2015 State of Entrepreneurship Address: Part II – Nine Point Action Plan

2015 State of Entrepreneurship Address: Part II – Nine Point Action Plan

South Africa 20 Year Democracy AnniversaryLast week’s blog introduced the concept of a South Africa State of Entrepreneurship Address. We concluded that no “State of” address would be complete without an action plan.  And so in a similar manner to our President’s Nine Point Plan for the country’s growth and without the distraction of continuous ‘points of order’, we allowed our imagination to soar and our optimism to rise. The result is a Nine Point Plan for Entrepreneurship in South Africa.  It is built around the three pillars of “Better culture, better information and better skills”

A: Better Culture:

Peter Drucker famously said “Culture eats strategy for breakfast” and it is no different for entrepreneurship.   It is where we must start.

  1. The Institution of  an annual State of Entrepreneurship Address

The idea of a state of Entrepreneurship Address should be built up into a pinnacle event of the year, supported by major campaigns elevating the awareness of significant entrepreneurial role models and coinciding with a number of awards, competitions and report releases.  It should be a signature day in the year for entrepreneurship where the subject is discussed by the entire country and a clear indication is given around entrepreneurial progress.

  1. Creation of South African Economic Independence Crowd Funding Platform.

In 2012, Rwanda initiated the Agaciro (Dignity) Fund to promote a culture of self-reliance with voluntary contributions from Rwandan citizens in Rwanda and abroad, private companies and friends of Rwanda. The Fund is intended to set the tone that Rwandans will work together to drive their own development. With a similar intent, but different mechanism South Africa will establish a crowd funding platform focussed on entrepreneurship, as part of supporting inclusive involvement in creating an entrepreneurial culture and dismantling any culture of entitlement.  Addressing the early stage funding gap, it will be privately run, supported by tax incentives and only offer funding to entrepreneurs on a matched basis. While this platform might be seen as largely symbolic, it is an important mechanism for providing a platform for inclusive involvement in shifting entrepreneurial culture.

  1. Icon Campaign leading mentoring revolution

Success breeds success. There will be an entrepreneurial icon campaign providing regular amplification of South Africa’s important entrepeneurial role models, including those icons now part of the diaspora.  This campaign will include a strong mentoring focus, where entrepreneurial icons while being widely celebrated through the campaign, will actively commit to mentorship of the emerging generation of South African entrepreneurs. A commitment that will be used to drive a structured Mentoring Revolution, fostering greater momentum for mentoring and knowledge sharing in South Africa.

B: Better Information:

It is not possible to take sensible action without first having sensible information.  There are key information gaps that need to be filled before we can move forward with the correct responses.

  1. Funding of a complete firm formation study in South Africa

The difference between new business and small business must be properly understood.  In South Africa the debate seems to be framed around big versus small business, whereas the real question hinges around new versus old. As Dan Isenberg states, “Small business without growth is the problem to be solved. They are net job destroyers, not job creators. Growing businesses are the solution.” All net job growth in USA comes from firms less than 5 years old. We currently don’t have accurate numbers for firm formation which hampers our assessment of entrepreneurial progress.

  1. Mapping of Entrepreneurship Ecosystems in the country

Every entrepreneurship ecosystem is different and has its own unique comparative advantages. For this reason entrepreneurship should be driven by cities and regions, not by countries.  In order to do this there needs to be a comprehensive mapping of these ecosystems.  There are a number of global initiatives currently being undertaken which would provide the framework for this exercise and the basis for comparison.

  1. Regional Entrepreneurial Portal providing one stop access to all entrepreneurial  information

Building on the above city and region ecosystem mapping, regional entrepreneurial portals will be established consolidating the current numerous information sources into a single point of access for entrepreneurial training, support and funding. It will include transparent disclosure of current “doing business” measures such as average time taken to register businesses.

C: Better Skills:

Lack of human capital is at the heart of our entrepreneurial challenge at the moment.  For any future progress, this has to be addressed head on. It is clearly a long term challenge and hence the plan suggests long term, medium and immediate responses.

  1. Entrepreneurial education integrated holistically into education

Implement an entrepreneurial curriculum for learners in all grades with increased exposure to entrepreneurship (intra- and extra-curricular) including a national Entrepreneurial Olympiad, entrepreneurial teachers award, entrepreneur related examples in existing curriculum and 21st century thinking concepts throughout curriculum. Teach entrepreneurship as a cross-cutting key competence not a stand-alone subject.

  1. National Entrepreneurial Talent Identification System

Initiate a National assessment of entrepreneurial potential for all learners at the end of high school. This will allow for the identification of a pipeline of high potential entrepreneurs who can then be fast tracked into entrepreneurial curriculum, internships and mentoring programmes.  It has been increasingly acknowledged that it only takes a few successful high ambition, growth orientated entrepreneurs to shift the system. This early talent spotting would provide the best possible chance of finding these few.

