Entrepreneurship consists of two types of enterprises, SME and IDE. The differences between the two are that latter focuses on a global market, while the first focuses on local markets.
Small/Medium Enterprises (SME) focus on the local market, like service businesses. These include small businesses that are not looking to expand globally; for example, dry cleaners or nail salons.
Although these businesses are fundamentally important, they create a linear growth that unfortunately taps out in the market, because they lack a large cash flow over time. This means that although your nail salon is consistently booked, the chances of its owner expanding and opening a second location is slim to none. Why? Because the market it’s in doesn’t necessarily support major growth with its businesses.
On the other hand, an Innovation Driven Enterprise’s (IDE) main focus is on the global market. Yet, unlike small media enterprises, IDEs require businesses to lose money in the beginning in order to have exponential growth in the market over time.
Due to this, IDEs need shareholders and capital funding in order to become successful. With this, IDEs will be able to expand to broader markets, something that small media enterprises cannot and will not do.
The two enterprises also have two very different underlying demographics, and although they may look similar on the surface, different elements go into each of them. There can be a crossover between the two enterprises, but IDEs are usually more experienced than SMEs, and therefore tend to benefit more.
Bill Aulet explains these entrepreneurial differences and more in his instructional video from MIT Open Course Ware.
Image credit: CC by Shane Adams