What African’s Entrepreneurs Can Teach the World

Continuing to ponder entrepreneurism, Africa and strategies for a rapidly changing environment, I came across this article on the informal economy.  I’m intrigued by the potential overlap it may have particularly in regards to strategies for the new economy.  Here is what I learned . . .

The author identifies two types of entrepreneurial activities that are repeatedly found throughout most of Africa, hyper entrepreneurship and excess diversification. 

Hyper entrepreneurship

This term describes the phenomena of a comparatively very high turn over rate within the entrepreneurial segment of the economy compared to it’s similar counterpart of start-ups and small businesses of the West.  Large numbers of paid employees are seen leaving these young ventures to go off and start their own enterprise (vs. going and finding a different formal employer).

Initially the author of the article, who is a part of a pro-business think tank that is looking into extensive data surrounding what drives enterprise in Africa, thought that this phenomena was a problem and drew the conclusion that this indicated there was a vital problem with the development of management talent.  A closer look however uncovered that just being in a job appears to trigger latent entrepreneurship with in turn also had the side benefit of leveraging significantly more social capital to generate financial capital than is ordinary in the West.

So in effect what he was seeing was individuals entering the workforce, quickly gaining confidence and stepping out to take the risk by resigning and starting their own business – in extremely high numbers.

This makes me think back to some of the discoveries I have made in how Sierra Leoneans learn that I stumbled upon during my years there.  The method that I found modeled in the village was, tell me, show me, let me do it with you, let me try it on my own, correct me if I make a mistake and then let me do it.  It makes sense, right.  That’s pretty much how we learn as children.  And, children learn that way fairly quickly.  So in this case, African small businesses are naturally acting as entrepreneur incubators.

The second dynamic at work is the tightly knit nature of their social structure.  You have heard it said that “it takes a village to raise a child,” likewise, just as the village raises the child, the village also protects the child.  And in this case provides entrepreneurs with a social safety net for taking more risk than more individualistic and independent societies.

Excess diversification

This type of entrepreneurial activity describes the common tendency for African entrepreneurs to concurrently operate on average six different businesses — with the most extreme case the author sited as being the operation of 66 businesses owned by one entrepreneur. 

The author’s initial perception was that these entrepreneurs where squandering their potential by not focusing their energy and attention on scaling a smaller more manageable number.  In other words, they had no vision for their own personal career growth.  And the effect of all the small, copy-cat businesses where appearing to result in lower profit margins, encouraging the loss of more employees who would go on to replicate the same business model further perpetuating the cycle and resulting in the retarded (or perhaps more stable) national economic growth.

In his deeper analysis it is uncovered that African entrepreneurs run profit ecosystems rather than business units.  There are many parallels with Western more “orthodox” way of doing things however in the end, the way in which African entrepreneurs do business with interactions between their “business ecosystems” in a culturally elaborate manner can actually produce extreme resilience, robustness and flexibility (there are those “new strategy” words again!).

The article states that, “When the World Bank's 2008-2010 survey of entrepreneurial activity observed that business failures in the wake of the financial crisis were far higher in the developed world than in the developing world, they shrugged off the need for deeper sounding.  Had they been more attuned to the unique character of business formation and propagation in places like Africa they may have questioned certain fundamental assumptions about risk management.”

Indeed we have some things to learn here in the West!  One of which is to not assume we have it all figured out and our way is the best way of doing things, and secondly that we can stand to learn from the proverbial “tortoises” of the world important lessons in how to foster flexibility and resilience that will take us the long haul.

Fail, Fail, Fail!

I have been pondering the discussion that was opened up on strategy in a rapidly changing environment.  The HBR article that Jill provided pointed out that some of the mental models are changing around how to a successful business is run.  The thing that occurred to me was that these changes that our world is experiencing are impacting more than just our compartmentalized idea of work.  Every area of our life is being touched by the rapidly evolving information age, new machine age, and globalization. 

In work and play, from education to imagination, in our relationships and the quiet moments of our life, it’s as if someone in the last 20 years has changed the locks and we are left to figure out the new keys to success . . . the new rules to the game.

The theme that I seem to see run through the article was flexibility and creativity, being adaptable and nimble to the changing winds and always looking at things from new angles and being open to possibilities.

Seeking out additional thought on the subject I turned to Ted . . . Ted talks, that is.  What are people learning, figuring out and what epiphanies are shaping the way we (in the very bawd sense) are thinking about success.  I came across a couple of interest.

The key to success: Grit presents the findings from graduate research about what makes someone successful across industries.  It wasn’t IQ, talent or even social connections — it was grit.  Passion and perseverance for very long-term goals . . . accepting delayed gratification with faith that despite failure or setback, the mission is worth the effort and the end will pay off.  And inherently in that, an understanding that failure is not a permanent condition — it’s but a step along the way that teaches us the course. i.e. they are resilient.

