Innovative entrepreneurship: educational manual 9786010430570

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AL-FARABI KAZAKH NATIONAL UNIVERSITY

S. K. Kondybayeva

INNOVATIVE ENTREPRENEURSHIP Educational manual

Almaty «Qazaq University» 2017 1

UDC 330 (075) LBC 65.01 я 73 K 72 Recommended for publication by the decision of the Higher School of Economics and business, RISO of the Al-Farabi Kazakh National University (protocol №3 dated 07.12.2017) Rewiers: PhD A.E. Kaliyeva PhD R.Zh. Bekova

Kondybayeva S.K. K 70 Innovative entrepreneurship: educational manual / S.K. Kondybayeva. – Almaty: Qazaq University, 2017. – 125 p. ISBN 978-601-04-3057-0 The educational manual «Innovative Entrepreneurship» is for students of economic and non-economic specialties. The educational manual is based on lectures, which were held in al-Farabi KazNU. It includes relevance materials, considers the term Entrepreneurship, its classical and modern types, algorithm of business plan, the meaning of entrepreneurial ecosystem, stages of innovation process, the way of creating startup, innovative technological project, etc. After each chapter, students can check their material knowledge by special questions. Publishing in authorial release.

UDC 330 (075) LBC 65.01 я 73 ISBN 978-601-04-3057-0

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© Kondybayeva S.K., 2017 © Al-Farabi KazNU, 2017

INTRODUCTION The educational manual «Innovative entrepreneurship» dedicated for students of economic and non-economic specialties. The course will provide a basis for an appraisal of contrasting perspectives on the role of creativity thinking, operation and management of organizational changes, and interactions among people who work within corporations. The educational manual outlines the methodology of system management of innovative projects aimed at creating new types of products or technologies. It uses the basic concepts and discusses the content of modern methods of project management. Particular emphasis is placed on the specifics of the management of innovative technological projects, the product of which is a set of intangible assets that provides control over the technology developed in the project by limiting the access of others to economic benefits from the use of technology. The educational manual shows the importance of developing a preliminary vision of the product of an innovative project based on the results of marketing, patent and information and other research on the technology market, research and development. The effect of project management on the company's success in the market is considered. The issues of forming the project team and managing the project staff are discussed based on the distribution of roles and functions, taking into account the innovative component of the project. Competitive advantage in the market the company can achieve in two ways: either to do and offer the consumer something that others cannot do or cannot offer, or do and offer the same as others, but better and cheaper. Both these methods of achieving victory in competition can be based only on the use of an innovative strategy for the development of the company and the conduct of innovation. Innovative activity is the process by which ideas and technologies are transformed into technological innovative products, goods and services, into processes that have commercial value, into new production methods, as well as to new directions of using existing 3

innovative products and services, to form innovative markets. In the modern world, companies of different profiles, levels of development and scale use a wide variety of options for implementing innovation. Increasingly, innovative activity of companies is realized in the form of implementation of innovative or innovative technological projects. An innovative project is understood as a set of interrelated measures ensuring, within a given period, the creation and bringing to a state suitable for operation of a new type of product or technology. The educational manual «Innovative entrepreneurship» shows the features of innovative enterprises, differences between businesses. Training material include interesting theoretical and practical information about startups, social entrepreneurship etc.

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Chapter 1

THE GENERAL PROVISIONS OF THE INNOVATIVE ENTREPRENEURSHIP The main sections of the chapter: 1.1. Definition of Entrepreneurship. Who is an Entrepreneur? 1.2. Differences between Entrepreneurship and Business 1.3. The role of Startup

1.1. DEFINITION OF ENTREPRENEURSHIP WHO IS AN ENTREPRENEUR? In Western countries, entrepreneurship is characterized as a special, innovative, anti-bureaucratic management style, based on a constant search for new market opportunities, an orientation toward innovation, the ability to attract and use resources from a wide variety of sources to solve the task. Entrepreneurship is the process of creating a new business, in other words it is a process, which is can be explained as a designing a start-up company. This new business has its own features, like producing and offering new outputs (products, process or service). Entrepreneurial activities allow to its owner new business opportunities. Owner of the company or entrepreneur can use these business opportunities on his own purposes, but they must be in the frame of company development. Using business opportunities called as the exploitation of entrepreneurial opportunities. This exploitation include such functions, as: – To develop a business plan; – Acquire the human, finance and other required resources; – Organize and manage; – To be responsible. Let us consider each of them more in detail. First, to develop a business plan means building a plan of business action. Business plan 5

is one of the most important part of any entrepreneurial activity. Because business plan can help to beginner entrepreneur to start his business in a right way. The importance of the business plan and its sections we will consider in the next topic. Second, acquire the human, finance and other required resources means that entrepreneur must to attract necessary resources. If the business idea is really interesting and new, it is mean that entrepreneur can reach success in a business environment. Interesting beginnings can attract attention not only of potential investors, which is by the way one of the key element of supporting and financing, but also necessary employees, who will believe in a business idea, trust and be faithful. Such actions defined as sequential solution, as finding investors and hiring work force can appeal necessary resources (raw materials, assets, equipment and so on). Third, organize and manage. Assume, that beginner entrepreneur generate a good and new idea. He has a team, which is include three or four people. He believes that his idea can reach success and make profit. Therefore, next step of the beginner entrepreneur is to give tasks for each member of the team, as each participant must have its own functions and be responsible for certain step in a way of idea realization. Of course, members must submit to the chief (entrepreneur), but this process have to be effective and fruitful for the future of the company. Entrepreneur must have special abilities to organize and manage. Organize means, that entrepreneur have to be in a right position. He should know the backgrounds of his workers (team members), their abilities, specialties, how to make conversations with them and other features. In that, position entrepreneur can divide task and work in a most efficient way, as he will know how to realize, implement a new product or service. If entrepreneur could organize a work in his company, then he can manage this work. Manage include many functions, such as to control, to handle, to drive, to run, to give an order and other. Fourth, to be responsible. Any entrepreneur and businessperson have to be responsible for his/her business and entrepreneurial activity. Responsible for success or failure. If the business idea was not so good to reach a high profit, entrepreneur should to rethink what went wrong and not to search guiltiest. Of course, sometimes the mistake can be the result of a human, but anyway responsible entrepreneur should to try to find a reason of failure. 6

Entrepreneurship and entrepreneurial activity can live and operate in the frame of entrepreneurship ecosystem. As a biological ecosystem, entrepreneurship ecosystem has its own parts. These parts are government, entrepreneurship resources, education and finance. Governmental part of the entrepreneurship ecosystem include government programs, policy, strategies and everything, which is directed to support entrepreneurial activity, services that promote entrepreneurs in a country. For the first view you may think, that Entrepreneurship resources of the entrepreneurship ecosystem include financial and other material resources, like money, raw materials etc. However, it is wrong point. Entrepreneurship resources defines as business incubators, seed accelerators and techno parks, organizations, which are specialized in supporting start-uppers in very early stage of business development. Education part of the entrepreneurship ecosystem include entrepreneurship education, training, seminars, university knowledge. So, all knowledge resources, which can be proved by special certificates and diplomas. Finance part of the entrepreneurship ecosystem include all finance resources, such as loans, venture capital financing, local and foreign investments and grants. All these types of finance resources different. For example, grant. Government or another financial organization can give Grant. This type of finance resource do not have any requirement for return. Nevertheless, the amount of the grant can be not enough for start-upper. Meanwhile, venture capital can be enough, but will require financial return under certain rate. Similar with investment. Picture below describes the element of the entrepreneurship ecosystem (Picture 1). As picture shows, policy is an element of Governmental part. Finance describes financial part of the entrepreneurship ecosystem. Supports describes Entrepreneurship resources. Human capital is an element of Education part. As you may note, there are two independent elements markets and culture. These elements can be included to other parts. Markets defines the current situation and forecasts the future due to the fluctuations. Culture defines the type of entrepreneurial activity and its place in a human being. Because country’s traditions and culture in many ways defines the development of any action. 7

Picture 1. The elements of entrepreneurship ecosystem

Why Entrepreneurial activity is possible? It may seem strange that entrepreneurship, in principle, is possible. After all, there are large companies that have significant resources (capital, land, buildings and structures, labor). Large companies are really engaged in entrepreneurship. However, the sole proprietor or small enterprise has its advantages over big business: – Large enterprises, by virtue of their size, are set to a large volume of production. Such a volume requires large investments for re-equipment, if the needs of the markets have changed. In addition, re-equipment requires a lot of time. Individual entrepreneurs in this respect are much more flexible, they had better take into account the needs of small markets, and they change more quickly. – Managers, who are often hired employees, manage large enterprises. They want to keep their positions and salaries, i.e. are not ready to accept risks. An individual entrepreneur or a small business owner risks his own property. Nevertheless, the laws of economics say that you can get a big profit more often where there are big risks. In addition, the entrepreneur goes for such risks. 8

– Since the government helps the development of entrepreneurship, it is possible to make a significant difference between the taxes that encumber a large business and an individual entrepreneur or small enterprise. This makes the cost of services or products of an entrepreneur lower than that of a large business, and makes the entrepreneur's business competitive. – Entrepreneurs, because they are on the ground, closer to the markets, can see opportunities that big business does not see and take advantage of these opportunities. – Entrepreneurs, by virtue of being owners of their business, are personally interested in making business prosper and develop. This makes their business more efficient and flexible compared to the business that is managed by hired management. – Entrepreneurs, because they are smaller, closer to the markets, are personally interested in success, so they are more innovative and creative. This allows them to come up with new products and services, which have not yet reached the hands of large businesses. Functions of entrepreneurship The general economic function. Entrepreneurial activity is directed to the production of goods, the performance of work, the provision of services and bringing them to specific consumers: the population, other entrepreneurs, the government. The state and level of development of entrepreneurship is one of the defining conditions for economic growth, increase in gross domestic product (GDP) and national income. Resource function is initially associated with the most effective combination of factors of production, economic resources. What distinguishes an entrepreneur from an ordinary business executive is the use of various new ways of combining the factors of production. Innovation, conscious risk and responsibility for the decisions made, and projects for which the entrepreneur is going for maximum profit, involves the rational use of reproduced and non-reproducible resources. Organizational function is manifested in the freedom to choose the type of commercial activity, independence and independence of economic entities, in the ability to form and lead a team. 9

Social function. Satisfying the personal needs of the entrepreneur – making a profit – is associated with meeting the needs of other people. At its own risk, the entrepreneur always performs a certain social order (for new goods, services, technologies), focusing on achieving economic success. Making a profit for an entrepreneur simultaneously acts as a goal and as an incentive in his activity. The more effectively the business structures function, the more funds are channeled into budgets of different levels, and the growth of jobs is ensured. A new layer of people is also forming – people who are enterprising and self-sufficient, able to achieve their goals. According to the available sociological assessments, about 5% of the population has a pronounced entrepreneurial ability, although in different countries this indicator may vary depending on the characteristics of the national character and the prevailing cultural traditions. The social function of entrepreneurship is expressed in the reduction of unemployment, the increase in the number of jobs for employees, which in turn are economically and socially dependent on how sustainable and effective the activities of entrepreneurial firms. Creative function is inherently in entrepreneurship, because it is associated with the implementation of original views and approaches to decisions, technologies, and innovations. Entrepreneurial abilities are a special manifestation of the abilities of human capital, the costs of highly skilled labor. Entrepreneur in his activity is driven by the will to win, the desire for struggle, not only material, but also moral satisfaction, self-affirmation. This function can be implemented in the following areas: – the production of a new good, unknown to consumers, or the creation of a new quality of this or that good; – introduction of new production technology, still unknown in the industry; – development of a new sales market, a market in which this product was not represented, regardless of whether the market existed before or not; – receiving a new source of raw materials or semi-finished products, regardless of whether this source existed before, but was not taken into account, or was considered inaccessible or has only to be created; 10

– changing the situation on the market, in particular creating its own monopoly position or undermining the monopoly of competitors. Political function. Relations in ownership to the possession, use and disposition of the means of production and the products of labor, in addition to property and legal aspects, always had a social, ethical and political connotation of the relations between the elements of the internal and external business environment. Who is an Entrepreneur? Entrepreneur is an individual, who runs entrepreneurship and do business activity. In other words, Entrepreneur can be defined as a person who organizes or operates a business or businesses. Entrepreneur should include several abilities and features. In ideal, one person should be: – Idea generator (Inventor); – Personal achiever (Entrepreneur); – Empathic super sales person (Promoter); – Real manager (Manager, Administrator).

Picture 2. Typology of an Entrepreneur

Picture 2 shows the typology of the entrepreneur. As you can see in a picture below, sometimes one ability or feature can be higher than another one. It is very rarely when one person include all the four features. For example, sometimes entrepreneur can be more inventor than a businessperson, and may not know how to administrate his 11

company, do not say anything about promoting and implementing his product. In such cases, several individuals can create entrepreneurship. The founders of the company will be three or four individuals. One of them is idea generator, second is promoter, another one is a real businessperson. Moreover, such scheme of creating entrepreneurship is widely used by young and enthusiastic people, who are dreaming about changing something in their own and society’s lives. Motivation of entrepreneurial activity One of the most important areas of entrepreneurial research is the motivation of entrepreneurial activity. Classics of sociology revealed a variety of motives, among which one can distinguish the following: – economic, connected with the desire to independently increase incomes, gain economic independence; to raise the level and quality of life; to find new material opportunities; – non-economic, associated with a social self-realization, the desire to improve social status; with a desire to gain independence and freedom of self-realization; with the desire for professional self-realization, inaccessible by other means; with the realization of leadership and power ambitions; with ideological convictions and shared values. This classification of motives for entrepreneurial activity is based on the classical view of the entrepreneur as the most appropriate social embodiment of the model of an economic person and contrasts economic motives to all the others. At the same time, it is not necessary that economic motivation is recognized as the main and the main one, for a concrete situation and historical period the ratio of economic and non-economic (social, cultural) motives will differ. Another classification of motives for choosing entrepreneurial activity as a profession, occupation is based on a different basis – the nature of motivation: – Positive (pulling) motivation presupposes a choice based on a conscious inner striving of the individual for professional and social self-realization; to independent activity and realization of leadership potential; to the implementation of ideas and plans; to economic independence and self-improvement of material well-being; to the realization of beliefs, etc.; 12

– Negative (pushing) motivation is based on contradictions, conflicts, negative events of the environment, prompting them to choose entrepreneurship activities. These may include loss of work or insufficient remuneration for work (low wages, non-payment of wages), inability to professional selfrealization in the sphere of wage labor, discontent with social, professional, economic status, etc. The predominance of negative motivation for entrepreneurial activity generates such a phenomenon as «forced entrepreneurship». Thus, the increase in entrepreneurial activity in society falls on crisis periods. This is explained by the fact that due to the growth of unemployment and the decline in incomes of workers in both the public and private sectors, the most active part of the population does not expect and does not require assistance from the government (or simply realizes that there is no point in counting on such assistance), and independently solves its problems, doing small business. In times of crisis, small business in various spheres of economic activity turns out to be a kind of social «safety valve»; the opportunity to resort to it reduces the tension in society. In addition, in the conditions of economic crises, the society's need for an entrepreneurial initiative, in search of new forms of economic life, also increases objectively. Therefore, during these periods, the growth of the «symbolic capital» of entrepreneurs is often evident. Their prestige is growing, since their hopes for a way out of the crisis are connected with their innovative activity; ideologies are activated, oriented to individual freedom and initiative, the ethics of success; the mythology of the «strong personality», «the person who made himself», etc., is consciously cultivated. When the economic situation stabilizes, there is a gradual decline in entrepreneurial activity, the number of small entrepreneurs is gradually decreasing. Thus, with the growth of positive motivation for entrepreneurial activity, the «quality» of entrepreneurial potential also grows, as voluntary entrepreneurs tend to have a higher level of education, the ability to attract the necessary resources, and a more creative approach to business. In stable socio-economic conditions, it is generally believed that only 4-6% of the able-bodied population has a positive (pulling) 13

motivation for entrepreneurial activity and the opportunity to realize it. In the conditions of economic well-being, not only is the objective need for the society for innovations and innovators, but also for bureaucratic organizations. Modern approaches to the analysis of business motivation are based on its complexity and multilevel structure, involving interlacing of economic and non-economic motives, social rootedness of economic interests and motives themselves. As has been repeatedly mentioned, economic motives arise in the contexts of certain social relations, normative and institutional conditions of activity that determine permissible, recommended and desirable actions, as well as value systems perceived as representations of ideals. Positive and negative motivation can also be delineated only on an ideally typical, abstract level. In real social circumstances, a negative life situation can serve as an impetus for realizing a personal predisposition that would not translate into action without such a «push» from the outside. Do I need seed capital to start my own business? Many believe that to start your own business is necessary to have starting capital. Only it is necessary to determine what capital is. It is necessary to remember, that this is not just money. In addition, often money is not needed to start a business, though it is desirable. Therefore, starting capital is the resources and means that an entrepreneur can invest in opening his own business. Such resources can be personal labor and entrepreneurial time, work and time of relatives and friends, if they are willing to work for some time without payment. The means for starting a business can be intellectual capital. This knowledge, the ideas of the entrepreneur himself or other people's ideas, drawn from friends, relatives, in literature or from personal observations of other entrepreneurs and their business. Personal or attracted (not necessarily for payment or immediate payment) material resources are also capital and can be used to start a business. For example, you can use a commodity loan from suppliers to pay for these goods after the sale. Links are also an entrepreneurial resource. Friends, relatives, classmates, classmates, etc. can advise what to do, provide contacts 14

with people or companies interested in certain products or services, and provide material or financial resources free of charge. Undoubtedly, financial resources are very important for opening and maintaining your own business. Sources of financial resources can be: – Personal funds of an entrepreneur accumulated or obtained from the sale of personal property; – Borrowed funds (money can be borrowed from relatives, friends, a bank in the form of a loan); – Venture financing (a type of financing when you get money for a share in a business or for a share in its future profits). However, as mentioned above, money is not a prerequisite for starting a business. If there is no money, they can be replaced by personal labor and other means listed above. However, in this case it is more likely to start with services. Many services do not require at all or require minimal investment of a material resource or money. They require the personal labor of the entrepreneur. How to open a business? Suppose that a beginner entrepreneur does not have the financial and material resources to start a business. Then you can do so. It is necessary to search for and find demand for any product or service. Those find out if any people or companies have any needs that they cannot satisfy or whose satisfaction is too expensive or difficult for them. Then we need to find those who can meet these needs or satisfy them cheaper or easier. Then the entrepreneur receives the product from the supplier and sells it to the one who has a need. At the same time, he can use his own funds to purchase or agree on what will be paid after the sale. The difference in price between buying and selling will be the entrepreneur's income – this is called mediation. A number of such transactions can create an entrepreneur sufficient resource for the growth or development of his business. Nevertheless, the entrepreneur does not need to buy anything and then sell. There are other types of activities, that do not require a starting financial or material resource. This is a direct and personal service delivery. An entrepreneur can provide services at the expense of his own work and professionalism, and get a decent 15

reward for it. This can be, for example, hairdressing, childcare, cleaning of apartments, etc. The service can be provided not to one, but to several clients simultaneously. These are intermediary services. For example, private realtors are looking for and finding willing to sell or rent premises and those who want to buy or lease these premises. At the time of the deal, realtors receive their commissions. To provide services often do not need additional financial or material resources. Only the personal labor of the entrepreneur is needed. How to develop your business? If an entrepreneur stops at what has been achieved and does not continue to develop his business, he is unlikely to achieve serious prosperity. Over time, it is worth taking some steps that can improve the welfare of the entrepreneur. There are several options for business development. In this case, only one variant can be selected or the variants can be combined sequentially or simultaneously. To develop their own business, the entrepreneur has the following options: 1. Increase the range for your customer by obtaining a greater variety of products from: – New suppliers. – One supplier. 2. Finishing the products of suppliers through their own production. For this, he can: – Obtain parts from suppliers and organize their own assembly. – To adapt the products of suppliers to the specific needs of the client. – Improve the quality of its services with a corresponding increase in prices. Increase the number of customers who need the goods or services they provide. 3. Increase the number of customers. 4. Attract additional investors or take support from financial organizations. 5. Search new ways in implementing and moving products or services. 16

1.2. Differences between entrepreneurship and business Today, there is a tendency to assimilate the words entrepreneurship and business, as well as to identify the words «entrepreneur» and «businessman». Deepening into the etymology of words, (we see into the root), there are several interesting facts and examples. The word business is first encountered in the Greek language (askholia), then in Latin (neg + otium), moving further into English, which gave the world the most famous word business (previously busyness) as an attribute of «participle in the business and financial sphere of life». The meaning of this word is employment, lack of time, business, and lack of free time. «The case» in this case, I want to note, is used in the general concept and without specifying the species differences. Therefore, laws define entrepreneurship as a permanent activity for the sale of goods or services carried out by a person independently, at one's own risk and risk, in order to obtain profit in the established manner with appropriate registration in state bodies. Thus, business is defined as an activity that should be: – Legal (registered); – Commercial (implying profit); – Self-sufficient (the final beneficiary is the entrepreneur himself); – Permanent (single sale of goods or provision of services by entrepreneurship are not); – Risky (no one guarantees the entrepreneur a profit). Thus, the main differences between business and entrepreneurship are that entrepreneurship cannot be a priori illegal, while business can. Moreover, the fact that one-time and non-permanent transactions can be classified as business, while entrepreneurship implies permanent activity. But in general, the issues of business research in the western economic school are actively engaged not only directly by representatives of the economy. Business is viewed from the point of view of political technologies, both as a psychological aspect of human life activity and as a social mechanism – therefore there are very, very many different definitions and researches on this topic. As 17

an example, it can only be said that in sociology, the key aspect of business is that it should be aimed at ultimately benefiting society, and in terms of psychology – it should bring satisfaction and comfort to its organizer. Types of entrepreneurial activities First, by types of entrepreneurial activity, it is divided into owners and can be: Individual. The subjects of individual entrepreneurship include individual entrepreneurship, as well as (de facto, but not de jure) other organizational forms, such as an LLC with one founder who himself manages his business. Collective. This type of entrepreneurship includes joint-stock companies, partnerships, cooperatives, LLCs, partnerships. State. Such entrepreneurial activities include state-owned enterprises, wholly or partially managed by appointed specialists. Is it tempting? As they say, who does not take risks ... In addition, in the fundamentals of entrepreneurial activity can be divided into the following areas: – Production; – Provision of services. Of course, not always these spheres are separate. Moreover – the majority of large enterprises one way or another, but combines both the availability of production and the provision of a number of services to its customers. In scale, entrepreneurship is divided into small, medium and large, and these characteristics can be calculated both from the number of employees engaged directly in this enterprise, and from the turnover of funds passing through it. In addition, industry, target audience and a number of other indicators can also subdivide entrepreneurial activities. Features of entrepreneurship After considering the question of what entrepreneurship is, it becomes clear that the activities carried out by the entrepreneur are identified at the state level with economic activity. This feature has led to the appearance in the budgets of some countries of a special expense item, focused on the allocation of seed capital to economically active 18

citizens. The status of an entrepreneur can be assigned to almost any person who expressed such a desire. Different countries have developed different lists of restrictions in this area. To achieve these goals, creative people are capable of taking non-standard decisions and are able to listen to constructive criticism. The development of weekly, monthly and quarterly plans contributes to increasing the likelihood of the implementation of the plan. The implementation of activities in accordance with the requirements put forward by legislative acts, is not capable of damaging the economy of the country and the citizens living in it. The main function of high-ranking officials working in developed countries is to help the entrepreneurs who have lost support. An honestly constructed business that takes part in the development of the state economy can count on providing financial and other support. The state is fully aware of the importance of such undertakings, since it is the entrepreneurs who bear the burden of filling the budget. The conduct of their own business will appeal to purposeful personalities, inspired by the desire to create and possessing sufficient forces to implement bold plans. As practice shows, the chosen case can turn out to be so profitable that it will save the owner from routine campaigns for unloved work. It's quite difficult to dare to take such a decisive step for most citizens. The difficulties confronting the inexperienced entrepreneur stop many people who refuse to open up their prospects. At the same time, one should not forget that even the most insane ideas could be transformed into something reasonable and in demand, which brings a stable daily income. Risk is voluntary. Overcoming their own fears can be marked by the introduction of ideas that are useful for a wide range of people. The number of attempts preceding the acquisition of the status of a successful businessperson is not limited. The process of achieving the desired can be much more interesting than the resulting result. The implementation of global ideas can result in the formation of a group of like-minded people, each of whose participants will contribute to the result. Material benefits under such an approach can recede into the background, giving way to a creative incentive. Businesspersons from Entrepreneurs can be distinguished by three main criteria: 1. Goals. 19

