How do You Measure Entrepreneurship?

How can you tell that a society is highly entrepreneurial? Simply counting the number of small businesses will not cut it, because not all small businesses propel economic activity. I have often wondered if it is utter folly to confuse small business with entrepreneurship. By serendipity, I found the answer.

A couple of months back I met a bunch of entrepreneurship researchers and scholars at the World Entrepreneurship Forum in Lyon, France. One of them was Zoltan Acs, professor at George Mason University.  He founded the Global Entrepreneurship and Development Institute and devised a way to measure entrepreneurship potential of nations - known as the GEDI index.

The Global Entrepreneurship and Development Index (GEDI) is comprised of three sub-indexes, each measuring the context of entrepreneurship in a society. Here is an excerpt from Prof. Acs's article on GEDI.

1. Attitude
Entrepreneurial attitudes are defined as the general disposition of a country’s population toward entrepreneurs, entrepreneurship, and business start-ups. The index in-volves measures for the population’s opportunity perception potential, the perceived start-up skills, feel of fear of failure, networking prospects, and cultural respect for the entrepreneur.
 
2. Activity
Entrepreneurial activity is defined as the start-up activity in tech sector. The entrepreneur’s level of education is an important measure. Level of competition is another important measure.

3. Aspiration
Entrepreneurial aspiration, is defined as the efforts of the early-stage entrepreneur to introduce new products and services, develop new production processes, penetrate foreign markets, substantially increase the number of firm employees, and finance the business with either formal or informal venture capital, or both. The role of ‘gazelles’ or high-growth businesses is also vital to entrepreneurship as are internationalisation of trade and the availability of risk capital.

As you can see, this index is a sophisticated measure, which really focuses on the job-creation potential  of entrepreneurship and hence the economic activity fueled by it. A big improvement over reporting the number of start-ups.

On this scale, then, the top 5 countries are Denmark, Canada, US, Sweden, and New Zealand. Among others, UK is at 14, France ranks 18, China 40 and India 53.

Diane Berard of Les Affaires reports from WEF

Image from: Les Affaires

Diane Berard works with Les Affaires, a publication in Montreal, Quebec, Canada. For those of you who can read French, here is an extract from Diane's blog which describes Harbinger's work. 

Le Groupement répond à la résolution #3 : promouvoir l’éducation continue des entrepreneurs via le partage des meilleures pratiques.

Ensuite, petite virée du côté de  l’Inde pour découvrir de la pépinière d’intrapreneurs de  Vikas Joshi, fondateur et président du conseil du Groupe Harbinger (logiciels). Harbinger est une des 50 sociétés qui croît le plus rapidement en Inde. Selon Red Herring, c’est aussi l’une des 100 meilleures entreprises techno au monde.

L’an dernier, Vikas Joshi a sélectionné 40/400 employés pour en faire des intrapreneurs. Il leur a donné le droit, et le devoir, de développer leur leaderhsip, d’innover, de créer. Résultat : un an plus tard, trois nouveaux projets lucratifs sont nés. Et cette année, il répète l’expérience avec 40 autres employés.

Sa citation : « On ne peut pas s’arrêter pour repeindre notre bateau. Nous devons à la fois peindre et ramer »

Using Google Translate, I was able to figure out the last line: His quote: "We can not stop to paint our boat. We need both to paint and (keep) rowing."
 
You can read Diane's full blog at http://tinyurl.com/36zlcl4
 

Day 3 - BSchool visit, more insights and commitments

EMLYON Business School played host to the World Entrepreneurship Forum this morning. After late dinner last night, most of us were experiencing sleep deprivation this morning as we got ready early to board the bus leaving for the B-School campus.

As the bus winded its way through the beautiful city of Lyon, we could witness the wonderful fall colors on the trees lining Lyon's twin rivers and atop hills on both sides. The city is the second most important place in France after Paris, and home to about half a million people.

The program at the school was a public workshop, aimed at disseminating the Forum's insights with a large audience - about 600 persons, including students, alumni, partners and forum members.

The highlight of the morning was a talk by LIU Chuan-Zhi, the founder of Lenovo, China, part of a diversified enterprise with $16.6 B in revenue. As we listened to Mr Liu's speech, translated in real-time from Chinese to English, through our headsets, we could discern the gems wisdom coming from a savvy businessman who put China's business acumen on the world map:

What helped Lenovo beat multinationals at their game was superior industry knowledge, higher agility in tweaking product-service offerings to quickly address unique needs of the Chinese, shrewd pricing, astute team building at the top (including leader selection) and capital structure reforms that helped create incentives for employees. "Take people with you" was his mantra.

