Tuesday, February 14, 2012

So What IS an “Entrepreneurial” Ecosystem

Any economy is an ecosystem – all the pieces are connected, often in surprising or indirect ways. But what makes it “entrepreneurial”?

How can we measure its “entrepreneurial-ness”?

In honor of TechStars’ David Cohen coming to town, I’ve updated my thoughts about how we take the state of the art of what we know and… put it to good use!

We have now officially reached over 100 different formal definitions for “industry cluster”… mostly circular. With entrepreneurial ecosystems, the most common one is “has a lot of entrepreneurial activity”… LOL but what if we want to predict? Wouldn’t a few metrics and a few slam-dunk policy prescriptions help?

Reality #1: A healthy ecosystem is one that encourages and nourishes the entrepreneurial mindset. (I know, I know... we don’t have good measures for that either…)

It nourishes it broadly & deeply – in healthy communities, people “get it” – not just the entrepreneurs and maybe service providers, but it’s in the air. I had been in Malmo, Sweden’s great MINC incubator for 30 minutes & I felt like a slacker, I need to start a venture. Had the same feeling in Chalmers’ Encubator. Or anytime I walk on Stanford’s campus. In those places, opinion leaders, especially the media get it. The “person on the street” gets it. (There are places that never get it – b-schools are remarkably blind, painfully so. But the students can get it!)

Reality #2: We do know critical predictors of entrepreneurial activity. There are three proven predictors and isn’t that a good place to start? [And, yes, I talked about this in an old blog post [http://goo.gl/zHAQQ ]

Short version? Entrepreneurial Capital includes…
                                           Human capital.
                                           Social capital

Human Capital?

Simply ask: How many people believe they are personally prepared to be an entrepreneur? Not just prospective entrepreneurs, but how many NON-entrepreneurs understand what needs to happen? How else can an inherently bottom-up phenomenon take off?

Can this be an illusion? Sure. The data reflects people starting businesses not whether they succeed, so we are already back to the entrepreneurial mindset. Knowing facts and even learning skills is NOT enough, not remotely enough. You must cultivate the mindset of an entrepreneur. Better still, cultivate the mindset of an expert entrepreneur [in the cognitive sense a la Gladwell’s book “Outliers” – if you haven’t put in your 10,000 hours, don’t tell me you’re an expert, ok?]

What does a healthy ecosystem provide to grow entrepreneurial human capital?
Training, sure, but it has to be REAL learning. To move from a novice to an expert, you need metacognition [knowing your own mind, which means intensive reflection].
You also need peer mentoring and support. It’s a lot easier to shift mental models when amongst friends. Why do think immersion events like Startup Weekend kick so much butt? [read me for more: http://goo.gl/K6TBn]
You need expert mentors; we all need people who are at our level or higher to coach us through the often harrowing shifts in mental models. Or why TechStars kicks so much butt…
And you need a maestro or two to make all this work. (And what’s funny? There are NEVER the people whose job title says so.. But in a healthy ecosystem everyone knows who these liaison-animateurs are! [google it!]

METRIC/PREDICTOR: How many deeply experiential learning activities are going on? How many groups are just meeting up, whether social media or digital imaging or hackathons or… ?

p.s. Did you know that Steve Blank is making his killer Lean Launchpad class from Stanford available online... for the cost of the text? And the Startup Weekend gang has recruited volunteers to hold in-person meetups staring in late March? If you want in, call me. If you want to help, call me. (Even if you’re not in Idaho, I’m happy to hook you up!)

Social Capital?

What would your momma say if you started a business? We are blessed in the US to have reasonably supportive social norms but it’s not quite universal. Does the media celebrate entrepreneurs? Do our civic leaders? (And do they actually get it?) Do our other institutions really get it? Even the most bureaucratic institutions can think they are pro-entrepreneur but if they don’t understand how entrepreneurs think, they are at best limited and at worst counter-productive. (Odds are, they think they that they DO get it… Yikes and…. Sigh.)

EMPHATIC POINT: Bureaucratic thinking will never get entrepreneurial thinking. Institutions operate top-down/ They LIKE top-down. But they CAN be helpful.. IFF the right people get it.

A healthy entrepreneurial ecosystem is a framework that enables and encourages the emergence of opportunities.

METRICS/PREDICTORS? So how do we know when Very Important People get it? Good place to start: Do they understand how an entrepreneurial economy works?
Do they get… churn? That to grow 1 million jobs could mean creating 10 million new jobs while 9 million jobs exit. It’s normal, it’s healthy & it freaks people out.
[Actual data from mid-2010 to mid-2011: 41 million people took a new job while 40 million left a job. Crazy? Yup. But healthy.]

Do they get… execution is far more important than ideas? The more ideas/intellectual property we have, eventually we get more ideas implemented. BUT the more ideas get implemented, it has a big (and quick) effect on ideas. The innovation pipeline is like pushing on a string. Why not pull instead?
In practice, this means… invest heavily in execution/implementation not on “creativity”. [p.s. Dick Florida agrees, btw.]

Do they get... distinctive competence? Do people in your community migrate toward roles where they add the most value to customers. Not what they do best (a/k/a “core competence”) and certainly not to what they WANT to do (or claim their charter or funders or board insist...) but where they add the most value. If people buy this, turf issues are far more manageable. So are your service providers doing things that add the most value or doing what they feel entitled to?
The same is true for economies. Ireland became the Celtic Tiger by focusing on 4 niches where they already had a sustainable competitive advantage that they could build on – all university research money went to applied research in just those 4 areas plus all industry incentives. It paid off almost overnight (and when they forgot those lessons... oops!) So in your community are leaders focusing on niches where we already can compete or worrying too much about the past?