2. Ways of doing business. 3. The result. Goals. The entrepreneur is convinced that he and his business have one common goal – to earn more money. He works for money and for them. Purpose personal (it is business) – more money. An entrepreneur, conditionally, is the «machine tool» for producing money. Therefore, like any machine, he does not care what to produce. Therefore, often, he is emotionally attached to his goods / service, because he invested many personal (often-physical) efforts – he sewed, washed, loaded, brewed, etc. Therefore, or trades to the last unprofitable, squeezing personally, just not to «change» their business. The goal is for this machine to work and make a profit. Often contrary to and in defiance of everything: consumer demand and needs, economic and political trends, fashion and trends, banal profitability and even common sense. The businessperson delineates the personal goals and objectives of the business. Personal goals can be anything: buy a house, a yacht, an airplane, make a circumnavigation, establish a foundation, live in America, etc. These are his personal goals. Moreover, money, profit is the goal of business. He uses business as a means to achieve his personal goals. Therefore, it is often not important for a businessperson in what industry to begin another business, what kind of goods or services to trade, what production to open. The starting point of choice is the percentage of profitability. What is the demand for now? That is all. Therefore, it is not difficult for him to close a low-profit business and open a new one. Perhaps in a completely different industry. Now more profitable. Business for him is a machine that produces money. Moreover, its goal in relation to the «business machine» is to create conditions for it to produce the most productive return, i.e. organize, manage and control. Way of doing business An entrepreneur is often the main employee in his business, the main «gear» of the business machine mechanism. If he is absent, then the matter has died. In addition, because he does not manage his business. He works. Moreover, his business manages it. He creates additional value through his physical efforts. An entrepreneur is a machine for producing money. 20

The businessperson in the business machine rustles other «gears». In addition, he is a manager – he who manages business processes and people. Therefore, its task is to create the necessary and sufficient conditions for the effective operation of the business machine. To produce more and faster. Result The task of the entrepreneur is to make maximum use of his own time and strength. More to spin. More work. However, any machine has its limitations. He cannot produce more than he can. Therefore, a unit of the entrepreneur's efforts makes one-time increases in profits. To double the earn – you have to work twice as much. The ceiling is close. There is no prospects for development. Machine – the businessperson is working at the limit. Often he does a lot or everything himself. Explaining this by saying that no one will do better than him. Consequently, the result of doing business by the Entrepreneur is due to his personal (physical, including) opportunities. The task of the businessperson – with the least personal effort to get the maximum profit Using and linking the energy and efforts of others, develop and expand the capabilities and productivity of your business machine. Therefore, a unit of his own efforts gives a hundredfold and a multiple increase in profits as a result. He manages and influences key business points. Where there is no need for it, other people make efforts. Consequently, the result of doing business by a Businessman is due to the competent co-organization of the personal opportunities of a larger number of people for their maximum return. Here are the main features of businessperson and entrepreneur. First. The most important difference lies on the surface. The essence of business and entrepreneurship is different. If in the first case, the person who decided to run a private business takes the finished model as the basis and embodies it, then in the second case the model is developed by the entrepreneur. His occupation is the realization of new ideas, the search for innovations, something that no one has done before. For example, the founders of the world-famous sports company Adidas at one time came up with the idea of supplementing the sole of the sneakers with metal spikes. Thus, adhesion to the surface was improved, and the athletes achieved significantly better results. 21

Here it is – entrepreneurship, output of products, which until now was not on the market. The fact that following them began to produce similar shoes competitors, we will call «business» – work on a readymade template, perhaps slightly modified or supplemented. Second. The second difference can be safely called the degree of risk in one and the other case. The finished model, time-tested and colleagues-competitors, has already proved its viability in one way or another, and the risks associated with doing business are significantly lower than in the organization of a fundamentally new business. Modern laptops have long become an integral part of our lives, but will there be a demand for devices that, for example, are not charged from electricity but from sunlight? On the one hand, such charging is available and free of charge, but on the other hand – the number of cloudy days in our latitudes is quite large. Whether such entrepreneurial activity is doomed to success or to failure can be learned only if you try. In addition, this means, at your own risk and risk, invest in the purchase of equipment, raw materials, labor, marketing and so on, and so on. However, if the idea finds a response in the hearts of millions of people, then millions (rubles or dollars) will be in your bank account. Third. The third point is the scale in either case. Business assumes a serious turn; a large business can be safely called the basis of state economic policy. In addition, entrepreneurship is an activity of a small and medium scale. To organize an entrepreneurial business, its owner (owners) invests their own funds. For example, they take loans and loans from the bank, pledging personal property as a guarantee of creditworthiness. Business, especially large, is often supported by the state and is based on existing capacities. It should be noted, that there is a direct dependence on public policy in the case of the organization of medium and large businesses. Fourth. Finally, summing up all of the above, I want to note that an entrepreneurial activity requires an extraordinary imagination, a creative approach and a fountain of new ideas. Moreover, to this – the desire and desire, the courage to deal with an unfamiliar business and the ability to attract people to their side, to 22

convince them of the advisability of investing money, gaining, helping in development. Perhaps there are some templates, for sure, you can find literature on the topic of interest, but largely the entrepreneurial vein should be in the person in the blood. In simple words, the main difference is as follows. An entrepreneur is someone who embodies new business ideas (new ways of earning money) into reality. That is, it creates a new product or services, or significantly improves (modernizes) existing ones. Here is an example among well-known entrepreneurs. Mark Zuckerberg – the founder of Facebook – a true entrepreneur, who is called the founder of social networks. He created not just a unique Internet site. He created a completely new environment for communication, entertainment and even doing business on the Internet. Here is an example of a true entrepreneur. Let us analyze the second term. A businessperson is one who acquires a ready-made business or copies an already existing model. That is, if you buy or open another store «Products», then you are an entrepreneur. As an example, our Internet activist Pavel Durov, who almost completely copied the business model from the above-mentioned Zuckerberg, created a successful Facebook clone (it is a question of the social network Vkontakte). As you can see, Paul is an excellent example of a businessperson – he saw, copied, earned millions. An entrepreneur is a man with a rich imagination and a mass of brilliant ideas. This is a creative person, whose brain constantly generates something new. They create themselves. Entrepreneurship cannot be taught at school or university, it must be in the blood. At the same time, a businessperson is the same profession as any other. In addition, this can be learned at the university or at special courses. For example, at MBA (Master of Business Administration) courses at Harvard University (recognized as the best courses for businesspersons all over the world). In addition, entrepreneurs are trying to occupy new or even not yet existing niche activities. Thus, they cut off competitors or significantly reduce the number to a minimum. Such activities are usually accompanied by low turnover, but high profitability. As for businessmen, they try to work in known, and long-proven areas of activity, where everything is transparent and understandable. 23

High competition and low profitability are compensated by high turnover. Summarizing the above, you can state the following. The engine of progress is entrepreneurs. After all, the latter create and introduce new technologies into modern production, realize the most insane ideas, create thousands of new jobs, improve and in every way diversify our world. Nevertheless, they support the economic situation in the world, not only entrepreneurs, but also businesspersons who also create jobs and annually bring billions of dollars in profits to the countries and states budget. 1.3. The role of startup How often do you hear the word startup? Recently, it has become very popular (so much so, that someone perceives it as a curse) and some are used to refer to almost any business, and others only as a description of Internet projects. In this section, we will answer the question «What is a startup?» Moreover, try to open the concept of a startup as broadly as possible, tell about the history of the term startup, about financing start-ups and other stages of its formation and development. What is a startup? The classic definition of a startup A startup either is a newly established company (perhaps even not a legal entity) at the development stage and building its business based on new innovative ideas or based on newly emerging technologies. More often, the characteristic features of a startup are the lack of finance and the fragile, almost «guerrilla» position of the firm in the market. Moreover, because of the fact that in the US startups are most often created by students, such companies are often called «garage». It should be noted, that the startup refers to any area of the market, not just the IT-sphere. The most modern meaning and concept of a startup is one or another venture project. The history of startups For the first time the term «start-up» appeared in the United States in 1939. Then almost all enterprises and firms engaged in developments in the field of high technologies concentrated near the 24

city of San Francisco, in the valley of Santa Clara (California). In those days, students of Stanford University David Packard and William Hewlett, creating here their own small project, called this business a startup (from the English start-up – start, run). Over time, this startup has grown into such a huge and successful company as HewlettPackard. Today, startups mistakenly describe all Internet projects (sites) that differ from the rest by some kind of «zest». This opinion arose based on monitoring the most successful, both foreign and domestic startups of the World Wide Web. Such as: – Social networks Facebook, VKontakte, Odnoklassniki.ru. However, based on the classical concept of a start-up (where the main features are the presence of an original idea and a niche that is not occupied by anyone), only the first one (Facebook) can be considered as such. The other two sites are successful copies, which are successful only in RuNet. – The largest online encyclopedia – Wikipedia. The number of articles on this resource cannot be counted, since their number increases daily. – YouTube – the largest database of videos. – Flickr – one of the most popular services for storing photos. – Twitter – a platform created by Jack Dorsey to exchange short messages Each of the above-mentioned start-ups is a website on the Internet. Therefore, we (in Kazakhstan) had the opinion that a start-up is a social network, an Internet service or some unusual site, because most people, citing examples of successful start-ups, refer to them. An English-speaking person puts a lot more into the concept of a «startup» and includes a definition of a company corresponding to a number of certain conditions. In other words, many in Kazakhstan mistakenly call the startup the result of development or a «raw product». It is right to start a company that implements this development and produces this product (it provides services). The main thing in a startup is ... One of the main reasons for the creation, successful development and continued existence of start-ups is the sluggishness and slowness of large corporations that successfully use existing products, but do 25

not deal with the development and creation of new ones. Therefore, start-ups, due to their mobility in terms of the implementation of new ideas, compete with large corporations. The main resource for creating a new startup is a good innovative idea. Actually, fresh and unusual ideas are chased by many, and often gaining large amounts of money. The idea itself, which has no material embodiment, and exists only on paper or in words (start-up plan), can cost a lot. Another factor in the success of this idea is its relevance (the degree of necessity for the consumer), because the idea may be unusual and new, but the benefit from it will be a minimum. The startups' success is also facilitated by the youthfulness of startups (the average age of a startup is 25 years according to statistics), their enthusiasm for ideas and deeds, and of course hard work (because they need only success, they work according to the principle: either everything – or nothing, or pan – or was lost). A good team is important for a startup. Of course, you can start a business on your own, but it is hard enough. In addition, the question here is not only and not how much money (for a purpose there are investors), how to develop a strategy, manage and enter all kinds of markets. As you know, one head is good, but two is better. It is important that one startup effectively complemented the other, that is, had the necessary qualities and skills that the companion does not have. Perfect partnership: one well plans – the second establishes ties, one develops a product – the second implements it, etc. Well, of course, money plays an important role in the development of a start-up. Where without them?! Financing start-ups Any investor knows that «dark horses» promise the greatest profits. Therefore, financing start-ups in Kazakhstan has long been put on stream. Today, investments in start-ups are handled by so-called business angels and venture funds. Venture entrepreneurs dispose of the shares of mutual funds, which invest in young, but very promising undertakings. Business angels are private investors who independently determine the object of investment and invest their own blood into it. To these two purses, start-ups can be conditionally added friends and relatives. And no matter how strange it seems to anyone, it is this 26

category that ranks second in Kazakhstan in terms of investments in start-ups, and at the world level – the third. If it is simple and clear with relatives and friends, where to find a business angel or how to attract the attention of venture funds, for many start-up start-ups remains a mystery. Business angels are private individuals who invest in business as a rule at the stage of becoming an idea. This is the main component of investment angels. They do not interfere in the affairs of the company and do not insist on an urgent return of the invested funds. Their goal is to make a profit in the long term, because investing start-up companies is not the main source of their income. Venture funds, in contrast to business angels, invest in the startups of their depositors' funds (money from insurance companies, pension funds, and individuals) and finance projects with a high or medium risk share, but with good yield potential. Venture funds like business angels can sometimes invest in projects at an early stage (when there is only a business plan), but they are more often preferred by companies that recently entered the market, who do not have the means to launch a full-fledged start. Where to look for an investor for a startup One of the most productive methods of searching for investors for its project is «Networking» – participation in industry forums and conferences, in startup competitions and venture investment events, in which a large number of companies wishing to receive financing, as well as potential investors take part. «Such conferences and events provide an excellent opportunity to get expertise and analysis of the project from market leaders, as they say from» first-hand. Hundreds and even thousands of people will see the presentation of the project, start-ups will receive feedback, find partners, and someone may even become their first client or tester. Everyone will get a chance to «shoot» with the business. To attract an investor to a start-up company can help the publication of ads on relevant forums and sites. There are also start-up exchanges and organizations that fund start-ups. We advise you to read the article «How to attract investment?». Picture 3 describes Start-up ecosystem. 27

Picture 3. The form of Start-up ecosystem

Stages of development of start-ups Stage of start-up – Pre-startup: a time period that lasts from the moment of the origin of an idea to the release of a product on the market. Stage of start-up – Pre-seed: the stage when there is already an idea and a clear understanding of what exactly buyers need, but there is still no clear idea of how to implement this idea technically and how it should be promoted, that it brings money, or is, but only in the most general form. The stage of the start-up is Seed: the seed stage at which the market is studied, a startup plan is drawn up, a technical task is drawn up and executed, a prototype is created and tested, the first investors are searched and the project is ready for commissioning. Prototype: creation of technical specifications and design of interfaces. A working prototype: creating a product or project with the most basic functions. Alpha version of the product or project: the product (project) is already ready, but not tested. In the process of testing and testing, some 28

minor corrections are made to the interface, which were not taken into account in the development and creation of the technical assignment. Negotiations begin with the first clients. Closed beta version of the product or project: the product (project) already has a form close to what the startups intended it, the project (product) has a small number of users invited by the founders of the startup in order to test the service and report on defects and possible improvements. Public beta version of the product or project: moderately active involvement of users is realized, who realized for themselves the need for the services offered by the project, or users of the most curious, and who are constantly in search of something new. Often, a public beta occurs by distributing a limited number of invitations. In addition, contracts are concluded with the first customers. Launching a product (project) into production or use: Startup stage: the decisive stage for any project is the early and late startup stage – the launch phase and the initial period of its operation. Stage of growth: the startup occupies a stable position in the market and moves confidently towards the conquest of the niche, which was planned at the stage of writing the business plan; Expansion stage: the start-up has already fulfilled or approached the business plan in the primary target market, and begins to increase its borders by conquering other markets. The company can expand its business either individually or through the purchase of other enterprises. The exit stage: The exit is primarily understood as the exit from business (partially or completely) of business angels and venture investors, who earlier took part in financing the start-up. The exit can occur through the sale of the company to strategic investors, through the company's stock placement on the stock exchange (IPO) and through private placement (sale of the company's shares to private equity funds). Venture funds finance promising start-ups, which, as a rule, always show rapid growth at the initial stage of growth, and by the time of release, the growth of the start-up is slowing down, compared to the previous stages, although the business itself becomes more stable. In addition, one of the options for «exit» and startups and investors may be the termination of business and bankruptcy of the enterprise. 29

30 Picture 4. Start-up development phases

Picture 4 describes start-up development phases. It is not necessary that every successful start-up passes through all of the above stages; it happens that some of them simply «jump», but in my opinion, a more detailed description is much better than simplified, as it gives a better understanding of how the start-up develops company. Questions by chapter 1 1. Describe definition of Entrepreneurship. 2. How do you understand the meaning of «the exploitation of entrepreneurial opportunities»? 3. How do you understand the ecosystem of entrepreneurial activities? What elements included? Give detail description for each of them. 4. Why Entrepreneurial activity is possible? Prove. 5. What are the functions of entrepreneurship? 6. How can you describe social functions of entrepreneurship? 7. How can you describe organizational functions of entrepreneurship? 8. How can you describe resource functions of entrepreneurship? 9. How can you describe a general economic function of entrepreneurship? 10. How can you describe creative functions of entrepreneurship? 11. How can you describe political functions of entrepreneurship? 12. Who is an Entrepreneur? Give definition. 13. What is the typology of the entrepreneur? 14. What include in motivation of Entrepreneurial activity? 15. Describe the nature of motivation. 16. How can you describe a phenomenon as «forced entrepreneurship»? 17. Does beginner Entrepreneur need seed capital to start his own business? 18. How to open a business? 19. How to develop your business? 20. What are the differences between Entrepreneurship and Business? 21. Describe types of entrepreneurial activities 22. What are the features of entrepreneurship? 23. Describe the way of doing business. 24. What is a startup? Give the classic definition of a startup. 25. Describe the history of startups. 26. What is a main thing in startups? 27. How to finance startups? 28. How do you understand the ecosystem of startups? 29. Describe stages of development of start-ups. 30. What are the main differences between ecosystem of startups and ecosystem of entrepreneurship?

31

Chapter 2

SOCIAL INNOVATION AND SOCIAL ENTREPRENEURSHIP The main sections of the chapter: 2.1. The concept of social entrepreneurship 2.2. The problem of formalization of social entrepreneurial activity 2.3. Organizational and legal forms of social enterprises

2.1 The concept of social entrepreneurship Previously we considered the main types of entrepreneurial activity. However, at the time of technological changes and modern issues the kinds of entrepreneurial activities defined by sustainabilityoriented entrepreneurship. Table 1 shows characterizations of such entrepreneurships (Table 1. Characterization of different kinds sustainability-oriented entrepreneurship). Table 1 Characterization of different kinds sustainability-oriented entrepreneurship

1 Core motivation

32

Ecopreneurs hip

Social Entrepreneurship

Institutional Entrepreneurship

Sustainable Entrepreneurship

2 Contribute to solving environmental problem and create economic value

3 Contribute to solving societal problem and create value for society

4 Contribute to changing regulatory, societal and market institutions

5 Contribute to solving societal and environmental problems through the realization of a successful business

1 Main goal

2 Earn money by solving environmental problems

3 Achieve societal goal and secure funding to achieve this

4 Changing institutions as direct goal

5 Creating sustainable development through entrepreneurrial corporate activities

Role of economic goals

Ends

Means

Means or ends

Means and ends

Role of nonmarket goals

Environment al issues as integrated core element

Societal goals as ends

Changing institutions as core element

Core element of integrated end to contribute to sustainable development

Organizational development challenge

From focus on environmental issues to integrating economic issues

From focus on societal issues to integrating economic issues

From changing institutions to integrating sustainability

From small contribution to large contribution to sustainable development

As you may see from the table there are four kinds of sustainabilityoriented entrepreneurship: Ecopreneurship, Social entrepreneurship, Institutional entrepreneurship, Sustainable entrepreneurship. The features of each kind described in the table. We will more deeply consider Social entrepreneurship. Social entrepreneurship is the use of venture business methods to develop, finance and implement innovative solutions to social, cultural or environmental problems. In this aspect, social entrepreneurship approaches the voluntary (non-profit, volunteer) sector. The concept of social entrepreneurship can be applied to a wide range of organizations, different in size, pursuing different goals, professing different beliefs. If ordinary entrepreneurs, as a rule, assess the success of their activities, focusing on profit, sales (sales volume) or the value of shares, then for the social entrepreneur the main criterion of success is 33

«social returns». Profit can also be taken into account, but not as an end in itself, but rather as a means for further progress towards the achievement of the social or cultural goals of the organization. The idea of social entrepreneurship differs markedly from the foundations of traditional entrepreneurship, but there are a number of similarities between these types of business activity. As early as the beginning of the 19th century, French economist-classicist Jean Baptiste Say defined the entrepreneur as a person who «accepts» an idea and transforms it in such a way that it begins to change society. Next, Say characterizes the entrepreneur as someone who «moves economic resources from the area of lower productivity to the area of greater productivity and income». Just as a traditional entrepreneur (for example, Henry Ford, Steven Jobs) changes the productivity of traditional economic resources, a social entrepreneur, as management theorist Peter Drucker points out, changes the performance of the whole society. Social entrepreneurship in modern society assumes an altruistic manner of doing business, focused on social benefits. Simply put, entrepreneurship becomes social when it transforms social capital in such a way that it begins to have a positive impact on society. The social entrepreneur as a gain considers this influence, since the success of a social enterprise depends on a number of factors related to social impact and not prioritized for traditional enterprises. Thus, the difference between «entrepreneurship» and «social entrepreneurship» is, first, in the goal setting. Social entrepreneurs seek to transform society as a whole, and not to derive the maximum profit from it, as the entrepreneurs are classical. In the process of social transformation, social entrepreneurs, as a rule, deal directly with acute social problems, and try to consider them in a broad context, at the intersection of various spheres of knowledge, theories and disciplines. This approach gives a better understanding of the roots of social problems, allows the development of innovative solutions and mobilizes the available resources for the most effective impact on society on a global scale. Both private and public agencies around the world provide support to needy communities and individuals, billions of dollars a year. Such support can contribute to the formation and wide dissemination of innovative ideas. 34

