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The Entrepreneurial Revolution – Moving from alchemy to science.

Anthony Farr

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The growing necessity for fast tracking our economic development in South Africa and the pivotal importance of entrepreneurship in achieving this has led to recent calls for an entrepreneurial revolution in this country.

This sense of proactive urgency is to be encouraged, yet such calls can be undermined when we lack a clear understanding of the tools for such a revolution.  Part of this is symptomatic of a broader entrepreneurship challenge. We see its powerful benefits, but after 40 years of intensive research we have not made significant progress in unlocking the secrets of the entrepreneurship phenomenon.

This tension is captured in a recent comment where Raymond Ackerman concluded that the entrepreneur is the modern alchemist, making something out of nothing.  This simple description captures both the power associated with entrepreneurial culture yet also reinforces the mystery surrounding its process.  And it is this notion of mystery that continues to hinder the full potential that entrepreneurial thinking and action can bring to society.

The entrepreneurial domain

It is normally seen as the domain of those particularly gifted and brilliant, outside the reach of the ordinary man.  The process itself is also not well understood, resulting in it being seen as a phenomenon rather than something that can be given more broad application. Yet if we reverse a few hundred years, this so called ‘great man’ explanation was exactly the situation where science found itself in the sixteenth century.

Before the intervention of Francis Bacon, scientific endeavour was the preserve of those special people, equipped with unique talents, who were able to divine the patterns of Nature.  Scientific progress was accidental, circumstantial and largely dependent on the breakthroughs of a select few.  In short it was a phenomenon.

Then Bacon initiated the process of codifying the actions of scientists, leading to the understanding of empirical evidence and experimentation that became the building blocks of the scientific method. In so doing he launched a scientific revolution with profound implications.

The simplest illustration of the benefits of the scientific method is that at the time of its introduction we travelled in horse carriages at a few kilometres per hour along the ground and now a mere two hundred years later we can travel at thousands of kilometres per hour into space.

The expansion of science has been so dramatic that according to Resnik, there are more scientists alive right now than have ever lived in the last two and a half thousand years of human history.   Today, the scientific method is taught indiscriminately.

Not only is it taught to potential scientists at graduate and postgraduate levels, but everyone at every level, and especially starting at a young age, is taught it as an essential mindset and skill that is carried through, and forms part of the core of all education.   The scientific method therefore gave us the tools for the scientific revolution allowing us to harness the potential of Nature.

Finding an entrepreneurial method

What if the key to unlocking an entrepreneurial revolution was to similarly see entrepreneurship not as a phenomenon but as a method? Entrepreneurship would then be released from the confines of a sub-category of economics and elevated to the level of a social force.  In Entrepreneurship as Method: Open Questions for an Entrepreneurial Future, Professor Saras D. Sarasvathy and Sankaran Ventakaram postulate exactly this – that entrepreneurship should be seen as a method comparative to the scientific method.

The impact of codifying entrepreneurship in this way has the potential to be as significant in the field of human endeavour as the scientific method was in the field of Nature.  Sarasvathy predicts that the entrepreneurial method will achieve no less than unleashing the potential of human nature.  This paradigm is still at an early stage of exploration, but already the implications are significant.

First, everyone can benefit from the reasoning and problem solving skills that emerge as part of this method.  (It would become necessary to introduce its logic as an essential part of basic education)  Secondly, it creates a powerful tool that can be more intentionally used to take on large problems at the centre of progressing humanity.

But if experimentation was the tool of the scientific method, what is the tool of the entrepreneurship method?

Sarasvathy stumbled upon a possible answer after completing a study on 27 expert entrepreneurs.  Despite the perception that we live in a commercial world dominated by prediction (a world where the aim is to use causal or rational thinking to achieve a previously identified goal), the findings of this study showed that the dominant logic of these individuals was effectual thinking – the exact opposite of causal thinking.

Focused solutions

Effectual thinking is a mode of thinking where possible new ends are imagined using a given set of means.  An illustration of the difference between causal and effectual  thinkers is seen by the examples of conquerors such as Alexander the Great  creating his empire out of the known world (causal) in comparison to explorers such as Columbus discovering the new world (effectual).

