The Two Types Of Entrepreneurship March 2010

After touring five local companies and hearing about five more local entrepreneurs give speeches about their successes, I’ve drawn some entrepreneurial conclusions. These are very likely existing business concepts, but I have never taken a business class, so bear with me. I’m just making connections from what I have seen and heard.

There are two types of entrepreneurship: precedented and unprecedented. In precedented entrepreneurship, you are simply creating a business based on ideas that already exist and on a business model that has already been proven effective. Precedented entrepreneurship is important as it fills needs that society has – it is purely a reaction to a demand. Any perfectly competitive market, such as web design, web hosting, marketing, restaurants, or accounting fits into this category of precedented entreprenurship. Precdented entrepreenurs start new businesses, but not new ideas. This is not to say that precedented entrepreneurship does not ever fill niches or involve creativity: even businesses within a perfectly competitive market are all slightly different and try not to overlap 100%. With that said, there is a little secret about precedented entrepreneurship that I will let you in on: its easy to get into because it’s based on products of high demand, but it’s also highly competitive and highly standardized. If you start a precedented business, based on an existing model, with an already well-defined market, you better be ready to compete with those standards. You obviously don’t have to be the best at what you do starting off – nobody ever is. But you should at the very least offer a product of comparable quality to your competitors and you should meet the industry standards. Upon starting a precedented business, be prepared not to come up with new, innovative ideas, but rather to try to be the best at what you do and to simply offer a damn good product or service. Don’t expect to get very big.

In unprecedented entrepreneurship, you are trying to create an entirely new idea, or connect existing ideas in an entirely new way. There is no precedent for you. You have to be able to innovate and constantly be open to new ideas and constant change. You will likely be creating a new technology that you might not even know how to apply in an economically feasible way. You may have no idea how to even create a business plan for the product. In fact, the product may simply not be profitable or demanded. With a new idea comes a new market. You will have to define a market that might not exist yet – you will have to even create a demand through advertising and demonstrations. If you are successful, it is very likely that you will get big and have little or no competition. Many huge corporations started, and often continue to be of this nature.

Both types of entrepreneurship are important to society. Precedented entrepreneurship brings prices down, brings quality up, and satisfies our basic demands. Unprecedented entrepreneurship changes the way that society operates by creating new technologies.