The next speaker was Ila Bhatt of India, popularly known as Ilaben, who has founded the Self-Employed Women's Association, with a membership of over a million women. When I talked to her in person, her penchant was evident in the one line she kept repeating: "There is so much more to do".

The Junior WEF members presented their ideas for fostering entrepreneurship - one of them being cartoon stories which depict the entrepreneur as a super-hero. What better way to get children dreaming about entrepreneurship?

Prof Zoltan Acs presented his findings of entrepreneurial competitiveness of nations, measured using a combination of indicators for attitude, activity and aspirations. The top 5 nations were: Denmark, Canada, US, Sweden, and New Zealand.

An interesting presentation followed where the topic of discussion was entrepreneurial aptitude measurement. Unfortunately the program was running late, so the speakers had to really cut it short.

After lunch, the team continued working sessions where commitments were made by everyone to undertake a few initiatives in the coming year in our respective businesses, to further the cause of entrepreneurship.

As I write this, members are figuring out the best way to spend the evening. Some plan to hang out and network, others are visiting the city center to enjoy Lyon city life and cuisine.

Day 2 - Keynotes, Working Sessions, Awards and Gala Dinner

Sir Fazle Abed, founder of BRAC in Bangladesh, the largest NGO in the world talked on developing entrepreneurship at the base of the pyramid. He argued that the perception of BoP has changed from "help the poor" to "sell to the poor" and further to "co-create with the poor".

Elmar Mock, founder of SWATCH, the famous fashion watch brand, made a passionate case for unleashing the creative forces within people, so that the creative does not become slave to the systematic; renovation does not replace innovation; and evolution does not pass off as revolution.

Zoltan Acs, professor at George Mason University's center for entrepreneurship and public policy, talked of entrepreneurial cities. Prof. Alain Fayolle of EMLYON business school talked on entrepreneurship education.

These four talks served as keynotes for four parallel tracks in the conference. Focused working groups were formed, and they got busy forming a vision for 2050 by sharing experiences, identifying drivers and inhibitors, and brainstorming ideas.

Time to leave for the Gala Ceremony where Entrepreneur for the World awards will be given away, followed by Barbara Hendricks concert and Gala dinner.

Day 1 - Opening Session

The highlight of the opening session was meeting everyone in person - the energy of participants was palpable. Selected case studies of entrepreneurial initiatives were presented.

Barack Ben-Avinoam of Iris Ventures, Israel, presented how the venture has become a growth engine for the local, regional and national economy. Receiving about 300 business plans a year, they select a dozen and fund them. The technology incubator leverages matching funds from government.

I presented BaseCamp 2010, an ad-hoc social e-learning environment set up to foster entrepreneurial learning for corporate executives within Harbinger Group in 7 cities. The emphasis was on bringing out collaboration and team learning.

Sabetha Mwabenja presented women entrepreneurs finance program, from Exim Bank Tanzania.

Fernando Moncayo Castillo presented how they took the lessons in entrepreneurship development from Singapore government to Ecuador -  a great example of learning facilitated by World Economic Forum.

Prof. Patrick Molle, President of EMLYON Business School and Mr Jean-Luc Decornoy, President of KPMG SA welcomed the delegates. The conference has begun.

Revenue Modeling for Software as a Service

The difference between Software as a Service (SaaS) and packaged software goes beyond the method of distribution. Obviously, SaaS is delivered over the internet on-demand, and packaged software is installed on user computers (desktops or servers). However, SaaS enables a whole variety of revenue streams that need to be considered carefully when determining its revenue model.

Sixteen Ventures web site has a presentation titled SaaS Revenue Modeling: Details of the 7 Revenue Streams. The authors classify revenue streams into two:


Scalable Revenue Streams
These revenue streams can scale significantly with the growth of the SaaS venture. Four such streams are identified:

1. Recurring: This type of revenue comes from site subscriptions. 
2. Ecosystem: The SaaS vendor realizes revenue by providing APIs to other players providing complementary offerings
3. Ancillary: Revenue coming for ancillary fees such as setup fee
4. Network: Anonymized and aggregated data from SaaS users is provided to those who will pay for it. This leverages the multi-tenancy of SaaS ventures.

Non-Scalable Revenue Streams
These are useful revenue streams but harder and sometimes impossible to scale. Three such streams are identified:

1. Products: Units that are shipped to users of SaaS - these could be devices and gadgets of sorts
2. Services: Setup, configuration, content development, software development, training
3. Advertising: Monetizes site by displaying advertisements alongside SaaS user interface

The presentation can be found on Sixteen Ventures site.

