced regional industrial growth and supports
small entrepreneurs with ready infrastructure.
[Link] Services
• Objective: To help MSMEs manage their working capital by getting
quick funds against their accounts receivable (bills).
• Meaning:
• MSMEs sell their invoices or bills to a factoring company (like SIDBI or private
financial institutions).
• The factoring company immediately pays most of the bill amount (say 80–
90%) and collects the payment from the buyer later.
• Types:
• Recourse Factoring: The seller bears the risk if the buyer doesn’t pay.
• Non-recourse Factoring: The factor bears the risk of non-payment.
• Benefit:
• Provides immediate cash flow.
• Reduces collection delays and improves liquidity.
10. Small Industry Cluster Development Programme (SICDP)
• Objective: To develop and strengthen small industry clusters by
improving infrastructure, technology, and skills.
• Meaning of Cluster:
• A group of similar small industries located in one area, producing similar
products (e.g., textile cluster, leather cluster).
• Key Activities:
• Upgradation of technology and tools.
• Skill development and training.
• Marketing support and common facilities (testing centers, design labs).
• Benefit:
• Improves productivity, competitiveness, and innovation among MSMEs.
• Encourages collective growth instead of individual struggle.
11. National Equity Fund (NEF) Scheme
• Implemented by: SIDBI (Small Industries Development Bank of India)
• Objective: To provide equity-type financial assistance to small
entrepreneurs, especially those without sufficient capital.
• Key Features:
• Provides soft loans (subsidized financial support) up to a certain limit to new
or existing small enterprises.
• Aims to fill the gap between the entrepreneur’s own capital and the bank
loan.
• Eligibility:
• New or existing small-scale units that are viable but lack adequate capital.
• Benefit:
• Encourages entrepreneurship by supporting projects that have potential but
face financial constraints.
• Promotes inclusive industrial growth.
 Institutions Involved in Entrepreneurship Development Program (EDP)
1. National Institute for Entrepreneurship and Small Business Development
(NIESBUD)
• Autonomous institution under the Ministry of Skill Development.
• Provides training, research, consultancy, and mentoring.
• Conducts EDPs, skill development courses, and trainers’ training.
2. Indian Institute for Entrepreneurship (IIE)
• Located in Guwahati.
• Focuses on promoting entrepreneurship in the North-Eastern region.
• Offers training, capacity building, and research activities.
3. National Institute for Micro, Small and Medium Enterprises (NIMSME)
• Based in Hyderabad.
• Provides training, consultancy and research for MSME growth.
• Helps entrepreneurs with technology, finance and management guidance.
National Small Industries Corporation (NSIC)
• Government enterprise supporting MSMEs.
• Offers marketing support, credit support, raw material assistance and incubation.
• Runs skill development and entrepreneurship programmes.
5. Rural Entrepreneurship Development Institute (REDI)
• Focused on promoting entrepreneurship in rural areas.
• Provides training for rural youth and women.
• Supports small village industries and local enterprises.
6. Training and Development Centre (TDC)
• Provides vocational training and entrepreneurship skills.
• Offers short-term and long-term practical training programmes.
7. Centre for Entrepreneurship Development (CED)
• State-level organisation promoting entrepreneurship.
• Conducts EDPs, skill programs, and consultancy services.
• Works with government and industry partners.
8. Small Industries Service Institutes (SISI)
• Now known as MSME-Development Institutes (MSME-DI).
• Provide technical support, training, and industrial consultancy.
• Assist MSMEs with project reports and technology upgradation.
9. Small Industries Development Organisation (SIDO)
• Apex body for MSME promotion (now renamed MSME-Development Organisation).
• Supports policy development, training, and infrastructure for MSMEs.
10. Entrepreneurship Development Institute of India (EDII)
• Ahmedabad-based national institute.
• Provides professional courses, research, and EDPs for new and existing entrepreneurs.
• Supports innovative start-ups and incubation.
11. National Alliance of Young Entrepreneurs (NAYE)
• Voluntary organisation encouraging entrepreneurship among youth.
• Conducts seminars, workshops, and motivational programmes.
• Acts as a support network for young entrepreneurs.