Professor Daniel Isenberg, Babson Executive Education (Open Innovation in the Food Industry)

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Copyright © 2011, 2012 , 2013 Daniel Isenberg

Entrepreneurship Policy Advisors E

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Fostering Entrepreneurship Ecosystems

Daniel Isenberg May 28 2014

1

All materials © 2014 Daniel Isenberg

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Assumption: One of the reasons you have a food

cluster organization is to foster dramatically more food-related

entrepreneurship

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Copyright © 2011, 2012 . 2013 Daniel Isenberg


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https://www.youtube.com/watch?feature=player_detailpage&v=zxq4ziu-wrI

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1903

2013

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SodaStream

• HCS Invented in 1903 in UK

• Peter Wiseburgh established Soda-Club competitor 1990 in Israel

• Grows big markets in Germany, Sweden, France, Israel, NK, CH

• Acquires SodaStream, lots of debt, law suits

• 2006 huge losses, Wiseburgh tossed out

• Fortissimo PE acquires control for $16 million in 2007

• Brings in CEO with about 5% of shares

• CEO takes SODA public in 2010, $109 million raised

• Market value $367 million -> $1.46 billion in 18 months

• Revenues $100mio (2006) -> $436 (2013)

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Is this entrepreneurship?

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Examples

• Tough Mudder

• Studio Moderna (Slovenia)

• Actavis (Iceland)

• SABIS (Lebanon)

• Cinemex (Mexico)

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C:/Users/disen/Desktop/Tough_Mudder_2013_-_YouTube-1.webm

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9

Robert Wessman and Actavis

Iceland and Generic Drugs

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Actavis (Iceland) A growth story

• #5 generic co. WW • Over 11,000 employees • Present in close to 40 countries • 26 acquisitions • €1.6 billion 2007 • 22% EBITDA • 650 products • 412 product pipeline • 24 billion tablets/capsules capacity

low cost / high quality

Actavis 2007

• 99 employees • Present in 1 country • EUR14 million in sales • Illiquid • Wessman is 29 years old

Actavis in 1999

ICELAND WORLD

10

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Example Cinemex

La Magia del Cine

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• small • union-controlled • poor service • single-movie • unpleasant • bad food • cheap

• large • reservable • multi-movie • A/C • good food • expensive

The Problem in Mexico – 1990s

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13

They raised $21.5 million!!! and then came the crash

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• 50% market share by year 2000

• 48 cinemas 2005

• Created entirely new market

• Sold for $300 mio in 2002 (founders made $30mio)

Outcomes

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15

5/29/2014

More about growth than about start

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Empirical findings on high growth firms are different from our stereotypes*

• Rare – anywhere from .75% (Denmark) to 6% (UK) of startups enter into minimal growth

• Old – most studies show that the bulk of high growth firms are 15-30 years old

• Basic industries – the large majority of high growth is in food, retail, manufacturing etc and NOT in ICT, life sciences

• Sporadic growth – growth is not linear, easily predictable

References include Acs et al. (2008), Audretsch (2012), Brown et all. (2014) , Danish Business Authority and OECD (2011)

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17

5/29/2014

As much about mature ventures as young ones

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18

5/29/2014

More about execution than innovation

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19

5/29/2014

Amazingly difficult to know the opportunities until after the fact

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21

Entrepreneurship:

5/29/2014

The Creation & Capture

of

Extraordinary Economic Value

Which is usually contrarian in

nature

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Support professions

• Legal• Accounting• Investment bankers• Technical experts, advisors

Non-Government Institutions

• Entrepreneurship promotion in non-profits

• Business plan contests

• Conferences• Entrepreneur-friendly

associations

Educational Institutions

• General degrees (professional and academic)

• Specific entrepreneurship training

Networks

• Entrepreneur’s networks• Diaspora networks• Multinational corporations

Government

• Institutions e.g. Investment, support

• Financial supporte.g. for R&D, jump start funds

• Regulatory frameworkIncentives

e.g. Tax benefits

• Research institutes

• Venture-friendly legislation

• e.g. Bankruptcy, contract enforcement, property rights, and labor

Early Customers

• Early adopters for proof-of-concept

• Expertise in productizing• Reference customer• First reviews• Distribution channels

3/12/2014© 2009, 2010, 2011 Daniel Isenberg

Leadership

• Unequivocal support• Social legitimacy• Open door for advocate• Entrepreneurship strategy• Urgency, crisis and challenge

Societal norms

• Tolerance of risk, mistakes, failure• Innovation, creativity, experimentation• Social status of entrepreneur• Wealth creation• Ambition, drive, hunger

Success Stories

• Visible successes • Wealth generation for founders• International reputationLabor

• Skilled and unskilled• Serial entrepreneurs• Later generation family

Infrastructure

• Telecommunications• Transportation & logistics• Energy• Zones, incubators, co-working, clusters

Financial Capital

• Micro-loans• Angel investors,

friends and family• Zero-stage

venture capital

• Venture capital funds• Private equity• Public capital markets• Debt

Entrepreneurship

Policy

Finance

Culture

Supports

Human Capital

Markets

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Important messages:

A lot of things have to happen In non-linear, “chaotic” path

Causality is very complex (in fact never know what causes what)

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Support professions

• Legal• Accounting• Investment bankers• Technical experts, advisors

Non-Government Institutions

• Entrepreneurship promotion in non-profits

• Business plan contests

• Conferences• Entrepreneur-friendly

associations

Educational Institutions

• General degrees (professional and academic)

