Effective entrepreneurship policy – Creating ecosystems that forge connectivity and break down barriers

By Nwaodu Lawrence Chukwuemeka

–Drawing lessions from the subjects of evolutionary biology and ecology to provide a framework for building vibrant entrepreneurial ecosystems–

30 JUNE 2016-Questions arises on the effectiveness of strategies by government and private grantmaking organisations which focuses narrowly on financing and training of entrepreneurs without regard to the broad context of entrepreneurship, which in contrast, it is believed that entrepreneurs perform best in environments that are connected, dense and diverse. The bank of industries (BOI) in Nigeria for instance tries to bridge the financial gap amongst the SMEs through its special scheme that promises to offers long term financing, single digit interest facility, but in the administration creates a barrier to entry by instituting stringent conditions for accessing the facility (amongst which is the provision of title documents of landed properties in the name of the applicant and much more – knowing the economic status of these startups). The SMEs would have to face another rigour because the facility would have to be channeled through a third party financial organisation (the commercial banks), thereby subjecting these entrepreneurs to the same obnoxious conditions of the regular banks (because they do not understand the risk factors involved in entrepreneurial practice) and neither would the newly appointed business development agents – BDCS – (who are majorly former commercial bank workers).

The microfinance banks as well are guilty of the same ignorance, otherwise what kind of businesses are they expecting the SMEs to be engaged in, that they are charged between four to ten per cent monthly on loan facilities of between one to two years maximum. Therefore, the SMEs’ only saving grace in Nigeria for now, is coming through the customer-owned financial associations, like the cooperative societies, the investment clubs and even the local savings programmes (ISUSU), because they are part of the entrepreneurial community and understands and knows tneir challenges and prospects.

This approach is especially apt to bear fruit amid economic disruptions, and in recessions as entrepreneurial activity actually intensifies to authenticate this assertion. Our present economic and social experience as a nation calls into question, the strategies for encouraging entrepreneurship in Nigeria, which is no doubt a sure way out of the quagmire, if we can get it right. Otherwise how else will a rapid growing population of unemployed youths in the face of dwindling national resources ever be taken care of, considering the attendant effects being manifested in diverse forms like increased cases of armed robbery, kidnapping and violence in all its forms across the country.

Questions abound, as well as practical advises on the way to encourage entrepreneurship, which is crucial to the growth of any economy. This encourages proponents of entrepreneurship to take a step back and envision a more realistic approach towards accomplishing their goals.

The most significant impediments to entrepreneurship are the everyday struggles entrepreneurs face in communicating ideas, building trust and making deals. To this therefore the prescription is for an entrepreneurial ecosystem that will remove or at least minimise the road blocks to these goals.

The ideal strategy would be to encourage the establishment of entrepreneurial ventures support systems, like the venture capital firms, the private equity companies, and facilities managers with entrepreneurship bias, for the provision of incubator facilities and mentorship / advisory firms – people who are part of the entrepreneurial community and understands the system, and not some professionals who would at best be proffering and practicing some theoretical and academic recipes that has no beneficial affinity with the entrepreneurs.

The entrepreneurs are interested in policies and programmes that would provide for risk sharing and not that of requiring them to cover the perceived inherent exposures, even with their limitations; thereby allowing the status quo of incumbent favouring and barriers to entry to continue. The insurance factor should be brought in to hedge this gap, as well as fast tracking the knowledge base of the financial operatives and policy makers on the subject and practice of entrepreneurship. Several other risk options should be considered, as well as sharing the exposures as a formidable strategy – the business, market and commercial risks for instance can be looked into, while playing down emphasis on financial risk as a major consideration in credit administration.

There are about six strategies to creating a strong entrepreneurial ecosystems and they are –

Favour Incumbents Less – policies and regulations that favour existing dominant companies over entrepreneurial ventures, constrain competition and create barriers to entry for new firms. Examples of such regulations includes assertive enforcement of non-compete laws, excessively restrictive occupational licensing requirements and regulatory complexity that inhibits contracting. Policymakers should avoid such policies and regulations and work to reduce the barriers to business startup.