5 Rules of Entrepreneurship

Here is a simple list to remember, extracted from my speech at 20th Harbinger Group Annual Awards Function.

1. If you want to jump into business, jump with both your feet.
2. Money is the result of business, not its sole purpose.
3. Never lie to a customer.
4. Reward employees on merit.
5. Sell and do what you are passionate about - business thrives on passion.

Of course, I have deleted all the funny examples that accompanied the recitation of these rules. Hope the summary helps.

Turning Adversity into Advantage

Silicon India's International Women's Day this year featured Harbinger Group as a Platinum Sponsor along with Nokia. For a second year in a row, executives from several organizations shared thoughts and ideas.

One of the panels featured Swati Ketkar, Executive Director at Harbinger Systems. Her topic was - 'Achieving Success: Turning Every Adversity into an Advantage'.

Excerpts from her talk -

1. Adversity is often a leading indicator of calamity - don't deny it, accept it and plan to overcome it to avoid further trouble
2. Adversity creates conditions that are conducive to change. In normal times people are too comfortable to be open to change. Adversity pushes everyone past the tipping point. 
3. Adverse conditions help unite teams and create a sense of bonding. Everyone goes 'we are in it together'.
4. Bad times test your character and integrity
5. Facing adversity is a transforming experience. Regardless of how well you did, what matters more is what the experience did to you - did you emerge stronger?
6. In some adverse conditions, the best response is to wait it out until conditions improve. This is a great opportunity to revisit other important and interesting things you may have left on back-burner.

These ideas bring out the positive side of adversity, which is otherwise generally considered a negative vibe. Being crestfallen is not a solution to adversity; rather it can be used as a force for superior achievement, resilience, agility, innovation, energy, and happiness.

The Innovative Entrepreneur

Like everyone else, the innovative entrepreneur sees the world and understands what is wrong with it. Then he questions why it must be that way, and realizes opportunities for change. This gives him passion.

He imagines, in his mind's eye, a different world. It looks different, better and compelling. He visualizes that new world to be a destination, not yet knowing which path leads there. This is vision.

His search for a path quickly reveals that he needs other people to join his pursuit. To win them over, he shares the vision of future with them. Here begins leadership.

The path to the vision usually involves solving multiple problems. The innovative entrepreneur nurtures a childlike curiosity for options available. He attacks problems with the zeal of a puzzle solver, enjoying the solving process. He thinks laterally, questions assumptions, backtracks when confounded, reasons, analyzes, and synthesizes. Above all, he puts up with all the chaos that accompanies thought. And finally an idea takes shape. This is innovation.

With his team, he nurtures the idea and fleshes it out. Then he questions it, subjects it to scrutiny and determines if it can play a role in realizing the vision. He must now make choices about investing scarce resources in pursuit of objectives. This is strategy.

With a deeply held belief in the venture the entrepreneur goes about leading his team to realizing the shared vision. Along the way, he needs to make decisions that are consistent with his values and principles. He needs to juggle resources. He needs to refine processes. This is execution.

Whole Product Experience Roadmap: A Simple Tool for Product Managers

Software product managers with an engineering background routinely use the product engineering roadmap, which is a document that lays out a broad time-line and engineering work items to be completed as a product evolves from one version to the next. Some of the work items are features that end-users can see and use, yet others are improvements that strengthen the product at the back-end with enhanced scalability, performance, security etc. A well maintained product roadmap goes a long way in providing a guideline for product development and maintenance efforts. It serves as a reference point for all planning discussions.

That said, products are rarely mere engineering artifacts. End-users are increasingly experiencing the consumerization of web. Consequently, the bar for total product experience keeps going up. Users need a whole array of value-adds to the core product, at various touch-points along the product experience cycle. These include online user community, social media user groups, forums for sharing best practices, webinars, on-demand videos illustrating product usage, tips, documentation, guidance on product use in specific business situations, purchase justification support, installation support, sample use cases and so forth. Geoffrey Moore, in his famous book Crossing the Chasm, refers to these value-adds collectively as the augmented product. According to him, the core product and the augmented product together make up the whole product.

Which brings us to the Whole Product Experience Roadmap, a simple tool to track the building up of a whole product experience. Prepare a tabular roadmap where rows correspond to several attributes of product experience such as Features, Documentation, Training, Community, Installation, Distribution, Pricing, Expectation Setting etc and columns correspond to successive months. For each month pick a few cells and fill them with goals that aim at enhancing product experience. It is that simple.