  1. Open the doors to highly skilled immigrant entrepreneurs

If exceptional talent is evenly distributed, then South Africa can only be expected to have less than 1% of this exceptional talent, as is the proportion of our population relative to the rest of the world.  But we start to shift this number if we make ourselves accessible to other exceptional talent. It is one of the unsung pillars of America’s entrepreneurial success – that one quarter of American high-tech start-ups have immigrant founders.  In the developing world, Chile has led the way in this regard with its Start-Up Chile, actively encouraging exceptional entrepreneurs to come to Chile with financial incentives thrown in. We must make South Africa as attractive and as easy to come to as possible for highly skilled immigrant entrepreneurs.

Now this might well be a Nine Point Plan to get excited about! What points would you want to see in the 2015 SOEA?

South Africa 2015 State of Entrepreneurship Address (Part I)

South Africa 2015 State of Entrepreneurship Address (Part I)

South Africa 20 Year Democracy AnniversaryAfter last week’s disappointing events in parliament, it is important that we restore some dignity back to “State of” addresses. Last week the Kauffman Foundation gave the sixth edition of their American State of Entrepreneurship Address.  It sparked a thought. The concept of a State of Entrepreneurship Address is a compelling one, particularly in a country like South Africa where any opportunity to elevate the prominence of entrepreneurship needs to be embraced. So what would be said in our 2015 State of Entrepreneurship Address?

The starting point would have to be the more recognised global measurements of entrepreneurial activity.  For this there would be a mixed to poor evaluation as we would again be reminded that our levels of entrepreneurial activity (7% of adult population) in the 2014 Global Entrepreneurship Monitor Report, is about a third of what it should be, and that we have very low levels of the adult population that either perceive entrepreneurial opportunities around them (37%) or perceive that they have the skills and abilities to start a business (37.6%). Particularly when these same measures average above 60% for the rest of sub-Saharan Africa.  This picture would be improved somewhat, as discussed last week, in the 2015 Global Entrepreneurship Index, largely due to the introduction of more measures of institutional capacity where South Africa fares better.

In more specific evaluations of African entrepreneurship, such as the Omidyar Accelerating Entrepreneurship in Africa Report  in 2013, while we would find more detail around weaknesses – the complexity of our legislation (SBP recently estimated that a company  with a turnover of R5 million would be spending 4% of turnover on red tape compliance) and strengths –  the important enabler of our financial sector, we would largely return to the overall theme of a South Africa not fully realising its entrepreneurial potential.

Yet these reports are difficult to summarise into an overall neatly packaged ‘state of entrepreneurship’. For this we need to turn to the Isenberg Ecosystem model which carefully organises the entire entrepreneurship ecosystem into six domains:

EES-Domains-and-Pillars-only-2

For the purposes of our State of Entrepreneurship Address this allows us to create a high level summary dashboard for our entrepreneurial performance. For each domain a positive (green), middling (orange) or poor (red) indication of status is given along with an assessment of the recent trend and a descriptive comment.

DOMAIN STATUS TREND COMMENT
Policy  red  arrow up Some positive developments in terms of the establishment of a Small Business Development Ministry as well as the revision of the S12J tax incentive for venture capital, but overall there is too heavy a legislative burden on new companies and a lack of urgency from leadership including a lack of understanding of the difference between new growing businesses and small business.
Finance  green  arrow up While there are areas in the financial continuum that need attention such as angel investors and venture capital, the overall sophistication of our financial markets is an important enabler for the country.
Culture orange  arrow up Entrepreneurial culture is improving with increasing attention and recognition given to entrepreneurs in more main stream platforms including the recent Dragon’s Den television show, and the continued momentum of in support of ecosystems from entities such as Silicon Cape, SiMODiSA  and TechInBraam. There is still work required on societal norms and attitude to failure.
Supports  green  arrow down South Africa has a strong combination of support from the depth in support professions (legal, accounting) and a wide range of supporting non-governmental institutions.  Until recently infrastructure has been a strength, but increasing pressure on energy may soon shift the rating of this domain.
Human Capital  red  arrow down While we have strong university institutions, the overall human capital pipeline in South Africa in almost every measure of significance is woeful. We simply do not have sufficient individuals with the skills to be successful entrepreneurs
Markets  orange  both ways We have a number of big corporations that can act as natural initial markets for new enterprises and there is significant enterprise development legislation to support this. However networks are not well developed and there is a lost opportunity in not fully harnessing the significant South African entrepreneur diaspora network which includes global entrepreneurship icons.

 

While the dashboard gives an indication of which areas need attention, such exercises can quickly become academic without an overarching target towards which we are all moving.  Thankfully we have this in the National Development Plan, and so it provides the ideal rallying point for the address, infusing the dry numbers and assessment with that life-giving inspiration of vision.  Simply the State of Entrepreneurship Address needs to benchmark our progress towards the 11 million new jobs required by 2030.