History of Social entrepreneurship and current state Although the term «social entrepreneurship» is only a few decades old, the origins of the phenomenon are much older. Among those whose activities can serve as a prototype of social entrepreneurship: researchers and enthusiasts refer to the founder of the Franciscan order of St. Francis of Assisi (the beginning of the 13th century); Robert Owen, founder of the cooperative movement (first half of the XIX century); Florence Nightingale, founder of the first school for nurses in the UK, developed progressive standards of nursing work and contributed to their widespread dissemination (1860s); Vinobu Bhave, the founder of the Indian movement «Earth as a Gift» [en] (1950s), and many others. In the nineteenth and twentieth centuries, some of the most successful social transformers contributed to the spread of innovations whose usefulness in social, cultural, educational and healthcare spheres was evaluated so highly that they were implemented on a national scale with the support of the state or business. In the 1980s and 1990s, social entrepreneurship experienced rapid development, first as an idea that attracted more and more supporters, then as a concept with its own terminology and theoretical basis. Just for the last two decades of the twentieth century, there was an explosive growth of non-profit organizations. If by the beginning of the 1980s their number in the whole world did not exceed 100,000 and the vast majority were American NCOs, by the end of the 1990s there were millions of them, and it was the US that became the main «growth center». As a result, a new multibillion-dollar sector of the economy has emerged – civil, or, as it is often called, the third sector, along with the public and private sectors. The impetus for its emergence was the concept of «new federalism» en envisioned by the Reagan administration in the mid-1980s, when an attempt was made to reduce the size of the federal government and cut its budget. Responsibility for many social services was shifted to the regions, and numerous charitable organizations (NCOs) lost their main source of financing, and in the conditions of the increased demand for their services they were forced to look for money. This led to the emergence of the phenomenon of social entrepreneurship in its modern form. At the same time, there are more fundamental reasons for the rise of social entrepreneurship in many countries of the world. This is the 35

so-called «global mobilization» and the «social revolution» that it caused, the roots of which should be sought in the growth of the wellbeing of the world's population, raising the level of literacy, awareness and sense of justice, activating feminist movements and other human rights movements, consolidating other social groups and communities. The decisive role was played by the emergence of new means of communication, the development of transport, financial institutions and, as a result, the fall or weakening of many previously difficult to overcome barriers for the movement of people, ideas and money: spatial, temporal, information and, in particular, linguistic. At the same time, along with all these benefits, an acute awareness of the many shortcomings and imperfections of modern society has come to a huge number of people, as well as deep disappointment in state and private institutions incapable, in their opinion, to cope with the challenges of the times. The result was the desire of citizens to change their lives for the better by their own efforts. The terms «social entrepreneurship» and «social entrepreneur» are first mentioned in the 1960s and 1970s in the English-language literature on social change. They became widely used in the 1980s, it is believed, thanks to the popularization of American business consultant and manager Bill Drayton, who is often called the «godfather of social entrepreneurship». In 1980, Drayton founded the Ashok Foundation, which became the first organization dedicated to identifying and supporting social entrepreneurs around the world. By 2016, the number of Fellowship Fellows members reached 3,000 among them representatives of 89 countries. The Ashoka Foundation does not use state funding, all funds, according to the fund itself, the organization receives from Western charitable foundations and large private donors. In 1987, the Drayton experience was first scaled: according to the Ashoka model, investor Ed Cowen founded another large fund – Echoing Green. A milestone in the history of the popularization of social entrepreneurship was the publication of the British journalist Charles Leadbeater «The Coming of a Social Entrepreneur» (1997). In 1997, a British sociologist, public figure and politician Michael Young opened the «School for Social Entrepreneurs» in London. By 2016, the school had branches throughout the UK, as well as in Australia, Canada and Ireland. Harvard University professor Daniel Bell called 36

Yang «the most successful entrepreneur in the world in the field of social initiatives». As a profession and an area for scholarly study, American economist Gregory Dees first introduced social entrepreneurship. In the 1990s, he published the pioneer article «The Meaning of Social Entrepreneurship» (1998) and several other works, and later headed the Center for the Development of Social Entrepreneurship at Duke University. In total, Gregory Dees devoted to describing and studying the phenomenon of social entrepreneurship for 15 years, making more than 60 publications on this topic. In 1998, the Swiss economist, founder and permanent president of the World Economic Forum in Davos, Klaus Schwab and his wife Hilda established the Schwab Foundation for Social Entrepreneurship to support the «world community of outstanding social entrepreneurs». A former high-ranking WHO official Pamela Hartigan heads the «former Schwab Foundation». For 2007, the fund provided support to 72 social entrepreneurs from all over the world. By 2016, according to the fund itself, their number has exceeded 260. Annually the Foundation chooses 20-25 social entrepreneurs within the framework of the global contest «Social Entrepreneur of the Year». The Foundation holds regional economic conferences, as well as the World Economic Forum in Davos, which receives invitations and social entrepreneurs. A year after the foundation of the Schwab Foundation, in 1999, another large fund was established in the United States, founded by Jeffrey Skoll, a North American investor and philanthropist, the first president of eBay. Skoll sold his stake in eBay for $ 2 billion, donated half of this amount to the fund of his name and headed it. «The Skoll Foundation» specializes in investing in social enterprises related to supporting health and education in developing countries. Under the grant program, the «Skoll Foundation» allocates up to $ 1 million for each project for three years, seeking to enter the stage of «pilotindustrial testing,» which will be followed by not only implementation, but also by further expansion and scaling. Therefore, in 2003, the Skoll Foundation provided $ 55 million for development in the field of social entrepreneurship. In 2004, the founder and chairman of eBay's board of directors, Pierre Omidyar, followed the example of his former employee and 37

established the Omidyar Network, a private, non-profit venture investment fund specializing in investing in start-ups in the field of social entrepreneurship in virtually all industries. The Fund prefers to invest from 1 to 10 million dollars in commercial companies and from 0.5 to 5 million – in non-profit organizations and projects. The total volume of investments is estimated at hundreds of millions of dollars, the «Omidyar Network» to creating conditions for microfinance pays special attention. A great popularizing effect was the awarding of the 2006 Nobel Peace Prize to Professor Muhammad Yunus from Bangladesh. Yunus founded Grameen Bank, which pioneered the concept of microcredit innovators in several developing countries in Asia, Africa and Latin America. After awarding the Nobel Prize, Yunus became a cult and central figure in the world of social entrepreneurship, his name is associated with many initiatives, including the 2010 International Social Business Day, which is usually celebrated in several countries on June 28, the day of his birth. In 2009, many leading players in the investment impact market, including a number of the largest organizers of social entrepreneurship, joined the Global Impact Investing Network (GIIN), initiated by the Rockefeller Foundation, JPMorgan Chase and the United States Agency for International Development USAID), with the aim of developing methodological base and standards, joint strategy, coordination of activities, expansion of its scope, effectiveness of impact and reduction of transaction costs of the members of the organization. Headquarters GIIN is located in New York. 2.2. The problem of formalization of social entrepreneurial activity The role of technology The information revolution of the late XX – early XXI century, leading to the creation of the Internet, and then social networks and social media played a key role for the success and cooperation of many social entrepreneurs. Internet resources, including specialized (crowdleading and crowdsourcing), are an effective tool for collecting donations, implementing other, more complex schemes for financing social entrepreneurship projects, as well as working together on them. 38

There are large portals devoted to working with non-profit organizations on the topic of donations (GuideStar), or informing (OneClimate, TakePart), databases of NCOs and vacancies (Idealist), platforms and network communities for fundraising (Network for Good) and targeted financing projects (GlobalGiving, Jolkona). A number of resources are focused on one direction of joint socially significant activity, for example, environmental (Care2), or on transformative investment (Kiva, MicroPlace). There are projects for coordinating the work of volunteers (Hands on Network, Do Something), and allowing professionals to provide free assistance, for example, legal (LexMundiProBono). There are social networks built around the theme of social entrepreneurship. In particular, in 2010, Chris Hughes, one of the founders of Facebook, launched the social network Jumo (a year later the project was bought out by the company socially oriented company Good Worldwide). The transition from the concept of social entrepreneurship, put forward in an extremely general form, to a single formal definition is not complete. The definition of social entrepreneurship as a phenomenon, and the social entrepreneur as its guide, evolves and refines over several decades, in parallel with the development of the field of activity. In the notion of social entrepreneurship, many activities related to the development of society are inscribed. Often, social entrepreneurs are considered philanthropists, public figures, environmentalists and other socially oriented figures. Difficulties with an unambiguous attribution of this or that figure to the number of social entrepreneurs are also because the career path of each of them varies greatly. Disagreements in definitions Classical is the definition of social entrepreneurship, cited by Gregory Deez in the article «The Meaning of» Social Entrepreneurship «of 1998. It was obtained by adding a social dimension to the definition of traditional entrepreneurship, borrowed from the works of Joseph Schumpeter, Jean-Baptiste Say, Peter Drucker and Howard Stevenson. According to Deez, social entrepreneurs are agents of change in the social sector, due to followings: 39

– The adoption of a mission aimed at creating and maintaining social values (and not just values for the individual); – Identify and relentlessly realize the new opportunities associated with this mission; – Participation in the process of constant innovation, adaptation and training; – Bold actions, not limited by the resources already available; – Exacerbated sense of responsibility for the fate of the social groups for which they work, and for the result of their activities. Thus, according to Deez, social entrepreneurship is the application of practices of traditional entrepreneurship to achieve social goals or fulfill a social mission. Jerr Boshi, in his work «Merging Mission and Money: A Board Member's Guide to Social Entrepreneurship», 1998 reinforces this definition, emphasizing the need for a balance between the two components: Social entrepreneurs are managers who pay increased attention to market mechanisms, while not losing sight of their main mission. They are capable of creating a balance between moral imperatives and the thirst for profit – and this process is the heart and soul of the entire social movement. Over the next 10 years, many definitions of social entrepreneurship were formulated. Debbie Brock and Susan Steiner, in the appendix to the article «Education in the field of social entrepreneurship: does it achieve the desired goals?», offer 13 such determinations proposed by theorists (Alex Nicholls, David Bornstein, Paul Light, Joanna Mayr, Sherrill Johnson, and others), as well as practitioners of social entrepreneurship (Ashok Foundation, Schwab Foundation, Skoll Foundation and others). In general, this period of the evolution of ideas about the essence of social entrepreneurship became a period of fixation of observations, affecting individual, disparate aspects. For example, Perrini and Wurro in 2004 noted that social entrepreneurs are more democratic and collegial than the usual in the decision-making process in their own environment. Joanna Mayr and Ernesto Nobo believe that the social entrepreneur is different from the usual big discontent with the surrounding situation. Ganesh Pradu suggests that social entrepreneurs can expect more support in society than traditional entrepreneurs. 40

However, none of these features is unique to a social entrepreneur; many businesspersons possess these qualities individually and even collectively. Sometimes analysts managed to make significant adjustments and additions to the emerging picture that did not raise objections. In particular, Helen Hoh and Paul Tracy in 2004 stated that when a social enterprise operates, «the surplus arising should be used in the interests of the» customers «of the social enterprise, and not the persons who control it». However, in the conditions of rapid development of the industry and its theoretical base, such cases remain isolated, and attempts to make more serious generalizations reveal disagreements already at a new level. Similar difficulties arise with respect to the term «social entrepreneur». For example, it is often attributed only to the founders of organizations that operate solely on the earned funds, that is, the income received directly from the consumer. At the same time, according to a broader interpretation, social entrepreneurs can enter into contracts with authorities, receive grants and collect donations. In 2007, the head of the Skola Foundation, Sally Osberg and Professor Roger Martin published the Stanford Social Innovation Review article-manifesto «Social Entrepreneurship: The Case for Definition, in which they pointed out that the sources of excessive inclusiveness of the concept of «social entrepreneurship» lie in the blurring of the term «entrepreneurship», whereas the concept of «sociality» does not raise problems. If ordinary entrepreneurial activity exists for centuries, and entrepreneurs themselves safely manage without its precise definition, then for social entrepreneurship, in the opinion of the authors, in this state of things lies the danger. Attempts to narrow the definition of social entrepreneurship continue. For example, the authors of the collection «Social Entrepreneurship and Social Business. In their view, social entrepreneurship is not «a synonym for social business,» or «a new form of social responsibility,» or «the only model social innovations «and, finally,» not a new sector «, as its boundaries are blurred and can include components of the private, public and civil sectors. 41

Observation of figures with a reputation of the most prominent social entrepreneurs can also be an effective way of replenishing knowledge and clarifying ideas about social entrepreneurship. Business and social sectors use different decision-making processes and, accordingly, speak different languages. A successful social entrepreneur acts like an interpreter, diplomat and mediator between them. It is no less important for a social entrepreneur to be able to act within a certain social context, he must skillfully use cultural, political, legal, financial and other infrastructures. A more profound analysis of the differences around the definition of social entrepreneurship reveals two fundamentally different views on this phenomenon; researchers tend to gravitate toward one of them: – Social entrepreneurship as a set of practices that can be associated with organizations (although this is not an obligatory condition); – Social entrepreneurship as an activity of non-profit organizations, trying to improve their effectiveness through traditional business methods. Despite all the difficulties, the idea of social entrepreneurship and its conductor, a social entrepreneur, evolves. It has come a long way from the assumption of the possibility of applying business tools to the social sphere, through the realization of the need for a balance between these components, to the idea of their homogeneous «alloy». Lyons and Kikal emphasize that in 2014, it is no longer a question of giving the social sector certain features of entrepreneurship or of giving a business to social consciousness, and that only a «mixture of the two regions» effectively achieves sustainable social results. The mass of literature on social entrepreneurship continues to grow, and the authors of almost every monograph address the problem of definition. Analysts often give reviews of the most well-known definitions, writers of more applied literature may be limited to one definition that «is well suited to our needs». The continuing variability of definitions makes analysis difficult, but at the same time provides a vast space for interdisciplinary research. 42

2.3. Organizational and legal forms of social enterprises John Elkington and Pamela Hartigan in the book «The Power of Unreasonable People» consider three models of the organization of social enterprises: 1. Non-commercial impact (The Leveraged Non-Profit): to respond to social needs, use available traditional resources (loans, grants, donations). Characteristic is the innovative use of available tools, which makes it possible to increase their effectiveness. 2. Social Business Ventures: designed to create changes based on public funds. Social business enterprises develop in the absence of external financing and are forced to be transformed into commercial enterprises. 3. Hybrid non-profit (The Hybrid Non-Profit): can take many forms, different from non-commercial enhanced exposure willingness to use its own profit to maintain its activities. Hybrid nonprofit organizations are often created to address the consequences of ineffective government regulation or a market fiasco, as they generate revenue for maintaining operations outside loans, grants and other forms of traditional financing. There are also hybrid commercial models, where ordinary businesses spend some of their profits on social, cultural or environmental activities. Employees of corporations can also participate in social entrepreneurship, with the approval of the company's management or without it. Such activities are defined as corporate social entrepreneurship. Purely non-commercial form Non-commercial organizations (NCOs) can profit from their activities. At the same time, they cannot distribute the proceeds between investors and owners, but must completely direct it to the achievement of the organization's goals. In addition, the profit obtained cannot exceed a certain fixed value. Thus, the actual entrepreneurial component of the activity of social entrepreneurs who choose the form of NCOs is initially significantly limited. At the same time, the bulk of investments by major philanthropists (Ashoka, Echoing Green, Acumen Fund) is for non-profit organizations. It is also important that such investors, as well as 43

venture capitalists from the private sector, provide NCOs with not only money, but also training resources, provide consulting, information and logistical support. To measure the effectiveness of philanthropists, the social return on investment (SROI) is used. Among other advantages of this form – tax exemption and the widest possible choice of sources of funding: membership fees, donations, grants, loans. On the other hand, social enterprises are particularly sensitive to fundamental shortcomings in the form of NCOs, in practice, only minimally controlling their activities. Thus, social entrepreneurs are forced to act in the interests of investors, who, for example, are often ready to finance only one of the activities of a social enterprise. Sponsors are often interested in the reputation of «progressive» and for its maintenance they follow the simplest way, financing risky innovation projects at the very first stage. Then they stop support and switch to other start-ups, talk about supporting the development of a non-material base, and the companies themselves and the skills of entrepreneurs, as a rule, do not have to. Complications arise with the provision of reporting with specific measurable results, since solving social problems requires a long time, and grants are usually issued for a short period (1-3 years). As a result, many successfully launched social projects are being closed. Among the latest trends, designed to mitigate somewhat the negative aspects of the functioning of social enterprises in the form of NCOs, one can distinguish: – The so-called «electronic philanthropy» (charity through the Internet), which, on average, attracts significantly larger amounts of donations while reducing costs and costs (including temporary ones. – Long-term loans (to provide working capital) provided by funds working with banks through special financial instruments (so-called «program investments» – programrelated investments, PRI – the hybrid form between the grant and the traditional investment). – Low-profit limited-liability company (L3C) (an NCO form that is gaining popularity in the US), which allows combining the pursuit of charitable goals that remain a priority, and the distribution of profits. In the event that profitable activity becomes for the L3C core, such an organization may change its status to commercial. 44

Purely commercial form Social enterprises in the form of pure commercial structures are no different from ordinary commercial enterprises, except for the existence of a declared social mission. Accordingly, they can exist in the form of private-entrepreneurial activity (individual entrepreneur), commercial partnership (partnership), limited liability company (LLC) or joint-stock company (JSC). There are other forms and varieties of the above, specific for the legislation of different countries. In particular, there is a new experimental type of corporations in the United States – a corporation for the provision of public interests (benefit corporation, Bcorporation). Such corporations are certified and are required not only to make a profit, but also to follow an explicit social mission, the implementation of which is monitored by independent observers, in exchange for some tax breaks. In 2016, the B-corporations law was passed in 30 states. Unlike NCOs, commercial organizations have a much narrower range of main sources of income: the funds of owners, their families and friends, commercial bank loans to cover working capital deficit, capital for intermediate financing (bridge loans, private venture capital Angels), and venture capital. Thus, owners of social enterprises in the form of commercial organizations have the opportunity to leave profits or a part of themselves, as well as maximum control over their enterprises, but at the same time a minimum set of ways to finance them and support them from outside. The preservation of a balance between the need to make a profit and the fulfillment of a social mission is a task that many entrepreneurs who are compelled to choose other structural forms of a social enterprise cannot do. Among successful examples, Kikol and Lyons call the commercial product company Newman's Own, whose owners direct 100% of the profits for educational and charitable needs. Hybrid forms Hybrid structures provide a variety of flexible opportunities for the activities of social entrepreneurs, and therefore are the most interesting and attractive option for an enterprise pursuing social goals. There are many types of such structures, among which are: 45

Commercial organizations with non-profit entities. Such units, unlike «parent» companies, are able to accept donations and grants. Example: the commercial company Pura Vida Coffee, which sells coffee, and its non-profit division Pura Vida Partners, which manages charitable projects in Costa Rica, Ethiopia, Nicaragua and Guatemala. Pura Vida Partners enjoys tax benefits, and Pura Vida Coffee can transfer part of its profits in the form of tax deductions to its non-profit department. Such a scheme is extremely effective for achieving social goals. Non-commercial organizations with commercial units. Such units, unlike their «parent» companies, can distribute the earned profit at their own discretion. Example: Greyston Bakery, part of the American non-profit organization Greyston Foundation. The bakery is located in New York, this is a commercial enterprise of the Bcorporation type with a turnover of about 5 million per year. Funds transferred by the bakery of the parent NCO are not taxed. Non-profit structures with non-profit units. Such units can be created for different purposes: for example, to engage in another type of business not related to the activities of the parent NCO, or to increase the chances of the entire structure to receive grants, or to prevent loss of grants. Partnerships between non-profit organizations (consortia). There can be two main types: non-profit cooperatives and strategic mergers (consolidations). An example of a cooperative project in the field of journalism is the information network of alter-globalists Indymedia. For partnerships of both kinds, especially for consolidations, the comparability of the missions of both partners is important. Partnerships between non-profit and commercial structures (alliances between sectors). Are successful under conditions of mutual benefit, complementarity of strategies, and proximity of corporate cultures. Examples: partnership between the largest US energy company Consolidated Edison and NCO Trees New York, engaged in the greening of the city; The Susan G. Komen for the Cure breast cancer fund, which has many commercial partners. International distribution Among the states in the field of social entrepreneurship development, the United Kingdom and the United States have 46

traditionally been leading, including by virtue of the legislated status of social entrepreneurship. Also high rates are shown by Italy (thanks to the historically strong cooperative movement), Slovenia, the Scandinavian countries, South Korea, Malaysia, India, Bangladesh, some African countries. The countries of Eastern Europe and the postSoviet space, including Kazakhstan, remain on the periphery of these processes. Organizations such as the Ashoka Foundation: Innovations for Society, the Skoll Foundation, the Omidyar Network, the Schwab Foundation for Social Entrepreneurship, the Canadian Foundation for Social Entrepreneurship, the New Profit Corporation, Echoing Green are engaged in searching around the world for people whose activities significantly change society, but while not having sufficient funds. The American company Ashoka's «Changemakers» program uses the Internet to organize a kind of competition, because of which communities arise that solve vital problems. In North America, organizations tend to support outstanding individuals, while in Asia and Europe more attention is paid to the interaction of social entrepreneurs with organizations, individuals and social movements. In Russia, the Fund for Regional Social Programs «Our Future», created in 2007 on the initiative of Vagit Alekperov, is engaged in the search and support of social entrepreneurs on an ongoing basis. An example of the involvement of young people in solving social problems is the Australian program of the Young People's Foundation for Young Australians, which invests in initiatives of young people bringing positive changes in society. Fast Company Magazine publishes a list of 45 best social entrepreneurs of the year each year, which the magazine calls organizations that «use the discipline of the world of corporations to solve complex social problems». Despite the fact that social entrepreneurs at the level of a small community or group realize many, sometimes very innovative, ventures, at the stage of scaling up their achievements to the level of society as a whole, face difficulties. Studies show that very few people have entrepreneurial talent and skills combined with a sociallyoriented world view. Thus, social initiatives turn out to be compromise and often do not reach a wide audience. Since the notion of social entrepreneurship was popularized relatively recently, some advocates 47

of this concept speak of the need to develop some standardized methods for disseminating the achievements of social entrepreneurs around the world. For a qualitative breakthrough in the development of social entrepreneurship, it is necessary to attract as many world leaders as possible on its side, which, in turn, requires a great deal of explanatory and popularization work. Involvement and cooperation between private corporations and government agencies can attract additional funds for social initiatives, increase accountability at both ends, and develop links with needy communities, individuals or institutions. For example, private organizations or non-profit organizations in the past have solved problems of unemployment in communities. With all this, at present there are only short-term solutions, or solutions that are not scalable to the required degree, in order to cover the maximum possible number of people in need. Public policy in the financial sector could solve this problem; however, inadequate cooperation between these parties, both of which serve society, leads to a decrease in the effectiveness of social entrepreneurship. The reasons for this stagnation lie in the motives and goals of both social entrepreneurs and politicians. The latter, naturally, tend to have priorities different from those of social entrepreneurs, which leads to insufficient growth and too slow expansion of social initiatives. Questions by chapter 2. 1. How can you describe characterization of different kinds sustainabilityoriented entrepreneurship? 2. What is ecopreneurship? 3. What is Social entrepreneurship? 4. What is Institutional entrepreneurship? 5. What is Institutional Sustainable entrepreneurship? 6. Describe the concept of Social entrepreneurship. Give definitions of different authors. 7. Why social entrepreneurs deal directly with acute social problems? 8. Who were the founders of Social entrepreneurship? 9. Why in the 1980s and 1990s social entrepreneurship experienced rapid development? 10. What is «a social revolution»? 11. How Ashok Foundation influenced to the development of Social entrepreneurship? 12. What was the publication of the British journalist Charles Leadbeater? 48

13. What is purpose of Schwab Foundation for Social Entrepreneurship? 14. The Skoll Foundation the Skoll Foundation for Social Entrepreneurship? 15. What was a contribution of Nobel Peace Prize Professor Muhammad Yunus for Social Entrepreneurship? 16. Describe the role of technology in Social Entrepreneurship. 17. What is the problem of formalization of social entrepreneurial activity? 18. What are disagreements in definitions in Social Entrepreneurship? 19. What are organizational and legal forms of social enterprises? 20. What is the non- commercial impact of social enterprises? 21. What is the commercial impact of social enterprises? 22. What is a hybrid non-profit of social enterprises? 23. Describe a purely non-commercial form Social Entrepreneurship. 24. Describe a purely commercial form Social Entrepreneurship. 25. What are commercial organizations with non-profit entities? 26. What are non-commercial organizations with commercial units? 27. Describe non-profit structures with non-profit units. 28. Describe partnerships between non-profit organizations (consortia). 29. Describe partnerships between non-profit and commercial structures (alliances between sectors). 30. Describe an international distribution of Social Entrepreneurship.