Building on the base of effectuation, the entrepreneurial method explores a method of human action that starts with what you have available, both in terms of your internal and external resources before then iteratively moving forward, taking into account evolving uncertainties and building partnerships to co-create a new future.  The implications of these tools for South Africa are particularly exciting.

Part of South Africa’s entrepreneurship struggle is due to a simple lack of belief.  In the 2011 Global Entrepreneurship Monitor Report, the percentage of the South African population who perceive that they have the capabilities to be entrepreneurial was just under 43%, which is nearly 10% below the average of our peer countries. If the entrepreneurial method inculcates an understanding that the process starts with our given means, however limited those means might be, it will act as a powerful catalyst to counter the current lack of belief in our abilities.

Second, a key finding in the initial studies around the entrepreneurial method is that entrepreneurial action is largely about interaction.  This is in contrast to the historical focus on the role of the individual or the team, rather than the importance of the interactions between them and the numerous stakeholders involved in the entrepreneurial journey.

While this might seem a small shift, an orientation towards negotiation and relational exchanges with a more sociological bias as a basis for value creation, plays directly to the inherent and proven strengths of South Africa’s history – a heritage that a cursory glance at the categories of our Nobel Prize winners immediately demonstrates.

Intentional revolutionary thinking

This requirement for the tools of a revolution was illustrated again in an unexpected context recently when Waleed Rashed, co-founder of the April 6th Youth Movement that led to last year’s freedom revolution in Egypt, met with a small group of Allan Gray Fellows.  Besides the inspiration of interacting with a 29 year old who already has ‘liberating his country’ on his CV, the abiding insight from his story is how intentional they were in understanding how the tools of social media, understanding the mindset of their target market and creating channels for those aspirations would ultimately ensure that the “revolution would no longer sit inside you, but be taken out and made realities.”  Whether it be in science, freedom or entrepreneurship, revolutions require tools.

A picture of large scale adoption of the entrepreneurial method fast tracking our economic progress by leveraging the power of entrepreneurship as a social force is a compelling one.  It is a picture of the entrepreneurial revolution – a revolution finally activated with the right tools.   No longer need we deal with the mystery of alchemy, instead focusing on the certainty of science, applying an understood logic and thinking process to improve the state of the country.

Anthony Farr, CEO of the Allan Gray Orbis Foundation, is motivated by an unyielding belief in the power of education and an entrepreneurial way of thinking to empower the future leaders of tomorrow in driving the country’s economic transformation. Farr believes that the economic empowerment of the next generation through entrepreneurship is more critical than ever in South Africa. Visit www.allangrayorbis.org for more information.

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Business Landscape

5 Thoughts To Give You The Courage To Make Change

The only constant is change. If you can’t learn to embrace it, you’ll be left behind.

Allon Raiz

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In my experience, change is harder for those who perceive themselves to be succeeding than those who perceive themselves to be failing. Failure produces an irresistible motivation to reflect and to seek changes that will eliminate the pain you are feeling. It is those who perceive themselves to be successful who are most likely to stick to the status quo in a sea of change.

Change always happens: Contexts change, markets change, competitors change and so on. So, reinforcing a strategy and recipe for success seems the logical thing to do, right? If it ain’t broke, don’t fix it, goes the mantra. Why on earth would you mess with a winning formula?

The problem is that these winds of change are numerous and subtle, moving slowly and in different directions, making them invisible to the ‘successful’ eye. Business books are filled with case studies like Kodak who, despite acknowledging the threat of digital, were so entrenched in their current thinking that they sailed their ship right off the end of their flat earth.

Related: Successful SA Entreps Share Their Most Valuable Business Advice Ever Received

Here are five thoughts to provoke you and guide you in finding the courage to change.

1. This too will pass

Live by the law of impermanence that says that nothing remains permanent; neither failure nor success. This should create a level of healthy paranoia in successful entrepreneurs that drives them to anticipate what will change and when it will change, and to constantly live in a start-up mindset. Being aware, self-reflective and conscious of your bias is the best remedy for the allure of a permanent reality mindset.

2. Use what you have

One of the most common reasons that we do not want to change is having to admit that the resources we have so painstakingly and expensively built and maintained are not as useful anymore. The now popular and commonly-used terms of ‘radical’ and ‘disruptive’ conjure up scenarios of throwing away everything we have.

