The missing gap

“We will not be able to produce sufficient commercial activity through Entrepreneurship if we do not apply the Design Thinking process on the products and services that we bring to the market”.

These were the words of Venete Klein, SABS board member, company director and social entrepreneur when she spoke at the Entrepreneurship Colloquium at the University of the Western Cape on 17 September 2013.

Klein’s passion for entrepreneurship and her drive to create new value, new wealth, new money and new jobs within our economy resonates with the Design Institute’s message that design without social or economic impact becomes a meaningless act. In her speech titled “The missing gap – A Thought Leadership Perspective on impactful entrepreneurship”, Klein shed a critical eye on the fusion between public policy, grassroots needs and corporate (private sector) obligations as far as the entrepreneurial landscape is concerned. She spoke from a belief that this fusion would potentially close the missing gap in this landscape.

Here then the challenges Klein identified that could be responsible for South Africa’s gap in impactful entrepreneurship:

Challenge no.1: Uncoordinated efforts erode the efficiencies of the enterprise development system

  • Experimentation is happening all across the nation today, as government, at all levels, craft policies in the hope of creating more alternative economic drivers that can reduce our over-reliance on financial markets.
  • Even though entrepreneurship is a powerful force that engenders local and economic growth, it is not obvious that government’s policies alone can create entrepreneurship.
  • It is clear that we are still just beginning to acquire enough wisdom to create sound policies that that can be effectively translated into activities that assist the entrepreneur, on the ground.
  • Moreover, most policymakers, seems to naturally favour the “kitchen sink”‖ approach where every potential intervention that could increase entrepreneurship is tried simultaneously in an uncoordinated fashion.
  • It is in this sense that we can identify numerous incubators, government agencies, and government departments that are busy operating in this landscape, trying to effect economic growth through actively supporting enterprise development within their policy frameworks.
  • However, reality has hit home with the outcome of the 2012 Global Entrepreneurship Monitor (GEM), published in May 2013, stating that Entrepreneurial activity in South Africa declined by 20% in 2011/12.
  • It further notes that fewer than 14% of South Africans planned to start a business in the following three years. This is 13% below the global average for comparable countries, such as Argentina, Brazil, and Malaysia.
  • A system can work therefore against each other, rendering it ineffective, wasting Billions of Rands, due to a lack of coordination and integration.
  • It would be ideal to conclude that paths toward better entrepreneurship policies are clear, but they are not. When we move beyond simple broad policies towards specific entrepreneurship strategies, our ignorance becomes obvious.

Challenge 2: Corporate responsibility towards enterprise development is not leveraged to the maximum

  • In a recent study done by GIBS, it is stated there is an estimated R12 billion in potential funding available for black businesses.
  • Enterprise Development currently makes up 15% of the overall B-BBEE scorecard.
  • Whilst there is great potential in this legislative directive - it is however clear that Corporates’ obligation towards ED is often misunderstood, due to the fact that it is relatively new legislation.
  • This therefore results in limited commitment, lack of uptake, and poor communication from corporates around access to this funding stream.
  • On the other end of the spectrum, there is a perceived lack of interest in ED in the corporate sector, reflected in the fact that ED is often positioned as a social objective, rather than a commercial exercise.
  • Adopting a commercial approach, will ensure that there are joint financial gains and interests protected within this business relationship.
  • Across the globe, Enterprise Development has been embodied in various business models, including micro-finance, venture capital, private equity, and commercial lending (each having frameworks that include strong technical assistance).
  • These models are only effective when driven by real businesses with appropriate skills, experience and dedicated capacity.
  • The challenge therefore to corporates, should be to avoid having a social focus on B-BBEE compliance, and rather focus on managing and leveraging partnerships that equates to economic equity for both incumbents.
  • Should we therefore change our mind-set to approach ED from an economic, rather than a social gains perspective, a further challenge comes to light.
  • More than often, our entrepreneurs fish in an over-crowded pond, due to a lack of tangible translation of our knowledge-based economy into executable market intelligence.
  • In our quest to establish a knowledge-based economy, we have created systemic inefficiencies.

