The Big Idea: How to Start an Entrepreneurial Revolution

In the latest Ease of Doing phvirtuoso line ranking from the World brim, one earth do a owing(p) stick outfrom 143rd on the list to 67th. It was Rwanda, whose population and institutions had been decimated by genocide in the 1990s. On the World Bank list, Rwanda catapulted out of the neighborhood of Haiti, Liberia, and the West Bank and Gaza, and sailed past Italy, the Czech Republic, Tur recognize, and Poland. On one subindex in the study, the ease of curtain raising a in the raw business, Rwanda ranked 11th worldwide.You give the bounce chat and charge smell the signs of Rwandas business revolution at Costco, one of the retail worlds most demanding trade customers, w here(predicate) pungent cturnedee self-aggrandizing by the nations sm any outlying(prenominal)mer-entrepreneurs is stocked on the shelves. And in Rwanda itself the secern is dramaticper capita GDP has almost quadrupled since 1995.pic Rwanda From Genocide to Costcos ShelvesThis is the material body of cha nge entrepreneurship brush off bring to a country. As Rwandas president, non bad(p) of Minnesota Kagame, put it recently, Entrepreneurship is the most sure modality of development. He is non a lone voice Economic studies from around the globe consistently relate entrepreneurship, farewellicularly the fast- ontogeny variety, with rapid job creation, GDP growth, and long-term productivity increases.Youll see much palpable consequence of surprising entrepreneurial achiever stories on the Costco shelves. A few steps away from the Rwandan coffee, you can find juvenile fish from Chile, which now ranks second solely to Norway as a supplier of salmon. The Chilean fish in Americas super grocery stores were supplied by hundreds of freshly fishing-related ventures spawned in the 1980s and 1990s. A few aisles over are warehousing USBs invented and manufactured in Israel, a country whose irre ironible entrepreneurs shake been give innovative technologies to the world since the 1970s. And respectable around the corner, the Costco pharmacy sells generic drugs made by Icelands Actavis, whose meteoric rise landed it, in just 10 years, among the top five global generics leading.Rwanda, Chile, Israel, and Iceland all are fecund ground for entrepreneurshipthanks in no small part to the groundss of their regimes. though the companies behind the products on Costcos shelves were launched by innovative entrepreneurs, those businesses were all aided, all directly or indirectly, by judicature leaders who helped build environments that prove and swan entrepreneurship. These entrepreneurship ecosystems restrain execute a kind of holy grail for governments around the worldin both rising and developed countries.Unfortunately, whatever governments tear a misguided approach to building entrepreneurship ecosystems. They pursue some unattainable ideal of an ecosystem and look to economies that are completely unlike theirs for shell practices. entirely increas ingly, the most outletive practices come from remote corners of the earth, where imaginativenesssas comfortably as legal frameworks, transparent governance, and democratic valuesmay be scarce. In these places entrepreneurship has a completely new face.The new practices are emergent murkily and by trial and error. This messiness should not deter leaderstheres too much at spot. Governments admit to attempt all available experience and commit to ongoing experimentation. They must get along an incomplete and ever-changing slew of prescriptions and relentlessly review and refine them. The alternatives victorious decades to devise a model set of guidelines, acting randomly, or doing cipherall are unacceptable. save the government cannot do everything on its have the private and nonprofit organization spheres too must shoulder some responsibility. In legion(predicate) instances corporate executives, family-business owners, universities, professional organizations, foundations, bray organizations, financiers, and, of course, entrepreneurs themselves have initiated and even financed entrepreneurship education, conferences, research, and insurance advocacy. As we shall show later in this article, sometimes private endeavor take a leaks it easier for governments to act more quickly and effectively, and all stakeholdersgovernment and otherwiseshould take every chance to show real leadership.To make progress, leaders need practical if imperfect maps and navigational guidelines. From what we know from both research and practice, heres what seems to actually work in stimulating thriving entrepreneurship ecosystems. lodge Prescriptions for Creating an Entrepreneurship EcosystemThe entrepreneurship ecosystem consists of a set of individual elementssuch as leadership, culture, capital markets, and broad-minded customersthat combine in complex ways. (See the exhibit Do You Have a Strong Entrepreneurship Ecosystem?) In isolation, each is conducive to entrepreneur ship but insufficient to sustain it. Thats where many governmental efforts go wrongthey address whole one or two elements. Together, however, these elements turbocharge venture creation and growth. When integrating them into one holistic system, government leaders should focus on these nine key principles.pic Do You Have a Strong Entrepreneurship Ecosystem?1 Stop Emulating ti vale.The n previous(predicate) universal ambition of becoming another ti valley sets governments up for frustration and failure. There is little argument that silicon Valley is the gold standard entrepreneurship ecosystem, home to game-changing giants such as Intel, Oracle, Google, eBay, and Apple. The Valley has it all applied science, cash, talent, a critical mass of ventures, and a culture that encourages collaborative plan and tolerates failure. So it is understandable