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Chapter 3

THE INNOVATION PROCESS AND ITS STAGES The main sections of the chapter: 3.1. Innovation in Entrepreneurship. Idea Generation and Mobilization 3.2. Advocacy and Screening 3.3. Experimentation 3.4. Commercialization, Diffusion and Implementation

3.1. Innovation in entrepreneurship. Idea generation and mobilization In the period of recovery, as, for example, the one we are experiencing now, changes are becoming the norm. Undoubtedly, they are always risky and painful and necessarily require hard work. However, if an individual manager or a leadership group does not consider it his task to manage change, then the organization (business company, university, hospital, etc.) will not be able to survive. During rapid structural changes, only those who are capable of innovation and change are surviving. An organization that wants to develop its ability to innovate, strives not to miss its chance to succeed and prosper in a period of rapid change, should apply entrepreneurial management in its activities, i.e. entrepreneurial methods and techniques. These methods and techniques need to be used both within the existing enterprise and in working with new companies. The organization should involve entrepreneurial strategies also outside of the organization. On the market. Finally, an entrepreneurial organization needs to make every effort to constantly seek innovative opportunities, in relation to which it will then be possible to apply entrepreneurial strategies. «Big companies do not innovate» says the well-known wisdom. This sounds plausible enough. Indeed, new, serious innovations of the twentieth century were made not by the old, large organizations of their time. The railways did not lead to the appearance of a car or truck, 50

they did not attempt to do so. In addition, although automotive companies still tried to do so (Ford and General Motors were the first to engage in aviation and space exploration), all the major aerospace companies of our time emerged based on completely new enterprises. Similarly, today's giants of the pharmaceutical industry are mostly companies that, fifty years ago, when modern medicines were being developed, were small or nonexistent. All the giants of the electrical industry – General Electric, Westinghouse and RCA in the US, Siemens and Philips in Europe, Toshiba in Japan – in the 1950s were actively involved in computer development, but none of them succeeded. First, there are many exceptions – many large companies that have made significant progress as entrepreneurs and innovators. In the United States of America, there is Johnson & Johnson in the field of hygiene and medicine, ZM – in the field of high-tech products for the industrial and consumer markets, Procter & Gamble – in the consumer goods market. Citibank, one of the largest banks in the world with more than a century of history, is the author of many innovations in various fields of banking and finance. In Germany, one of the largest chemical companies in the world, Hoechst, now more than 145 years old, has become a successful innovator in the pharmaceutical industry. Secondly, it is not true that a large size serves as a hindrance to entrepreneurship and innovation. When it comes to entrepreneurship, they often recall the bureaucracy of large companies and their conservatism. Of course, both of these phenomena exist, besides they are a serious obstacle to entrepreneurship and innovation, but at the same time for effective work in any other direction. Nevertheless, the data convincingly show that among existing enterprises, whether in the business sector or among non-profit organizations, smaller companies are less inclined to engage in business and innovation. Among the working entrepreneurial organizations there is a huge number of very large firms, this list could easily include about a hundred different business companies from around the world, and innovative public organizations include many large institutions. Yet the popular opinion that large companies cannot and do not want to engage in innovation, even half is not true, this is a real misconception. 51

Not the size of the company hinders entrepreneurship and innovation, but the existing principle of activity, especially successful. A large company or an organization of medium size will be easier to cope with such difficulties than a small firm will. To work in any field – at a manufacturing enterprise, in the field of technology, on the product line, in the sales sector – constant efforts and undivided attention are required. The only thing that can be guaranteed to expect in any kind of activity is a daily crisis. It cannot be postponed, it has to be dealt with immediately. Moreover, the existing activity should always be in the first place. Well-known wisdom is mistaken in that it claims that entrepreneurship and innovation are natural, creative or spontaneous phenomena. If in the organization with them there are problems, means, something hinders them. In addition, the fact that only a minority of existing successful companies are actively engaged in entrepreneurship and innovation is seen as evidence that existing organizations are suppressing the entrepreneurial spirit. Nevertheless, in fact, entrepreneurship is not natural or creative. This is work, and therefore, based on the available evidence, it would be correct conclusion, the opposite of the widespread. The fact that a significant number of existing companies – among them a very large number of medium, large and very large organizations – have succeeded as entrepreneurs and innovators, suggests that any company can engage in innovation and entrepreneurship. Nevertheless, it must consciously strive for this. Entrepreneurship and innovation can be learned, but this will require effort. Entrepreneurs perceive entrepreneurship as their duty, so they are accustomed to it, working on it and improving their skills. The development of innovative entrepreneurship depends on consumers' demand for innovation, the availability of a developed scientific and technical potential of the national economy, the functioning of venture firms and investors financing risky innovation activities. Table 2 shows the factors that influence the development of innovative entrepreneurship. As a rule, the basis of entrepreneurial activity is innovation in the field of products or services, allowing creating a new market, meet new needs. Innovation is a specific tool of entrepreneurship, not innovation in itself, but a directed organized search for innovations, a constant focus on them entrepreneurial structures. 52

Table 2 The factors that influence the development of innovative entrepreneurship Factors Economic, technological

Characteristics of the factors Presence of a reserve of financial, material and technical means, progressive technologies, necessary economic and scientific and technical infrastructure, state programs for financing innovative activity; material incentive for innovation

Political, legal

Legislative measures that encourage innovation, state support for innovation activities Flexibility of organizational structures, democratic management style, predominance of horizontal information flows; self-planning, the admission of adjustments; decentralization, autonomy, formation of target, problem groups, reengineering

Organizational and managerial

Socio-psychological and cultural

Moral encouragement, public recognition; providing opportunities for self-realization, liberation of creative work. Normal psychological climate in the work collective

Innovative entrepreneurship is a special innovative process of creating something new, an economic process based on a constant search for new opportunities, an orientation toward innovation. It is related to a willingness of an entrepreneur to assume all the risk of implementing a new project or improving an existing one, as well as financial, moral and social responsibility that arises at the same time. In general, innovative entrepreneurship can be defined as an economic process leading to the creation of the best goods (products, services) and technologies by means of practical use of innovations. There are three models of innovative entrepreneurship, which are Based on the method of organization of the innovation process (Picture 5). Innovative entrepreneurship based on internal organization – innovation will be created and / or developed within the firm by its specialized units based on planning and monitoring their interaction on an innovative project. Innovative entrepreneurship based on an external organization supported by contracts – an order to create and (or) master the innovation is placed between third-party organizations. 53

Innovative entrepreneurship based on an external organization supported by ventures – a firm for the implementation of an innovative project establishes daughter venture firms that attract additional thirdparty funds. Most often, the second model of innovative entrepreneurship is used – the company places an order for the development of innovations, and masters them on its own. models of innovative entrepreneurship

Innovative entrepreneurship based on internal organization

Innovative entrepreneurship based on an external organization

Innovative entrepreneurship based on an external organization supported by ventures Picture 5. Three models of innovative entrepreneurship

At the heart of all types of innovative entrepreneurship are the creation and development of new types of products (goods, services), manufacturing, and the creation of things, values, and goods. The main determining part of such entrepreneurship is the creation and production of scientific and technical products, goods, works, information, intellectual values, which are subject to subsequent sale to customers and consumers. Therefore, innovative entrepreneurship is a special innovative process of management. It is based on a constant search for new opportunities, an orientation toward innovation, the ability to extract and use resources from a wide variety of sources to solve persistent tasks. This type of entrepreneurship is associated with the willingness of an entrepreneur to voluntarily assume all the risks associated with the implementation of a new project or the improvement of an existing one, assume financial, moral and social responsibility for the process 54

that should bring monetary income and personal satisfaction to what has been achieved. Innovative entrepreneurship is the main base of all spheres of entrepreneurial activity. Idea generation

Selecting and assessing the most perspective ideas

Creating business plan

Assessing business plan

Searching necessary resources

Registration of innovative entrepreneurship

Creating and implementing prototype

Registration of intellectual property

Sales volume analysis and adding necessary corrections

Mass production of new products Receiving profit from innovative activity

Picture 6. Innovative Entrepreneurship phases

In addition, innovative entrepreneurship is both an economic phenomenon and a process. As an economic phenomenon, 55

entrepreneurship acts as a form of production relations with regard to the production and sale to consumers of specific goods (works, services) of the required quality and obtaining the planned result. As an economic phenomenon, it expresses the entire system of relations arising in the entrepreneur in the relationship with consumers in the process of selling goods (works, services), with suppliers, other business entities, employees and, finally, with state and other government bodies. Since innovative entrepreneurship is recognized as a special type of entrepreneurial activity, for it, these stages should be divided into smaller (Picture 6). Entrepreneurship as a process is a complex chain of actions – from the search for the (birth) of an entrepreneurial idea to its implementation into a concrete project of an enterprise that allows producing goods necessary for consumers. This process ends with a certain amount of profit. Accordingly, as part of entrepreneurship as a process, there are four most significant stages: – Search for new ideas and their evaluation; – Drawing up a detailed business plan; – Finding the necessary resources; – Management of the established enterprise. Not always listed phases are executed consecutively one after another, as indicated in Picture 6. Quite often, separate stages are carried out in parallel, and this only speeds up the process of innovation. As a rule, the idea is chosen and evaluated simultaneously with the development of the business plan, at the same time, state registration of the created innovation enterprise can be conducted and an application for a patent can be submitted. It is important for innovation entrepreneurship to acquire such stages as the search for a new idea and protection of the created intellectual product. Therefore, at these stages it is necessary to dwell in more detail. Innovation process include five main stages: 1. Idea Generation and Mobilization 2. Advocacy and Screening 3. Experimentation 4. Commercialization 5. Diffusion and Implementation Below we will consider each of them more deeply. 56

Idea Generation and Mobilization Any idea creating during idea generation. Idea generation means thinking on something, problem and finding solution. What is the secret of creative geniuses, thanks to which cool ideas are born? Although the creation of ideas may seem a random process and something mystical, there is a simple and practical way to increase your chances of the appearance of good ideas. Everyone wants to come up with brilliant ideas, but have you ever wondered what an idea is? Try to think about it. The answer can be simpler than it seemed to you at first: ideas are connections. Any idea, even the simplest one, is an association between the previously emerged, already known ideas. Our mind constantly forms such connections – most often spontaneously and unconsciously. Another interesting property of these links is that nothing can be said about them in advance. Often, ideas are formed by merging two seemingly completely different concepts, produced in an unexpected or unusual way. To create a moving literature, Gutenberg combined the ideas of the grape press and the machine for coinage. Joseph Pulitzer for the creation of a newspaper published in mass circulation combined large-scale advertising with high-speed printing. Creating cool ideas may seem like a matter of chance – but this does not mean that the development of this skill cannot be promoted. Creativity and Productivity Since the process of the emergence of ideas is of an accidental nature, it is unlikely that a direct approach is possible here. The only way to increase the chances of creating a good idea is to increase the number of ideas available for the formation of links. Even the most common ideas serve as the starting material for ideas of a higher level. The more ideas you have the more material your mind has to match them and give out good ones. Nobel laureate Linus Karl Pauling formulated this effective strategy in one sentence: The best way to come up with a good idea is to come up with many ideas. Thus, the key to creating brilliant ideas is fecundity. In matters of creativity, there is no compromise between quality and quantity: only quantity comes quality. 57

It is necessary to abandon the mythical image of a genius, all ideas of which are successful. It may seem that every sample of the work of a genius is remarkable, but this only happens because it is precisely the greatest creations that get fame. Nobody could create brilliant creations, not being highly productive. Consider the following examples: Einstein is known for his theory of relativity, but he also published 248 other works. Bach wrote a cantata every week, despite the poor state of health and fatigue. Mozart created more than 600 works. Thomas Edison received no fewer than 1093 patents. Just imagine the number of works not patented by him... Another interesting fact about innovative ideas: their quality is completely independent of the quality of other ideas of the same author. In fact, if you study the most productive periods of most geniuses, you can identify a general principle: it was during the creation of their best masterpieces that they also suffered the greatest setbacks. Great inventors, therefore, do not care about creating outstanding ideas: they just come up with ideas – any more is better, anywhere and anytime. How to get many ideas If the best way to come up with good ideas is to create them using an extensive reservoir, then our task is to fill this capacity with as many ideas as possible. Here are six tips that can help you develop a type of thinking that corresponds to an «excess of ideas»: 1. Expect the emergence of ideas The first thing to do is to get rid of such limiting beliefs, as «I'm not a creative person». Discard the prejudice that only a select few can create ideas. Usually this is enough to make ideas come to you. 2. Greet stupid and generally any ideas Never concentrate on creating great ideas. Fight always for their number. Most people do not even try to come up with ideas, because they fear in advance that their ideas will be called «stupid». Do not pay attention: ideas that are considered stupid today can become the basis for a revolutionary idea tomorrow. In addition, when you finally 58

have such an idea, no one will remember the less successful. (As for the fear of talking about your ideas, keep in mind that provocations are a hidden form of shame, a desire to get you out of balance.) 3. Be open to new experiences Your senses absorb the information that the mind subsequently applies to create associations. The more you deal with different situations, people and places, the more fuel you give your mind for the formation of connections. Learn to welcome diversity in your life: travel, try new dishes, read magazines that you usually do not look at. Do not be afraid to do the usual things differently. 4. Fix ideas immediately Develop a habit of recording all your ideas. Use notebook, or voice recorder. The method of fixation does not matter, just make sure that the tool for writing ideas is always at hand. If you do not write down ideas right away at the moment of appearance, most of them you are guaranteed to forget – and even worse, you do not even know that you had ideas. Every time the mind notices your attention to his ideas, he rewards you with other ideas. 5. Be grateful for the ideas Every time an idea came to my head – any – be thankful for it. Developing this habit, you create additional positive reinforcement, an incentive for the mind, encouraging the creation of new ideas. 6. Ideas come in stream In a few days you could not come up with any idea – it is normal. Ideas will start coming suddenly, one after another, like a stormy river. Sometimes ideas come so quickly that you barely have time to write them down. Do not worry during the natural recessions, but be ready to take full advantage of the flow of ideas when it rushes. Idea mobilization takes part when idea start move to different physical or logical locations. For example, when you generated an idea and shared it with your friend. Alternatively, you have solution for bothered problem and you may offered it to your director. 3.2. Advocacy and screening Advocacy and Screening are the second stage of innovation process. At this stage, idea generator have to present his idea to the audience. 59

When you have a ready idea on your hands, the next step is to prepare and conduct a presentation of your business idea. Presentation is an official, solemn presentation of a newly created company, project, and products to the media, the public or potential consumers. In case of presentation of the business idea, the target audience is made up of investors or employees of your company. Of course, the first case requires a closer look. The fate of the project depends on how effectively the presentation takes place in the investor's eyes. It follows that the main purpose of your presentation activity is to convince the investor (creditor) that you will be able to implement the proposed project. To do this, it is necessary to show the strengths of the business and the benefits to the investor, given the fact that the time for communication in many cases is limited to no more than 20 minutes. During this time, you need to have a dialogue with potential investors. This is facilitated by an understandable and logical structure of your presentation. Most of the presentations cover seven key areas: – enterprise and its products (services); – market – customers and competitors; – marketing strategy; – priority financial tasks; – a team that will implement the business plan; – the necessary amounts of the loan or equity and the purpose for which this money will be directed; – conditions and terms of investment return (it is natural that investing their funds, the investor waits for their mandatory return and profit). It is important to realize what needs to be given more attention, to ask a question, what can be incomprehensible to your listeners. Of course, we should focus on the feasibility of investments, their start, volume, return, risks, etc. In addition, it should not be forgotten that the product itself, especially if it is innovative, should be presented most clearly and with a graphic emphasis on its strengths. The project team is very important. In the eyes of a potential investor, the most important factor is your personal qualities, as well as the personal qualities of the entire management team of your firm. Potential lenders want to see your interest, enthusiasm, sincerity, as well as many other qualities that 60

would indicate your talent as a leader and competence and would be the key to the successful implementation of your plans. It is not superfluous to briefly tell about the experience of those people with whom you are going to do business. Creating the presentation of the business idea The simplest and most effective way to technically draw a presentation is to make it in Power Point. The format of this program allows you to integrate video and audio files into the presentation, create primitive animations at the level of «slideshow». However, one must be prepared for the fact that the files integrated into the presentation can begin to «hang». At this time, you should not get lost and take a pause with an appropriate joke or important additional information. Pitch (from the English pitch – roll, pitch) is a short and capacious presentation of the project in slides. It serves as a support for personal communication or teleconference with investors and partners. An effective presentation of the business plan works to reduce uncertainty and risk, those factors that deter investors. The ideal formula for creating a marketing presentation is not. When making presentations of Power Point with the involvement of professional designers, it is possible to achieve a combination of information and a qualitative visual implementation of the individual components of the image created specifically for presentation. Presentations made with European quality are text and picture, representing a single «wrapper», in which this or that information is wrapped. In general, design in the first place should not distract the attention of viewers and contribute to the emotional perception of your idea. Moreover, the information on the slides should be presented briefly, informatively and logically. All visual materials must be performed professionally and accurately. Use also diagrams, tables or graphs. You should always send a copy of the shortened business idea in advance to potential investors, so that they have the opportunity to read it before the meeting. In addition, after the presentation is over, give potential investors CDs or DVD-versions, with which they can slowly read in a comfortable environment for themselves. In your favor, use for presentation of visual material will play. If you have the opportunity, take samples of your products with you. If 61

for some reason you cannot do this, or your business belongs to the service sector, take photos. Try to ensure that future partners look at samples or photographs, if possible. This will immediately cause a more serious attitude to your words. However, do not forget to remove the visual aids that have already completed their task, since they can distract the attention of listeners. Creating a presentation serves several purposes. Entrepreneur it helps to organize their ideas. The main goal of the pitch is to convince the investor of the return on investment. Ten slides below form the basis of an effective presentation. Slide 1. View As an introduction and for a brief introduction, briefly introduce your company, its vision and goals. Slide 2. Problem The need of the target audience in the product or service is the main factor of the project's success. Describe the problem in terms of opportunities and show its practical significance. Slide 3. Solution Demonstrate the innovation or uniqueness of your solution. Show what will make a person use your product or go to you from competitors. Brightly highlight the advantage that drives consumers to action. Slide 4. Proof of potential Lean on specific figures and facts, describing investors the pattern of future success. Get the first customers and estimate their potential quantity. Prove that the time to launch is appropriate. Slide 5. The market Tell us about the volume of the market and the share that you are trying to occupy. Assess the ease of penetration of a new product on the market. Imagine a marketing strategy to attract consumers. Slide 6. Product / Service Add details of exactly how your product or service works. Demonstrate the samples and explain their device. Slide 7. Business model Show the movement of material, financial and information flows at the entrance and exit of your system. Schematically imagine business processes. 62

Slide 8. Team Specific people, rather than abstract products or solutions receive investors’ funds. The experience and achievements of the team will convince the investor to believe in you. Slide 9. Competition Compare your decision with the key competitors and visualize your advantage in the form of a table or chart. Slide 10. Finance Sound the amount to implement your startup in the key stages. Describe how the team plans to use the investment and what financial results it will achieve. How to make the pitch bright? Use the power of the first impression. Take care of the unusual and interesting beginning of your presentation. Learn more about the investor before the meeting and prepare for the questions. Imagine the command as the main asset. The greatest time when viewing the pitch of the investors devote to the sections on finance and the team. Show people behind the idea, in the light of their personal achievements and team spirit. Tell the story and try to engage the audience emotionally. Interact with listeners, using questions and humor. Keep the same style of design. For all presentation slides, apply one font, color and capitalization. Use high-quality images. Clear phrases and exact figures. Imagine that you need to convince an investor with one phrase. Write down the entire text with this approach. The numbers and metrics are louder than words. Too long presentation. Analysis of the statistics of 200 presentations shows that investors give the project about 5 minutes. On average, the pitch consists of 19 slides. The abundance of text and lack of visibility. People cannot read the text at the same time and listen to the speech. Illustrations carry more information and are better remembered. Too much formatting. Excessive use of a fat, underlined font or italics makes perception difficult. Unreadable font. Do not try to fit more text into your presentation at the expense of readability. 63

