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So What Is Entrepreneurship and Why Is It So Critically Important?

oday we have about 25 million unemployed, increasing to about 75 million including dependents, many more ‘underemployed’, and a stagnating U.S. economy. To create new jobs and grow our economy, we are told that we need to provide major corporations with new financial incentives; eliminate regulatory agencies that create roadblocks to growth; and reshuffle tax rates to serve vested interests. Maybe, but I don’t think so.

Get past the rhetoric from all sides and look at the numbers, always a good approach. And what the numbers suggest is focusing on entrepreneurship and emerging business provides exciting job creation and economic growth opportunities. You be the judge – here is my view:

— Most new jobs in the business sector are created by major corporations. False.

Most new jobs are created by entrepreneurial companies that have less than 500 employees- that is a historical fact. SBA statistics show that during the past 15 years, firms with less than 500 employees accounted for 64 percent of net new hires in the U.S. and pay 44 percent of the U.S. private payroll. Exact percentages may vary slightly year to year but these are the facts.

— Most technology innovation is driven by R&D within major corporations. False.

Smaller, entrepreneurial firms provide the rocket fuel driving our technology innovation engine. SBA statistics show small firms produce 13 times more patents per employee than large patenting firms; and these patents are twice as likely as large firm patents to be among the one percent most cited.

— Most U.S. trade is driven by major corporations. True and False

Major corporations do account for the bulk of U.S. exports, representing 71.1 percent of total exports in 2006. But of the total number of firms exporting goods and services, 97.3 percent of the total were entrepreneurial firms with less than 500 employees. And in 2006, the entrepreneurial firms with less than 500 employees accounted for 28.9 percent of the total $910.5 billion in U.S. exports.

The above points are counter-intuitive and I find not often mentioned in the media. Starting and growing an entrepreneurial venture is tough business, and clearly entrepreneurs are really fueling our nation’s job creation and economic growth. So it makes sense to develop strong, proactive, creative policies and programs that support entrepreneurial firms.

Andy Grove, Intel’s founder, estimated that so far we have achieved less than 5 percent of the Internet’s real business and personal impact. Paraphrasing Andy Grove’s quote, my vision is we have only achieved less than 5 percent of the benefits and personal impact that “entrepreneurial thinking”, entrepreneurship programs, and creative strategies and policies will provide, implying 95 percent of the real entrepreneurship opportunities, changes and benefits lay ahead. And these benefits include new job creation and economic growth.

We are concerned about global competition from China and India and we should be. And China’s growth was not by accident, but through careful planning driven by entrepreneurial policies. Many countries, such as China, are well ahead of the U.S. in implementing successful entrepreneurship programs helping smaller firms “survive and thrive”. I am not sure many realize that China’s smaller businesses, not large corporations, drive their impressive economic growth, employing about 75 percent of all urban employees, holding about 60 percent of all invention patents and accounting for about 80 percent of new products. China is also pursuing a comprehensive plan to create 10,000 mostly small- and medium- size companies each year, hoping to create 100,000 new jobs. Malaysia’s MSC initiative, managed within the prime minister’s office, also has an impressive track record, attracting 2,006 companies representing about sixty-three thousand knowledge workers- creative entrepreneurial policies such as R&D credits, tax incentives, strategic financing are some of the policies used to drive growth. And I can cite many other examples which I believe can help us develop an ‘entrepreneurial blueprint’ to jump start job creation and economic growth.

New entrepreneurial directions and possibilities will emerge, such as proposed Entrepreneurship Empowerment Programs (‘EEP’), to help inner city entrepreneurs, both young and old, start and grow new business ventures, with both local government and business support. And we have the opportunity to enhance our current entrepreneurial education process, building on best practices now used by institutions in selected overseas markets. These are all coming.

I may be more passionate than most about entrepreneurship driving business value creation and economic growth, and do have a vision here. What is clear is exciting times lie ahead as new entrepreneurial programs and policies emerge in coming months.

Paul B. Silverman is the author of a new entrepreneurial management strategy book Worm on a Chopstick: Understanding Today’s Entrepreneurial Age: Directions, Strategies, Management Perspectives. A seasoned entrepreneur, global management executive, public and private company CEO, educator, management consultant, speaker, and former founding Director of the Entrepreneurial Step Up Program at George Mason University targeting CEOs of early stage high growth companies, the author is well known in the global information industry and venture community. The author has conducted hundreds of presentations worldwide and published many articles addressing management strategy, policy and new business development issues.

The author serves as CEO of Sante Corporation, an early stage personal health care management company developing a new vision to improve today’s health care system; Managing Partner Gemini Business Group, LLC; and serves as adjunct professor in the Center for Entrepreneurial Excellence Program (“CFEE”) in the George Washington University School of Business.

Why Entrepreneurial?

Entrepreneurial development lies on the notion of creativity and innovation. An idea is said to be creative when it is novel. That creative idea becomes innovative when it turns into something useful – a product. Entrepreneurship is underpinned by external factors, or all external factors. Any condition in the external environment whether favorable or unfavorable is a source of entrepreneurial development. Technological, social, cultural, political, and economic factors are sources of entrepreneurship. The fast-paced technology poses opportunities. During economic downturn or boom, the market is always confronted with needs and demands. The political, societal, and cultural changes give rise to new, untapped demands. These require entrepreneurial minds. The changes in these factors create new problems that require new solutions. These solutions are then translated into products. Any product that solves a particular problem of the market will create customer value proposition. What the market values will prosper in a highly competitive market.

As mentioned, there can be no external factors that hinder entrepreneurial development. What makes them a hindrance is when they are not taken as opportunities. Even a crisis can be an opportunity to be entrepreneurial. Apparently, blunders to entrepreneurial development are more of internal than external. What lack many to become entrepreneurs are entrepreneurial passion and spirit. Others fail to become entrepreneurial even when they take the initial steps because they fail to plan. They are oblivious that entrepreneurship is a risk-taking activity. When they fail, they have no plans to take the risks and hold back from re-trying. Entrepreneurial spirit must be sustained.

Conflicting ideas are present about when and where to germinate the seeds of entrepreneurial spirit. The academe is a pillar of education in the field of business. The industry is a good training ground for entrepreneurs-to-be to develop soft and hard skills. To create future entrepreneurs, the academe should instill the entrepreneurial mastery. The academic culture is important to nurture a cohort of future entrepreneurs. Educators can play a great role to motivate students pursue entrepreneurship. They might lay down the choices and teach their students to use their perceptive powers in determining which course to take. A good background of the industry is helpful to see realities and eventually delve into entrepreneurship or directly engage oneself to entrepreneurial activities. This is a matter of choice. Educators must guide the protégés and do not allow themselves to choose for other people.