Entrepreneurship 2.0
Thoughts on the state and future of entrepreneurship, innovation & management
Feb 26, 2009
White-knight or grey-mouse approach in crisis management
What is a truly innovative approach? Launching the idea of a war cabinet in which you, not so secretely, dream of being part of? Or do you prefer the idea of a company that collectively decides to cut back 20% of their wages (and labour time) in order to avoid staff-reduction?
Both are hot items in the Belgian press. The war-cabinet (launched by Geert Noels for-the-time-being-but-looking-for-a–new-job head-economist of Petercam) wants to assist the governement in managing the crisis by defining actions, which the government and its hundreds of advisors is apparantly uncapable of finding themselves.
I agree, we need to think out-of-the-box, sure we need creative actions, BUT, I sincerely doubt that yet another counsel brings the answer.
It is as if all the advisors, the economic cabinets, the centrale bank have been fast asleep and we are now waken up by the white knight and his war-cabinet. I do not believe in directive top-down actions. Why would the war cabinet be able to do something different in a top-down manner that all the others have not been able to accomplish? Stop the discussions about who should be in the war cabinet. We do NOT need a war cabinet.
What we need is more Jaga’s, a medium sized company that collectively decided, from the CEO to the janitor to take a 20% pay-cut until the crisis is over. All work 4 out of 5 days a week. All earn 80% of their salary. A great way to avoid, cuts in jobs and be sure that once the crisis is gone they can head full steam ahead in the shortest period of time.
That is what we need. Let the companies be creative about their own solutions. Give them the freedom to operate and implement creative solutions that adopt to the slow-down but avoid a break-down.
My personal preference: let’s reward the bottom-up approach.
Nov 11, 2008
Design London stirs it up
Or maybe you fancy floor tiles that illuminate when you walk over them. Used in interiors they can function as safety lights or way-leaders in hospitals or as automatic lights in private or public spaces. In public spaces they can contribute to the safety feeling indoor and outdoor.
You can also find printed books with electronic links. The printed book combines an old-fashioned book that connects to the net and combines electronic links to websites and electronic content. By double clicking on the links with your fingertip you are automatically diverted to the book’s electronic counterpart.
Maybe you are a nurse and interested in one of the designer dispensers for alcohol hand gel to be used to reduce infections in hospitals. The dispenser fits to your belt and counts the number of times you have disinfected your hands the last shift. The dispenser transmits your statistics to the central computer and keeps track of you and all your colleagues. This way, hospitals can get a clear view on the behavior of their medical staff and implement a hospital-wide MRSA- policy.
I have seen all of these products when I was invited to visit the Design London offices. Right behind the corner of the London Museum of natural history is the very impressive entry hall and annexe building of the Tanaka Business School of Imperial College. After a ride to the 3rd floor you enter the incredibly stimulating space of Design London. Its logo is bright pink, its wall is pink. It al has a bit of a stirring effect (stir stands for simulate, teach, incubate and research, not all necessarily in the same sequence).
Design London incubates business ventures based on successful product design. It is a joint venture between the Royal College of Art and Imperial College. The basic idea is to incubate ventures based on promising product designs (the artistic side of the equation). The incubator coaches and guides these embryos to the level where they can become companies that are sufficiently mature to collect their own funding (the business side of the equation).
What makes it a notable initiative is its combination of the business school acumen and experience and the creative forces of the Royal College of Arts. Maybe it can bring us some inspiration and evaluate whether Flanders (or Belgium for that matter) can make its own design incubator? We already have our Flanders DC (district of creativity). I would certainly welcome to have our own little Design Flanders.
Oct 29, 2008
Entrepreneurs to the rescue
The credit crunch is no longer a problem solely to the financial sector. Other industries to are facing the consequences. Some have reduced production, others even shut down complete production plants (cfr car production facilities). We have even had the first bankruptcies. Unemployment is on the rise and at the same time it’s getting increasingly difficult for organizations to get loans at affordable rates. It’s not looking good.
Oct 23, 2008
"Peeters & Pichal" on top management remuneration
This morning I was invited by "Peeters & Pichal", the popular Radio 1 show about money, personal finance and everything related, to discuss the remuneration and severance packages of top managers. It proved to be very interesting. You can still listen to the radio item here (only available in Dutch).
Oct 22, 2008
Are executive's compensations imoral?
Oct 10, 2008
Size does matter
For the past few years, we've seen numerous mergers & acquisitions in every market and industry. Whether you're in banking, insurance, it, utilities or travel; consolidation is the key. Until recently. It seems the sky has its limits after all. Within just a few weeks, 'scalability' has become highly overrated.
Is it really? Or have we simply been overambitious, neglecting what was so obvious: there's big and there's 'too' big. Does size really matter? And, if so, than what size should we strive for? What's feasible? And perhaps more important: what's not?
Let's have a look at the current financial crisis and Fortis bank in particular. Less than six months ago, Fortis was the pride and glory of the Belgian financial industry, solid and trustworthy (listed on the Brussels' stock market Euronext). Without doubt, our largest and most successful bank. It even grew beyond our borders through several mergers and acquisitions.