Smart failure for a fast-changing world discusses the new paradigm we face where learning is not keeping up with the pace of change.  The speed, scale and density of interaction has rapidly increased and we have crossed over from a world where your education allows you to forecast what is “right and wrong” vs. the new age we live in where failure is our best teacher to catch us up in the learning we need for the current system. 

This along with some other talks made me wonder if I was asking the wrong question.  Maybe the question I am asking shouldn’t be, how do we succeed but how should we fail?  Or in the words of the HBR article, what is the best systematic way of exiting business.  If failure is actually viewed as successfully identifying the need for additional experimentation, iteration and learning, how do we set ourselves up to “fail often so you can succeed sooner” in the words of Tom Kelley.  I have also heard the quotes “fail early, fail fast, fail often” and “fail fast, fail cheep.”

This article from Bloomberg Businessweek ties it all back into the ideas of rapid prototyping, rapid feedback, iteration, and co-creation.  The article ends by reminding readers:

“The only barrier to failing fast and failing cheap is your ego. You must be willing to fail, fail, and fail again if you are going to win in today's competitive marketplace.”

How Do You Define Sustainable Luxury?

No, it’s not an oxymoron.  Surprisingly this is becoming a very relevant topic of discussion.

I’m on a project team that is creating a business model for a luxury eco lodge in Sierra Leone, West Africa.  But what ensure that we will have the quality of facilities and experience we need to consider our resort “luxurious,” and attach the associated $685/night price tag?  Further yet, considering luxury through the lens of sustainability, how does one define sustainable luxury?  Does that mean that utopian luxurious experiences are to be measured against Channel Rock-esk and IslandWood like construction and facilities?  Both of which are beautiful in their own right, AND both of which make me want to wear Birkenstocks with wool socks.

The plan is to create a modern Robin Hood like model that  “extracts” resources from the rich and gives back to the poor.  In order to achieve this though it begins to feel like we must be a sheep in wolf’s clothing.  How do we retain our values and still provide the quality of experience our wealthy guests will expect?

Let’s start with defining luxury.  It could be that difficult right?  Ha!

All of the research that I have done uncovers that fact that defining luxury is becoming more and more of a slippery topic. There is a lot of debate and differing opinions that surround how you define and qualify this word even as it applies to hotels and resorts.

According to the Five Star Alliance, who have helped to define luxury in terms of hotels and resource, “there no longer seems to be one standard definition to help determine what is or is not luxury.”  — Interesting, maybe this could work in our favor!

I did come across one resource that has helped to put some parameters at least on what the current market expects from luxury branding.

·       Price: The brand offers products which belong to the most expensive products of their category.

·       Quality: The brand offers everlasting top-of-the-line products, which won't be disposed of even after long utilization or defect, but rather repaired and which often even gain in value over time.

·       Aesthetics: The brand behaves like a chic and vain dandy, who would never leave the house in less than perfect style. Whenever and wherever the brand is seen, it embodies a world of beauty and elegance.

·       Rarity: In contrast to mass-market brands, the brand needs to limit its production and tries not to disclose its (high) sales numbers. The brand plays hard to get and is not available at all times or places.

·       Extraordinariness: The brand has a mind and style of its own and its products offer a "kick" and surprise with the "expected unexpected."

·       Symbolism: The brand stands for "the best from the best for the best"; its charisma fills the room, and regardless of whether it is of a conspicuous or understated nature, deep inside, it is swollen with pride.

Okay, let’s take those one by one.

Price – Alright, that doesn’t seem to hard, let’s just add another zero.

Quality – I like this one!  It resonates with sustainability.

Aesthetics – Got it — we have to always have our game on!

Rarity – Hum, interesting . . . this speaks to the exclusivity that is often associated with VIPs.  This makes me think that in the design of our facility we will need to be very conscious about how we lay out where our entrepreneurial training location will be.  We may need to have a location off site or at extreme ends of the property to protect guests from feeling their space is not sacred.  The note on not disclosing sales numbers represents the discretion that people of affluence expect in protecting their anonymity. We will need to be careful to find a way to create an agreement with the community in regards to the benefits they will receive that does not require us to disclose our net income – even if our metric for community contributions is measured as 20% of that.

Exraordinariness – This is the playful and more creative design part of the experience.  The tricky part is this is largely qualified by ones own personal taste and preferences.  What to one person is gaudy and excessive is another person’s bling.  The key here may be it’s timeliness (paying attention to global fashion trends) and it’s functionality that leaves one thinking “they have thought of everything.”   An example of this might be in the detailed conveniences.  From collar stays in the top drawer to anticipating the time desert should be served.  And taking it one step further by interjecting location and culture specific traditions into part of the experience — creating that unique one of a kind experience.  I see great potential here for sustainability paying both a functional service role here with a unique flavor and unexpected special twist. 

