Efosa Ojomo – Global Peter Drucker Forum BLOG

6 Signs You’re Living in an Entrepreneurial Society by Efosa Ojomo

guest — Thu, 27 Oct 2016 22:01:25 +0000

In his landmark 1985 book, Innovation and Entrepreneurship, famed author and educator Peter Drucker wrote about an entrepreneurial society and its impact on economic development. “Entrepreneurship rests on a theory of economy and society,” he wrote. “The theory sees change as normal and indeed as healthy. And it sees the major task in society — and especially in the economy — as doing something different rather than doing better what is already being done.” What does it mean, then, to live in a society that is becoming more entrepreneurial? I see six major signs:

1. Innovation precedes regulation, not the other way around. In entrepreneurial societies, innovation always precedes regulation. In the United States, for instance, scientists and engineers in Silicon Valley, Boston, and New York are always one step ahead of regulators, developing innovations that help us solve some of our most critical problems. The regulators eventually catch up, but not before the innovators have developed viable solutions for us to improve our lives. If the regulations in your society precede innovation from entrepreneurs, this is likely to curb the entrepreneurial spirt of innovators.

2. Entrepreneurs and innovators are richly rewarded for their breakthroughs. In an entrepreneurial society, entrepreneurs are popular heroes and profit materially from their work. People want to emulate them. In non-entrepreneurial societies, government officials, politicians, and civil servants are the ones who—while not heroes— reap the greatest financial rewards, largely because they are key to getting anything done. When that is the case, then society is at the mercy of the altruism of government officials as opposed to the ingenuity of entrepreneurs and innovators.

Before India liberalized its economy, its government bureaucrats occupied the higher socioeconomic rungs. But today, many Indian entrepreneurs are creating wealth for themselves and for their country.

Think about the most admired members of your society; are they innovators?

3. The government depends on the ingenuity of the innovators. A society’s ability to develop innovations that continually solve problems is the best index to its long-term growth and prosperity. A government that understands this also understands that it must manage the economy in order to promote innovation and entrepreneurship in order to remain competitive and vibrant. On the other hand, governments that depend mostly on natural resources and rents put their citizens at the mercy of commodity prices set by international markets over which they have little control.

4. Innovations are pulled into – not pushed onto — society. In many countries, innovations such as primary and secondary schools, sanitation interventions, and clean water projects are pushed onto society. But many of these interventions don’t gain traction and are unsustainable. Research by the World Bank, for instance, shows that less than three percent of World Bank projects since 1970 are “highly likely” to be sustainable.

Entrepreneurial societies are different. They thrive on developing innovations that are pulled into society because these innovations solve an important job-to-be-done. Consider the proliferation of mobile telephony in many poor countries today. Barely a decade and a half ago, mobile phones were seen as a toy for the rich and a luxury many poor people could not afford. But through the efforts of entrepreneurs and innovators who devised affordable devices and plans, hundreds of millions of poor people in India, China, and across Africa now have access to mobile devices.

5. Work is becoming more modularized. As societies become more entrepreneurial, work, and our idea of work, is becoming more modularized. In other words, work will no longer be confined to employment contracts that require people to work at least eight hours a day for an indefinite amount of time for a corporation. Instead, work will depend largely on shorter term engagements and will be specific to a particular project. This evolution is already happening. Uber, Lyft, Catalant (formerly HourlyNerd), Task Rabbit, and other on-demand platforms that connect the supply and demand of labor are all signs that our societies are becoming more entrepreneurial.

6. The society is either prosperous or is on a clear path toward prosperity. Perhaps the clearest sign that you live in an entrepreneurial society is that it is either prosperous or on a path to prosperity. Prosperity is different from growth. Economies can grow without becoming prosperous. We saw this happen in the 2000s when many African economies, such as Nigeria, Angola, and Equatorial Guinea, were the fastest growing in the world, but failed to create prosperity for millions of their citizens. Growth is a subset of prosperity which includes an increase in the standard of living for the poor and low income. Despite Africa’s astounding growth, according to this PEW research study, the percentage of poor and low income barely changed in the 2000s.

Consider how Africa’s growth differs from the growth of the Asian Tiger economies of the 1950s and 1960s. The Asian Tiger economies encouraged the growth of the private sector, nurturing such entrepreneurial companies such as Samsung, GIANT Bicycles, LG, Hyundai, and Formosa Plastics.

The entrepreneurial society is a prosperous society, where more and more people are able to choose what they do, and when they do it. Innovation and entrepreneurship are the necessary ingredients for any economy or market to flourish.

About the author:

Efosa Ojomo is a research fellow at the Clayton Christensen Center for Disruptive Innovation, where he looks into how disruptive innovation can engender growth and prosperity in emerging markets. He is a 2015 MBA graduate of Harvard Business School.