In most instances where change is required, the most successful way to change is to use the resources currently available in your business in a reconfigured manner. My rule of thumb is that any new strategic direction should incorporate no more than 20% of new resources, know-how or processes. This approach might not be radical or disruptive, but it ensures that there is a higher appetite for change in the organisation and a higher probability of it succeeding.

Related: Raizcorp: Business ‘Think’ has to come before the Business ‘Plan’

3. Focus on the positive energy change creates

Change is terrifying for many, but it creates a positive energy in a business. We often spend too much time trying to pacify employees who are fearful of change. In my opinion, you should rather be weeding these people out of your business as it grows.

They slow down progress and redirect valuable time and energy from focusing on the future and building towards that. It is important to focus your energy on the positive energy that is being released when change happens, such as excitement, new possibilities, and new growth opportunities for people and the business.

4. Plan your change, but also expect the unplanned

Effective change is ideally planned. Thought-through, documented and communicated phases are always better than a chaotic laissez-faire approach. But as Mike Tyson once said,

“Everybody has a plan until they get punched in the face.”

Life happens, the unexpected is ever-present in our lives, and we need to plan for this. Allowing a 10% to 20% tolerance for the unknown is a wise thing to do to ensure your expectations are catered for. Accepting the potential of random change in your planning will make it easier to accept and manage.

5. Expect Magic

After the dust has settled following a recent change or upheaval, and nerves and emotions have normalised, there will inevitably be an unforeseen positive outcome from the change. When you expect to find this outcome and appreciate the chemistry of time, resources and random events that created it, you will see change as the unavoidable path to these magical events.

It makes going through the change so much more tolerable when you know that when this phase of change is completed, there will be an outcome that will make it worthwhile. This expectation has never failed to deliver for me.

Entrepreneurs do not have the luxury of remaining still and constant, even for a short while. Mighty corporates are also  susceptible to the devastation of the law of impermanence. But, there is a different lens on this that I prefer; every day and every moment brings the gift of change to us which is always a door to a better, more fulfilled future.

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Business Landscape

5 Steps To Cutting The Fraud Of A Cash-Driven Society In Africa

African consumers still prefer cash transactions – here’s how to stop this from impacting on your business bottom line.

Chris Ogden

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There is an issue when it comes to transactions in Africa. That issue is cash. There are plenty of reports that point to the percentage of people who remain unbanked on the continent – it’s high. There are also reports that talk about how those who are banked use their accounts as little more than cash repositories – money in on payday, money out on payday. Why?

The African consumer doesn’t trust the system. They also face significant difficulties in rural areas that have limited card-based services and access to cashless transactions. And bank charges are hefty, eating into their pockets.

Pay attention: Cash is king

Your consumer isn’t banking savvy. They have a bank account because their employer wants to pay via EFT or because a sales rep got them enrolled, but didn’t explain exactly how the banking system could work to their benefit. They don’t trust banks, they don’t like the transaction fees and cash remains the currency of choice. In this world, cash is king. For the entrepreneur this cash-based society has both challenges and opportunities.

Related: Strong Company Culture Fattens The Bottom Line

The challenge: Cash is easy to lose

If the majority of your business transactions are carried out with cash, you run a big risk. Cash is easy to steal as transactions are rarely audited and accounted for. Unethical employees can put half in their pocket and half on the books, directly impacting on your income.  Paper money is hard to audit and track, it is expensive to bank, and often undeclared.

The challenges lie in the land where you are the entrepreneur receiving the cash, but the opportunities lie in helping other people to manage their cash.

The solution: find ways of tracking cash

The business has to be smart. Allow cash transactions to remain a part of the process, but use services that facilitate some of the collections and ease those headaches. Companies often use cash management companies, but their price tag makes handling of cash even more expensive.  Fraud is rife in the cash market. There are many ways to skin a cat, but handling cash in without technology to track it can be dangerous. Any mismatch of manual records and payments needs to be carefully analysed to pick up any discrepancies.