The order of the slides may vary depending on the strengths of the project. If it is a professional team, tell us first about it. In other cases, focus on a unique solution to the problem. Behavior of the speaker during the presentation From how you behave during the presentation, depends on the impression of you as a leader who is able or not able to implement the project. The main signs of confidence include the following. Spotting: – Correct posture; – Look straight (in the eyes), fixed (hold in one point for at least 2 seconds, otherwise it looks from the side as running); – Gestures are free, coordinated with words; Auditory: – The voice is loud enough, even. If the voice trembled – add a little volume, and the shiver, as a rule, disappears; – The tone of the voice is sure (from calm to any emotional coloration); – Without frequent hesitations, stammering, unnecessary pauses. If they have appeared – slow down the pace, give you time to take a breath, and they will be lost. Also, to establish good relationships with potential partners will help to ensure that you are well prepared for the presentation, showing enthusiasm for your products (services). Try to conduct a presentation in the form of a dialogue, not a monologue, use affirmative sentences, avoid vague and negative statements, and do not shift from one foot to the other if you are asked about your business. For absolute success, you need to look at things from the point of view of your potential investors and be sure to listen carefully to their questions. Questions are the last important part of the presentation process. Investor’s questions It would seem a simple, but at the same time, important thing – is that the business idea and the presentation contain the same information. Otherwise, the investor may have questions that will have to be answered with justifications. It is very likely that the 64

decision-makers will be interested in a deeper examination of the following issues: – How an investor can enter the company's capital (purchase of bonds, shares, shares of the authorized capital, establishment of a joint venture, etc.), whether this is in accordance with the current legislation; – What profitability the investor will receive and what are the risks of not getting or not receiving the income; – That you, as a beginner entrepreneur, will do, if some parts of the business plan are not fulfilled in time or other problems arise; what they can be; – Whether the licensing of the product (service) is required; – Whether the state controls the type of activity that you are going to do; whether there are programs of the state support of this direction, etc. The scope of questions varies depending on the proposed structure of the transaction, the type of investor and the final objectives of the contracting parties. It is best to prepare for answers to possible questions in advance. The investor may have a desire to look at copies of constituent documents, which you must have with you. These include the Charter, the Memorandum of Association, the Certificate of Registration, etc. In addition, most importantly, remember that you are not a petitioner, but a partner who offers a profitable deal. Confidence in yourself and your product will make your presentation effective. 3.3. Experimentation Next stage of innovation process it is experimentation. When the next business idea came to mind, there are two ways. The first and the right thing is to find out whether people need a product and how much they are willing to pay for it. The second and dubious is to develop a product, launch sales and hope that it will be bought. Experimentation means testing an idea, such as prototype testing, virtual prototyping and other types of testing. The type of testing and experimentation depend on different factors. 65

First, the mission of a company. If the company large, then experimentation will be widely and may include several phases of testing. Second, the resources of the company. If idea generator have necessary resources, such as finance, quality group of people, who are specialized in their area, and time then experimentation phases will be completed. The results such testing will be faithful and right. Moreover, there is no doubt. Concept development and verification – the idea of a new product is transformed into a product concept that is tested on a group of target consumers in order to determine the degree of its attractiveness. The concept can be presented to consumers verbally or in the form of illustrations. Development of marketing strategy – determination of the marketing strategy of entering the market with a new product. The following questions are considered here. First, the size, structure and nature of the target market are described, and the positioning of the new product is carried out. Further, estimates are given of the volume of sales, market share, price, profit, and the choice of distribution channels. Undoubtedly, in most cases such forecast estimates are very indicative. However, the use of even tentative estimates is better than their total absence. To obtain information about a new product, surveys are conducted (consumers, employees of trade organizations, individual experts). Information of a predictive nature about the possible market fate of a new product can also be obtained based on analysis of the volume of sales (say, by studying the life cycle curves) of similar products, from an analysis of the situation in the field of competition. Business analysis – an estimate for a new product of the expected values of sales, costs and profits for compliance with the organization's objectives. In other words, it is about assessing the attractiveness of this new product for the company. Developing a product directly – transforming the concept of a new product into a tangible product; the goal is to make sure that the idea of the product can be brought to the working model. When choosing the best variant of a new product, different methods can be used, the simplest of which is presented in Table 3. 66

Table 3 Integral (qualitative) evaluation of a new product Characteristics of the new product Volume of sale Type and number of competitors Technical capabilities Patent protection Availability of resources Production upload Additional benefit Correspondence to the main direction Influence on the products

Very high V (V)* V

High

Rating Acceptable

Very low (V)

V

(V) V V (V) V V (V)

(V) (V)

(V) (V)

Low

V V

* V – estimates of the 1st product (acceptable); (V) – evaluation of the 2nd product (unacceptable).

One of the final stages of creating a new product is a test in the market or test marketing. Trial marketing is testing a product and marketing program in real market conditions. The purpose of trial marketing is to evaluate the product and its marketing program (price, advertising, brand, packaging, service, etc.) before the full-scale product realization begins and find out how consumers and intermediaries will react to all this. The results of trial marketing can be used in forecasting the volume of sales and profits. During trial marketing of consumer products, the following methods are used: – standard testing of the market; – control testing of the market; – imitation testing of the market. Standard testing of the market is market testing, in which the new product is placed in conditions similar to the conditions of implementation with a full-scale release of the product. They find certain sales areas for the product, where the marketing staff of the organization conducts a full marketing program, analyzes the activity of stores, conducts research on the opinions of consumers, distributors, etc. in order to determine the degree to which the product meets the needs of consumers. The purpose of standard testing is to use the 67

results obtained to forecast the sales volume on a national scale and to identify the problems associated with the production and marketing of this product. Control testing of the market is the creation of special panels of stores, which agree for a fee to experience different methods of selling the product. The organization that carries out market control testing, in accordance with its plans, determines the number and geographical location of stores, controls the location of the product in the trading floor, prices, selected methods for promoting the product. Analysis of the results obtained makes it possible to determine their impact on demand. Simulation testing of the market is the testing of a product in conditions simulating real conditions, for example, purchase by the selected organization of consumers for the limited amount of money the goods, among which the new product is located, in a regular store or in the laboratory store of the organization. At the same time, consumers are presented with samples of advertising and other methods for promoting the product aimed at various products, including the product being tested. During trial marketing of production products, product samples are transferred for a limited time to potential customers. In addition, the product can be tested at trade shows and demonstrations organized by trade, distributors and dealers. All results, the work is described by a formula of four variables: test coverage, information provided, speed and budget. 1. Test coverage This is percentage of possible user scripts, conditions, settings, input parameters, etc., which was checked by the testing team. The higher this percentage, the more bugs are found, the less missed. The more bugs you can fix if you want and opportunities. In this case, the test coverage and the number of tests, as well as the resources spent for testing, are very indirectly related. Qualified testers have a whole arsenal of techniques and tools, aka optimize the test suite, aka provide the maximum coverage with a minimum number of tests. 2. Information provided For years, there lives a meme about the tester, with a panic in the eyes saying «nothing works!». And if you ask to explain in more 68

detail, he replies: «Well, absolutely nothing!». Perhaps he provided a good test coverage, but did not provide adequate information. What information does the project need from testing? – Qualitatively described bugs in the bug tracker – Statistical product information for forecasting releases and decision making on processes – Quality metrics for making decisions about releases – Evaluation of the testing itself: what coverage, what is checked, how much testing, etc. If the testing team does not provide clear information about the product and project (and this is its main function!), It is very difficult to make decisions. 3. Testing speed 4. Budget Test the idea is necessary because the launch will be spent at times (and someone and dozens of times) more resources and the idea may be inoperative. The best way to check how effective the business idea is to follow the kick-starter model. First sell, then release. One must be consistent and take one risk after another. The first layer of risks – product demand (supply testing) is the largest: if you do not need it, you will waste time and money for its development for nothing. To check the relevance, you need a landing page and an advertising campaign. Visitors to any online store can see only photos, features and reviews. They do not know for sure whether you have a product or not. You just need to create a landing page – to prepare a detailed description, to select images and video. There are several ways to do this: Order in an agency or studio. At the testing stage, this is unreasonably expensive. In addition, if there are no interactive elements on the page, then it does not differ from similar pages made on Tilde. To pay to freelancers for the fact that they use a template from their database, they will correct it according to your desires, fill the text with a «C grade» and add stock images. If you need one page, the option is acceptable, and if five – the amount grows and bites. In addition, if a page with a complex SMS or 69

without it, you have to contact the artist for any reason – replace the title, picture, etc. Make yourself on Tilde. Scary, but only at first glance. You know the product best of all – you know how it is profitable to file and describe it. Simply take ready blocks and fill them with information. For this, you do not have to be able to code, make up and draw a design. Costs of attracting customers For hardcore – choose a suitable advertising platform and launch the campaign on your own. To understand the intricacies, it will take a day or two to study the literature. It is better to start with a small budget to not drain money, and gradually increase it – as the processes are understood. If there is no serious experience in setting up an advertising campaign and the desire to understand this, assign the task to professionals. Not freelancers, because among them there are very few smart experts, and advertising agencies with successful cases. Walkthrough – how to test an idea 1. Structure products For this, the format of the mental map (MindMap) is great. Label the products in it that you are testing. They are the center of attention. 2. Identify the audience that will be interested in products It is very important to determine your audience. In fact, you test not the product, but how people treat it. Mistake with the audience – the product will not buy, and the test result will be incorrect. Ask the question: who will buy your service – housewives, students, parents or all at once? To begin with, the number of audiences can be large – gradually unprofitable ones will be eliminated. To determine the audience, start from the service and from whom it will be interesting. Start with the general strokes. Then add parts. Answer the points: Demography. For whom is your service for men or women? How old are these people? Where do they live? How much do they earn? Their marital status? Do they have children? Interests. What are they interested in? What sites do they visit? What social networks are used? To whom do they listen? 70

Pain. What worries them? What are their pain points? It is important to understand why a person needs your product. What problems will he solve? Why does a person want it? To what image is it and who does it want to become? What does he lack? Pull all the answers into a separate document. What will help you? Customer surveys. Small – on Google Forms, or full interviews. For people to respond more willingly, promise a discount at the next purchase or a small gift. Thematic forums. Learn what people write, how they choose similar products, what questions they ask, what they doubt. Groups in social networks are also thematic. Similarly: see what people write, then analyze their profiles: so you can better understand your future buyer. 3. Compose the page structure Think about what blocks should be on the page so that the potential customer gets the most information. Please note that for free people subscribe even to what they are not particularly interested. They can actively use the service, and leave when asked to pay. Therefore, simulate the actual conditions of sale, otherwise the test result will be incorrect: – Think about the details – the method of distribution, conditions and cost of delivery, time and place, the number of employees, etc. – Plan the cost of creation – for salaries to developers, speakers, designers; for rent of premises and equipment. – Calculate the cost, add margin and sell for the resulting value. 3.4. Commercialization, diffusion and implementation New products appear differently. Sometimes their occurrence is simply a fluke. «Ivory soap» («soap that floats») was obtained when the worker, leaving for lunch, forgot to turn off the steam generator, and the air got into the soapy mixture, because of what it floated to the surface. On the other hand, many products are the result of long and costly market research and scientific research. The manufacturer of computer chips «Intel», which in 1991 launched a very successful advertising campaign to convince computer buyers that the processor 71

brand plays a big role, in 1994, spent $ 1 billion on research and development and $ 2.4 billion on promotion new products to the market. The appearance of successful (and even unsuccessful) new products, as a rule, involves great difficulties and costs. In many large companies, the process of their development includes seven stages. 1. At the stage of idea generation, attempts are made to develop a wide range of possible products. Sources of ideas are numerous and diverse: consumers write letters with wishes, trade workers make their suggestions; In addition, in many companies the process begins with the proposals of special research groups created to develop new types of goods and services. Of the ideas expressed, regardless of the source of their origin, the most reasonable proposals are selected. 2. At the stage of development and verification of the concept, the manufacturer embodies the idea in a specific product, which is then submitted to the consumer's court. After that, the analysis of production and marketing opportunities for a new type of product is carried out, expenses, incomes and profits on invested capital are planned. If a decision is made that the product satisfies the commercial purposes of the manufacturer, a prototype is created that is tested by the users. 3. Then a commercial product is created from the model, sold in a limited market. At this stage of trial sales, an advertising campaign is being conducted in a number of large cities. The reaction to trial sales shows the possibilities of promoting the product to the national market. 4. At the last stage, manufacturers launch the product into batch production, select a brand, develop packaging and start large-scale sales. Implementing of a new product. Under the introduction of new in the market means the development of the commodity market. After the goods are produced, it must be sold, that is, sold to the target consumers. The introduction of a new product on the market is a complex process, which can be conditionally divided into two stages. The first stage of the introduction of the product is connected with the work on preparing 72

the market for the perception of new products. This is the so-called pre-market stage of work with a new product. The actual introduction of the product into the market begins at the second stage, the market stage, when the products are delivered directly to the market and become the object of purchase and sales. These two stages are in turn subdivided into a series of smaller steps, which are reduced to the following: 1. The stage of identifying and studying the consumer properties of a new product, the creation of its concept. 2. The stage of choosing a technical solution for a new product, making a prototype. 3. The stage of testing the sample of the goods, the release of the trial lot of the goods. 4. Serial production of new products. 5. Stage of final improvement and improvement of the goods. 6. Mass production and marketing of goods. The successful implementing of a new product on the market depends primarily on the volume and rate of sales. This is a real test for new products. Only in the process of selling and selling goods, it becomes possible to learn the opinion of customers about it and see their reaction to the novelty. Opinion of consumers and their purchasing activity allow the manufacturer to modernize its goods, to learn its strengths and weaknesses. An important role in the process of product introduction is played by advertising and the policy of the sales department of the company. The first sales should show a lot. If they were successful, then mass production of goods and its implementation are being established, and if trial sales have failed, then the program for further introduction of the product may prove to be just as unsuccessful. If in such circumstances the manufacturer decides on the further production of this product and its commercial introduction to the market, then its actions involve a certain risk. In order to avoid failure, the manufacturer needs to analyze the reasons for the low demand for the novelty, remove the shortcomings of the product (if they were), change the marketing policy and deploy effective advertising of the modernized product. After carrying out this kind of diverse, wideranging research, you can start marketing activities and enter the product on the market. 73

The main steps for implementing a new product that you need to know. 1. Market research and formulation of ideas Many good ideas come to their authors at a time when they are looking for something, but do not find it. However – does it mean that you need a product, that others will gladly get it? Perhaps the niche you want to start in is too tight and too saturated with offers. In addition, as with the export possibilities – will there be a greater demand for a specific product in other places in the world? Maybe this product is unique only in Latvia and therefore it will have very limited growth potential? These are the questions to which you must find answers, if you want to successfully sell your product in the future. 2. Business plan When the idea generated, it is necessary to understand whether it is financially viable, so it is necessary to draw up a business plan that necessarily includes the following information: Product Description What technologies will be used, what raw materials will be needed, where will it be received, what will be the potential price and what factors will influence it, and also what will be the target audience? The situation in the market and competitors Research, the characteristics of the industry, the export potential, the level of market saturation with similar or similar products, the main competitors, the price of their products or services and methods of work, the difference between the product or service offered by competitors. Marketing plan What qualities of a product or service are emphasized, pricing policy (as well as a policy of discounts), the place of providing a product or service, its interior, advertising, sales representatives, participation in exhibitions, public relations, etc. Project implementation The necessary resources (premises, land, equipment, labor, raw materials, materials, licenses), settlements with suppliers and buyers (prepayment, advance, etc.), project implementation schedule (3-5 years, given the possible seasonal nature of the product or services), the total amount of the project and financing (equity capital, 74

attraction of investors or credit – the most affordable financing for small and medium-sized enterprises). 3. Creating a prototype and seeking funding Consider that product development can last several years, for example, if you want to introduce a new cosmetic or innovative technology to the market, which are created through experimentation and testing. With regard to financing – if you do not need large investments, you can manage your own capital, but for most of small and medium-sized enterprises additional funding is needed. Opportunities are the means available within the framework of EU programs, attraction of investors, grants for enterprises, loan in a bank, in the end – even contests, where the authors of several ideas compete for financing. 4. Development of the final product Moreover, although you have a prototype, at this stage many changes and a «fit» of the product are still possible. Perhaps, the investor will have their own conditions, so it is necessary to provide for a sufficient time resource and to establish the framework that should be adhered to. 5. Marketing and promotional activities This item may seem the easiest, considering all the work that is already behind, and the fact that you managed to create a wonderful product. However, the incorrectly chosen marketing strategy can very quickly «drown» it. Therefore, you should carefully consider whether your employees will create and implement a strategy, or it may be better to entrust it to professionals who have already implemented successful campaigns. Be sure to ask feedback, and conduct a price survey – maybe your product is so unique and interesting that some agency will take on its promotion to the market at a lower cost, in return, having received an excellent addition to its portfolio. Commercialization of innovations Commercial production is the full-scale release and implementation of a new product in the selected market. At this stage of developing a new product, the manufacturer must choose the right time to enter the market, the sequence and volume of activity in different markets, the most effective methods for distributing and promoting the product, and develop a detailed operational plan for marketing activities. 75

One of the most critical stages in realizing the effect of innovation is its commercialization. It is a process of transforming an idea, a design into a profitably sold commodity and covering all stages of the development and introduction of goods into the realm of realization. In order for the innovation to be successful in the market, it must have a powerful commercial idea, i.e. To contain uncontested arguments in favor of its purchase and to be based on motives of behavior of buyers. Marketing work in the process of commercialization of a new product begins with preliminary marketing research of consumer behavior, their claims, complaints, complaints. A great help at the stage of forming options for a commercial idea is an analysis of the practice of competitors, opinions and experience of workers in wholesale and retail trade. Comparison and selection of ideas should be carried out based on a number of interrelated criteria. First, it is necessary to determine how attractive the market segment is at which the proposed commercial idea can be realized. The value of the product itself, which will be created based on the idea under consideration, also has significance. When comparing different ideas, it is also necessary to take into account the possible risk and uncertainty of existing information on the market. The next stage consists in describing selected commercial ideas in terms that reflect the importance of the designed products for the consumer both at the stage of product selection and during use. It is important to have a clear idea of who the product is intended for and how large the number of potential consumers, what characteristics they are interested in first, when and in what situation the goods will be used. The description of commercial ideas on these positions forms the concept of the goods, which serves to clarify the possibilities and feasibility of implementing the selected ideas. Before investing funds in the selected product concept, a detailed analysis of expected market demand, potential sales volumes, necessary costs and profits, as well as their compliance with the company's objectives is carried out. The difficulty of obtaining such estimates depends on the novelty of the product concept and market stability. If the concept concerns the differentiation of an existing product in a relatively stable market, based on experience, one can get a complete idea of the possible sales of the intended product. In the 76

case of a fundamentally new product, one cannot rely on experience. The testing of the concept is possible only in the presence of a prototype – the material realization of ideas about the product. This stage concludes with the final choice of the concept of the product, which most satisfies the criteria put forward. The creation of a new product involves the manufacture of prototypes and their testing in laboratory and market conditions. Based on checking the real qualities of the goods and preliminary assessment of customer loyalty, a decision is made to launch the prototype into production. When the goods are released into the sphere of implementation, it is important to provide the managing instances with information on the progress of the products realization in order to prevent a decrease in the sales volume. This is the main chain of monitoring the process of selling a new product. The following characteristics are monitored during monitoring. – The image of the goods being sold; – Volume and speed of sales; – Description of the main buyers of the goods; – Places of purchase; – Frequency of purchases by different groups of consumers; – The main reasons for purchases; – Market shares of competitors on the type of goods being sold; – Degree of saturation of the market with this product. Monitoring involves several stages. 1. Formulation of the basic requirements for monitoring (goals, criteria, program). 2. Choice of place and periodicity of testing of goods. 3. Determine the content of marketing activities conducted by the organization and its competitors at the current time. 4. Realization of the program of control of sales volume in the market under consideration. 5. Analysis of the results of wholesale and retail trade (sales volume, the share of the surveyed product in the total sales of the trading network, the average sales volume per one outlet, means of delivery of goods to the wholesale and retail network, the volume of finished goods in storehouses, the maximum capacity warehouses, price dynamics). 77

6. An estimation of behavior of consumers (volume of purchases, a share of the investigated goods in a consumer's basket of the buyer, demographic characteristics of the buyer, preferences at purchase etc.). Questions by chapter 3. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

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How you understand the meaning of innovation in Entrepreneurship? «Big companies do not innovate» challenge this wisdom. Why is entrepreneurship not natural or creative? What are the factors that influence the development of innovative entrepreneurship? What are three models of innovative entrepreneurship? Why innovative entrepreneurship is a special innovative process of management? Describe the elements of Innovative Entrepreneurship phases. What are the four most significant stages of Innovative Entrepreneurship? Describe the phases of Innovative process. What is idea generator? When idea mobilization take place? How to get many ideas? What is advocacy and screening? How can they help to idea generator? How to create the successful presentation? Describe tips. How to make the pitch bright? How human behavior can influence to the decision of investors? What investors may ask? How to answer to investor’s questions? What is experimentation? Why it so necessary? What is the concept development and verification? How development of marketing strategy can influence to the experimentation? What is developing a product directly? Describe the integral (qualitative) evaluation of a new product. What methods used during trial marketing of consumer products? What are the variables of test work? How to test an idea? What is commercialization? What is implementing and diffusion? Describe the process of development and its seven stages. Describe the process of implementing of a new product. What are the features of innovations commercialization?