Now, you can record progress as you keep enhancing product experience and easily visualize the gaps which need to be filled. Every time you hear back from marketing, sales, support or directly from a customer or a partner something that could be improved in the product experience, you simply add a row to the whole product experience roadmap.

If you provide services instead of products, you can still use the same tool with minor variations. Whatever be the nature of your offering - product or service - the idea of designing a customer experience is much the same. Identify the touch-points throughout the engagement experience and plan improvements with time.

From Customer Orientation to Customer Centricity

Much has been said about the importance of customer orientation. Satisfy your customer : Do as customer says, never say no, the customer is always right. Don't stop at customer satisfaction: Endeavor to create customer delight. Deliver benefits, not just features. Be close to your customers : Meet them personally, talk frequently. Relationships matter: It is all about people. Listen to customer suggestions. Customer is king: As Gandhi famously wrote, he is the very purpose of our existence.

I argue that Customer Orientation, as expressed in the lines above, is a necessary but not sufficient condition for winning in today's highly connected markets. What we need is Customer Centricity, and that is what I am about to describe in this post.

To define Customer Centricity, we need to look beyond the obvious factors of customer orientation. Let us do this in seven steps.

1. Identify with customer goals
First you need to understand customer's goals. This will help you perceive true customer pain points. Not just the pain points the customer expresses explicitly, but the latent ones that remain beneath the surface.

2. Understand customer aspirations
Customers are human - they aspire. Do they aspire to be associated with your product or your service or your brand? Think of a developer trying to get into an Apple conference, or an online user wanting to experience Google wave - which is currently by invitation only!

How do you create this desire for associating in your customer's mind? You need to recruit the customers who are already on board as trust agents. Get them to present on your behalf at conferences, write about your products and services in magazines, write reviews on sites such as yelp or e.pinions, give quotes, create podcasts and build youtube videos. Collaborate with your customers to build case studies to celebrate joint achievement.

One key purpose of branding then is to create an aspiration in customer's mind to associated with you, and to be seen with you.

3. Co-create value with customers
Involve customers in creating value through your business. Get ideas from customers in a focus group or a user meet. Have them test your products, as many SaaS companies do. Take their help in merchandising: an online user community is a great place where you can do this. Observe customer buying preferences and create attractive bundles. Groupon is a great example of how customers can be involved in marketing and selling. Referral programs involve customers in the selling process. Online community MVP programs encourage customers to get involved in supporting other users.

4. Build great customer experiences
Say goodbye to one-time transactions with your customers, and say hello to continued engagements. Move from deal / transaction thinking to continuous engagement thinking. Consider the Apple App Store. You get an account, buy something today and you get an ongoing relationship where you receive new offers, latest arrivals, specials and so forth. Your buying experience is hassle-free. You get all your account information in one place. Same with the Amazon Kindle store, or even a brick-and-mortar bookstore such as Borders .

The idea of a customer experience is to convey a consistent net impression through all customer touchpoints. Consider visiting a Nordstrom outlet and a Nordstrom site, and compare that with the Costco experience. In each case the core value proposition (class or variety and cost-savings) is conveyed across both touch points consistently. A Toyota Prius iphone advertisement conveys the experience of the interior of the car - you simply move the iphone to pan across the view of the interior. AAA combines the phone service, texting and technician visit touchpoints into a unified customer experience suggesting friendly and prompt help from a knowledgeable professional.

5. Provide thought leadership
In some markets, thought leadership provides the foundation of trust, which is critical to customer relationships. Thought leaders identify and express latent needs of a large number of users. They envision a better future. They take uniquely refreshing positions on key topics. For example, a presentation software vendor may write a thought leadership article on the use of Twitter for setting up backchannels during presentations for audience collaboration. An e-learning software vendor may write about how to design ad-hoc social agile learning.

6. Narrate success stories together
It is your customer's success, not yours, that we are talking about here. Describe your achievement in terms of customer goal fulfillment. Describe the business context of the challenge you overcame. Preferably state measurable results. For example, instead of saying :'Created 70 hours of e-learning in 90 days' say: 'helped UNO train 9000 volunteers in Africa in 90 days thru elearning'. Share the stage with your customer. Identify the various elements of value that you created for your customer.

7. Get on the customer's social graph
People use social media for self-actualization. Recognize and harness the power of interest groups. Get on the social graph, spread your message, use them as online trust agents. Imagine three options: Post to Yelp / Share on Facebook / Email a Friend. Which one has the highest trust factor? Which one has the widest reach? You will need to make decisions of this kind in utilizing social networks. You can also use social graphs to monitor your brand. Use dialog between your customers to learn about your brand and reputation. Understand why people are not buying your products. Listen to these non-customers.