Disruptive Entrepreneurship vs. Survival Entrepreneurship: Only one of these can catapult Africa from poverty to prosperity by Efosa Ojomo

guest — Tue, 14 Jun 2016 22:01:40 +0000

If entrepreneurship is truly the pathway to prosperity, and if Africa is bustling with entrepreneurs, then why is the continent still devastatingly poor? I am always amazed whenever I read an article that highlights the entrepreneurial prowess of Africans as an asset. Yes, Africans are entrepreneurial but if their entrepreneurialism were as much of an asset as many writers suggest, then Africa – indeed, Africans – should no longer be poor. In April, for instance, The Economist published a Special Report on Business in Africa and highlighted Kinshasa’s Marche de la Liberte, a wholesale market, as evidence of entrepreneurialism, noting that “there is clearly money flowing.” “…Stalls selling mobile phones. You can buy anything here, from fried fish to Premier League football shirts. People flash cash as they negotiate, and everyone is haggling,” the article explained. However, while that sort of activity is more productive than the war, poverty, and devastation that Africa is known for, it will not lead to the truly transformative development that Africa needs.

All entrepreneurship is good; but some are better than others.

The art of buying something at a fixed or established price and selling it at an uncertain, but hopefully higher, price is not new. For thousands of years, merchants have traded in goods and services in the hopes of making a profit. It is that sort of entrepreneurship that The Economist writes about when they refer to Africa. We call it Survival Entrepreneurship, and it is not specific to Africa. It existed in Europe and the United States hundreds of years ago. It was necessary for survival.

But something began to happen in the 1800s as entrepreneurs started developing disruptive innovations that made historically complicated and expensive products simpler and more affordable so that many people would have access to them. This kind of entrepreneurship created tremendous wealth for the entrepreneurs but also made society significantly more productive. We call this Disruptive Entrepreneurship.

An 1800 Disruptive Entrepreneur, Eli Whitney

In 1793, American innovator, Eli Whitney, invented the cotton gin. Before the invention, the process of separating cotton seeds from cotton fibers was extremely laborious and required a great deal of skill. The cotton gin allowed for the simpler separation of cotton fiber from their seeds, revolutionizing the cotton industry in the United States.

In 1790, for instance, America produced approximately 1.5 million pounds of cotton and it was fairly expensive to obtain. By 1810, America was producing 85 million pounds of cotton, growing at a compound annual growth rate of 22 percent a year. This innovation caused the price of cotton to fall from 38 shillings per pound in 1786 to less than 10 shillings per pound by 1800. During the first half of the 19th century, cotton accounted for more than 50 percent of all American exports. This even created an underwear revolution that had a huge impact on public health in the United States. This kind of entrepreneurship has the potential to move people from survival to prosperity.

So, Africa does not simply need entrepreneurs; it has many of those. The continent needs disruptive entrepreneurs. These entrepreneurs are the engines of economic growth that propelled historically poor countries to “rich country status” today. The innovations that these entrepreneurs introduced served as the catalyst that spurred governments to act in the best interest of the people. Without these innovations, there would have been no incentive for the governments to create business friendly environments which further fostered the creation of more disruptive innovations. With enough disruptive entrepreneurs, Africa can rise.

Disruptive Entrepreneurship is possible in Africa

The widely known mobile money platform in Kenya, M-PESA, is a textbook case of disruptive entrepreneurship. In 2007, the year M-PESA was introduced, only 19 percent of Kenya’s 38 million people had access to any sort of financial services including bank accounts. There were just 1,000 banks and barely 20 percent of the population had access to electricity. Major development indicators such as road networks, education, health, etc. were equally low. But there was a booming mobile phone market. It was on the back of the speedy proliferation of mobile phones that Safaricom, a telecommunications company, built M-PESA, enabling both the rich and the poor to save money in and send money through their mobile phones. Soon after, a revolution, similar to that of the cotton gin, happened. In a few short years, M-PESA had 19 million people on its platform; more than 80,000 agents; and today transacts more than $1 billion monthly. Disruptive entrepreneurs bypass the conventional path and create new value networks that have the potential to pull in millions of people from non-consumption into consumption.

The chicken and the egg

So, which should come first for Africa, the chicken or the egg? Should the chicken, the business friendly environments and institutions that support investments, come first? Or should entrepreneurs develop innovations in the difficult environments they find themselves, after which, they hope, business friendly institutions will begin to emerge? Here is what we know about Africa: we have been waiting for governments to create institutions that support a thriving business environment for over five decades. It is safe to assume that entrepreneurs must create their own luck. Just like many rich countries did hundreds of years ago, African entrepreneurs must force the government’s hand by triggering an entrepreneurial revolution with disruptive innovation at its core.

African investors and entrepreneurs must look at the millions of Africans who wake up every day and struggle to get simple things done, and create innovations that improve their lives. The impact of such innovations should resemble that of Whitney’s and Safaricom’s. They must not simply buy low and sell high. They must do what is rarely done in Africa. They must create. They must disrupt.

While it would be a huge plus to have good institutions that promote economic development, today we do not. But, thankfully, a careful observation of history shows that disruptive innovations typically precede good institutions. Good institutions do not simply fall from the sky. Just like chickens, they develop over time through arduous effort. When policy makers see that making life easier for the innovators also enriches themselves and the State, they respond accordingly. The question then, for Africa, is: when will it graduate from survival entrepreneurship to disruptive entrepreneurship?

About the author:

Efosa Ojomo graduated from Harvard Business School in 2015 and is currently a senior research fellow there at the Forum for Growth and Innovation. He is working with Professors Clay Christensen and Derek Van Bever on applying the theories and principles of disruptive innovation in emerging markets in order to engender growth and prosperity.