Of course this is not going to happen without a plan and no “State of” address would be complete without an action plan.  In a similar manner to our President’s Nine Point Plan for the country’s growth, after allowing our imagination to soar and our optimism to rise, a Nine Point Plan for Entrepreneurship in South Africa emerged.  It is built around the three pillars of “Better culture, better information and better skills”

But more on that next week. What would your SOEA dashboard look like?

 

 

Better news for entrepreneurship in South Africa – 2015 Global Entrepreneurship Index

Better news for entrepreneurship in South Africa – 2015 Global Entrepreneurship Index

After years of coping with the depressing entrepreneurship measures coming out of the annual Global Entrepreneurship Monitor Report, where South Africa consistently tracks last out of all African countries participating, with both low volumes and low quality of entrepreneurship, it is pleasing to get better news. This came in the form of South Africa’s ranking in the 2015 Global Entrepreneurship Index (“GEI”) released at the end of last year.

Screen Shot 2015-02-10 at 8.41.57 AM

According to the GEI, South Africa places 53 out of 130 countries participating and by virtue of its score is operating at 40% of its entrepreneurship capacity. (By comparison the index suggest that, as a whole, the world is at 52 % of its entrepreneurial capacity.) This score places South Africa at the top of the Sub Saharan Africa region, well above the next highest ranked country, Botswana which placed 66.

The GEI is an annual index that measures the health of the entrepreneurship ecosystems in each of 130 countries. The GEI is composed of three building blocks or sub-indexes: entrepreneurial attitudes, entrepreneurial abilities, and entrepreneurial aspirations. These three sub-indexes stand on 14 pillars, each of which contains an individual and an institutional variable, unlike other indexes that incorporate only institutional or individual variables.

Entrepreneurial attitudes Societies’ attitudes toward entrepreneurship, which we define as a population’s general feelings about recognizing opportunities, knowing entrepreneurs personally, endowing entrepreneurs with high status, accepting the risks associated with business start-ups, and having the skills to launch a business successfully
Entrepreneurial abilities Entrepreneurs’ characteristics and those of their businesses. Different types of entrepreneurial abilities can be distinguished within the realm of new business efforts. Creating businesses may vary by industry sector, the legal form of organization, and demographics such as age and education
Entrepreneurial aspirations The early-stage entrepreneur’s effort to introduce new products and/or services, develop new production processes, penetrate foreign markets, substantially increase their company’s staff, and finance the business with formal and/or informal venture capital. It reflects the quality aspects of start-ups and new businesses

Source: GEI 2015

As explained by GEW President, Jonathan Ortmans: “The Global Entrepreneurship Index, while by no means the definitive answer, seeks to provide more than just a country’s relative global ranking. The Index sheds light on the efficiency of national start-up ecosystems through analysis of 34 essential individual and institutional variables. It attempts to reveal the bottlenecks that erode hard-won competitive advantages for start-up ecosystems and provide rankings by region to provide policymakers regulatory environment comparisons with surrounding economies.”

Watch the introduction of the 2015 GEI here.

An interesting question that immediately arises is why South Africa would fare so much better in this index relative to others?  The most significant reason is the fact that this index combines both individual and institutional variables. Sadly for our levels of human capital, South Africa currently performs much better in indexes that give more weight to institutional capacity.  The GEM report for instance focuses entirely on individual variables.

Analysing the South African performance more carefully across the three sub-indexes, it is evident that our relative weakness is in the area of entrepreneurial attitudes (where our score is 33.4 relative to abilities at 38.5 and aspirations at 48.1).  While there is growing recognition of the importance of entrepreneurship in the country, this index confirms that there is still significant work that needs to be done in building a vibrant entrepreneurship culture.

Exploring further at the pillar level our three biggest areas for improvement are in start-up skills, human capital and risk capital. The worst of these is our start up skills where we are hit by a combination of our low gross enrolment levels into tertiary education (institutional) and the fact that only 42.7% of our population perceive that they have the capabilities for starting a business, compared to a Sub Saharan Africa average of 74% (individual).

The GEI therefore provides interesting food for thought, giving both cause for increased optimism around the South African entrepreneurship eco-system as a whole, while giving direction to the nature of our bottlenecks. Entrepreneurship is too important to our future for us not to take hold of these valuable insights to improve our overall entrepreneurial capacity.

 

EP10 – Time to discover your entrepreneurial talents.

EP10 – Time to discover your entrepreneurial talents.

Allan Gray Orbis Foundation National Jamboree, Spier, Western Cape.The Foundation has long been convinced of the merits of the strengths revolution and we ensure that everyone entering the Foundation community identifies their top strengths using Gallup’s Strengthsfinder. It is a helpful tool for assisting each person to increase their engagement and effectiveness. Recently Gallup came out with a second instrument that piqued our interest – it is the Entrepreneurial Profile 10 (EP10).

