Three very good questions and I wonder what a small potential entrepreneur in say a village or small town in Africa would think if they read this discussion? My sense is that they might be looking for more practical support, provided in a rather more holistic or coherent way. So a combination of (in no particular order):
- training in a trade or business that they might be in or wanting to enter
- finance, but recognise that a small business might need more than just basic microfinance, to cover say working capital
- basic financial training, so for example they can price their products and services properly and manage their cashflow
- basic marketing training so that they can promote themselves properly and recognise where the opportunities lie
And ideally backed up by some degree of continuing support and business advice. There are of course other factors such as safe affordable access to transport (perhaps the biggest block to 'market access) and access to reliable power. Ironic that we now see many locations with access to the Internet but still with limited power and transport...
Perhaps the biggest contribution that an organisation like SAB Miller can make is to take a lead in pulling these components and the relevant organisations together. As a successful business it understands what is needed to build a successful business in a way that with all due respect, most NGOs and government departments do not. However, they have other very important roles to play
We heard from SABMiller partners in Uganda on March 2. I was impressed by the work that is going into the programmes as part of supply chain. The lesson for me and perhaps multinationals from that experience was that scale can be achieved even at the macro level and what is needed is commitment to invest in human resources. The new products on the market demonstrated that like SABMiller you don’t have to reinvent the wheel to succeed and that sometimes working with what is available to improve it or innovate is a better option
Governments are necessary to provide an ideal business environment and I believe NGOs tweaking their programmes to say for instance bridge the gap between available skills and what the market wants would be a good use of aid money
Supporting value chain can be achieved by forming a co-operative kind of structure where micro entrepreneurs collaborate to deliver jointly PRODUCTS/SERVICES or MARKET the same.
The biggest enabler in the process is the value of trust and joint ownership.
ICT helps in developing the knowledge base of shared resources and transparencies in the process. This is specially true with highly fragmented and geographically spread entities in small business and large distribution networks (tourism and travel).
I guess this is normally overlooked and should be a point to be addressed by SAB Miller.
Thanks Ida! I think you are absolutely right with your comment on innovation... it surprises me to see how much duplication there is within the Entrepreneurship agenda and the need for alliances and economies of scale, instead of re-inventing solutions... in SABMiller, we recognise the importance of creating partnerships with other institutions in order to provide solutions for entrepreneurs accross our value chain, recognising our competitive advantages. We believe that is the best way to approach the challenges and to generate the best possible impact for the entrepreneurs in our projects.
Q1: What are the most important constraints facing opportunity entrepreneurs, and what are the most important constraints facing survival entrepreneurs? What methodologies have people used to "diagnose" and prioritise their needs?
There are important differences between survival entrepreneurs and opportunity entrepreneurs however a good framework for thinking about constraints for both types of entrepreneurs would be
- enabling environment (much of which is in the realm of government policy)
- access to finance (in the realm of financial instruments the financial industry)
- capability building (which is a mentoring/training gap)
The most important constraints facing survival entrepreneurs are: access to microcredit, a cost-effective way of accessing practical training and nurturing a can-do mentality. Survival entrepreneurs are wrecked survivals, the psycological elements are crucial and often neglected.
The most important constraint for opportunity entrepreneurs in LatAm is the lack of capital venture system and angel investors, due to lack of trust in others. At the end, what is lacking is a legal system that fosters trust between the owners of ideas and the owners of venture capital.
One similar constraint that face both opportunity and survival entrepreneurs is the “idea” or the inspiration on how to generate a valid business opportunity. In the case of survival entrepreneurs, we see too many of them investing in the same kind of business in the same geographies, atomizing the market so much that there is almost no growth opportunity for any of them. In the case of opportunity entrepreneurs, they face the challenge of time to market. Is in this phase when the access to networks probes key, for both kind of entrepreneurs, to validate their “idea
Welcome to the discussion, David. From TechnoServe's perspective, what seem to be the most pressing of the three buckets of constraints you have identified? And are there differences in the priorities for the two types of entrepreneur?
A couple of interesting data points. On average, 60% of SABMiller “tenderos” (survival entrepreneurs, mom and pop stores) are women. Meanwhile, Endeavour was having a really hard time (and not for lack of trying!!) in some Latin American countries to have women representing more than 5% of its high-impact entrepreneurs. It’s clear that women are highly unrepresented among opportunity entrepreneurs.
Recognizing the importance of women’s economic empowerment as an underutilized driver of productivity and economic growth is a first step that needs to be followed.
Note: Full disclosure. Endeavor’s statistic is a few years old, so it might have changed as I know they were working hard in addressing this gap.
I agree with you Miguel but I think there is an additional characteristic among survival entrepreneurs which is quite challenging... when working with small retailers, I have found that in many cases there is actually a lack of inspiration or innovation... which is the opposite of our definition of entrepreneurs... many of our small Tenderos have inherited their businesses from their parents and they need support to realize how, even when they didn't start the business themselves, there is huge space for innovation and growing...
A very important consideration in evaluating survival vs. opportunity entreprepeurs is the "opportunity cost" both of them face. In the case of the survival entrepreneurs, this is minimun; and that's why they move from being entreprenerus to being salaried worked with relative easiness. On the contrary, opportunity entrepreneurs face a large "opportunity cost" as their time and investment commitment is much larger.
Same happens with the consequences of failure, one of the largest blockers of entrepreneurail activity in Latin America and the Caribbean. While opportunity entrepreneurs face a considerable stigma, survival entrepreneurs not so much.
Hi Christian, welcome to the discussion. I see that you are Global Lead for Enterpise Development at Anglo American. What are your thoughts on the distinction between "opportunity" and "survival" entrepreneurs - from the perspective of, say, Anglo Zimele? And are they all outside of the value chain, or are some connected?
Our research in LatAm shows that survival mom and pop shop owners (tenderos) do not, in general, inherit their business to their children. Survival tiendas are an efeective tool to get their children out of poverty and into the middle class. In survival tiendas there is not much room for innovation, but there is for organization and increasing productivity, but we have to be honest and admit that their growth potential is limited.