Entrepreneurs and their networks

You are an entrepreneur – or you are thinking about becoming an entrepreneur… who do you go to for advice? Who do you trust for advice? Why?  Well, according to the research in the UAE and MENA (Middle East and North Africa) I have participated in (and as soon as the articles and reports are published I will write about the specifics of our findings) – entrepreneurs in the region turn to family and friends first and professionals (accountants, banks, professional services firms) last.

We tend to think about entrepreneurs as independent beings, succeeding and failing solely by their own efforts. Of course, this is not a totally accurate view. Entrepreneurs are part of a larger network made up of social and professional actors. These actors provide resources and support which entrepreneurs capitalize on to achieve their goals. Networks are the  relationships that each entrepreneur as an individual is involved in that provides resources – for the subject of this blogpost: knowledge/information/advice – one resource commonly needed across all phases of the entrepreneurial process.

A network is the “set” of contacts (individuals, organisations,  around an entrepreneur who provide a resource (advice) to an entrepreneur. Networks should be considered as social entities.  An entrepreneur’s social network supports her business network (in fact it could be the same network viewed from two different angles) as these networks promote trust and reduce transaction costs (for services, resources, etc.).  This is done through superior information gathering and a reduction in opportunistic behavior – because network actors could and would lose reputation through a misuse of information or erroneous information/advice. 

Networks are also a key means of accessing external knowledge, knowledge we don’t possess.  This knowledge involves both formal and informal exchanges and the exchange and creation of both tacit and explicit knowledge. Tacit knowledge is know-how, know-why and our instincts developed through experience. Explicit knowledge is what is written down, but which also often needs interpretation.

Trust of course is the key to these networks working – which is maybe why entrepreneurs turn to family and friends before the professionals – at least in developing economies where professional infrastructures are not as “trustworthy” or are simply unknown to entrepreneurs.

From research we know that the use of different kinds of networks leads to different results. For example, the more contact a person has internationally, the more innovative their products or services and of course the more likely they are to export their products or services internationally.

More innovative products and services are also more likely to come from entrepreneurs with closer and a greater number of links in their industry/market. When an entrepreneur knows what her competitors are offering, the more likely she will try to be a little different – offer something newer, better – more innovative! Also, links with suppliers (e.g. a fabric manufacturer for an abbaya designer) will although the entrepreneur to know more about what will be available in the future – raw material wise – which will help her creative more innovative designs which better incorporate the new materials.

My PhD thesis was about knowledge and technology transfer from universities to industry – well, you can imagine not many entrepreneurs in the MENA region use the results of university research … hopefully that will change, because a knowledge economy is built on – uhm, well knowledge – and the most cutting edge knowledge is produced by universities and working researchers… Yes, the Google guys are university “drop outs” – but they dropped out of a PhD program and Google is a direct result of their (and their professors) research there…

Finally, an entrepreneur or future entrepreneur can seek and gather advice for years – but it is making the leap which is the most difficult part – which is perhaps why the support we receive from our family and friends (and professors J) might be the best resource any network can produce.

Charity group project for Intro to Management - an experiment

A  school new year and new classes have started. I want to write about an experimental project I will be doing with my Introduction to Management class on the male campus - and ask for input from any reader who is involved in a charity in the UAE.

Past group projects in this class I have taught for 3 years now, have included a focus on Abu Dhabi Plan 2030, organizing a charity event on campus and focusing on an innovation introduced in an Emirati company in the last five years. Now I want (well am forcing) my students to be innovative themselves and organize something in collaboration with an organization operating in the UAE.

The project involves choosing a charity in the UAE, contacting them and working with them to discover their needs - then planning, organizing and leading an event, awareness campaign, fundraiser, etc and then explaining the results and all the feedback loops involved (the control phase). The final report will be a one page summary outlining the highlights of POLC and a five minute video of the POLC process they took.

Now, given cultural and other boundaries, the video will force them to be innovative and creative and sensitive (all things they actually excel at). I think it will go well, but then again (as any regular reader will know) I am extremely biased concerning the outstanding talents of my students.

The input I could need from you – do you run a charity that needs some support? Do you know of a charity that needs support? If so please contact me at the email listed in my profile.

Of course I will keep you updated as to the results of the project, and also keep you updated of several other completely awesome projects students in my other classes are working on.