It's management took pride in turning Fortis into a top player in the European finance theatre. For years they build on the company's future, the latest milestone being the acquisition of ABN Amro. But timing sucked, so it seems. In just a couple of weeks, Fortis is back to square one: a regional, small and even partially government owned bank. Was ABN Amro a bridge too far?
Some argue profanity drove Fortis' management to buy ABN Amro. Others don't care about the reasons why, but simply found it too expensive. Honestly, I don't know the answer. But I can imagine that - together with many managers - the board at Fortis really believed that 'scalability' is an important catalyst in today's highly competitive world and therefore they simply had to proceed.
Scalability is the mantra of modern management. It is the number one explanation for the consolidation wave we've seen in every industry over the past years. But is it always to a company's advantage? Look at Fortis: can one manage a company with over 85.000 employees? Does 'being big' implies 'being efficient'? I believe that size does matter. Scalability comes at a prize: inefficiency.
Sure, scalability can be to the advantage of two separate companies, especially when their markets or products are overlapping and both companies are still in a growth scenario. However, if they're active in complementary markets or produce complementary products, I'm not convinced that the combined companies can turn their scalability to their advantage and become more efficient.
An oil tanker can be larger than life, but that does not make it any more manageable, and when the storm's coming I can imagine you're better of in a smaller, more manageable vessel.
So, if scalability is no guarantee for success, shouldn't we refrain from our consolidation plans? Small can be beautiful, even if it's not scalable. Remember, to everyone's surprise, it was not the hare who won the race. It was the tortoise.
Oct 2, 2008
Who dares, wins
For once we have found something our politicians, captains of industry and media fully agree on: Belgium needs more entrepreneurs. If we don’t find them, we’re soon to see our economic fertile soil turn into a desert. But despite all measures and initiatives such as Flanders Enterprise (VLAO) or Flanders DC, we’ve seen hardly any successful start-up, let alone one that made it to a scalable level. Why? Never before we had that much venture capital available on our market. Word has it that local investors are loaded. But, there are simply no(t enough) interesting projects to spend their money on. Really?
The ARKimedes Fund for instance, which invests in promising SMEs through the activation of venture capital, managed to gather over 200 million euros from private investors in no time. But in the following 12 months it invested only 23 million euros in 38 companies. So on average 600,000 euros. That is significantly lower than the current statutory maximum (1.5 million euros), and even lower than the initial maximum of 1 million euros that was imposed by the government.
And what about the Business Angels, the network of (former) entrepreneurs who want to invest in promising start-ups or fast growing companies? In itself a laudable initiative, as expertise is of inestimable value for each young company. But the project has not really lift off. The Business Angels invest an average of 70,000 euros per project. If you are an entrepreneur and you need to fetch 600,000 euros, not even that big a number, you’ll soon need 10 guarding angels. It’s simply not worth the effort.
The question must be asked as to whether such an investment is realistic at all. Is it really promoting entrepreneurship? Or is it a waste of time and money? I believe it is actually too much to fail, but also too little to start a company that can make a difference on a national, let alone an international scale. One thing is for sure: foreign investors have a whole other idea of risk assessment than their Belgian colleagues. Several Belgian entrepreneurs have managed to attract millions of dollars from foreign investors, and they had only a simple business plan to show for it. Something they would never have achieved on their native soil.
The Belgian company Acquia for instance, the consultancy firm of Dries Buytaert, managed to convince US based investors Northridge, Sigma and OATV to invest 7 million dollars. Buytaert didn’t hesitate for a minute. Today, he’s delivering services on Drupal, a very popular open source software product (by the way: invented by Dries himself). And that’s probably what’s keeping Belgian investors from helping companies like Acquia: they don’t have the guts to invest in services or products of which the intellectual property rights aren’t perfectly protected. That’s the very definition of open source software. Such a project is too daring for our venture capitalists.
But why do some entrepreneurs succeed to attract foreign funds, often ten times the size of the limits set by the Flemish government to the local initiatives?
As far as the investors are concerned, two reasons: economies of scale and simply having the guts. Our local fund managers represent only a fraction of the large international funds. Not the absolute amount per capita is a decisive element, but the extent to which the funds are dispersed. Moreover, they use very conservative criteria for selection and there is little or no room for seed capital (the initial money needed to start a company). Our best bet would be to invest as much as possible in seed capital. Sure, the risks are higher, but by inserting money from the various existing funds, we can spread the risks and we’ll finally have a tool that allows us to keep our entrepreneurs and their companies in Belgium.
On the entrepreneurs side it's also chrystal clear: dare to think big. A start-up company cannot be proud of growing slowly on the local market. From its very conception, it should have international ambitions. Companies like Acquia or NetLog (yes, this popular social network site is 'made in Belgium') have international ambitions from day one and... they act on them. That's why venture capitalists have faith in these projects: they too think big. Remember: who dares, wins.