As Gallup explains, EP10 is a 30-minute assessment completed online, that measures 10 scientifically proven talents of successful entrepreneurs. It allows for early identification of entrepreneurial talent and provides a personalised developmental report that includes a personal intensity ranking for each talent. The assessment can be accessed here and costs $12. Alternatively for the more detailed, a book has been written on the instrument, with each book containing a code to take the assessment.

The 10 suggested talents and their explanations are listed below:

 

1. Business Focus The Business Focus talent couples sharp business instincts and a fascination with making money. They have an uncanny ability to look at data from which they can form unique insights. Ultimately, they evaluate decisions through the prism of profitability.
2. Confidence The Confidence talent is keenly aware of their abilities. They harness this awareness to take quick and decisive action. They seize opportunities knowing they will succeed and use their talents to persist in the face of uncertainty and failure.
3. Creative Thinker The Creative Thinker talent has a curious intellect that helps them constantly imagine new products, services, and solutions. They are quick learners who explore various options and consider novel solutions as they anticipate the future needs of their customers.
4. Delegator The Delegator talent can trust and empower others to help grow their business. They know what their employees do best and position them to take responsibility for tasks at which they are most likely to excel. They can relinquish control and focus on growing the business.
5. Determination The Determination talent pursues their goals with tenacity. They are intensely committed to success and are eager to take quick action. They rely on high motivation to turn adversity into opportunity. They can see beyond roadblocks and visualize a better future.
6. Independent The Independent talent can single-handedly start and operate a business. They rely on high energy and extreme commitment to succeed in the gruelling grind of business creation. They firmly believe their actions decide the fate of their business and are motivated to make things happen.
7. Knowledge-Seeker The Knowledge-Seeker talent understands that information is a valuable asset. They have a deep desire to acquire knowledge about all aspects of their business. They search for new information to solve problems and succeed in complex business environments.
8. Promotor The Promoter talent speaks boldly on behalf of their company. They consistently communicate a clear vision of their business to customers and employees. They are great salespersons with an ability to form deep relationships and convince others to follow their well-defined business growth strategy.
9. Relationship-Builder The Relationship-Builder talent has strong interpersonal skills that allow them to build a robust and diverse personal network. They rely on relationships to access resources and information essential to the success of their business.
10. Risk-Taker The Risk-Taker talent embraces challenges with enthusiasm. They have a strong, charismatic, and confident personality. They naturally focus on the rewards of success instead of potential failure. They emotionally connect with customers and exceed their expectations.

Source: EP10 Report

While not in complete agreement with all of the dimensions listed, for example Business Focus, where we believe that purpose is a better driver than money, the EP10 is a convenient tool to gain a sense of one’s entrepreneurial aptitude and competence.

But beyond the specifics of the tool itself, what is particularly intriguing is the vision behind the tool. It is a powerful plan for identifying and developing tomorrow’s business-builders because of the disproportionate economic impact that these individuals can have on the future.

The premise, as described by tool’s co-author Jim Clifton, is that “all talents, of any kind, explode with early identification and intentional development.”  Knowing this to be true in some fields of human endeavour, we are well accustomed to the identification and development of rare academic, musical and sporting talent. However why do we not do the same with individuals with that rare ability to build a business? Particularly when one considers the now almost undisputed positive societal impact of responsible business builders.

The systematic identification of entrepreneurial talent becomes an even greater imperative when one considers that initial Gallup research suggests that high entrepreneurial talent is rarer than high IQ.  It is claimed that only about five in 1,000 people have the aptitude for starting and growing a significant business.  On the IQ side, 20 in 1,000 have IQ’s high enough to be accepted into Mensa.  Exceptional intellectual talent is therefore four times as common as exceptional entrepreneurial talent.

To bring this thinking back to South Africa, there were just under 600,000 learners writing matric in 2014.  Based on the above scarcity of exceptional talent, this would predict that there are approximately 3,000 individuals coming out of the school system each year with rare entrepreneurial talent – are we finding these individuals, are we developing them?  The Foundation is committed to bringing around a 100 of these individuals a year into our entrepreneurial development pipeline.  What is the pathway for the remaining 2,900?

It would make an important contribution to our entrepreneurial culture if we were able to harness tools such as the EP10 and other selection processes to develop a comprehensive entrepreneurial talent system whereby we had had full visibility of the “blue-chip” potential entrepreneurs coming out of the secondary education system.  These individuals would then be subjected to intentional accelerated development, including specialised entrepreneurial curriculum, appropriate internships and mentoring. This relatively achievable intervention would likely have a significant impact on our economic future.  It is not beyond our combined capabilities, in a fact on a small scale, it is very much what the Foundation has been doing for the last 10 years.