Smile and courage J

Entrepreneurship as Process

Although many believe that entrepreneurship is a singular concept – as any entrepreneur will tell you, it isn’t. In the scientific literature, entrepreneurship is described as a process which entrepreneurs take from opportunity recognition to established business to harvesting the rewards of hard work, through sale or closing down or continued success (or well-earned experience). Each phase of the entrepreneurial process requires support from the local entrepreneurial ecosystem and each has its own learning curve for the entrepreneur.

There are four basic phases of the process :

1.      Recognising opportunities

2.      Assembling resources

3.      Launch of venture

4.      Harvesting and succeeding

The process (GEM terminology in brackets)

Phase 1: Recognizing  Opportunities

How do some entrepreneurs recognise opportunities and others don’t?  What types of training or backgrounds support this (e.g. international experience, wide interests, specialised knowledge, etc.) and what factors impede it (e.g. fear of failure, limited interests, lack of access to R&D findings, etc.).

Also, how do we support recognising opportunities within organisations (be it governmental or private firms)? In the UAE we can look to successful intrapreneurial ventures such as Saaed traffic unit of the Abu Dhabi police which are responsible for traffic related accidents in the Emirate (I had a group of students do an excellent report on this) or the start of the Entrepreneurship Club at Zayed University in Abu Dhabi J. In global firms my favorite example is Nestle’s Nespresso – now one of the main profit centres for the huge multinational (and the innovation that makes me smile every morning).

Phase 2: Assembling Resources

From idea to beginning to assemble resources takes support – and courage, and gathering the necessary resources for any new entrepreneur can be a daunting task. Here is where the entrepreneurial ecosystem of the nation, city, region, economy, really plays a supporting role. There are several parts of the ecosystem which can be used to support this sometimes difficult process, including physical infrastructure such as roads and ports (like the newly opened Khalifa Port in Abu Dhabi will create many opportunities for entrepreneurs in the Emirate and the country) and telecommunications systems; non-physical infrastructures such as supporting networks of external advice for entrepreneurs (e.g. RUWAD, Khalifa Funds, Saud bin Rashed funds,  Mohammed Bin Rashid Est. for Small & Medium Enterprises), access to capital markets,  availability of necessary data needed for researching opportunities and the general supportive culture of the economy (e.g. awards, and television programs such as The Entrepreneur to launch this fall).

Phase 3:  Launch of New Venture

What are the rules, regulations and costs associated with starting a new business? Where can a potential entrepreneur go to get the licenses and permissions? Future entrepreneurs will not launch new ventures if the environment in which they want to operate is not considered supportive. This environment, or entrepreneurship ecosystem is an absolute requirement in any economy that wishes to foster entrepreneurship risk taking.

Entrepreneurship Ecosystem: Ecosystems are inherently local. While national policies shape the economy in profound ways, the institutions and activities of regions differ. Indeed, multiple actors that share an interest in entrepreneurship —large firms and organisations (e.g. banks, large scale manufacturers), government entities, educational institutions, community non-profits, etc.—must come together to enrich the ecosystem.

Previous research has found that start-ups that become dominant players have strong early-stage relationships with established companies. Large companies could give smaller suppliers access to internal resources helping them break into global export markets through referral or international assistance.

Clusters of Innovation: Often arise out of large physical infrastructure (e.g. ports) and large anchor companies (such as Aluminum smelters, Yas Marina Sports Complex, etc.) – they spur smaller entrepreneurs to take advantage of the customers that are drawn to these places, or the companies and people working in them (e.g. a laundry service to service hotels).

Phase 4: Success and Harvest

The final, and perhaps most enduring phase of the entrepreneurial process is the success, or continued existence of the new venture and could even mean the exit of the entrepreneur through the sale of the firm to another.  A great example of an Emirati SME that is “harvesting” their hard work is Just Falafel – which is now franchising around the world.

Of course, many SME ventures do not succeed – but, in the West (especially in the United States and most especially in Silicon Valley) a failure of a venture is seen as a badge of honour and courage and experience. So the first “failure” might teach the entrepreneur to be a better entrepreneur the next time, or might inspire another to take the leap themselves.

So, the basic four phases – the story will continue with a more in-depth look at each phase and some local entrepreneurs and their stories (so if you have a story to share, please contact me). Entrepreneurship (and intrapreneurship) is exciting and a key to economic diversification and personal job satisfaction – if our jobs were just about pushing paper how boring would life be?