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Entrepreneurship Illusions

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Illusions of Entrepreneurship

Scott Shane from Case Western has just published (in the US) The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By.

“People start businesses based on the myths we tell ourselves about entrepreneurship and then are hurt when confronted by reality. Investors believe these myths and invest money and they’re disappointed when they don’t hold true. Policy makers make policy based on these myths and then wonder why the economy isn’t growing with all these entrepreneurs now in it.”

Try taking his entrepreneurship test. I scored a massive 50%!

Clearly care will have to be taken in translating the US research to the UK context – but I am sure this will provoke some interesting conversations. You can pre-order the book here.

Blame is a primitive response – Entrepreneurship is a much better one

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“If journalists spent as much time studying the lives of the poor as they do gazing at the rich, it would help us all keep our heads on straight.

We would marvel at a world economy strange enough to sustain such gaps.

We’d learn not to blame the rich for the poverty of the poor, but we’d also learn not to blame the poor themselves. Blame is a primitive response. Entrepreneurship is a much better one.”

Prof. Jeffrey Sachs ,the Director of The Earth Institute, Quetelet Professor of Sustainable Development, and Professor of Health Policy and Management at Columbia University

Build it and they will come…or we can always ‘refer’ them to it!

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I have been asked to help various parts of the enterprise development network (Chambers, Business Links, Enterprise Agencies, community based enterprise projects, managed workspaces, load funds, credit unions, training providers etc.) to think about and hopefully improve their ‘referral’ processes. (A referral is the name given to the process where one agent in the enterprise support network refers a client of theirs to another part of the enterprise support service.)

So what are the drivers for wanting to improve the referral process?

In my book there should only be one: a genuine desire to ensure that the client accesses the right kind of service at the right time to help them progress on their enterprise journey.

This implies that the person making the referral has worked with the client to accurately help them identify what service is required and what it is expected to achieve. Sometimes this happens. Often it does not. Many referrals are driven by the referrer recognising that they are not in a position to serve the client – or it will be too time and resource intensive to be practical. They then look for a service that may be able to help and ‘refer’ the client. Or more accurately they ‘palm them off’.

Often when the referrer does take the time to identify with the client the service they need to progress on their enterprise journey the ‘diagnosis’ is based purely on technical and functional concerns and takes little account of the wider cultural and social needs of the client. This can result in clients with a tentatively held belief about their own potential on the enterprise journey being referred to judgemental and time pressured service providers who have learned to just say ‘No’! ( Or to refer them to the morass of web sites, training workshops and leaflets that is the ‘universal start up offer’). Either way the enterprise journey often hits the buffers catastrophically.

Occasions when the referrer really does their homework on the service to which they are referring and the individuals who deliver it (to find the most appropriate individual – technically, culturally and empathetically – to which to make the referral) are not common. Occasions when the referrer asks the clients permission to make a referral and offers to go with them to broker an introduction are even rarer. If the referral is actually a ‘palming off’ it may be made clear to the client that this is in fact a one-way referral. ‘This person will help you now – good luck! (and goodbye)’.

As I have already said there should only be one driver of the client referral process – a genuine desire to ensure that the client accesses the right kind of service at the right time to help them progress on their enterprise journey. In practice there are several, including:

  • the challenge of service sustainability – by making lots of referrals we can demonstrate the use and effectiveness of all of our services and make a strong case to continue to fund everything
  • the need to ration (some parts of) the service – there are not enough resources to give everyone a person centred and customised enterprise journey – we need to focus our efforts on those most likely to provide a quick return on investment – we can always refer (palm off) the rest
  • lack of skill, competence or experience – this client is a nightmare – I have got to find them another place to go!

There are of course also significant drivers against making referrals including financial drivers where the potential referrer has a direct or indirect financial interest in retaining ‘control’ of the client. If you run a managed workspace and need to raise occupancy it is massively difficult not to see every entrepreneur as a potential tenant and therefore wish to retain control of that account. If your funding is linked to the achievement of certain outcomes with clients and they should be referred before those outcomes have been achieved there can be a pressure to delay the referral.

And then there is ignorance. Simply not knowing about the full range of support that is available. When I helped to run BLU – the Business Link University as was we used to run half day workshops – tailored to meet local needs – called an introduction to business support. Participants were helped to explore the wealth of support available to support would be and actual entrepreneurs and to understand the relevance and objectives of each. I must have attended a dozen of these events over several years and was never less than gobsmacked at how little many service providers new about other parts of the network. And this was not simply a function of experience. It was a feature inherent in the siloed service design of the providers. Does this mean I am in favour of simplification agenda. NO I AM NOT! At a time when the consumer is getting more and more demanding, and the market place for enterprise is becoming ‘super-diverse’ we have to offer a wide range of niched services. However I am in favour of these being a genuine network. But that is another soap box – for another day!