when public leaders throughout the world full point to California and say, I want that.Yet, Valley envy is a slimy guide for trio reasons. One is that, ironically, even Silicon Valley could not induce itself today if it tried. Its ecosystem evolved under a unique set of percentage a strong local aerospace sedulousness, the open California culture, Stanford Universitys validatory relationships with industry, a mother lode of invention from Fairchild Semiconductor, a liberal in-migration policy toward doctoral students, and pure luck, among other things. All those factors set off a chaotic evolution that defies definitive determination of cause and effect.Further, Silicon Valley is fed by an overabundance of technology and technical expertness. exploitation knowledge-based industrythe mantra of governments everywhereis an admirable aspiration, but achieving it requires a massive, multiplication-long ratement in education as well as the ability to develop best intellectual property. On top of that, a knowledge industry demands an awful technology pipeline and scrap pile. Consider that top venture capita lists invest in at best 1% of the technology-based businesses they look at, and a important proportion of that select group fails.A third limit is that although Silicon Valley sounds as if its a place that breeds local ventures, in reality its as much a powerful attractiveness for ready-made entrepreneurs, who flock there from around the globe, often forming their own friendly subcultures and organizations in what Gordon Moore, one of the Valleys graybeards, calls an industry of transplants. And difficult as it is to foster an ecosystem that encourages current inhabitants to make the entrepreneurial choice and then espouse at it, it is even harder to grow an entrepreneurs Mecca.2 skeletal system the Ecosystem Around Local Conditions.If not Silicon Valley, then what entrepreneurial hatful should government leaders aspire to? The most difficult, yet crucial, thing for a government is to tailor the suit to fit its own local entrepreneurship dimensions, style, and The hitting d issimilarities of Rwanda, Chile, Israel, and Iceland illustrate the principle that leaders can and must foster native solutionsones based on the realities of their own circumstances, be they natural resources, geographic location, or culture.Rwandas government took a strongly interventionist strategy in the postgenocide years, identifying three local industries (coffee, tea, and tourism) that had proven potential for development. It actively organized the institutions that would support those industries by, for example, train farmers to grow and package coffee to intertheme standards and connecting them to overseas distribution channels. Rwandas immediate priority was to provide gainful employment to megs of people. Its efforts led to approximately 72,000 new ventures, almost entirely consisting of two- and three-person operations, which in a decade tripled exports and rock-bottom poverty by 25%.Chile also focused on industries where it had copious natural resourcessuch as fis hing. As in Rwanda, the government took a powerfully interventionist approach to its entrepreneurship ecosystem in Augusto Pinochets early years, and the authoritarians free-market ideology made it easier for Chiles center of attention year to obtain financing and licenses for fishing operations. The government also weakened labor (sometimes brutally) to conquer new ventures input costs and kept Chiles currency inexpensive to maintain competitiveness in export markets. inborn resources often are not a key component of an ecosystem, however. Frequently, entrepreneurship is emotional when such resources are scarce, requiring people to be more inventive. Taiwan, Iceland, Ireland, and New Zealand, resource-poor islands far from major markets, all developed ecosystems based primarily on compassionate capital. So did Israel. In the 1970s and 1980s, its unique ecosystem evolved haphazardly out of a combination of factors, including spillover from tremendous military R&D efforts, stro ng diaspora connections to capital and customers, and a culture that prized frugality, education, and unconventional wisdom.3 Engage the Private sphere from the Start.Government cannot build ecosystems alone. Only the private sector has the motivation and perspective to develop self-sustaining, profit-driven markets. For this reason, government must involve the private sector early and let it keep or acquire a significant stake in the ecosystems conquest.Start with a candid conversation.One way to involve the private sector is to reach out to its representatives for early, frank advice in reducing morphologic barriers and formulating entrepreneur-friendly policies and programs. If the necessary expertise doesnt exist domestically, it can often be found overseas among expatriates. In the 1980s the Formosan government engaged with the Taiwanese diaspora, consulting prominent executives in leading U.S. technology companies and establishing ongoing forums to collect their input. The government actually make programs based on the suggestions of these expats, who liked how their ideas were implemented so much that they returned home in droves in the 1990s, many of them to occupy prominent policy positions or run the new plants that were realized. For example, Morris Chang, the former group vice president of Texas Instruments, came home and eventually set up and ran TSMC, Taiwans second semiconductor-fabricating plant.Taiwan Bringing Expat Entrepreneurs shellDesign in self-liquidation.In 1993 the Israeli government created Yozma, a $ hundred million fund of funds that in three years spawned 10 venture capital funds. In each one, Yozma, an Israeli private partner, and a foreign private partner with proven fund management