This article on Luxury Hotels: Luring the Next Generation indicates that the up and coming generation of millionaires are gravitating away from the “bling factor”. . . that’s good news for us.  One thing however that the article does bring up, and something that we have not entirely factored in, is the need for extreme security. “. . .  in some markets, security will become increasingly important; the bulletproof glass and steel doors now in some locations will be replaced by bazooka-proof glass and personal panic rooms.”  Having gone through and evacuated from a coup in Sierra Leone in 1997, I understand these precautionary measures are not unreasonable to expect.

Back to specifically — Sustainable Luxury . . . when I stopped just focusing on luxury alone in my research I was surprised to find a number of sites that are currently defining and discussing, you guessed it — sustainable luxury.  Here are a couple that I was most impressed with:

1618-paris.com has published a guide on the topic of sustainable luxury, started a world fair and conducted a workshop earlier this year on the topic.

Sustainable Luxury Forum 2013 (the 3^rd one) is actually happen this June 18-19 in Geneva, Switzerland addressing the luxury dilemma of how to balance business opportunities with social change and impact.

Interesting!  I wish I could go!

Entrepreneurial Training Resoruces

What does it take to be an entrepreneur?  Is it something that can be taught?  Is it something that some people are uniquely gifted for? Or are all of us born with the potential?

This term my project team and I took on creating a business model that would address the needs of those living in poverty.  Our plan is to include entrepreneurial training as a part of the training we give our employees at a luxury eco lodge.  A portion of the revenues brought in by your high-end clientele would serve to provide paid training and community service hours as well as provide grants for start-ups that compete in business plan competitions.

I spent some time looking for resources and training programs that are currently out there that service low income communities.  Here are a few of the things I found:

Neighborhood Development Center operates in Minneapolis-St. Paul and serves about 20 communities in the surrounding area.  They have an 11-week training program that includes up to 10 hours of one-on-one consultation and class sizes are small (8-12 people).  The program is built on the premise that “all communities have the talent, energy and ideas to revitalize their own communities.”  This perspective resonates with me – so what are their results? 

Since 1993 they have trained over 4,250 aspiring entrepreneurs with just over 10% now owning an operating their own business.  They have created and maintain 2285 new jobs as a result (53% of the total number trained), which pump about $48M back into the local economy each year in the form of payroll, taxes, rent, and subcontracts.  — Encouraging find but I think a program of this type should be able to be more effective.

TiE which recently started a chapter in Seattle four years ago is an after school program for students in grades 9-12.  It appears to be a six month program and has had 100 students participate so far so I’m guessing class size is around 25.  Because students are so young and the program so new there is no information available yet on the success rate locally. 

Internationally TiE has about 11,000 member with roughly 22% who have gone on to launch a venture.  The program was founded in 1992 in Silicon Valley by a group of successful entrepreneurs, corporate executives, and senior professionals.  TiE’s focus is on generating and nurturing our next generation of entrepreneurs. The purpose of TiE is to encourage and nurture the next generation of entrepreneurs and aims at developing economic growth in vibrant economies as well as under-developed regions.

The Ice House first came across my radar through BGI.  It was developed by The Entrepreneurial Learning Initiative and provides courses for entrepreneurs and trains others in how to lead the course in their community.  The book Who Owns the Ice House seems to provide a foundation for understanding their approach.  Looks like I have a book to add to my summer reading list!

As for their success rate, I was not able to find any statistics however their site is chalked full of testimonial quotes from program participants and associates.

$100 Start Up is a book that I keep see popping up on must read lists for entrepreneurs.  It’s one I purchased a few months back and plan to read this summer.  The motivation behind the book is to help people lead a life of adventure, meaning and purpose — while earning a good living.  Who doesn’t want that? 

From what I can tell so far it presents a simplistic approach to getting started.  It cuts through and bypasses a lot of the traditional hoops people thing they have to jump through in starting a business.  It’s approach and style to me are attractive because the model seams to adapt well to the rapidly changing environment that’s rate of advancement is ever increasing.  It seems very down to earth, get your hands dirty and gain traction quickly kind of thinking.

An article on How to Start a Small Business in a Few Hours in Inc. also caught my eye.  It reminded me of the Monday after leaving my last formal employer and getting things set up for my own first entrepreneurial venture as I prepared to come to business school.

From this research I’m encouraged to find a few resources and organizations out there that align with my hope and dream of creating a business that would support the training of entrepreneurs in developing nations.  The next step will be to dig a little deeper and get to know some of the people behind these orgs. It will be interesting to see what I can learn and glean for when I am ready to step out once more and embark on the next adventure of life in pursing my vision.