A word about power. I firmly belief that the role of all enterprise support agency is to empower the client on their enterprise journey. To improve their ability to understand context, negotiate resources and act to make things better for themselves, their loved ones and their community. Yet the language of referral is essentially disempowering. We refer to higher authorities, we refer to specialists and experts. The nature of the referral relationship is essentially one of a power imbalance. Submit yourself to their expertise…. become compliant again. That is why I urge discussion about the introduction process rather than the referral process. Introducing a client to someone who may be able to help them is VERY different from ‘making a referral’. The power must remain with the client. They must decide who they work with. They have to retain control and ownership of their own enterprise journey.

I am sure there is much more to write on the subject of referrals please post comments to highlight aspects of the referral process that require further thought. If we want clients to navigate a path effectively through diverse enterprise support services we need to do much more than urge people to refer more. We need to:

  • Design services in a way that removes distorting financial/performance management drivers on the referral/introduction process
  • Ensure that the client always controls the timing and nature of the referral
  • Reduce ignorance among service providers about what else is available to introduce potential clients too
  • Ensure that all service providers are both willing and able to make effective introductions with their ONLY interest being the clients development on their enterprise journey.

Should We Forget About Start-Ups?

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I have for a number of years argued that ‘enterprise’ is not an inherently good thing and that we should not be encouraging or promoting enterprise as some sort of ‘new world economy force for good’.

At least, not if what we mean by enterprise is economic activity through self employment and entrepreneurship. If, by enterprise, we mean the ability of individuals and groups to act on the world, to make things happen, to shape their own futures and make things better for themselves, their families and their communities then perhaps we need be a little less cautious with our enthusiasm.

When I look at ‘enterprise development programmes’, especially those targeted at the poor, they are predominantly about self employment and entrepreneurship. Work with young people and schools sometimes takes a wider perspective on enterprise. But generally programmes targeted at adults view enterprise as synonymous with self employment and entrepreneurship. Funders want to know how you will promote enterprise, how you will encourage start-ups and self employment, how you will encourage VAT registrations, and how quickly you will do it.  They want you to develop basic skills of literacy and numeracy and they want you to train people.  Fast enterprise is the name of game with apparently little thought given to whether this is likely to help or harm longer term ambitions of changing the enterprise culture.

The truth is that for some people self employment and entrepreneurship can provide the perfect vehicle to a fulfilled and wealthy life. For many more it provides a subsistence lifestyle through continuous struggle. For some it ends in failure with their problems exacerbated through debt, bankruptcy, damaged confidence and self-esteem.

We should be encouraging people to approach enterprise with ‘optimistic caution’.  We should be encouraging people to think twice about self employment and entrepreneurship – because the truth is that it is a risky and difficult way of making a living. The rewards can be great, but so too can the costs. It seems that almost every week I meet a ‘successful entrepreneur’ who tells me what their business cost them in terms of marriages and families.

Encouraging people into enterprise without helping them to really understand the potential downsides is irresponsible. It damages progress towards the goal of a more enterprising culture. As more people experiment with self-employment and entrepreneurship it is likely that business start-up rates will rise – but so to will business failure rates. And each business failure will have significant negative social consequences.

There is a very real chance that these business failures will serve to put a generation off enterprise for life.

A Flow of Referrals to the Mainstream

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I was recently asked to contribute to a tender to supply a series of ‘enterprise awareness raising events’.  These would be short events held in super output areas (poor communities) designed to create a continual flow of referrals for the mainstream business support providers (Enterprise Agencies and Business Link I guess).

When will we recognise that ‘the mainstream’ is just not resourced to provide the level of support and assistance that many potential entrepreneurs from these communities will require?  They have plenty of great people, some of them able to work with this client group.  But the performance management system discourages them from doing so.  This client group often demands too much intensive support that they are just not resourced or managed to provide.

Many have forgotten how to dream, and have lost confidence in their ability to successfully shape their futures.   They simply don’t believe that enterprise is a viable opportunity for them.  They need a lot of time and support to really develop their ideas and their belief in their ability to achieve.  They are often a long way from being ‘Enterprise Ready’.  They need to explore the risks slowly and be confident that they can manage them.   Pointing them at a ‘Universal Start Up Offer’ is in many cases unlikely to provide the key to success.

It would be unethical to raise their enterprise awareness – unless the support that is going to be made available to them will meet them ‘where they are at’ – rather than be an off the shelf range of business training and mentoring.  Working with this client group is very different from working with well educated, well trained, articulate and confident aspiring entrepreneurs.

The potential for enterprise in poorer communities is immense – but it needs a more person centred and nurturing approach than ‘the mainstream’ can provide if it potential is to be realised.