Q2: What can a company like SABMiller do to meet the needs of opportunity entrepreneurs and of survival entrepreneurs? Are there things a company like ours can or should do?
This will be contextual. In some countries/regions the enabling environment is quite healthy (eg. it takes very little time to register a business, the business environment is relatively stable and these types of enabling factors reduce risk for an entrepreneur,) in other cases it will be prohibitive for SME entrepreneurs. In some countries the banking environment is extremely challenging for SME entrepreneurs, in other countries it is less of an issue, and access may vary considerably between rural and urban contexts.
A good approach would be to
- systematically understand the constraints and work out what you can live with as a status quo and what you can change at what cost.
- run an optimization equation; what are the risks (of achieving success) and what are the returns (social, economic or other defined) of any intervention and what is the return on investment
This can help guide well designed interventions at effective cost/return rates which manage risk
Great posting! I had a question in regards to the result framework used by SABMiller when evaluating the scalability and sustainability of those business models. What were the specific key aspects used to determine these indicators when evaluating the businesses they encountered, and how were they able to better integrate them in the global value chain?
And that's where lies one of the great opportunities in working with survival entreprenerus. How one company, in theis case SABMiller with its 4e tenderos, can expand the vision, the experiences, the inspiration... that tenderos have access to so they can improve their businesses by innovating, and with that, will come an improvement in their selfsteem, another core issue in this segment.
Miguel - is there anyway to help transform survival entrepreneurs into opportunity opportunities - through business, marketing, financial training - and perhaps around specifically developing an idea? If so, do you know of any programmes focused on that?
One of the bottlenecks micro and small companies face in accessing to finance is that they don’t have audited financial statements, sufficient collateral and longstanding credit history; and therefore are not eligible for traditional bank loans despite their potential for growth. The Inter-American Development Bank’s (IDB) Multilateral Investment Fund (MIF) has partnered with Harvard University Entrepreneurial Finance Lab (EFL) to develop a very innovative risk analysis tool based on psychometrics.
Based on its academic research, EFL identified a significantly high correlation between the loan repayment rates and the personal traits of entrepreneurs. In other words, many entrepreneurs (mostly survival) who don’t qualified for loans due to the reasons described above, consistently demonstrate personal traits that are predictors of becoming successful business owners.
The tool evaluates the business loan applicant’s personality, intelligence, business skill and ethics, to predict his/her future repayment capacity. The MIF is now providing technical assistant grants to financial institutions in Latin America and the Caribbean that wish to be pioneers in implementing this tool for solving one of the most acute constraints of survival entrepreneurs. Stay tuned!
Hi Sophie - welcome. I'll let SABMiller respond to your specific question, but thought you'd be interested to hear that at an event we co-organised yesterday in London with the World Business Council for Sustainable Development and the Business Innovation Facility, we looked at this issue. We'll be posting the audio online soon for those who couldn't make it.
Miguel, really provocative statistics - thanks for sharing. I can think of a number of companies (and one social entrepreneur, come to think of it) that I've worked with that have found that the women entrepreneurs in their value chains actually had limited appetites for growth because their main concern was for stability, so they could provide for their families, and/or they didn't want to challenge cultural norms too much around the "proper" roles for women. Reading all the back-and-forth on women in the workplace here in the States (Cheryl Sandberg, Annemarie Slaughter, etc. etc.) this seems like a tension women face around the world almost regardless of socio-economic status! Would love to hear of any examples of programs that have successfully cultivated or supported women opportunity entrepreneurs from survival stage. Coca-Cola's 5by20 initiative is focusing on women entrepreneurs but many are within the retail segment where as Andres mentions perhaps the potential for growth is going to be limited for most. Not all, I'm sure!
Cooperatives are a great solution to some of the challenges that large companies face in developing supply networks among micro and small producers: volume, quality, certainty. Many companies in Latin America, especially agribusiness, are actively helping the creation of cooperatives in the cacao, coffee or quinoa (http://www5.iadb.org/mif/Portals/0/home/Infografia-Quinoa-web.jpg) value chains per example. On the minus side, helping micro and small farmers to join in a cooperative with good governance and, even more importantly, good management skills is a very time consuming and hard task.
The concept of pivoting is harder when you are barely out of survival mode. How can these entrepreneurs accept failing faster?
Hi Zahid,
It is a fundamental distinction. I feel is almost unfair to push 'survival' entrepreneurs to take more risks, grow or increase the sophistication of their activities. Sometimes the best strategy is to link a jobs fund with the enterprise development initiative supporting survival entrepreneurs so that they, or their family members, can find a job (less risk+more stable income).
No, Zimele has four funds, one of them supports supply chain SMEs and the rest is outside. Our community fund supports more than 26 thousand SMEs in rural communities via a network of business hubs.
In terms of the differences between entrepreneurs
you might expect survival entrepreneurs to have less business skills, less of a traditional entrepreneurial mindset, and less of a safety net. This has implications for being careful about what sort of risk you want to encourage such entrepreneurs to take on, which links back to intervention design.