Chapter 4

BUSINESS PLAN OF THE INNOVATIVE PROJECT The main sections of the chapter: 4.1. What is a business plan? 4.2. The structure of a business plan

4.1. What is a business plan? Business plan is a plan, a program for the implementation of business operations, actions of the firm, containing information about the firm, the product, its production, sales markets, marketing, organization of operations and their effectiveness. A business plan is a software product developed in the course of business planning. Sometimes the business plan is identified with the technical plan, which was the main planning document of enterprises in the USSR. Business planning is the definition of the goals and ways to achieve them, through any planned and developed action programs that can be adjusted in the implementation process in accordance with changed circumstances. Planning is an ongoing process aimed at bringing the enterprise's activities in line with market conditions. Types of planning: – strategic (long-term); – medium-term; – short-term. Strategic plans reflect the future development prospects of the company (over 5 years). Medium-term plans (3-5 years). Short-term plans (1 year) – link the volume of production with available resources (production funds, number of employees). Plans are made in both quantitative and qualitative terms. Quantitative – characterize the volume of sales, increase in profits, decrease in cost. 79

Qualitative plans include raising the prestige of the enterprise, protecting the environment, raising the cultural and educational level of the company's employees. The enterprise development plan includes the following sections: – plan for production and sales of products (production program); – plan for the development of science and technology; – plan to increase the economic efficiency of production; – logistics plan; – plan for capital construction and capital investments; – plan for labor and personnel; – plan for costs, profits, profitability of production; – financial plan; – the social development plan of the team; – a plan of measures for the protection of nature and the rational use of natural resources. The business plan serves two main purposes: It gives the investor an answer to the question of whether to invest in this investment project. It serves as a source of information for persons directly implementing the project. The business plan helps the entrepreneur to solve the following main tasks: – identify specific areas of the firm, – target markets and the place of the firm in these markets; – formulate the company's long-term and short-term goals, strategy and tactics of achieving them. – identify the persons responsible for implementing the strategy; choose the composition and determine the indicators of goods and services that will be offered by the company to consumers. – to estimate the production and trading costs of their creation and implementation; – identify the adequacy of the available cadres of the firm, the conditions for motivating their work to meet the requirements for achieving their goals; – determine the composition of the marketing activities of the firm to study the market, advertising, sales promotion, pricing, sales channels, etc.; 80

– assess the financial position of the firm and the compliance of available financial and material resources with the opportunities to achieve the set goals; to provide difficulties, «pitfalls», which may interfere with the practical implementation of the business plan. The business plan helps to give answers to the entrepreneur on the following questions: – what kind of products or what new business to choose for entering the domestic and foreign markets; – what will be the market demand for the goods and services offered and how it will change; – what resources and in what quantities will be required for the organization of the business project; – how much will the necessary resources cost and where to find reliable suppliers; – what are the costs for the organization of production and sales of products and services in the relevant markets; – what can be the market price for this product and how will competitors affect it? – what general revenues can be and how they should be distributed among all participants of the business project; – what will be the performance indicators of production and how they can be improved. Why do you need a business plan? Business plan for a loan. The business plan gives the banker an opportunity to understand how much interest can be taken from you, for how long it is worth giving you money. Business plan for investors. An investor is someone who has the money needed to implement your project. Any investor would like to receive high returns and avoid the risk of losing money. Any investor, Kazakh or foreign, would like to first study the business plan of the project, and then invest in the project money. Business plan for yourself. If you make a business plan for yourself, it means that you are both the project investor and the initiator of the project. The objectives you have are the same as for the investor – to get income and avoid risk. Even if the project is not commercial and involves losses, it is advisable to pre-compile a business plan and assess these losses. 81

What are the business plans? Business plan production Each company, starting its activities, must clearly represent the need for a future in financial, material, labor and intellectual resources, the sources of their receipt, as well as be able to accurately calculate the effectiveness of using available funds in the course of the firm's work. The production business plan is devoted to these issues. Business plan of the trademark The focus here is on marketing communications, pricing strategies, the advertising company's plan. The developer of the business plan has to deal with the difficult predictable consumer behavior. Corporate business plan Perhaps the most difficult to develop a type of business plan. It needs not only to plan the future activities of the company, but also to sum up the past. The development of such a business plan always begins with an analysis of the company's activities. 4.2. The structure of a business plan The composition of the sections of the business plan and the degree of their detailing depend on the size of the future project and the sphere to which it relates. For example, if production of a new kind of a product is planned to be established, a very detailed plan must be developed, dictated by the complexity of manufacturing the product itself and the complexity of the market for this product. If we are talking only about the retail sale of a product, the business plan can be simpler and do not include sections that plan production. The composition of the business plan also depends on the size of the prospective market, the availability of competitors and the growth prospects of the organization being created. Let us give an approximate structure of business plan sections. I. Title page. The name of the project, the name of the organization that plans to implement the project, its location, telephone numbers, on which it is possible to contact the owner (manager) or authorized person for negotiations, name, patronymic (completely) of the owner (manager) and the developer of the business 82

plan, the date (month and year) of the compilation. If a business plan is sent to an external investor or a lender, it is possible to make the main financial indicators (the need for financing, the payback period, the profitability index) on the cover page. II. Memorandum of confidentiality. The Memorandum is designed to protect the copyright of developers on this business plan and can be placed on the title page, if it is short enough, or inheriting the front page. The Memorandum warns persons who are familiar with the business plan about the confidentiality of the information contained in it. It may contain a reminder that the person acquainted with the business plan assumes responsibility and guarantees the nondistribution of the information contained therein without the prior consent of the author. It may be indicated to prohibit copying the entire business plan or its individual parts for any purpose or prohibiting the transfer to third parties. It may also require that the author return the business plan, if he does not cause interest. Here is an example of information about the confidentiality of a business plan: «This business plan is submitted for consideration on a confidential basis solely for making a decision on the financing of the project and cannot be used for copying or any other purposes, and also be transferred to third parties. Please return the business plan if it does not cause any interest in participating in its implementation». III. Executive Summary. This section is of general informative, advertising character, designed to attract the interest of who will be addressed to the business plan. It is from this section that potential investors get their first impression, which is often crucial to the fate of the project as a whole. In this section, it is necessary to summarize the whole business plan in several clauses in a concise form, revealing the essence and purpose of the project. The basis for writing this section is the information contained in all sections of the developed business plan, so the summary is made last, after writing the entire business plan. but placed at the beginning of the document. Recommended resume structure: – a brief description of the project, its goals and objectives; 83

– resource support; – implementation mechanism; – uniqueness or competitiveness of products or – services; – the amount of external financing required; – forecast sales and profits; – return of loans to investors; – main indicators of project effectiveness. The main requirement for a resume is the simplicity and conciseness of the presentation, a minimum of special terms. The volume should not exceed 1-2 typewritten pages. IV. The purpose of the proposed project. In this section, it is necessary to give a clear definition and description of those activities, products or services that will be offered to the market. Some aspects of the technology necessary for production should be indicated. When describing the main characteristics of the products, emphasis is placed on the advantages that this product brings to potential buyers, and not on technical details. The detailed information of the technological process can be given in the appendix. It is very important to emphasize the uniqueness or distinctive features of products or services. This can be expressed in different forms: a new technology, the quality of the product, a low cost price or some special advantage that satisfies the needs of customers. It is also necessary to emphasize the possibility of improving this product. This section should describe the existing patents or copyrights to the invention or give other reasons that could prevent the competitors from entering the market. Such reasons may be, for example, exclusive distribution rights or trademarks. V. Analysis of the state of affairs in the industry. This section presents the results of the analysis of the current situation and trends in the industry and draws conclusions about their impact on the implementation and results of the project. It is very important to present the idea of a new project in the context of the current state of affairs in the industry. It is necessary to demonstrate a deep understanding of the state of the organization and that branch of the industry in which it will work and compete, as one of the factors ensuring victory in competition is knowledge of the situation in the market of products of this class. 84

It is recommended to give a reference on the latest innovations in the industry, list potential competitors, indicate their strengths and weaknesses, study all the forecasts of the filed industry and, as a result, answer the question on which consumer is the goods or services of the organization. VI. Analysis of the state of the enterprise in the industry. This section provides a comprehensive analysis of the situation of the enterprise in the industry, the results of its economic activities, organizational characteristics: – all activities of the enterprise, its products (services), consumers (customers); – organizational and legal form of the enterprise, organizational structure, founders, personnel and partners, date of establishment; – financial and economic indicators of the company (firm); – the location of the enterprise (the address of the enterprise, the characteristics of the building or premises, property or rent, the need for reconstruction); – specificity of work (seasonality, hours of work (hours and days of the week) and other features related to the business or resources used). This section is of particular importance if the purpose of the business plan is the creation of a new enterprise. In this case, it should contain points of justification for the success of the enterprise being created, entrepreneurial experience of the project manager in this business area. Links to contracts or preliminary agreements with suppliers or consumers are possible. If the project is realized within the framework of individual entrepreneurial activity, then the essence of the entrepreneur's business is described. The section should convince the investor of the reliability and prospects of the firm offering the project. VII. Description of the product of labor. This section should contain detailed information on consumer characteristics of products (services) and advantages over competitors. This section as an application can be accompanied by a natural sample, a photograph, a drawing, technical documentation or a detailed description. If the subject of the project is not one product, the business plan provides a description for each of them. Approximate structure of the section: 85

– the name of the product (service); – purpose and scope; – brief description and main characteristics; – competitiveness of products (services) with the identification of parameters by which the product is superior to or inferior to competitors; – patentability and copyrights; – presence or necessity of licensing of output; – availability of a product quality certificate; – safety and environmental friendliness; – terms of delivery and packaging; – warranty and service; – exploitation; – recycling after the end of operation. VIII. Marketing and implementing plan for the enterprise's products. In this section, it is necessary to identify the market, analyze it and develop a strategy of behavior in the market, i.e. show why, in what volume and which consumers will buy products, how can they affect demand. It also describes how it is supposed to sell a new product or service, what is its planned price, an advertising policy is being formed. The section information is intended to convince the potential consumer of the business plan in the existence of the market for the subject of planning and the ability of the persons implementing the project to sell it. Consumers (buyers) are characterized by: – place in the chain of sales: wholesale buyers, retailers, endusers; – status: legal entities – enterprises (characterized by industry, location), individuals – individual entrepreneurs (characterized by the type and place of business), population (characterized by age, sex, etc.) Among the consumer characteristics of the product are allocated such as appearance (attractiveness), purpose, price, strength (service life), security of use. The approximate structure of the section is as follows: – analysis of consumers: requirements for products (services) and opportunities for their satisfaction; 86

– analysis of competition: the presence of competitors, their strengths and weaknesses, their own opportunities in competition; – analysis of the market for the sale of products (services): the size of the market and its growth, the estimated market share; – description of the delivery of goods from the place of production to the place of sale or consumption. Full description includes: packaging. Warehousing at the place of production, acquisition for shipment, transportation to the point of sale, pre-sale service, actual sales, and sales channels of products (services). The sale can be made through the following distribution channels: a retail store, small wholesale stores or shops, a traveling service (agents, salespeople), etc .; – strategy of attracting consumers: advertising campaigns, free samples, participation in exhibitions, etc .; price and volume of sales of products. It is the price of the sale of a product (service) that determines ultimately the amount of profit, the profitability of the project. It is necessary to ensure the matching of the parameters «foam – quality – profitability». Specific details of the marketing strategy often turn out to be complex, complex and affect such areas as marketing arrangement, pricing policy, trade policy, advertising and promotion of products on the market, product support policies, interest from prospective buyers, and forecast for new products. IX. Production plan. This section should describe all production and other work processes. Here, all issues related to the premises, their location, equipment, working personnel are considered. This section should reflect the questions of how and in what terms the volume of output can be increased or reduced. If the aim of the project is to organize production activities, then a complete description of the production process is necessary: how is the production system organized and how is the production processes controlled, how will the main elements included in the cost of production be controlled, for example, labor and materials. If certain operations are to be entrusted to subcontractors, information should be provided about them, including the name of the subcontractor, its address, the reasons for which it was chosen, prices and information on contracts concluded. For those operations that are 87

expected to be performed in-house, it is necessary to give a production flow diagram, a list of production equipment, raw materials and materials with suppliers (name, address, delivery conditions), estimated costs, and a list of production equipment that may be needed in the future. This section also calculates production costs for the planned sales volume: the calculation of the cost of production, the cost estimate for production, the definition of variables and fixed costs in cost. The approximate structure of the section is as follows: – general information on the production structure of the enterprise, the availability of necessary transport links, engineering networks (electricity, water, heat, sewage, communications, etc.), resources, and proximity to the market; – the technology used and the level of its development by the enterprise; – need for production facilities: – the need for production personnel (number, specialization, qualification); – meeting the requirements to ensure environmentally friendly production for the environment and the safety of workers; – cash and necessary production facilities; – the characteristic of the equipment; – assessment of the need for raw materials and materials; – planning of sources of supply of raw materials, materials, equipment and labor; – identification of subcontractors; – determination of the cost price of all types of products; – estimate of current production costs; – cost structure analysis. X. Organizational plan. This section specifies the legislative, regulatory and other documents that have legal force and relevance to this project, as well as the project implementation schedule. This section provides information describing the organizational structure of the enterprise, information about the personnel and the personnel policy of the firm. The implementation of any plan requires human resources. This section of the business plan should show the user that the organizational structure of the company allows you to achieve the goals described in the business plan. 88

In order to make the right decision regarding the organizational structure, the following information is required: the work required to implement the business plan; positions; duties and responsibilities of each post; who and how he manages the firm in the process of implementing the business plan. In order to competently manage human resources, you must first answer the following questions: What are the requirements for executors of each type of work required to implement the business plan? What qualifications should each performer have? What should be the salary of each performer for the successful implementation of the business plan? How is the selection of personnel carried out? What is being done to keep capable and highly qualified employees? How are the results of the work evaluated? The organizational plan contains the following groups of questions. 1. The organizational structure of the enterprise: – organizational chart of enterprise management; – composition of units and their functions; – organization of coordination and interaction of the company's services and units, etc. 2. Management personnel is characterized from the perspective of age, education, position, experience, authority, ownership of company shares, functional duties, merits and demerits. 3. Non-management personnel: – need for cadres by profession; – qualification requirements; – form of involvement in labor (regular work, part-time work, etc.); – mode of work. It is desirable to present this group of questions in tabular form. 4. Remuneration of labor: the regulation on remuneration of labor (the system of remuneration, the procedure for awarding, the provision of benefits, surcharges, subsidies, moral incentives, insurance, etc.). 5. Personnel policy of the enterprise: – principles of selection of employees; 89

– principles of hiring; – the creation of a system of professional development and retraining of personnel; – development of a method and procedure for assessing the quality of work of employees; – system of promotion of employees. In the section «Organizational plan» the need for personnel for the project implementation at various levels of management is justified. It should contain the following information: – calculation of the need for specialists of various categories and justification of the level of qualifications and wages; – the staffing table; – the proposed system of staff motivation; – a recruitment, training and training plan; – the social development plan of the team; – the final cost estimate for staff. XI. Financial plan. Financial planning is recommended to be carried out by drawing up the following financial documents: the income and expenditure plan for each year of the project implementation period with a monthly breakdown of the first year, a cash flow plan and a planned balance for the first year. You can give the results of the break-even analysis. In this section, investments are planned (for the purchase of equipment, construction and installation works, the creation of working capital and others related to the preparatory period of the project). The sources of funding for the project are planned. The scheme of repayment of credit financial means is given. The financial planning section should be completed by an analysis of the effectiveness of the project. For these purposes, you can use the methodology of project analysis (in terms of net discounted income indicators, profitability index, internal rate of return, payback period), methods of economic analysis of financial and economic activity (profitability, financial sustainability of the project, etc.). The approximate structure of the section is as follows: – profit and loss account for each year of the project implementation period, the first year on a monthly basis; – structure of tax payments (can be analyzed separately); 90

– – – –

a cash flow plan for the first year; planned balance of the first year; need for investment; costs associated with servicing the loan (leasing) (can be analyzed separately); – analysis of the effectiveness of the project (according to the chosen methodology). XII. Risk analysis. Each project inevitably encounters on its way with certain difficulties threatening its implementation. It is very important to be able to foresee such difficulties and to develop strategies for overcoming them in advance. It is necessary to assess the degree of risk and identify the problems that the business may face. The main points related to the risk of the project should be described simply and objectively. The threat can come from competitors, own miscalculations in the field of marketing and production policy, mistakes in the selection of leading cadres. Danger can also represent technological progress, which can instantly «age» any novelty. The availability of alternative programs and strategies for a potential investor will indicate that. That the entrepreneur knows about the possible difficulties and is ready for them in advance. Risk can be assessed by methods of qualitative analysis, which consists in identifying factors, areas and types of risk. This work is carried out expertly based on work experience (for example, SWOT analysis), as well as quantitative analysis methods. Quantitative analysis makes it possible to determine the volume of losses for each type of risk. Quantitative analysis uses methods of analogies, statistical, expert, modeling, etc. The analogy method involves the use of data on other similar projects. The statistical method is based on the study of available statistics. The expert method is to collect the opinions of qualified specialists. Modeling the situation allows you to assess the impact on it of external influences. In addition, special methods and models of risk analysis have been developed: the break-even analysis methodology, the financial strength and sensitivity of the project based on the margin analysis, the project risk analysis method by building the project decision tree, 91

the probabilistic risk assessment method, the risk analysis based on the Monte Carlo simulation. The result of the risk analysis may be the search and provision of guarantees to partners and potential investors. Among them, we can distinguish: – guarantees of federal, regional or local authorities; – insurance; – pledge of assets (real estate, securities, etc.); – bank guarantees; – transfer of rights; – commodity guarantees (finished products). XIII. Applications. In the application can be made all the documents that are not subject to planning, but referred to in the main sections of the business plan: – copies of contracts, licenses, etc .; – copies of documents from which the original data is taken; – price lists of suppliers; – tables of calculations of financial indicators, not included in the main sections. In conclusion, of consideration of the methodology of business planning, it should be noted that now a large number of software products have been developed and actively used in practice. Allowing automating the procedures for drawing up business plans. The most famous of them are: Business Plan Pro (a business plan program that additionally allows you to adjust the business plan in accordance with the investor's interests online), TEO-INVEST (a program complex for financial planning and business plan development of investment projects), Business Plan PL (the program is designed to develop business plans and feasibility studies on a professional level, while it is available to a wide range of users who have computer skills and basic knowledge in the field of economy). Project Expert (the program is based on the construction of the financial model of the company and the economic environment in which it operates, allows you to develop a reliable step-by-step analysis of options for decisions, financial efficiency of business projects, a strategic development plan for the company, prepare a business plan that meets the requirements of foreign and domestic investors to control the execution of financial plans). 92

Questions by chapter 4. 1. What is a business plan? Why it is so necessary? 2. Describe types of planning. 3. Why strategic plans reflect the future development prospects of the company? 4. What is quantitative term of planning? 5. What is qualitative term of planning? 6. Why the business plan serves two main purposes? 7. What task the business plan helps the entrepreneur to solve. 8. What questions the business plan helps to give answers? 9. Why do you need a business plan? 10. Describe Business plan for a loan. 11. Describe Business plan for investors. 12. Describe Business plan for yourself. 13. What is the business plan of the trademark? 14. Is it necessary to include title page in a business plan? 15. Is it necessary to include Memorandum of confidentiality in a business plan? 16. What is the structure of executive summary? 17. How to describe the purpose of the proposed project? 18. Why analysis of the state of affairs in the industry is so important? 19. What is the analysis of the state of the enterprise in the industry? 20. What is the structure of the description product section? 21. What to include in marketing and implementing plan for the enterprise's products in a business plan? 22. What is a production plan? How to describe it? 23. What is an organizational plan? What to include? 24. What is the financial plan in business? 25. How to attract investors by financial plan? 26. What is a financial projection? What is the structure of financial projection? 27. What to include in risk analysis section of business plan? 28. What methods used in risk analysis section of business plan? 29. Why appendix can be important? 30. What are the latest technologies in creating business plan?

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Chapter 5

MANAGING OF THE INNOVATION PROJECT The main sections of the chapter: 5.1. Technological innovation cycle 5.2. Basics of System Project Management 5.3. Logical structure of the innovation project

5.1. Technological innovation cycle Effective response to current market needs for engaging and maintaining sustainable situation on it in modern conditions can be provided only through continuous updating of its production technologies based on new technical solutions and rights to them. That is, investment projects that form enterprise response to market requirements, should be innovative and include the acquisition and creation of new technologies. Picture 7 shows the scheme of the technological innovation cycle of the company occupying a stable position in the market. Based on the market forecast, the company's strategy and business plan are formed, aimed at implementing the strategy. To implement the business plan, investment innovative projects are formed, the results of which are expected to be introduced into production. The reason for launching an innovative project is always the forecast of changes in the market, which are determined by the activity of competitors, excellent trends in technology, changes in legislation, and the state of the company itself. Already at this stage of the innovation cycle, research and development work may be required. Based on the market forecast and the results of R&D carried out, a decision is taken on the path of further development that will ensure the implementation of the company's chosen strategy. In addition, strategic requirements to the level of technological development and the general technical design of its implementation are formulated. 94

Formulation and statement of general technical design allows in the next stage of the innovation cycle to begin the formation of an innovative technological project. This activity includes the search, evaluation and selection of alternatives to a specific implementation of the general technical plan, i.e. implies the need for the company to conduct research and development for each of the alternatives in question. After selecting and stating the best alternative to the technical plan, its implementation begins and the main work of the project is carried out, related to the formation of the final product of the innovative project-the resulting technology. At this stage, the company either by its own forces or order, work is carried out to create or supply the necessary for the formation of the resulting technology of private technologies and technical solutions, as well as the acquisition from other persons of licenses for the right to use the company the necessary technical solutions.