From the foregoing, it should be easy to see that Customer Centricity is a leap forward from Customer Orientation. The chart below summarizes the differences.

Customer Orientation	Customer Centricity
Do as the customer says	Identify with the customer's goal (anticipate customer needs)
Create events of customer delight	Captivate customer through engagement
Deliver benefits	Deliver experiences
Be close to customer	Get on social graph
Build a relationship through service	Strengthen relationship through thought leadership
Listen to customer	Also listen to non-customer
Customer is king	Customer is a strategic resource

In today's always-connected, over-communicated and trust-hungry markets, I believe customer orientation is not enough. Indeed, customer centricity, as described above, shows the way to win those markets.

Eight Things to Look out for in a Plan

Some time back I had read somewhere an article on how to assess the health of a factory during a site visit, based on 8 factors. In this post, I propose to help assess how good a plan is, based on 8 salient features of a good business plan.

1. The Idea
What is the idea? What is different? A simple, un-obvious, easy-to-describe idea which a large number of people can repeat back without changing. That to me is the #1 requirement. Twitter's microblog and Subway's Foot-Long Sub are good examples.

2. The Opportunity
Does your idea solve a big problem? What is the market opportunity? What is the addressable market? It must be right-size and -more importantly- with a growth potential. That growth potential should be deduced from observable trends in the environment. The opportunity is at the core of external analysis. Nokia in the 1990s and Google in the 2000's identified such big and growing opportunities in mobile communication and online advertising respectively.

3. Why Us?
Why on earth should we be the best people to pursue the opportunity and the idea? What are our core competencies? Why can't someone else do it better? What's so special about us? This is the core of internal analysis. When Apple went after reorganizing the music industry with iPod, and Wolfram Alpha decided to be the #1 search engine for computable information, they leveraged their core strengths in consumer software/hardware and mathematical software respectively.

4. What Will it Take?
What resources will this take and where to get them from - what to give up, what to do less in order to do more of this. When Nokia decided to focus on Telecom in the early 1990's they gave up a bunch of other businesses. When ICICI decided to become a bank around the same time, they invested in a bunch of new capabilities related to retail banking.

5. Business Model
Who pays? How do we make money? That defines the business model. A musician may distribute the music absolutely free online and leverage the popularity to organize live concerts for a fee. A site like LinkedIn may provide free membership to a large number of professionals and essentially sell the use of their data to a select number of paid subscribers interested in recruiting. Zynga may choose to money on several small transactions, each involving buying of a virtual trinket meant as a gift. Tap2Talk is free for the user, but its customization requires subscription, and it is tempting to customize it to suit the voice of your kid.

6. Sustainability
How do we protect our business from competition? What barriers for competitor entry do we erect? Are these on supply side (patents, exclusive sourcing) or on demand side (customer captivity, channel exclusivity)? Or are their systemic barriers arising out of economies of scale, making it hard for competitors to produce for less? Microsoft, Garmin, Research in Motion all created barriers that allowed them some measure of sustainability.

7. Timeline
Okay, so what is the plan? What are the milestones? What is time critical? What are the dependencies? Companies like Electronic Arts -the game maker- and Intuit -the personal finance software maker- must take into account external factors (holiday season, tax year-end) to determine their timelines.

8. Cash Flows
It does, initially outward and then hopefully inward. A plan needs to visualize the flow of cash and figure out investments needed, RoI and other metrics.

In summary then the first 4 factors answer the "what" questions. What is the big idea? What is the big opportunity? What's special about us? What will it take? The next four factors answer the "how" questions. How do we make money? How do we sustain? How do we plan the timeline? How do we finance and get a return?

A good planner should pay sufficient attention to both types of questions and put together a winning plan.

Why this blog?

Since 1990, I have been involved in growing Harbinger Group, a business that I founded. It has been nearly two decades full of action. This blog is an effort to chronicle some of the insights gained, lessons learnt, values upheld and beliefs strengthened.

The main theme of this blog is entrepreneurship. Posts of this blog will draw on innovation, strategy and leadership. More often than not, the lines are blurred, and indeed these additional themes are sometimes inseparable. In such cases, a post may touch upon two or more of these additional themes.

And again, the past is only a prologue. As we enter next cycles of growth, some reflection upon our ways of doing things is in order. Reflection is a great way to learn, and writing encourages reflection. That is another important purpose of this blog.

Happy reading.