Challenge 3: Knowledge-based economy inefficiencies

  • In recent years a language has emerged that carries with it a great deal of hope and optimism. Enterprise, entrepreneurship and innovation are just three of the terms that are used, often interchangeably, but with very little understanding and clarity.
  • Since the advent of the global recession, many first world countries have proven that recessions are times of great opportunity if entrepreneurial ability can be harnessed.
  • However, SA’s economic growth prospects are in a slump and lag our developing peers in countries like Brazil, India and China.
  • Prospects for achieving our national imperatives of job creation and poverty alleviation are low.
  • In 2008 when the recession bit deeply, registrations of new products or services to market, effectively new entrepreneurial ideas, globally soared by more than 32%.
  • In SA no such occurrence happened although the expenditure on Research and Development (R&D) doubled between 2003/4 and 2008/9 (Budget Speech of DST).
  • I am indeed proud of the strides that we have made, as a country, to venture into the territory of developing a knowledge-based economy, and further to settle the National System of Innovation, which is supposed to be an enabling framework for science and technology, which aims to aid the country’s prospects for continued economic growth and socioeconomic development.
  • My criticism however, is that a predominantly technology driven knowledge – based economy becomes restrictive and have a limited impact on entrepreneurial development or the surfacing of new business ideas.
  • Further, the outcomes of R&D are not sufficiently manifested into economic entrepreneurial activity, due to the fact that knowledge archives are not translated into business intelligence which can create new enterprises.
  • It is therefore apparent why funding agencies are often approached by entrepreneurs, with Business ideas for highly saturated markets and shows an inability to differentiate themselves through new products and services for local and global market relevance.
  • The issue is not that the entrepreneur or his business is not viable enough, but rather that under such market circumstances it is more difficult for entrepreneurs to present unique business models and opportunities that will render them successful.
  • We can therefore understand government’s concern that more than R5bn is invested in R&D, but yet we operate in an innovation chasm? (Reference: The Minister of DST budget speech 2013/14: the total appropriation to the Department of Science and Technology for 2013/14 is R6, 2 billion. Almost all of this (about 92%) goes to our science councils and agencies, and to other research institutions, including universities).
  • This in essence means that the knowledge captured through research has a limited span of translation into economic activity.
  • In conclusion – having raised all these challenges, let’s apply a thought leadership perspective and try to uncover, what I believe is a critical gap.

Conclusion: Thought leadership perspective

  • I have stated at the beginning that my purpose is to uncover the “Gap” and to attempt to shed a critical eye on the fusion between public policy, grassroots needs and corporate (private sector) obligations.
  • In our quest to effect positive socio-economic change through entrepreneurship, we have ended up with:
    • Public policy that is not as effective as it was intended to be due to a lack of coordination;
    • Corporates, applying a social, rather than a commercial approach towards enterprise development funding;
    • An innovation chasm, i.e. a national system of innovation that churns out R&D at a high rate and big volumes – therefore resulting in a knowledge-based economy that is one-sided and does not see sufficient new products or services churned out into the market.
    • We are further sitting with entrepreneurs who fail because their product offerings fail to compete in saturated markets.

What do we miss in this space?

  • I have taken a look at the trends over the past few years, since the inception of the recession, and it is clear that great economies like China actively ventured into what we call a creative economy space where design plays a critical role in the innovation and entrepreneurship value chain.
  • I need to however, demystify the myth that design is all about the beautifying aspect.
  • Whilst beautifying is implied, when I refer to design, it is that particular element that is responsible to bring commercial value to an idea or what we term R&D.
  • Design thinking in essence, warrants the entrepreneur to apply a user-centric approach to its value proposition and further ensure that R&D results in commercial value. In other words, a product and service that is needed by the market, in a format for which they are prepared to pay.
  • Let’s apply this to our problem of a decrease in entrepreneurship activity as well as the glaring innovation chasm.
  • We have a total misconception about what innovation is: R&D remains an idea and therefore equates to be an invention, it is only when we apply Design (the making of a product or service that the user wants) that we can call it an Innovation, as it produces commercial value to the entrepreneur.
  • Which therefore brings me to what we are missing as a country: We will not be able to produce sufficient commercial activity through Entrepreneurship if we do not apply the Design Thinking process on the products and services that we bring to the market. It will just remain a R5bn knowledge stream that goes untapped.

Final words

  • It is therefore my plea to this panel to critically look at this notion that, as a country, our manufacturing capability is low. We do not pay critical attention to the value of beneficiation when it comes to entrepreneurship, or even ensuring that entrepreneurs apply the Design thinking methodology in their Business Plans.
  • I have attempted to prove that a different school of thought is needed in this sphere, which aims to bring a fusion in public policy, corporate responsibility, and Design Thinking in Innovation.
  • Should we get this right, it is time that we define Entrepreneurship as: “Getting ideas in the market in a tangible format that is fit for purpose, user-centric, and ultimately creating economic equity, and socio-economic emancipation (Klein:2013).
  • This will allow us to move from an entrepreneurship spaza shop mentality, to driving an entrepreneurship economy where our products and services are sought after globally.
  • This is what I call “impactful entrepreneurship.”

This perspective on the impact of entrepreneurship, or lack thereof, continues the debate which has been opened up by the Design Institute in its quest to position design as a change agent. There is an undertaking to heed the words of Venete Klein so that her ideas can become part of the dialogue driving change in our country.