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Why it matters

tbi6-slide04Ana Greif looks at how perspectives of incubation have changed across Latin America and the challenges that the industry faces globally

During a training session at the first Latin American Conference on Business Incubation in 2011, the presenter asked the group of around 120 attendees, mostly incubator managers from Mexico, what industry they belonged to. Their responses revolved around 'education', 'engineering', and 'computer tech'. Not a single incubator manager responded that he or she was part of the business incubation industry, or even the entrepreneurship support industry. Participants had not considered these as viable answers, and they had never thought of either as industries. Only three years ago, few incubator managers in Latin America had held that title more than once in their careers or longer than a year or two. These incubator managers were learning skills and gaining valuable experience that could be transferred to other roles helping start-ups, yet they had never considered this field as their industry.

A very different story emerged out of the most recent Latin American conference, organized by the National Business Incubation Association (NBIA) and hosted by the Autonomous University of Nuevo Leon in Mexico. Incubator managers who had started in the industry a few years ago had shifted to new positions with higher authority, and started to view themselves as professionals and experts in the field. Attendees participating in the conference for the first time found role models with whom they could establish connections. Attendees from opposite coasts of Mexico who had met at previous events were now established presenters. A mature business incubation industry became evident, ready to participate in the global entrepreneurship scene.

Why should this integration of support professionals matter to entrepreneurs? What is the value of this new entrepreneurship support industry to them? To answers these questions, one must first look back at why entrepreneurs need help in the first place.

Full circle

Entrepreneurship is not a new idea. Young and old countries alike are full of stories of hard-working men and women improving their lives through trade and commerce. Children grew up around their father, sometimes their mother, tending to customers, making whatever would be sold or going great distances to procure the items. There was an infrastructure in place for young people to apprentice with an experienced professional to learn a trade, which they would later practice independently. That independence was a milestone of adulthood that most young men (and a few women) would eventually reach. Being an entrepreneur was the social norm and there existed an infrastructure to support it.

The industrial revolution changed this however allowing firms to grow very rapidly and to require large numbers of employees. It only took a few generations for the idea of being self-employed to become obsolete. Education systems were put in place to teach young people new skills, but these were narrow skillsets relevant in the context of an organization that takes care of all other business activities and pays the professional for his time spent performing that one specific task. The benefit to the employer/employee relationship is the financial security that comes from a 'steady paycheck'. The loss was the freedom that comes with being an entrepreneur.

After decades of an employment-centric society, the tide is turning for entrepreneurship, as the desire for freedom overtakes the need for security. However, this lifestyle that many want, few know how to achieve. Over the last 30 years the world has been inundated by research to explain every aspect of entrepreneurship: why it's good, what makes it work, who should do it and how it goes wrong. Yet, an academic paper cannot possibly prepare the average person for the uncertain, risk-filled world of a start-up. This is where business incubators play their most important role.

Why it matters

To articulate the value to entrepreneurs of business incubation and other tools for entrepreneurship support, we refer to a spin-off of the Business Model Generation methodology developed by Alexander Osterwalder and Yves Pigneur and published in a book by the same name in 2010. Based on the ideas of Clay Cristensen and Tony Ulwick, Osterwalder is developing a new canvas aptly named the Value Proposition Canvas (to be published in the fall of 2014). The premise of this new approach is a deep dive into the target market and value proposition frames from the business model canvas in order to ensure that the business model being created is addressing a real problem and will therefore have value to its potential customer. The Value Proposition Canvas comprises the following process: Step one, put yourself in your customer’s shoes. Step two, figure out what task she needs to accomplish. Step three, identify what would make doing that task easier (or less painful). Step four, create a product or service around that solution.

Following the VP Canvas, put yourself in the shoes of an aspiring entrepreneur; not an experienced entrepreneur with a successful track record, but a person completely unfamiliar to the start-up world. He has worked in his industry for many years and identified a problem no one has solved. He made the decision to build a business that addresses this problem while allowing him the personal freedom and fulfilment he cannot get as an employee. The entrepreneurship support professional looks at the tasks this aspiring entrepreneur has to do on the road to starting up, and the pains associated with each. Here are some examples of the entrepreneur’s perspective:

Job 1 – I (the entrepreneur) need to identify the best business model and I don’t know where to begin. I know what I need to do: collect data, make assumptions and predict outcomes, but I don’t know how to actually do it.

Job 2 – I need to secure the funds to start my business. I will require financial statements that I do not know how to create and an understanding the various options available to me and how they work.

Job 3 – I need to assemble my team. I must figure out the roles I need to fill, find the right people and convince them to join in spite of ambiguity, low pay and high risk.

This is a short list of typical 'jobs' an entrepreneur has to do in the early stages of the start-up journey. Other tasks specific to entrepreneurs your programme might include: Tech entrepreneurs who must learn management skills; Scientists who have to develop and test their discovery; or a business-oriented entrepreneur who needs help with software design. Of course starting a business will require many additional tasks that span from understanding legal issues, finding a suitable location, marketing… too many to list here.

Pain relief

After analysing the tasks this entrepreneur has to do, and some of the pains associated with each job, the next step is to identify what would make those tasks easier or relieve those pains. Successful entrepreneurship support programmes base their value proposition, its service offer, on directly addressing those needs. The solutions might come in the form of a training programme to help the entrepreneur learn a set of business skills. The programme may offer workshops to help him draft a first business model. It may also provide an experienced mentor who can walk the entrepreneur through the process of hiring the first employee. The value of providing support to entrepreneurs is in understanding their needs, and delivering those products and services that truly address them.

Entrepreneurship, however, is not a static notion. As technology advances, markets shift and new possibilities emerge, the way people do business also changes. Those who support entrepreneurs must continually adapt their programmes to meet new needs ensuring they continue to provide value to the entrepreneurs they serve. In order to keep up with the changing business world, managers must continually re-evaluate a programme's business model and keep asking: who is my customer? What is her pain? How can my programme help? Are the activities my programme engages in helping my clients or are they irrelevant to their needs?

Global challenges

At the Latin American Conference, as in many similar conferences around the world, attendees attempt to answer these questions, not as individuals but as an integrated industry. Fortunately, technology has made communication easier for the organizations that connect them around the world to provide a pathway to extend expertise beyond borders. The Latin American Conference is one such example of collaboration. Similarly, NBIA helps organize the yearly Russian American Forum on Business Incubation in Russia, bringing together experts from both countries; and the European Business and Innovation Centre Network (EBN) encompasses programmes from all over Europe, and its annual Congress is a trove of international knowledge. Similar events, hosted by networks in every part of the world, attract professionals who travel ever-greater distances to participate in the sharing of ideas and knowledge.

This globalization of the entrepreneurship support industry provides the means for managers to benchmark their programme’s value proposition and stay current with industry trends. Examples of recent trends include seed acceleration, co-working, and start-up weekends, all of which quickly spread around the world. Time will tell which of these evolving models will endure and which will not stand up to the rigours of entrepreneurs’ demands. Either way, this connected and globalized industry will be ready to respond.

Published on 29-05-2014 00:00 by David Tee. 1486 page views

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