Opportunity entrepreneurs will have different needs at different stages but in general
- mentoring that is able to support them at different stages. Often an entrepreneur will plateau at a certain stage and wont have the skills to go to the next level due to some limitation (eg, lack of formal finance systems, uncertainty regarding how to recruit structure and train management etc., how to prepare a business plan to understand all the different facets of the business etc.)
- Access to finance - that can grow with them as the business grows but is sensitive to all the risks on both lender and borrower side.
In terms of how SAB Miller can play a role, on the mentoring side, SAB Miller can help support this activity as it is difficult for market mechanisms to provide the mentoring needed within the means of the entrepreneur.
on the finance side there are a range of things that can be done including steps to ensure finance is accessible by developing relationships with financial intermediaries and identifying what would be needed to make it viable (eg, loan guarantees or shared risk arrangements to coax financial intermediaries into the space)
Enabling environment is more challenging and long term. We usually take a pragmatic approach of identifying opportunity within the existing status quo, rather than requiring a change in the status quo to ensure success, while working quietly in partnership with government entities to identify and implement opportunities for improvement
Beth, you can find interesting this just launched program: http://www5.iadb.org/mif/HOME/News/PressReleases/tabid/467/artmid/3819/articleid/55/language/en-US/Default.aspx
It will buid on Endeavor Uruguay 2010 program “Women Entrepreneurs Breaking Down Barriers,” which raised the awareness of more than 800 women interested in creating and developing businesses. As part of the program, a Survey of Women Entrepreneurs on Gender Barriers in Uruguay was produced, which revealed that women entrepreneurs in Uruguay, in addition to having difficulties reconciling family and professional life, face negative stereotypes, lack positive attitudes regarding their own personal abilities, and are not aware of success stories of women enterprises that could stimulate their entrepreneurial interests. Building on the experience of this program, the project aims to expand its scope and include specific training, mentorships, and personalized advisory services for women entrepreneurs with micro, small, and medium-sized enterprises .
Survival entrepreneurs are a key part of our distribution chain in Latam. Opportunity entrepreneurs are a key part of the supply chain. For the former we are developing a special program to support and improve them called 4E, with the help of the IDB and FUNDES. For the latter we have a special development program aimed at increasing their competitiveness in Colombia, also done with FUNDES.
Hi Marzena - thanks for sharing your Ashoka Changemaker insights! That Tribanco case is interesting - do they partner with companies to support entrepreneurs in the value chain?
Q3: Where do we need to bring other players into the ecosystem - like banks, government agencies, NGOs, other large companies - to support each type of entrepreneur? How can we incentivise these players to participate?
I wouldn't dare to say "no, never" because there are a few cases of survival entrepreneurs transforming into opportunity entrepreneurs, but I would say they are more the exception that the norm. One of the main issues here is the motivation behing the entrepreneurial activity. In the case of survival entrepreneurs their main motivation tend to be to earn an income. In the case of the opportunity entrepreneurs is to pursue a dream or an ambition.
One way of incentivizing players to join in developing an entrepreneurial ecosystem is by providing examples of peers that are already doing it. In other words, if companies see what SABMiller is doing it and they get to understand the reasons behind it, there are more possibilities they will also join. Same goes with universities, municipalities, governments, etc. Leading by example is a very powerful motivator for others to follow.
Zahid in response to your question before
Companies like SABMiller can help meet the needs of entrepreneurs in a number of ways. Obviously, they can invest in training and seed funding for promising entrepreneurs. But beyond funding, they can share the expertise of their employees and use their purchasing power to incorporate small businesses into their supply chain.
In Honduras, TechnoServe worked with SABMiller (through local subsidiary Cervecería Hondureña) to conduct two supply chain development projects and implement a small retailer training program. The aim of both programs was to develop and strengthen the management and entrepreneurial skills of the micro enterprises working with SABMiller through targeted business development training and a dedicated aftercare program.
TechnoServe worked with 145 small and medium enterprises, strengthening interactions between Cervecería Hondureña and its suppliers and retailers, improving operations and transforming businesses into more sustainable and competitive enterprises, creating a replicable model of assistance for future use by SABMiller, and contributing to local economic development. As a result of this program, participants have shown a greater understanding of business leadership and improved their organizational structures and ethics, and 58% of small and medium enterprises experienced a 25% increase in average monthly revenues.
Tribanco case is REALLY interesting actually - would recommend SABMiller chat with them in Brazil, or perhaps even more broadly. Tribanco is an arm of the Martins Group which is a wholesale distributor of "white goods" (so non perishable). Martins recognized that its business could suffer with the entrance of big box retailers - since its customers were mostly small stores - so its strategy became to help the small stores grow. They have really interesting training programs (which stores pay for with loyalty points) and also Tribanco which provides access to finance for working capital, store upgrades, etc. Tribanco also provides Tricard which is a credit card that small shop owners can offer to their customers (to replace the system of writing it down in a notebook). The Tricard can even be branded with that store's name which is a huge source of pride for a small shop owner! Tribanco is a solid IFC client