An alternative is to employ a service provider who can manage the cash transactions for you, but this will also be a cost to the business, Retail stores can collect on your behalf, but they want you to pay a service fee.  Understandable costs, but ultimately each one impacts on the bottom line.

The technology opportunity

One opportunity which has already started to edge into the mainstream is the use of eWallets and digital cryptocurrencies. Cash carrying individuals can swap these out for virtual monies that they can use to manage their payments. M-PESA in Kenya is a superb example, even if it never really got a foothold in South Africa.  For the entrepreneur that wants to engage with the cash empowered customer, these solutions could potentially help overcome the hurdles of trust and cost and ensure security on both sides of the fence.

Related: Your To-Do List Can Boost Your Bottom Line

The final countdown

What it boils down to is this – cash exists and cash-based transactions and attitudes are unlikely to change overnight so the entrepreneur needs to invest in solutions and systems that manage and audit transactions carefully. Ensure there are various control measures that can pick up anomalies, give people the opportunity to unpack these anomalies and then identify any issues.

Ultimately, if your business is to successfully avoid the multiple opportunities for fraud in the cash transaction society, then you have to invest in tools that will ensure your cash is properly managed and that you’ve chosen a well-known service provider to do so. Otherwise you’re just swapping cash fraud for technical fraud…

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Business Landscape

Are You Forgetting To Think About Your Business Strategy?

If you want to make money, save money and improve your efficiencies in 2018, you need to keep reviewing your strategy.

Ed Hatton

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It’s hard to keep upwith the pace of change. Economic uncertainty, disruptive technologies, fast-changing consumer needs and complex digital marketing means entrepreneurs have to move fast just to stand still. While managing constant change this is easy, but dangerous to forget about strategy. A couple of pertinent questions: What are your business and marketing strategies? Who owns them? How many people in your organisation understand them? When last did you review them to see if they are appropriate now, and likely to be appropriate in the next year or two?

Every organisation, from tiny businesses, clubs, NGOs and start-ups to much larger companies would benefit by taking time out to review key strategy issues. I suggest you examine whether your target markets are the right ones, and are still buying enough to meet your sales targets. You should ask if your sales channels, pricing policies, promotional messages and the media used are right for the times.

  • Do you really know what your target market needs and how those needs are changing?
  • Are your products and services providing solutions to those changing needs?
  • Does everyone in your organisation know what differentiates you from your competitors?
  • Do you have the right people?
  • Is your financial strategy still sound?
  • What about purchasing or manufacturing — is it still as cost-effective as it could be?
  • What are your competitors doing now?
  • What are they likely to be doing in future?

Related: Guru Ed Hatton on Marketing On A Tiny Budget

Get out of your comfort zone

These are tough questions, but if you ignore them, your organisation may drift along in its comfort zone in the hope that everything will work out. A company that continues to try to sell familiar products to anyone who will buy, and does not know what its competitors are doing is taking very high risks in a changing environment.

The risk increases if your prices reflect your efficiency or otherwise at product procurement rather than the value they deliver to customers. Risk rises to danger levels if few people actually know and understand the strategy, because they will usually keep their heads down and do the same old things.

Start the journey

Strategy development is like a journey. You know the starting point, you decide on your destination (your goals) and then you map out how to get there, which is your strategy. You have to consider the time it will take, the resources you will need, especially money and skills, and how you will know you are still on track (your milestones). Start at the beginning; ‘we know where we are’.

Do not assume everyone has the same idea of where you are, especially your management team; you may be surprised at the distance between perceptions of where you are now. Then set the goals and recognise that the future may not be what you envisage. You will have to be flexible to cater for change in a different economy.

Using questions like those in this article, map out the strategy of how to get there. An outside facilitator is a good idea for a strategy session but if you choose to run it yourself be careful that your management team does not only tell you what you want to hear.

Related: What Should You Cut First When Times Are Tough?

What great strategies are made of

Keys to good strategy in these turbulent times are to really understand your target market needs and provide solutions at a price that the customer regards as fair value. Two other ideals are to provide the products or services in a manner convenient to the customer rather than to you, and to inform the customer of the advantages of your solution in a manner and in media that the customer trusts. You may recognise the venerable 4Ps of marketing in a new guise; outwardly focused, concentrating on the customer.

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