Setting business objectives

Explotation of technologies

innovation project

creation of technologies and products

implementing technologies

Picture 7. The technological innovation cycle

When the company receives the resulting technology, the introduction into production stage begins. This may be due to the construction of new buildings or structures, or with the adaptation of 95

existing ones, the purchase and / or development of new equipment, the arrangement of new production lines, the training of personnel, etc. The final stage of the innovation cycle is the use of technology in current production, i.e. use as an asset for profit. At the same time, the company can continue to carry out activities to improve the technology used or adapt it to changing market and production factors. Fundamentally important in the implementation of innovations is the achievement of pre-set goals by replenishing the existing asset system with newly created assets. This is the only and natural for business justification of the funds invested in the project, meeting the requirements of Kazakhstan’s legislation. Thus, the management of the company's technological development should be oriented towards an economically justified result. Currently, Kazakhstan's legislation indicates that the costs of scientific and technical activities should be considered as long-term investments. The current normative acts quite fully regulate the scope of investments in technological innovation, and the problem lies only in the absence of practical experience and scientific and methodological reserves in the Kazakhstan's companies themselves. Investment projects in the field of technological development, which provide for the increase of the enterprise's property by including additional intangible assets in the existing system of assets, are called «innovative projects» or «innovative technological projects» (ITP) in this course. An important feature of an innovative technology project is that R&D is necessarily included in its work. Any enterprise that carries out investments in technology as part of its business activities is forced from the very beginning of technology formation to make decisions about the advisability of creating an intangible asset and about the feasibility and scope of investments in this creation. This approach is in contradiction with the most widespread among specialists, especially those who started their careers in the Soviet era, the opinion that it is impossible to plan scientific and technical activities because of its high uncertainty. Domestic business sufficiently successful in the formation of investment projects, aimed at expanding production through the creation of new production capacities. However, the process of forming new productions is inevitably accompanied by a solution of 96

the issues of technological re-equipment. With the observed continuous growth of the level of technology, the competitive situation does not allow the construction of a new production on the same technologies as the already functioning one. Stereotype misconception, manifested in the composition of investment projects related to technological re-equipment is the belief that construction, roads, workshops, manufacturing of equipment and other known aspects of activity can be forecasted, and the forecast for the creation of new technologies is hopeless. Such views cannot currently be applied in the management of technological development. The main attention in the management of technological development, as well as investments in intellectual property and intangible assets, must be given to forecasting and planning the economic consequences for the business of exploitation of the intangible asset planned for acquisition, which the enterprise intends to assign after the completion of the innovative technological project. The project, implemented in the interests of business, is always aimed at forming introduced into the combination of assets of a particular business of a new additional asset – the Project Product, which in terms of accounting is a collection of fixed assets and intangible assets. Innovations can have different strengths and lead to different consequences. By the completion of some works the company receives a new technology, at the end of the other – changes in the operating mode of the production (technological) process, the introduction of new equipment, changes in the composition of the reagents without a significant change in the current production (technological) process, etc. In particular, cases of implementation of various projects, the final product of the project can provide solutions for various production tasks. Table 4 shows the types of Project Products that correspond to different tasks. The project's product, entering the company when creating a new technology, also called a technological asset. The technological asset is a component object of the company's property, formed based on the allocated technology through the implementation of actions for the assignment in the form of patenting of technology objects in selected 97

countries of the world and / or in the form of the preservation of technology objects in secret. Table 4 The types of Project Products that correspond to different tasks Production tasks

Project Products

The emergence of a new production in the company based on the NEW technological process (a new «industry», a new production line, a complex of production facilities, etc.)

The output complex of fixed assets and intangible assets

The commissioning of a new unit in the company (complex installation, complex multifunctional apparatus, etc.)

The output complex of fixed assets or a single item of fixed assets

Introduction into operation in the company of a new technology as a set of technical solutions, formed in production (technological) processes intended for operation at the Company's facilities

The output complex of exclusive rights to technical solutions comprising the Technology represented by a set of intangible assets

Formation of a single asset (building, machine, machine, exclusive rights to a separate technical solution, etc.)

Output single asset of fixed assets or output unit intangible asset

In order to properly allocate, plan and implement the innovationtechnological project in accordance with the law and with the interests of the enterprise, it is necessary to begin with, an answer to the question about what the enterprise intends to receive after the ITP is completed. Undoubtedly, the enterprise expects that by implementing the project it will change its state and take some new, more adapted to the characteristics of the market and more resistant to competition position. When planning and stating the characteristics of output products of projects it is necessary to clearly formulate such «business parameters» of future technologies that affect the change in existing production, increase its efficiency, etc., like: – time of the receipt of technology in production, 98

– terms of useful economic use, – the volume of reasonable expenses, – characteristics of production (technological) utility, – the scale of development of future technologies, – criteria for refusing to develop and implement, etc. The end product of the innovative project provides the solution of the problem commissioning in the production of new technology as a set of technical solutions, formed in production (technological) processes, intended for operation in the enterprise. 5.2. Basics of system project management Signs of the Project Any innovative project is primarily an investment project, so the principles of project management can be used to build a management system for innovative projects. All projects distinguish common characteristics that differentiate projects from other activities: – goal for achieving goals; – limited length in time; – coordinated implementation of interrelated actions; – uniqueness. The goal orientation determines the main criterion for the success of the project completion. The project is considered to be successfully completed if the project objectives are achieved. Usually the project involves a whole set of interrelated goals. Accurate definition and formulation of goals, starting with the highest level, and then gradual descent to more detailed goals and objectives is an important feature of projects management. Thus, the project can be seen as a pursuit of carefully chosen goals, and that the project's progress is forwarded with the achievement of the objectives of an increasingly high level, until the ultimate goal is achieved. Projects are carried out for a finite period. The projects clearly the beginning and the end are defined. The project as an activity system exists for as long as it is required to obtain the result, that is, the achievement of the project objectives. Much of the effort in implementing the project is aimed at ensuring that the project is completed at the scheduled time. 99

The project includes the implementation of numerous interrelated actions. Some intermediate project operations cannot be implemented until other operations are completed; some operations can only be carried out in parallel, and so on. If the interrelation of the execution of different operations is violated, the successful implementation of the entire project may be violated. That is, the project is a kind of dynamic system – the whole, consisting of interrelated parts and developing in time. Any project event is to some extent unique and unrepeatable. However, the degree of uniqueness can vary greatly depending on the project. Any innovative project by definition has a high degree of uniqueness due to the presence in it of research and development. Classification of projects, features of project types Investment projects differ in the scope of application, the composition of project activities, duration, scale, composition of participants, degree of complexity, etc. There are several classifications based on various characteristics. One of the most common project classifications (Picture 8). The classification is carried out according to the following characteristics: – composition and structure of the project: monoproject – a separate project in any field of activity and subject area, of different scales; multiproject – a complex project consisting of a number of monoprojects and requiring the use of multi-project management; megaproject – targeted programs for the development of regions, industries and other entities, and includes a number of mono- and multi-projects. – in the main areas of activity in which the project is implemented: technical; organizational; economic; social; mixed. – by the nature of the project's subject area: investment – creation or renewal of the company's fixed assets; innovative – development and application of new technologies, know-how and other innovations that ensure the development of the company's systems; 100

educational; mixed. – for the duration of the project (for the duration of the project implementation period): short-term (up to 2 years); medium-term (from 2 to 5 years); long-term (over 5 years). – in terms of the scale of the project (in terms of budget size, number of participants, etc.): small, small, medium, large (sometimes the scale of projects is considered in more concrete form – international, national, interregional and regional, intersectoral and sectoral, corporate projects one enterprise, etc.).

Picture 8. Common project classifications

Phases of the project. Any project passes through certain phases in its development. Apply different ways of splitting into the stages of the life cycle of the project. The most traditional is the breakdown of the project into four major phases (phases): the initial phase, the development phase, the implementation phase and the completion phase. The initial phase. The main content of the work in the initial phase is the definition of the project, the development of the concept of the project. The main activities and activities of this phase: – Collection of source data; 101

– Status analysis; – Definition of basic requirements, restrictive conditions, required material, financial and labor resources; – Defining results, criteria, constraints; – Identification of risks, participants, timing, resources, time, funds, etc. – Comparison and evaluation of project implementation alternatives and selection of technical proposals; The development phase. Drafting of the project work plan, development of the main components of the project and preparation for its implementation. The main activities of this phase: – Appointment of the project manager (manager) and the formation of a key project team; – Development of the project content, determination of the results, quality standards of the main project work. – Structural planning of the project: decomposition of the goals and activities of the project, compilation of the calendar plan, calculation of the resource requirements, budget and project budget, identification and mitigation of risks. Implementation phase. Implementation of the project. The management, communication, control and coordination systems are put in place, coordination and operational control of the project works. The main activities of this phase: – Conclusion of contracts; – Organization of work; – Detailed design; – Operational planning; – Organization of material and technical supply; – Status forecast; – Monitoring of project components (results, quality, timing and cost of work). The completion phase. Legal and information completion of work on the project when the planned goals and results are achieved. The main activities of this phase: – Closing of the project; – Conflict resolution and controversial issues; – Product testing; – Summing up; 102

– Evaluation of project results, accumulation of experimental data for subsequent projects; – Preparation of final documentation and compilation of databases. Project management processes. Project management is performed using management processes using specialized knowledge, tools and methods. A process is understood as a set of interrelated actions performed to achieve predetermined results, that is, those operations and procedures that are associated with the implementation of management functions. Project management processes are usually represented by two categories: 1. Substantive processes – the processes focused on the product, the set of actions relating to the production of the product of the project. The operations of substantive processes are determined by technical and production capabilities, as well as by the professional level of the staff. To the content processes include and content support activities, such, for example, as: – evaluation of proposals for the use of technical solutions contained in patent materials, in the design of technological processes and equipment in the company's innovative projects; – performance of patent research; – conducting market research, etc. 2. Management processes – a set of actions relating to the organization of meaningful processes. These categories of processes are closely interrelated and intertwined, forming the structure of the project. Management procedures need information coming from content activities. Based on this information, a management decision is made. In this sense, meaningful events are subject to management procedures; on the other hand, events caused by operations of meaningful processes can lead to the need for adjustment in management processes. Project management is an integrative action. Integration of project management implies that the structure and interrelationships of all management processes are defined. Integration of the project includes such characteristics as unification, consolidation, articulation and other integrative operations of project implementation and completion, successful satisfaction of the project participants' 103

requirements. Integration is thus the process of making decisions about where and when to concentrate resources, anticipating potential problems, and their solutions before these problems become critical, and good coordination of the project as a whole. Integration also implies finding trade-offs between overlapping goals and alternatives. The need for project integration arises, because in any project there is interaction of individual management processes. For example, within a large and complex project, there may be processes that need to be repeated several times to identify and fulfill the requirements of all project participants and reach agreement on the outcome of the processes. Usually six groups of management processes are distinguished: – Initiation; – Planning; – Execution; – Analysis; – Management; – Completion. All management processes are closely interrelated. The receipt of certain information data, in the form of documented indicators, triggers a particular process. These input data are converted into output documents using various methods and means. All management processes can be considered based on the following indicators: time, cost, personnel, quality, relationships, contracts and risks. The processes of initiation. This process is always connected with making decisions. Here, clear descriptions of the project objectives are developed, including the reasons why this project is the best option. The documentation for this decision also includes a basic description of the project's content, duration of the project, and a forecast of the required resources for analyzing the organization's investments. Such forecasts can be made using economic modeling methods and through expert assessments. The initial limitations and assumptions for the project are documented here. The result of this process is the completed Feasibility Study. Once a feasibility study is completed, a project manager is appointed, he can be both internal and external to the company. Upon completion of this process, the planning process begins. 104

Planning processes. This process is one of the most difficult. It consists of a number of subprocesses relating to the planning of all project parameters. First, all project objectives should be planned. After that, it is determined which operations and in what sequence it is necessary to perform in order to achieve the desired result, thereby creating a list of documented operations. Then, the duration and volume of each operation are evaluated. It is necessary to schedule for each operation the assignment of resources, both material and labor, and to estimate the cost, based on the amount of costs. Personnel planning (project team) involves identifying and assigning roles and responsibilities, assigning human resources for the execution of works and project operations. In addition, during the planning process, possible information flows and ways of interaction between members of the project team are considered. An important parameter of any project is the risks. Risks can be scientific, technical, production, organizational, legal, financial and other. Because of risk planning, a risk management plan and action plan are drawn up in risk situations. An important task for innovative projects is the planning of intellectual property objects (IPOs) and a portfolio of rights to them. Its solution requires a high level of qualification in the field of intellectual property. When drafting a project plan, it is important to consider all possible situations, while the plan should be physically implemented. The result of the planning process is the following documentation: statement of purpose; the list of operations of the project; list of resources, indicating the amount; schedule of project execution; budget; assignment of roles and responsibilities; the staffing table; a plan for responding to risks. Using the results of the planning result, they move on to the analysis and execution process. Processes of execution. Under the implementation process, it is customary to understand the processes of implementing a previously drawn up plan. At this stage, people and resources are coordinated to carry out planned operations of the project. During the execution of operations, the reporting indicators are collected, including a list of the results of 105

intellectual activity received in the course of the work, information control flows are formed. Monitoring of measures to ensure the regime of confidentiality, which is of particular importance for innovative projects, is being monitored. After that, the received data enter the input of the analysis process. Monitoring of implementation should be carried out for all parameters included in the project plan. It is necessary that the problems that have arisen be found on time and, if necessary, corrective actions can be taken. Thus, parallel with the execution process is the process of analysis. Analysis processes. The analysis process, like all the others, must necessarily go on all indicators (time, cost, quality, personnel, etc.). It includes analysis and comparison of the plan and execution of the project. In different phases and depending on the nature of the project, the analysis processes may differ. In the planning development phase, the result of the plan analysis can be a decision on the need to change the initial conditions and draft a new version of the plan. The analysis during the project implementation is aimed at estimating the forecast indicators and identifying deviations of the planned parameters, for example, when one of the operations was not completed by the planned date, it may be necessary to adjust the current plan – rescheduling. When analyzing the course of an innovative project, the important results are the results of intellectual activity, when analyzing the project they determine their novelty and protection. Based on the data of the analysis process, a decision can be made about the need for corrective actions, the choice of which is made during the management processes. The result of the analysis process is a report on the detected deviations, including possible causes of these deviations. The received report is the input information for the management process. Management processes. The management process is implemented through change management. If no deviations were detected at the analysis stage, that is, everything goes according to plan, then management is not necessary, but in practice, this situation is not usually realized, 106

especially if it is an innovative project. If there are any deviations in the implementation of the project, in which corrective actions are necessary, then a list of possible corrective actions is required to identify possible ways of resolving the problems (from the absence of any impacts until the project is terminated). The solution of the same problem can be approached from different sides, correcting either the time, or the value, or any other indicator, but it is possible to correct an expedient set of indicators. The list of corrective actions received is submitted to the input of the planning processes, to make appropriate changes to the plan, in order to successfully implement the project. At a certain point in time, all project management processes can run in parallel. Exit the loop through the completion processes. Completion processes. At this stage, there is a formal completion of all project operations, the transfer of the finished product and the closure of the project. At earlier stages, the criteria for the completion of the project must be determined, after which the project can be considered completed. Completion operations can be divided into: Legal completion – execution of all documents, including a portfolio of rights, the closure of all contracts. Administrative (information) completion is the collection and distribution of information received necessary for the formal completion of the project. Black and white lists for staff, risks, etc. are formed here. A success story is created. Techniques and project management tools. The main techniques of management are the resources, access to which is provided to the project and ways (methods and tools), as well as tools (including technological, for example, software) project management. The main levers of project management include tools that allow to influence the way of obtaining the ITP Product: the objectives and the subject area of the project, the quality, timing and cost of performance. Such influence is feasible through the choice of an acceptable technical design, composition, characteristics and assignment of resources for the performance of the work envisaged by the Project. 107

Management of the subject area. Under the subject area or the content of the project, there are two concepts: Product content – the properties and functions that characterize the product, service or result. The content of the project is the work that must be done to obtain a product, service or result with the specified characteristics and functions. Project domain management includes processes that ensure the inclusion of all those and only those works that are necessary for the successful implementation of the project. Quality control. Project quality management processes integrate all activities and operations in the company that determine the policy, objectives and distribution of responsibility in the quality field in such a way that the project meets the objectives for which it was undertaken. Quality management is implemented through a quality management system that provides certain rules, procedures and processes for quality planning, quality assurance and quality control, as well as operations for their improvement. Time management. Time management (project periods) includes processes that ensure the timely completion of the project. The main processes of project time management include the definition of specific planned operations and project activities, the identification of dependencies between them, the evaluation of resources and duration of operations and project activities, scheduling with the definition of project control points. The completion of works for which it is planned to obtain protected results is a control event for an innovative project, upon the approach of which all the scientific and technical data, including contractual documentation, are analyzed to identify technical solutions capable of legal protection. Cost management. Project cost management combines the processes performed during planning, budgeting and cost control, and ensuring that the project is completed within the approved budget. Additional techniques of management. The auxiliary levers of management include contracts, personnel, communications, risks, etc. Contract management. Contracts for the project include contracts for the supply of goods, works or services that support the work of the 108

project. Contracts allow you to attract the necessary resources in the required time. Personnel Management. The human resources management of the project includes the processes for organizing the project team and managing it. The project team consists of people, each of whom has a certain role and responsibility for the project. As the project progresses, the professional and numerical composition of the project team members may change. Members of the project team are also called «project personnel». Management of communications. Management of project communications is the processes necessary for the timely creation, collection, dissemination, storage, receipt and subsequent use of project information. The communications management processes of the project provide for the creation of the necessary connections between the interested parties to exchange the required information. In order to manage communications in the innovative project, information flows necessary for the implementation of the project are established, and to demonstrate to the interested persons the achievement of the specified indicators of the progress and results of the project. The following is determined: information support of the innovation project; means of transmission and exchange of information; document flow; requirements for the protection of confidential information. Management of risks. Project risk management includes processes related to planning risk management, their identification and analysis, risk response, monitoring and risk management of the project. Most of these processes are subject to updating during the project. The objectives of project risk management are to increase the likelihood of occurrence and impact of favorable events and reduce the likelihood of occurrence and impact of adverse events for the project. 5.3. Logical structure of the innovation project Logical structure of the innovation project The logical structure of the innovative project is represented by a sequence of steps, each of which is necessary, but all together are 109

sufficient to carry out the project. The implementation of each step allows not only to advance along the path of the project, but also to receive some specific information on the progress and prospects for the successful completion of the innovative project. Completion of activities in each of the envisaged steps is considered in the logical structure of the project as a control point, for the achievement of which it is necessary to make an appropriate management decision. In this sense, the whole course of the innovation project can be represented as a sequence of making managerial decisions. The main management decision for the implementation of any project is the decision to continue or reject the project. The decision to abandon the project, although it requires justification, seems simpler than the decision to continue the project, which gives rise to the need to make many other equally important and complex decisions. For example, it could be decisions about reacting to changes, making adjustments to the project plan, choosing partners and contractors, completing any of the project activities, etc. Each decision taken at the time of project management must be provided with the necessary information that was obtained during the project implementation and which must be concentrated and documented. Picture 9 shows the general logical structure of the innovation project. Step 0 «Constancy the goals of the ITP» Since the objectives of the project are determined by the results expected by the Company at its completion, it is important to orient the project to achieve the company's business goals and objectives in order to form an innovative project. The input data for ascertaining the goals of the project is information about the business intentions and business objectives of the company. For the formation of an innovative project, it is essential that the business intentions and business objectives of the company provide for its technological development, if the innovation-technological component is not available, it is advisable to carry out the investment project without considering it as innovative. Activities to identify an innovative project and ascertain its goals and objectives are carried out outside the project before its implementation; the innovative project gets its basic settings, limitations, etc. from the relevant divisions of the company. It is 110

advisable to record these settings in the form of formulated goals and objectives of the project in the specific documentation of the company. An innovative technological project is always aimed at the formation and introduction of the Technology Asset Company into the business system; therefore, to ascertain the project objectives, work is needed to structure the vision of the future ITP Product. At the step «Establishment of ITP goals» it should already be confirmed that the company expects the formation of the Technological Asset from the project, although a specific technical plan of this asset will be formulated and implemented only when the project itself is implemented. Step 1 «Preliminary description of the Project Product and forecast of its use» In the step «Preparing a preliminary description of the ITP Product and forecasting its use», a preliminary ITP Product Description is formed, characterized by the following indicators: – Duration of operation of the resulting Technology; – Estimated date of commencement of use; – Preliminary enlarged cost estimate for ITP Product formation; – Independence (separation) of results from other assets of the Company; – Innovation of technical solutions; – Demonstration of use; – Protection of technical solutions; – The possibility of forming intangible assets; – Ability to implement (rights to technical solutions as part of the resulting Technology); – Putting into operation of the Company; Preliminary Product Description ITP is documented in the main project documents, which can be, for example, the Project Charter, the Project Information Memorandum, etc. Step 2 «Formulating a common technical plan» The basis for the formation of an innovative project product is the resulting technology, formed on the basis of available in the company and newly developed technical solutions subject to patenting or other protection. In this regard, in the implementation of the project, actions should be envisaged to search for, select and evaluate alternatives to the implementation of the overall technical design (OTD) of the resulting technology. 111

At the stage of formulation of plan prior to R&D, the parameters of the resulting Technology are unknown, in particular, the type and configuration of technical systems in the Technology, as well as specific technical solutions in the technical systems. The activity at this step is primarily aimed at finding and selecting the overall technical plan for the corresponding project objectives, which should be formulated to obtain the future Project Product. Activities in the formulation of plan increase the certainty of the project with respect to the creation of future technological systems and technical solutions in their composition. In addition, the implementation in subsequent steps of the final choice of the general technical plan will definitely formulate the subject and parameters of the technical assignment for the development of technical solutions for the technology. Step 3 «Statement of goals and launch of the subproject» Search, selection and assessment of alternatives to the implementation of the general technical plan». In the early stages of projects containing an innovative technological component, it is impossible to determine in advance how technically it will be performed created product, however, the requirements for this product, necessary for the solution of the company's tasks, are already sufficiently clear. Since the general technical design usually involves the possibility of several alternative technical options for its implementation, the project faces the task of finalizing among the alternatives to the implementation of a project one of the best technical proposals corresponding to the project objectives, on the basis of which the resulting Technology will be formed. The activity at this step ensures the definition of the project boundary in the allocated field of technology and is necessary for organizing actions aimed at verifying the results of the subproject «Search, selection and assessment of alternatives to the general technical plan» alternatives in terms of compliance with the requirements for the Project Product. This check can be very resource intensive, but if you make an informed choice of one of the alternatives considered, the project will receive certainty regarding the technological basis of the future product and the resulting technology. 112