expertise all invested approximately equal amounts. From the start, the Israeli government gave the private sector partners an option to buy out its interest in the funds at attractive termsa fact often overlooked by other governments that copy the Yozma model. That option was exercised by eight of the 10 funds, fruitfully for the government, I might add. Five years after the founding of Yozma, its be assets were liquidated by auction. The governments exit served as market verification that real value had been generated and is one of the reasons that the Israeli venture capital industry not only became self-sustaining but simultaneously achieved a quantum leap in growth.4 Favor the High Potentials.Many programs in emerging economies spread scarce resources among quantities of bottom-of-the-pyramid ventures. And indeed, some of them, such as the Carvajal Foundation in Cali, Colombia, have dramatically increased income for segments of the population. But focusing resources there to the riddance of high-potential ventures is a crucial flaw.In an era when microfinance for small-scale entrepreneurs has become mainstream, the reallocation of resources to support high-potential entrepreneurs may seem elitist and inequitable . But in particular if resources are limited, programs should try to focus first on ambitious, growth-oriented entrepreneurs who address large potential markets.The social economics of high-potential ventures and small-scale employment alternatives are significantly different. Whereas 500 microfinanced sole proprietorships and one rapidly globalizing 500-person operation create the same number of jobs, many experts argue that the wealth creation, power to invigorate other start-ups, labor force enrichment, and reputational value are much greater with the latter.One organization that recognizes this is Enterprise Ireland, an agency responsible for supporting the growth of world-class Irish companies. It has created a program specifically to provide mentoring and financial assistance to high-potential start-ups, which it defines as ventures that are export-oriented, are based on innovative technology, and can generate at least 1 million in sales and 10 jobs in three years. The glob al nonprofit Endeavor, which focuses on entrepreneurship development in 10 emerging economies, has to date take some 440 high- regard entrepreneurs, who, with Endeavors mentoring, are turning their successes into role models for their countrymen. non all high-potential ventures are technology based in fact, Id argue that the majority are not. SABIS is a perfect example. An educational management organization founded in Lebanon many years ago as one school, SABIS now is one of the worlds largest EMOs, teaching more than 65,000 students in 15 countries, with the goal of reaching 5 million students by 2020.5 Get a Big Win on the Board.It has become clear in recent years that even one success can have a surprisingly stimulating effect on an entrepreneurship ecosystemby igniting the imagination of the public and inspiring imitators. I call this effect the law of small numbers. Skypes adoption by millions and eventual $2.6 jillion sale to eBay reverberated throughout the small nation of Estonia, encouraging highly deft technical people to start their own companies. In China, Baidus market share and worldwide recognition have inspired an entire generation of new entrepreneurs. Celtels amazing success as sub-Saharan Africas leading regional mobile provider and acquisition by Zain for more than $3 billion stirred the regions pride and helped African governments fight Africa fright among investors. In Ireland it was Elan Corporation and Iona Technologies, listed on Nasdaq in 1984 and 1997, respectively, that served as guiding lights to a generation of budding entrepreneurs.Sub-Saharan Africa grammatical construction Shareholder Valueand Better GovernmentEarly, visible successes help reduce the perception of entrepreneurial barriers and pretends, and highlight the tangible rewards. Even modest successes can have an impact. Saudi Arabia, a nation with a dearth of entrepreneurial ventures (aside from the powerful family business groups), is fighting hard to tear down the numerous structural and cultural obstacles entrepreneurs face. One preteen Saudi, Abdullah Al-Munif, left his salaried job, tightened his belt, fought the bureaucracy, and started a business making chocolate-covered dates. He ultimately grew the business, Anoosh, into a national string of 10 high street stores and turned an eye to overseas markets. now when Al-Munif appears as a panelist at entrepreneurship seminars, he is swamped by plan Saudi entrepreneurs who take inspiration from his bravery, realizing that neither capital, nor technology, nor connections are essential to success.Overcelebrate the successes.Governments should be bold about celebrating thriving entrepreneurial ventures. Media events, highly publicized awards, and touts in government literature, speeches, and interviews all have an impact.This is not as straightforward as it may seem, because many cultures discourage any public display of success as boastful or an invitation to either bad luck or the tax c ollector. Whereas in Hong Kong even small-scale entrepreneurs drive black Mercedes to have their status, in the Middle East flaunting ones success publicly can attract the envy of neighbors or, worse, the evil eye.Kenyas first international call center, KenCall, founded by Nicholas Nesbitt and two partners in 2004, built an international strawman by overcoming many bureaucratic and structural barriers, including the lack of a fast optical lineament hookup to the international communications grid. The Kenyan government didnt wait until KenCall became big to sing its praises even when it was a callow operation, the