Listen to Entrepreneurs – Rather than developing policies abstractly intended to correct ‘market failures’, policymakers should listen to what entrepreneurs have to say about their challenges. That imput should be used to develop policies that stimulate idea exploration, product development and increased rate of deal flow.

Map the Ecosystem – Entrepreneurial supporters should create an inventory or graph indicating who the participants in the ecosystem are and how they are connected. Ecosystem maps can become valuable tools in developing engagement strategies.

Think Big, Start Small, Move Fast – This simple rule which applies to entrepreneurial ventures long a guiding principle for entrepreneurial ventures, also holds true for strategies that will enable entrepreneurial ecosystems. The ecosystem should enable the connectivity needed for early success and then clear the runway for future growth. To be effective, such strategies should seek dormains for early success and rapidly iterate forward from there to build well grounded programmes at scale.

Avoid artificially segmenting your community or your strategies – Entrepreneurs and members of entrepreneurial communities are not potted plants, they are active participants in a range of activities, such as creating new companies, investing in and/or advising startups, mentoring entrepreneurs, teaching in a formal setting, working ina large corporations in research and market development, providing services such as legal and accounting, and serving as customers of entrepreneurial companies. Expect participants in entrepreneurial ecosystems to be playing multiple roles, and make sure to the most of the unique skillsets of your most versatile community members.

Prepare to capitalise on crisis – Much like the rutting trunk of a fallen tree feeds the growth of new saplings. Economic disruptions creates entrepreneurial opportunities. Because disruptions are inevitable in economic and social life. Architects of entrepreneurial ecosystems should anticipate them and prepare to make the most of the opportunities they create.

Finally, establishing that entrepreneurial ecosystem requires a practical approach toward entrepreneurs everyday needs. Policymakers should ask relevant questions and map out a broad framework that minimises barriers to success – once the results are evaluated, policymakers should use that data to make necessary adjustments.

Inspired by the importance of entrepreneurship for sustained economic growth and improved wellbeing, governments and nongovernmental grantmaking organisations in their search for a better way to support and encourage entrepreneurship for over the past decade, has sparked off growing appreciation of the limits of strategies focused narrowly on financing and training entrepreneurs (focusing on financing and the development of the entrepreneurs personal abilities without paying specific attention to the operational context), has prompted a number of such entities to shift their efforts towards more broad based strategies aimed at enabling “entrepreneurial ecosystems”.

Entrepreneurship is present in all societies, but manifest differently depending on the context. Productive entrepreneurship corresponds to the creation and expansion of new firms, Unproductive entrepreneurship corresponds to rent seeking activities, like we are experiencing with the petroleum marketers in Nigeria. Distructive entrepreneurship corresponds to trafficking in illicit goods and other vices, a good example will be the oil theft and bunkering practices in Nigeria or the substandard and adulterated goods businesses.

All three forms of entrepreneurship creates economic activity, however, institutions advance and societies progress only when the returns to productive entrepreneurship exceeds those to unproductive and distructive entrepreneurship.,

While government may not be able to affect the overall supply of entrepreneurs, it can influence where and how entrepreneurs – or entrepreneurial inclined individuals – focus their abilities. Strategies that support development must consider not only the quality of general economic, social and political climate but also how government actions affect the relative reforms to different types of entrepreneurship.

With entrepreneurship importance to sustained economic growth and wellbeing. Non governmental grantmaking organisations as well as governments around the world increasing have sought strategies to encourage entrepreneurial initiatives and support entrepreneurial ventures. The growing interest in launching policies and programmes that support entrepreneurship has intersected with increasing recognition by very different parties that entrepreneurship is a highly context dependent activity.

Evolutionary / ecological perceptive on entrepreneurial ecosystem departs from the neoclassical default –

These theoretical differences also imply different practical strategies to encourage entrepreneurship :

Nwaodu Lawrence Chukwuemeka, (IDEAS Exchange Consulting, Lagos).

nwaodu.lawrence@hotmail.co.uk (07066375847).