Actions aimed at the search, selection and evaluation of alternatives to project of the resulting technology, it is advisable to carry out within the «subproject» of the main innovation project. The launch of any project is carried out with the stated goals of this project; therefore, the objectives of the subproject «Search, selection and assessment of alternatives to the general technical plan» should be noted. The purpose of the subproject «Search, selection and assessment of alternatives to the general technical plan» is to ensure «Mother» project technical plan, on the basis of which the resulting technology will be formed. The product of the subproject «Search, selection and assessment of alternatives to the general technical plan» is a justified choice of a specific technical design, on the basis of which the resulting Technology will be formed. To conduct the competition and ensure the evaluation of the results of the works aimed at choosing the alternative on which the technical proposal for the implementation of the general technical plan will be based. Regulation on the evaluation and selection of alternatives and the evaluation of scientific and technical products is developed in the formation of a technical proposal that must be formalized with a separate document stating: – objectives of the subproject «Search, selection and assessment of alternatives to the general technical plan»; – general technical plan; – the order of selection of alternative bids, aimed at the implementation of project; – the order of evaluation of scientific and technical products received from contractors; – the order of the final selection of technical proposals, based on a comparison of non-technical (economic, environmental, etc.) benefits; – requirements for executors of customized works of the subproject, including in the aspect of the contract and patent history of the performer. Step 4 «Selection of alternative tender proposals aimed at the implementation of a common technical plan» Selection of alternative bids for the implementation of project is carried out within the framework of the subproject «Search, selection 113

and assessment of alternatives to the general technical plan», whose goal is to provide the «parent» ITP with a technical proposal on the basis of which the resulting technology will be formed. The selection of alternative tender proposals for the implementation of project is necessary to ensure a reasonable the choice of a specific technical proposal based on which, in turn; the resulting Technology will be formed. The selection of alternative bids includes the collection and evaluation of alternatives to the implementation of project. The selection of alternatives to the implementation of project is carried out in accordance with the developed regulations based on a functional analysis aimed at identifying the possibility of use alternatives to achieve the stated ITP goals. Step 5 «Planning, execution and monitoring of the subproject» Search, selection and evaluation of alternatives to the implementation of the general technical plan Maintenance activities and management procedures at this stage serve a significant amount of substantive activity – the performance of works to obtain scientific and technical results allowing to carry out a feasibility study of selected proposals aimed at the implementation of project, which will then be able to make an informed choice of a specific technical design, on the basis of which will be the resultant Technology. After the completion of the processes of this step, the project gets certainty of the boundaries in the selected field of technology. In the subproject, work is performed, the result of one of which becomes the basis for the technical proposal that is transferred for the preparation of technical tasks and the development of the selected resulting technology for them. The intermediate and final results obtained during the work are subjected to the selection procedure, which makes it possible to choose an alternative to the implementation of project from the alternative bids submitted for verification of compliance with the requirements for the resulting Technology and ITP Product. During the implementation of the subproject, a monitoring system is implemented to ensure compliance of the intermediate and final results with the requirements of the relevant technical assignment. Deviation of intermediate results parameters of works from the 114

requirements fixed in the relevant technical task, revealed during monitoring. It is the basis for refusing to choose the results of these works as a basis for the technical proposal for the development of Technology, and can serve as the basis for the decision to terminate the work on the formation of the technical proposal. Step 6 «Assessment of received scientific and technical products and the formation of technical proposals» The main task of filtering technical proposals is to approximate the moment of final selection for the formation of a technical proposal on which the resulting Technology will be developed. It is advisable to filter technical proposals in the process of performing works based on data on intermediate (non-final) results of these works, which will shorten the timeframe for selection and exclude the costs of full execution of works the result of which is already qualified as not meeting the requirements for the ITP product. Thus, the filtering procedure is applied to intermediate work results at the completion of their stages. At this step, the received scientific and technical products are evaluated from the technical point of view in terms of compliance with the requirements for the product of the project, on the basis of which decisions are taken to continue or terminate or successfully complete the Works as part of the subproject. According to the STP, which meets the criteria, technical proposals are formed, of which comparison of non-technical benefits will be selected technical proposal of the project, on the basis of which the formation of a technological asset is expected. The selection of the best alternative to the implementation is carried out in accordance with the provisions of the Regulation on selection and selection of alternatives and evaluation of scientific and technical products in the formation of a technical proposal on the degree to which they meet the requirements for the product of the project. Step 7 «Final selection of technical proposals» In case of positive completion of the step «Evaluation of received project and formation of technical proposals (based on the results of work monitoring)», it is necessary to assess the compliance of the selected technical proposals (or one selected technical solution) with the level of non-technical benefits for its use by the Company in the 115

ITP product. Non-technical benefits can be manifested in the economic, environmental, social and patent-legal aspects. At this step, the economic justification of the continuation of the ITP is checked based on the final selected technical proposal. Step 8 «Determination of the selected technical proposal» The statement of the selected technical proposal does not require the implementation of any activities and procedures, being essentially a managerial event of zero duration. It is important that after approval and confirmation of the final selection of the best of the submitted technical proposals, the Company can reasonably fix its intention to create a specific Technological asset, complete it and use it to extract certain benefits. This intention will be disclosed in the ITP Concept, which will carry out the activities and procedures of the investment phase of the Project. Step 9 «Formation of the description of the technological asset» Having ascertained the selected technical proposal on the basis of the selection of the best of the submitted technical proposals, the Company can reasonably fix its intention to create a specific Technological asset, complete it and use it to extract certain benefits. In this situation, the project goes into the investment phase, in which the Company's property assets – intangible assets within the Technology Asset will be formed. For the transition to the ITP investment phase, a documented description of the Technology asset based on the stated technical offer is necessary. The description of the Technological asset sets the resulting Technology through its Technical Systems and technical solutions in their composition. Usually this information is recorded in the document of the project «Concept». In this case, the technical utility of the stated technical proposal for the formation of a technological asset with specified properties should be evaluated. Such an assessment of the technical utility of the technology is carried out every time when project milestones are reached, usually associated with the removal of uncertainty by obtaining new technical solutions. Technology is concretized and a list of expected results of the project works is formed – a list of intangible assets being created. Step 10 «Confirmation of the goal of an innovative technological project» Confirmation of the objective of the innovation project is necessary for making a decision on the transition to work planning as 116

part of the project, but this operation is iterative and is subject to permanent activation to confirm the continued relevance of the Technology being developed on the basis of its utility evaluation. Loss of relevance can be caused by the implementation of any of the risky events: a change in the industry conjuncture, the appearance in the technology level of other people's technologies, similar to the expected technology, changes in business goals and production objectives of the company, etc. Confirmation of the objective of an innovative project does not require the implementation of any activities and procedures, being essentially a managerial event of zero duration. It is important that after confirming the purpose of the project, the company can reasonably record its intentions to create and bring to the state of serviceable, specific intangible assets and use them for extracting certain benefits. This intention is disclosed in the document of the project «Concept», on which the activities and procedures of the ITP investment phase will be implemented. Step 11 «Managerial cycle of an innovative technological project» The management cycle of the innovation project is a complex of content and management processes, and a large amount of action is necessary for the direct implementation of the work of the innovative project aimed at obtaining the resulting Technology. Upon completion of the project management cycle, the main technical result should be obtained – a description of the resulting technology. Maintenance activities and management procedures at this stage serve a significant amount of substantive activities – performance of works on obtaining scientific and technical results, allowing composing the resulting technology. In the management cycle of the innovative project, the planning and execution processes are developing in parallel because of the uncertainty caused by the presence of research and development in the project. The update of the project plan is carried out, first, in connection with the reduction of uncertainty on the receipt of scientific and technical products based on the results of the work, as well as in connection with the correction related to the changes-deviations of the project. The resulting technology is subject to a final evaluation, both from technical and non-technical points of view, which allows 117

deciding on the nature of the completion of the project – successful or unsuccessful. In the main project documents related to planning, summarized data on the necessary work with the name of the work, the purpose of the work, contractors, etc. are reflected. Upon the conclusion of contracts, a monitoring system of works performed under contracts is introduced to ensure compliance of intermediate (in stages) and final (at the conclusion of the contract) results of work with the requirements for the resulting technology. Deviation of the parameters of intermediate results of work from the requirements fixed in the relevant technical task, revealed in the monitoring process, is the basis for taking managerial decisions. Activities in this step include planning and execution processes, the implementation of which in an innovative project as in a project with a high degree of uncertainty occurs alternately. Therefore, it is expedient to single out a group of initial planning processes, as a result of which the main planning documents are prepared and approved, which makes it possible to proceed to the execution processes. When executing the execution processes, the results of the works provided for in the project plan are accepted and evaluated. These results, in turn, determine the management decisions on the continuation or termination or successful completion of work in the project, as well as decisions on the need to implement corrective actions that once again return the project to the planning processes. Step 12 «Evaluation of technical utility» The evaluation of the technical utility of technology is aimed at comparing the characteristics of technology with the level of technological development achieved at the time of the assessment, as well as comparing the direction of its development with the current trends in scientific and technological development. This activity involves identifying the technical advantages of the technology in question, determining its technical relevance, as well as identifying a range of tasks to be performed using similar or similar technologies. The evaluation of utility is necessary to compare the resulting technology and the complex of technical systems that implement it, as well as the technical solutions in their composition with basic samples, which is the basis for assessing the effectiveness of the received technological asset and, consequently, the efficiency of investments. 118

Steps to assess technical utility are aimed at the timely decisionmaking on the termination of work on the study of the unsuccessfully chosen alternative. They are carried out in the management cycle iteratively based on monitoring the progress of research on alternatives and analysis of the results obtained. Maintenance activities and management procedures at this step serve to assess the compliance of the received work results with the requirements for the Project Product, i.e. Possibility to compose based on these results the resulting technology. Step 13 «Final Evaluation of the Complex of Technical Systems» The final evaluation of a set of technical systems is the evaluation of the resulting technology from an economic, technical and legal point of view in terms of compliance with the company's requirements for the Project Product. When this step is completed, information on the evaluation of the utility of the complex of technical systems from the technical point of view received in the previous step is accepted. Information obtained at the end of this step allows you to decide on the nature of the completion of the project – successful or unsuccessful, as well as on the beginning of the registration of rights and determine the modes of assigning technical solutions – the appropriateness of patenting or keeping them in secret in the form of know-how. The final evaluation of the complex of technical systems is necessary to compare the actually obtained resulting technology with the expected one, which allows us to evaluate the effectiveness of the received technological asset, and, consequently, the effectiveness of investments in the project. Step 14 «Registration of rights to technical solutions» The step «Registration of rights to technical solutions» is a sequence of actions aimed at the company's acquisition of technical solutions developed during the implementation of the project. Maintenance activities and management procedures at this stage serve the formation of the Technological asset. At the end of this step, information should be obtained that allows the decision to transfer the Company's Technology Asset created during the project to the account. Demonstration of actions for the legal protection of inventions, utility models, computer programs, etc. It is necessary to qualify the expenses incurred during the formation of the Technological asset as an investment in the project. 119

Step 15 «Transfer of the technological asset into operation» The step «Transfer of the Technological asset into operation» is a sequence of actions aimed at acceptance by the company's production of the resulting technology, brought to a state suitable for operation. The procedures of this step serve the receipt of Technology in the production of the Company and are not complex or resource intensive, moreover, these actions are, in fact, post-project. When transferring the technology it is important to demonstrate the transfer with the possibility of putting into operation each of the technical solutions as part of the technical systems of the project technology. Such a demonstration is ensured by compilation of conformity certificates for each technical solution, in which full lists of technical features of the corresponding technical solution are fixed indicating which of these technical characteristics are actually used in the relevant production facility of the company. The existence of such acts as justification documents is mandatory for the fulfilment of the actions stipulated by the legislation of Republic of Kazakhstan for the justification of amortization of intangible assets. In addition, the availability of this documentation allows structuring the exploited technologies and allocating economic effects for each technical solution used separately. Questions by chapter 5. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 120

What is a technological cycle of innovation? Describe the scheme of the technological innovation cycle of the company. What are the reasons for launching an innovative project? When the introduction into production stage begins? Describe the final stage of the innovation cycle. What is an important feature of an innovative technology project? What approach is in contradiction with the most widespread among specialists? What took the main attention in the management of technological development? Explain the meaning of the Project Product/ Why innovations can have different strengths and lead to different consequences? Describe the types of Project Products that correspond to different tasks. Why plan and implement the innovation-technological project in accordance with the law and with the interests of the enterprise? What are the basics of System Project Management?

14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.

Describe the signs of the Project. Why projects are carried out for a finite period? Why some intermediate project operations cannot be implemented? How investment projects differ in the scope of application? What is monoproject? What is multiproject? What is megaproject? Describe the main areas of activity in which the project is implemented. What are the phases of innovative project? What are the main activities of the development phase? What are the main activities of the Implementation phase? What are the main activities of the completion phase? What is the Substantive processes of the project management? Describe the processes of initiation of the project management. Why the planning of intellectual property is objects an important task for innovative projects? 29. Why it is important to consider all possible situations, while the plan should be physically implemented? 30. What should include analysis process of project management?

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LITERATURE REVIEW 1. A Guide to the Project Management Body of Knowledge (PMBOK Guide) – PMI, 2013. 2. Шапиро В.Д. Project management. Управление проектами: толковый англо-русский словарь-справочник. – М.: Высшая школа, 2000. – 379 с. 3. Мазур И.И., Шапиро В.Д., Ольдерогге Н.Г. Управление проектами: справочник для профессионалов. – М.: ОМЕГА-Л, 2007. – 430 с. 4. Управление инновационными проектами: учебное пособие в 2-х частях / Т.В. Александрова, С.А. Голубев, О.В. Колосова и др.; под общ. ред. проф. И.Л. Туккеля – СПб.: СПбГТУ, 2009. 5. Джилл Кикал, Томас Лайонс. Социальное предпринимательство: миссия – сделать мир лучше = Understanding Social Entrepreneurship: The Relentless Pursuit of Mission in an Ever Changing World. – М.: «Альпина Паблишер», 2014. – 304 с. 6. Дэвид Борнштейн. Как изменить мир. Социальное предпринимательство и сила новых идей = How to Change the World: Social Entrepreneurs and the Power of New Ideas. – М.: «Альпина Паблишер», 2015. – 496 с. 7. Крейг Дарден-Филлипс. Ваш шанс изменить мир: практическое пособие по социальному предпринимательству = Your Chance to Change the World. The No-fibbing Guide to Social Entrepreneurship. – М.: «Альпина Паблишер», 2013. – 280 с. 8. Гришина Я.С. Социальное предпринимательство как инновационноправовая основа обеспечения имущественных потребностей (рус.) // Вестник Нижегородского университета им. Н.И. Лобачевского. – 2013. – № 3(2). – С. 50-52. 9. Московская А.А. Социальное предпринимательство в России и в мире. – М.: Издательский дом Высшей школы экономики, 2011. – 286 с. 10. Сидоров Н.И. Социальное предпринимательство и предпринимательство в социальной сфере (теория и практика). – М.: Издательский дом ФГБОУВПО «ГУУ», 2015. – 80 с. 11. Abu-Saifan S. Social Entrepreneurship: Definition and Boundaries / Technology Innovation Management Review. – 2012. – February. – P. 22-27. 12. Jason Haber. The business of good. Social entrepreneurship and the new bottom line. – Entrepreneur Press, 2016. – 128 p. 13. Georgia Levenson Keohane. Social Entrepreneurship for th 21st Century: Innovation Across the Nonprofit, Private and Public Sectors. – N-Y: McGraw-Hill, 2013. – 273 p. 14. Social Entrepreneurship and Social Business. An Introduction and Discussion with Case Studies. – Wiesbaden: Springer Gabler, 2012. – 227 p. 122

15. Charles Leadbeater The Rise of the Social Entrepreneur. GB: Demos, 2001. – 87 p. 16. Joanna Mair, Jeffrey Robinson, and Kai Hockerts, Social Entrepreneurship. Macmillan: Palgrave, 2006. – 250 p. 17. Muhammad Yunus, Bertrand Moingeon, Laurence Lehmann-Ortega Building Social Business Models: Lessons from the Grameen Experience / Long Range Planning. April-June, vol 43. 2010, p. 308–325» 18. Jacques Defourny, Marthe Nyssens Conceptions of social enterprise and social entrepreneurship in Europe and the United States: Convergences and divergences / Journal of Social Entrepreneurship, Vol 1(Issue 1). 2010. – p. 32-53. 19. Sally R. Osberg and Roger Martin Social Entrepreneurship: The Case for Definition / Stanford Scocial Innovation Review. Vol 4. 2007 20. Michelle J. Stecker, Tonia L. Warnecke, Carol M. Bresnahan Social Entrepreneurship and the nonprofit in developing countries // Routledge Handbook of Entrepreneurship in Developing Economies / Colin C. Williams, Anjula Gurtoo. – Routledge, 2016. – P. 198. 21. Paul C. Light The Search for Social Entrepreneurship. – Brookings Institution Press, 2008. – 295 p. 22. Paul C. Light Driving Social Change: How to Solve the World's Toughest Problems. – Wiley, 2010. – 224 p. 23. Peredo A. M., McLean M. Social Entrepreneurship: A Critical Review of the Concept. Journal of World Business, Vol 41 (1). 2006. – P. 56-65. 24. John Elkington and Pamela Hartigan The Power of Unreasonable People: How Entrepreneurs Creates Markets to Change the World. Harvard Business Press, 2008. 25. Robert Gunn and Christopher Durkin Social Entrepreneurship: A Skills Approach. Policy Press. 2010. – 200 p. 26. Alejandro Agafonow Toward A Positive Theory of Social Entrepreneurship. On Maximizing Versus Satisficing Value Capture / Journal of Business Ethics, Vol. 125, No. 4, 2014. pp. 709–713, 27. Alejandro Agafonow Value Creation, Value Capture, and Value Devolution: Where Do Social Enterprises Stand? / Administration & Society, 24 November, 2014. 28. Ian Mac Millan The Social Entrepreneur's Playbook: Pressure Test Your Start-Up Idea. – Wharton Digital Press. 2013. – 75 p. 29. Lombard, K.J. Social entrepreneurship in youth culture: Organics, Russell Simmons and Emile 'XY' Jensen / Journal for Cultural Research. Vol 16(1). 2012 p. 1-20. 30. Rita Gunther McGrath, Ian C. MacMillan The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty. – Harvard Business Press. 2000. – 380 p.

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CONTENT INTRODUCTION ..................................................................................... 3 1. THE GENERAL PROVISIONS OF THE INNOVATIVE ENTREPRENEURSHIP ............................................................................ 5 1.1. Definition of Entrepreneurship. Who is an Entrepreneur? .................. 5 1.2. Differences between Entrepreneurship and Business .......................... 17 1.3. The role of Startup .............................................................................. 24 Questions by chapter 1............................................................................... 31 2. SOCIAL INNOVATION AND SOCIAL ENTREPRENEURSHIP ............................................................................ 32 2.1. The concept of social entrepreneurship ............................................... 32 2.2. The problem of formalization of social entrepreneurial activity ......... 38 2.3. Organizational and legal forms of social enterprises........................... 43 Questions by chapter 2............................................................................... 48 3. THE INNOVATION PROCESS AND ITS STAGES ........................ 50 3.1. Innovation in Entrepreneurship. Idea Generation and Mobilization.............................................................. 50 3.2. Advocacy and Screening..................................................................... 65 3.3. Experimentation. Commercialization. Diffusion and Implementation ................................................................... 71 Questions by chapter 3............................................................................... 78 4. BUSINESS PLAN OF THE INNOVATIVE PROJECT .................... 79 4.1. What is a business plan? ..................................................................... 79 4.2. The structure of a business plan .......................................................... 82 Questions by chapter 4............................................................................... 93 5. MANAGING OF THE INNOVATION PROJECT ............................ 94 5.1. Technological innovation cycle .......................................................... 94 5.2. Basics of System Project Management ............................................... 99 5.3. Logical structure of the innovation project ......................................... 109 Questions by chapter 5............................................................................... 120 LITERATURE REVIEW .......................................................................... 122

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Educational issue Kondybayeva Saltanat Kanapiyaevna

INNOVATIVE ENTREPRENEURSHIP Educational manual Computer page makeup and cover designer N. Bazarbayeva The website used for front-page designing https://www.linkedin.com IS No.11591 Signed for publishing 22.12.17. Format 60x84 1/16. Offset paper. Digital printing. Volume 7,81 printer’s sheet. Edition 70. Order No.6960 Publishing house «Qazaq university» Al-Farabi Kazakh National University, 71 Al-Farabi, 050040, Almaty Printed in the printing office of the «Qazaq university» publishing house

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Новые книги издательского дома «ҚАЗАҚ УНИВЕРСИТЕТІ» Кондыбаева С.К. Көлеңкелі экономика: институционалды бағыт: оқу құрaлы / С.К. Кон­дыбаевa, А.Е. Калиева. – Aлмaты: Қaзaқ университеті, 2017. – 184 б. ISBN 978-601-04-3018-1 Бұл оқу құралы экономика және бизнес жоғары мектебінде көлеңкелі экономика пәнінен оқылған дәрістер негізінде дайындалған. Құрал көлең­келі экономиканың негізін жүйелі сипаттайды, көлеңкелі эко­­номика және оның институционалды бағытына арналған. Бас­ты ерекшелігі негізгі оқырмандар бакалавриат студенттері мен ғы­лыми-педагогикалық бағыттағы магистранттар болып табылады. Тео­риялық материалдар заңсыз экономика бағытымен айналысқан жетекші авторлар еңбектері негізінде жиналған. Еңбектің әр бөлімінде оқырмандардың теориялық материалды игеру деңгейін тексеретін бақылау сұрақтары бар.

Бизнес-анализ: учеб. пособие / сост.: Р.Е. Джаншанло. – Aлмaты: Қaзaқ университеті, 2017. – 216 с. ISBN 978-601-04-2964-2 В учебном пособии «Бизнес-анализ» рассматриваются различные аспекты бизнес-анализа, в частности, сущность и структура бизнес-анализа, роль бизнес-аналитика в современной организации, стратегические и операционные аспекты бизнес-анализа, бизнес-модель организации как объект бизнес-анализа. В конце разделов приведены контрольные вопросы. Учебное пособие предназначено для магистрантов, докторантов PhD, преподавателей экономических вузов и работников финансово-аналитических служб организаций.

Nurgazina A.M. Monetary and credit policy: tutorial / А.М. Nurgazina, A.S. Assilova. – Almaty: Qazaq University, 2017. – 266 p. ISBN 978-601-04-3010-5 The tutorial covers topics related to the development and implementation of monetary policy, the activities of central banks, the classification of monetary instruments, conditions and procedures for conducting open market operations. To improve study outcomes, the tutorial contains questions for self-monitoring, tasks, test questions and attachements. The presented educational material allows to form theoretical knowledge and practical skills in the field of monetary policy. The tutorial is recommended for students and undergraduates studying on financial and economic specialties, and it can also be used to improve the skills of financial market professionals.

По вопросам приобретения обращаться в отдел продаж издательства «Қазақ университеті». Контактные тел.: 8 (727) 377-34-11, 328-56-51. E-mail: [email protected], cайт: www.read.kz, www.magkaznu.com