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How to Fan the Flames of Entrepreneurship Back Home

We launched the Babson Entrepreneurship Ecosystem Project (BEEP) early in 2010, but very recently we have noticed a sharp uptick in interest from cities, states, and regions from Cape Town, South Africa to Concepción, Chile. They’ve been reaching out for our help in enhancing various elements of their entrepreneurship ecosystems in order to significantly impact local business development.

 

By Daniel Isenberg

Why all the interest? The first reason is that societies’ leaders everywhere have caught on that entrepreneurship is one—some say the—critical element in economic development. They believe that entrepreneurship creates what economists call “spillovers”: jobs, wealth, taxes, as well as social inclusion, quality of life, human skill enrichment, innovation, and government reform.

A second reason is that the existing strategies—national competitiveness, cluster strategies, innovation systems, and knowledge-based economies—have been frustrating for leaders. The basis for frustration is that strategies are often unintentional rehashes of top-down industrial planning (where government picks winners, identifies segments to invest in, etc.). Moreover, it’s perplexingly difficult to identify economic actors in clusters, competitiveness systems, innovation systems, or knowledge-based economies. Whose actions are you trying to influence? What are the behavioral outcomes? In entrepreneurship we know who the economic actor is and what actions we are trying to encourage.

If a society really wants to increase the level of entrepreneurship, its leaders have no choice but to act holistically, and in the context of their own very specific environment. One size doesn’t fit all, as the old saying goes, and it is necessary to impact several elements at once in order to create the conditions that are conducive to entrepreneurship. Not only does piecemeal intervention not work, it can backfire. The University of Puerto Rico at Mayaguez is ironically referred to as the Island’s best exporter: students leave for jobs on the U.S. mainland because there are few opportunities at home. Improving education without improving other elements of the ecosystem may actually have adverse consequences.

Through the Babson Entrepreneurship Ecosystem Project, we have developed a methodology for helping societies strengthen their entrepreneurship ecosystems that is both specific and holistic.

The Entrepreneurship Ecosystem

The Entrepreneurship Ecosystem, Copyright 2009 Daniel Isenberg

Copyright © 2009 Daniel Isenberg

Below are a few of the guiding principles:

  1. Identify a core of leaders willing to put skin in the game. They could come from a variety of places: foundations, government, entrepreneurs, multinationals, families. Wherever it starts, very soon there has to be a hard core of committed leaders that goes beyond the interests of any one stakeholder. Every revolution needs a band of revolutionaries.
  2. Work collaboratively with them to identify a specific region—preferably a medium-large size city or small state—to start a project. It should be large enough to have diversity of opportunities and assets, and small enough to allow face to face communication among the stakeholders.
  3. Set specific targets in terms of venture creation. One rule of thumb we have developed is, if a region achieves 1/100,000 high ambition ventures that have already started selling, the region gets close to a tipping point. So for Boston or Madrid, for example, that means 30. We are constantly amazed at how much having a specific target galvanizes action and focuses attention in a specific region.
  4. Get a large group of stakeholders in a room, and begin to hash out with them what kinds of entrepreneurship are appropriate for them, and what programs will stimulate it, maintaining a holistic approach. Frequently governments confuse self-employment with entrepreneurship, and it is important to set these apart.
  5. Since this is a highly complex and specific endeavor, it is important to experiment intensely by launching specific pilot programs designed to impact high leverage elements of the ecosystem. It could include getting the financing unblocked—but note: without a deal flow, too much money is a problem, not a resource. It could include a media program to influence the public image of the entrepreneur. You may enlist large multinationals to engage with the small new suppliers. Identifying and bolstering a small, ambitious cadre of existing entrepreneurs has to be a part of the program. The important thing is that you have to move the chess pieces simultaneously, at least to some extent.
  6. Within four to six months, it is usually possible to show scalable proof of concept of the specific programs, and see how they might be synergistic with each other. It is highly stimulating to realize you have the ability within a short period of time to generate focused enthusiasm, create useful business contacts for entrepreneurs, mentor them significantly, engage the providers of capital as a group to optimize available capital, and impact the culture by aligning with the media in new and innovative ways.

There is a lot more but the above action principles should convey the feasibility of getting something going quickly. Anyone can play a role in this process. For instance, entrepreneurs can organize and lobby for public commitment to enhance the entire entrepreneurship ecosystem. Or investors can embark on a broader strategy of strengthening deal flow and the readiness of entrepreneurs to take advantage of financing, for example by sponsoring education.

Executives in large companies also have a crucial role to play, because all budding ventures need a potential customer with whom to discuss their product offering, and who will teach them “big league” standards of customer service and documentation. What’s in it for the executives? Well, it is not a coincidence that Google, Apple, and Walmart all invest in strengthening their pools of suppliers: it is a way of making the supply chain more robust, and also tapping into innovative services and products that would otherwise remain unnoticed.

The entrepreneurial revolution is good for everyone in the society, and we can all help make it happen.

Daniel Isenberg is the Founding Executive Director for the Babson Entrepreneurship Ecosystem Project (BEEP) and a Professor of Management Practice, Babson Global.