Do they get… the economy is an ecosystem? That it is a messy web of networks? That we need to encourage connectivity? Read this: http://bit.ly/Karen_S
Who are your community’s “influentials”: Are they the people that control access to resources? Or are they the people who connect? (You can’t do both, alas; if you do both, you’re a resource-controller.)
Are your connectors truly liaison-animateurs? [I told you to google it ;) ] Are they proactive? Are they helping others to become connectors too?
In a healthy ecosystem, more and more people know more and more about the ‘map’ of the ecosystem and proactively share that intel. (Again look at Stephenson’s diagram…) Alas… very, very few communities have a detailed (and accurate) shared map of the ecosystem. If they have a map at all, it’s just a laundry list of the ‘players’…which tells us NADA about how to play the game.

p.s. Do they get… the economy is an ecosystem.. redux? Something entrepreneurs can lose sight of is that it’s an ecosystem that is highly and unpredictably interconnected. It’s NOT just new firms but also older firms. Not just small firms but large ones too. Urban & rural. High tech & low tech. Growing & shrinking. For-profit & non-profit. Even public sector & private sector. We’re all in this together folks.

Now that I’ve probably depressed you or inflamed your “Boulder Envy” or “Malmo/Gothenburg Envy”… anything we can do right now? Affordably? Let me offer several ideas where Norris is the Big Slacker - feel free to kick my butt into gear, ok?

Educate Opinion Leaders
Experiential entrepreneurship training by our best & brightest – and start nourishing the mindset broadly & deeply across your community. Find the fertile ground – youth entrepreneurship is maybe the #1 no-brainer for development. Seniorpreneurs are red hot as are disabled veterans, etc., etc.

Policy briefings for civic officials. [OK, Norris is really the slacker here...] Tell them that we bring good news.. ‘cause we do! also...

‘Visioning’ is such a New-Agey term so lets call it a ‘listening session’ – bring together a cross-section of the entrepreneurial community [broadly defined, see the “p.s.” above] and figure out where would we like to be in, say, 2020.

Everyone a Liaison-Animateur?
Why not REALLY map the entrepreneurial ecosystem in your community? Not just make lists of entrepreneurs, service providers, etc. but a real map of the playing field. (Karen Stephenson charges up to $100K to do studies but we can get a rough map for far less & mostly sweat equity. I have the software.)

The visioning, er, listening session connects with this beautifully – gives us a killer roadmap for moving forward productively. Also cheap to do. And there are terrific experts to help us pull it off… magnificently.

Maybe start with asking your community’s entrepreneurs what will trigger them forward. NOT what they are lacking and NOT what the barriers are, but… “What’s the one thing that would trigger you to start (or grow) your venture?”
                  [hmmm. .I suppose that’s one more diagnostic: Do we focus on what we have or what we don’t have? Whether it’s a civic leader or a trade group leader or… ourselves!]

I am really, really interested in your thoughts on this. Please pass this along to anyone else who might want to strangle me, er, buy me a martini. It was fun to write – thank you for reading this far.

Who’s with me????? [not to sound like Bluto in Animal House ....;) What AH character should I be?]

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Anonymous Karen said...

@ Reality #1 and Chalmers in particular:
I am so happy that you got the feeling that the students ‘get it’ when you were at Chalmers and Encubator - we are very proud. This year we will be celebrating 15 years of operation and 50 companies started! But it is certainly not always the case that Gothenburg in general ‘gets it’(unfortunately). Though I should not complain because Sweden is generous and responsible in its innovation/entrepreneurship funding (relative to many other places) and Sweden is generally in a good economic position (compared to the rest of Europe) so such funding is still available.

But there remains the challenge of countering 'assumptions' presented in the media. We have had two recent examples (one on television, on in the local newspaper) where we have felt the need to speak up about judgments made around entrepreneurship and entrepreneurial activity. I think it is helping – we have certainly garnered some (positive) attention from it. In the recent article where we responded about the impact of university based incubators and particularly those that utilize surrogate entrepreneurs, it was kind of funny because the caption under Mats stated ‘har koll’ – which basically means ‘has knowledge’ (or in street terms) knows his s**t. It is a challenge - even in the academic arena we struggle with 'definitions' and this gets complexified when terms like entrepreneurship get picked up in popular culture

@ entrepreneurial capital
I know it’s not applicable in all forms, but in the type of entrepreneurship we deal with, IP (and as it is often transformed into intellectual capital) is often pretty important. We have had many a venture shut down due to lack of IP control position, and/or lack of ability to establish or translate intellectual assets from ‘property’.

@ metacognition:
The metacognition really rings true for our environment. We are continually trying to get/help the students build self-awareness, ability to see and appreciate others interests and perspectives – so that they know how to speak to them, as well as ability to break down what they get told relative to their own situation – adopt what is applicable and adapt the rest. A lot of them fight this early on – they just want the ‘right’ answer…
A lot of them need reminders, after some time, that they can push issues. Sometimes they get burned early on, and then they react more cautiously. We have to boost them up again… sometimes I feel like it is about a process of teaching them how to interpret their gut – to translate that emotive feeling into argumentation they can reason around and even articulate to others.

12:59 PM  

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