government brought in foreign delegations for visits, promoted the company in official publications and press releases, and hosted an international outsourcing conference. Government officials also used KenCalls example to have-to doe with for reforms, which expedited the construction of East Africas first undersea optical fiber linkan example of how entrepreneurial s uccess can facilitate structural change, not just the other way around.6 Tackle heathenish Change Head-On.Changing a deeply ingrained culture is tremendously difficult, but both Ireland and Chile demonstrate that it is possible to alter social norms about entrepreneurship in less than a generation. Until the 1980s employment in government, financial services, or agriculture was the main aspiration of Irelands young people. There was zero tolerance for loan defaults, and bankruptcy was stigmatized. Parents discouraged their children from backing out on their own, so few nurtured dreams of starting their own business.But by the 1990s, after triple-crown pioneers paved the way, hundreds of new software companies had been launched in Ireland. Some exported products some went public. Many achieved healthy sales revenues. dependable as important, entrepreneurs learned that it was possible to fail and regroup to try again. If you wanted to be respected and taken seriously, you needed to be a founder with a stake in a company trying to do something, recalls Barry Murphy, who was national software director at Enterprise Irelands predecessor in the 1990s.In her research, University of Minnesota professor Rachel Schurman has described how Chileans negative image of entrepreneurs as greedy exploiters was transformed in just one decade, as a direct result of the Chilean governments concerted effort to liberalize Chiles economy. Until the 1980s, Chiles well-educated middle class wasnt entrepreneurial, avoided opportunity-driven investment, and preferred to consume rather than save and invest. But by the 1990s, Chiles new middle-class entrepreneurs were telling Schurman forthwith the youth, everybody, wants to be an entrepreneur. If a successful empresario is interviewed in the newspaper, everybody reads it. Why was he successful? How did he do it? Its a model that never existed in advance.The media can play an important role not just in celebrating wins but in changi ng attitudes. In Puerto Rico, El Nuevo Da, the largest passing(a) newspaper, supported local entrepreneurship by running a weekly rapscallion of start-up success stories. On the small island, these stories have quickly become part of the social dialogue and have raised awareness about the opportunities entrepreneurship presents, as well as the tools it requires.7 Stress the Roots.Its a mistake to flood even high-potential entrepreneurs with easy money More is not necessarily merrier. New ventures must be exposed early to the rigors of the market. Just as grape growers withhold water from their vines to extend their root systems and make their grapes produce more-concentrated flavor, governments should stress the roots of new ventures by meting out money carefully, to ensure that entrepreneurs develop toughness and resourcefulness. Such measures also help heap out opportunists.In 2006 Malaysias Ministry of Entrepreneur and Cooperative Development awarded 90% of some 21,000 applica nts about $5,000 each in business support, strong evidence of the governments commitment to entrepreneurship. The program was part of an affirmative live up to program largely aimed at indigenous Malays, who were less entrepreneurial than the countrys business-minded Chinese immigrants. Yet Malay entrepreneurs themselves attribute the disappointing results partly to the fact that funding was too loose and even stigmatized the Malay recipients as less capable.More broadly, Malaysian entrepreneurship-development programs, considered by many, including myself, to be among the most panoptic programs in the world, have been criticized for actually inhibiting entrepreneurship among the Malays by unwittingly reinforcing their lack of risk taking. Similarly, recent reports on second Africas Black Economic authorisation program have reached the conclusion that BEE has discouraged entrepreneurship among the bulk of black South Africans and has benefited primarily the elite and well-conne cted.In fact, the hardships of resource-scarce, even hostile, environments often promote entrepreneurial resourcefulness. New Zealanders call Kiwi ingenuity number 8 fit In the countrys colonial days, the only plentiful resource was 8-gauge fencing wire, and New Zealanders learned to fix and make anything with it. Icelandic entrepreneurship is built upon a legacy of fishing when the fish are there, not when the atmospheric condition is good.For years incubators or entrepreneurship centers that provide financial help, mentoring, and often space to start-ups have been popular with governments. But I have seen scant rigorous evidence that these expensive programs contribute commensurately to entrepreneurship. One municipality in Latin America established 30 small incubators, but after several years only one venture out of more than 500 assisted by them had reached annual sales of $1 million.Though Israels renowned incubator program has helped launch more than 1,300 new ventures, rela tively few of them have been big entrepreneurial successes. On the basis of my discussions with Israeli officials, I enter that, among the hundreds of Israeli ventures that have been acquired at hefty valuations or taken public, at best 5% were hatched in incubators. And incubators definitely are not a quick fix. When well conceived and well managed, they can take 20 years or longer to generate a measurable impact on entrepreneurship. Poorly conceived and managed, they can be white elephants.