• Specific entrepreneurship training

Networks

• Entrepreneur’s networks• Diaspora networks• Multinational corporations

Government

• Institutions e.g. Investment, support

• Financial supporte.g. for R&D, jump start funds

• Regulatory frameworkIncentives

e.g. Tax benefits

• Research institutes

• Venture-friendly legislation

• e.g. Bankruptcy, contract enforcement, property rights, and labor

Early Customers

• Early adopters for proof-of-concept

• Expertise in productizing• Reference customer• First reviews• Distribution channels

3/12/2014© 2009, 2010, 2011 Daniel Isenberg

Leadership

• Unequivocal support• Social legitimacy• Open door for advocate• Entrepreneurship strategy• Urgency, crisis and challenge

Societal norms

• Tolerance of risk, mistakes, failure• Innovation, creativity, experimentation• Social status of entrepreneur• Wealth creation• Ambition, drive, hunger

Success Stories

• Visible successes • Wealth generation for founders• International reputationLabor

• Skilled and unskilled• Serial entrepreneurs• Later generation family

Infrastructure

• Telecommunications• Transportation & logistics• Energy• Zones, incubators, co-working, clusters

Financial Capital

• Micro-loans• Angel investors,

friends and family• Zero-stage

venture capital

• Venture capital funds• Private equity• Public capital markets• Debt

Entrepreneurship

Policy

Finance

Culture

Supports

Human Capital

MarketsBeware: This pretty picture is

potentially misleading

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Don’t confuse the snapshot and the feature length film

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Easy for Bostonians to see this:

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And conclude all you need are these:

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So Fostering Entrepreneurship Ecosystems

A cultivation problem, not an

engineering problem

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Don’t confuse the tangible “hardware” and intangible “software”

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The Hardware

Accelerators?

Angel

networks?

Government

VC

fund of funds?

Crowd

funding? Angel tax credits?

Incubators? Technology

transfer?

Clusters?

SME

policies?

SME loan

guarantees?

Startup Weekends

Mentor corps?

Startup

Visas?

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“Soft”ware

• Engagement

• Alignment

• Learning

• Experimenting

• Mutual interest

• Assessment

• Mindset/attitudes

• Commitment

5/29/2014 31

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These “hardware” solutions can all work, and they can all fail

Depends on what else you do, and

how it is done, and who does it

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Whose responsibility is it?

(Easy to get confused)

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Not government’s job Not education’s job

Not corporations’ job Not the entrepreneurs’ job

Not the VCs job Not the banks’ job

SO WHOSE JOB IT IS?

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Fostering Entrepreneurship Ecosystems You need a committed coalition of local leaders

Entrepreneurship centers

Shared work spaces

Cluster leaders

Educators

Media leaders

cultural icons Entrepreneurs

Corporate execs

Elected and appointed

Public sector leaders

Investors, VC bankers etc

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Entrepreneurship Ecosystems

Need to focus on high growth (which has no single definition)

Encourage, support, observe, record, and COMMUNICATE

growth events, small, large, big

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A few words to policy makers

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Avoid the trap of second guessing where entrepreneurial success will emerge

Can be retail, trade, construction, manufacturing, bio, events, etc.

Almost always happens where even the

“experts” least expect it

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Beware of tangible incentives for entrepreneurs based on size,

industry

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Get and stay off ventures’ balance sheets (public sector)….

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Get and stay off ventures’ balance sheets (public sector)….

That does NOT mean the public sector doesn’t have an essential

and unique role

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Focus on the off-ramp of value capture at least as much as the on-ramp of firm

creation

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Don’t protect entrepreneurs too much

Mistakes are normal

Death is normal Failure is normal

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Balance your “portfolio” of social investment in scale ups and start ups

Quick wins: Easier for one scale up to go from €10 mio- €100

mio

Than for nine startups to go from €1 - €10 mio

(in reality, not either-or)

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Two different languages

Best practice words

• Create

• Establish

• Make

• Design

• Copy

• Blueprint

Best process words

• Foster

• Facilitate

• Foment

• Catalyze

• Support

• Enable

• Encourage

• Empower 5/29/2014 47

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“Fostering entrepreneurship ecosystems” is a wicked

problem, with no clear causality

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“Fostering entrepreneurship ecosystems” is a wicked

problem, with no clear causality

To impact an under-determined system, need to “over-

determine” the solution

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Entrepreneurship Ecosystems

Need to focus on high growth (which has no single definition)

Eradicate the term small

business

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Don’t eradicate adversity (as a policy goal)

Regulatory adversity – make appropriate Infrastructure adversity – reduce

Market adversity – leave and even foster

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Some wrap up thoughts

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https://www.youtube.com/watch?v=mD5bCNvAihU

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https://www.youtube.com/watch?v=p6Ba2B7icSU

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“Food for thought”

• No “recipe”: lots of interest ideas, but it often “boils down” to specifics (even people)

• Big & small: how to mutually benefit? (Arla, Findus)

• Reverse “menu”: tell us your problems to solve” in addition to “here is what we have to offer.”

• “Bread and butter:” execution (making AND selling)

• Food innovation: “Red Bull” and “Nespresso” – drugs

• “Where’s the beef?” : value creation for customer

• “The sizzle and the steak”: How to put sizzle in food industry? • Have amazing “steak”

• Be a little bolder: You are really cooking: “Nordic Inside”

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To en·gage : To pledge or promise, especially to marry; to draw into; to involve; to enter into conflict with

http://www.thefreedictionary.com/engage

http://www.thefreedictionary.com/engage