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Empowerment Through Entrepreneurship.

[postintro]There are many reasons to elevate entrepreneurship as the institutionally-approved and institutionally-accelerated pathway to economic success for everyone. Community flourishing through self-help is one of them. I’m supporting the team behind Entrepreneur Zones, focused efforts for enhanced performance of small businesses in targeted locations in economically under-performing geographies  [/postintro]

2020 witnessed small businesses across the country struggling to adapt and survive during the government-imposed pandemic lockdowns. And while some were able to pivot their services and business model to serve an increasingly digital market, many were forced to shut down for good, leaving thousands jobless.

The closure of these businesses is one of this year’s biggest tragedies. The economic impact of these closures will continue to be felt for many years to come. If we have collectively learned anything this year, it’s that America relies on small business entrepreneurship to flourish and prosper. 

Entrepreneurship is empowerment

Nowhere is the empowering potential of small business entrepreneurship more prominent than in our small-town Main Streets and local communities. Even through the pandemic, we’ve seen small businesses all across the country step up and change the way they operate in order to help their communities. Via a quick search around the internet, you can find dozens of examples of small businesses doing their part: from local pharmacies doing Covid testing to distilleries manufacturing hand sanitizer and restaurants providing free meals.

These entrepreneurs and workers were faced with an existential crisis like they’ve never seen before. Their response? Do good for the community. There’s something about small businesses that is just so inspiring.

Ultimately, entrepreneurship is the backbone of these communities, and provides both residents and the local economy the opportunity to grow as these businesses grow. What’s more, entrepreneurship is not just for the rich, it is for everyone. Building a business from the ground up is no small feat, but it is something that’s achievable by anyone, regardless of background. Through entrepreneurship, people can pull themselves up and bring new economic value to their communities and to themselves.

The potential of Entrepreneur Zones

Heading into 2021, we need to place a renewed focus on encouraging entrepreneurship in our small towns and cities. The key to this could be Entrepreneur Zones –  targeted areas within economically-distressed communities where new entrepreneurship-focused initiatives can help local business get their start, and help those that have already started to thrive. Policy initiatives can include relaxed regulations, tax incentives to encourage investors, focused education and training, and the kinds of mentoring and interconnection that help businesses integrate into larger value-creation ecosystems. 

Dale G. Caldwell of Fairleigh Dickinson University’s Rothman Institute of Innovation and Entrepreneurship notes, “To accelerate small business employment, government could provide entrepreneur grants and issue small business bonds through the Small Business Administration specifically for the businesses in federally approved entrepreneur zones. These programs would not be a burden on taxpayers and potentially lead to an injection of billions of dollars into businesses…that desperately need a lifeline to survive.”

As more than 11 million people look for new opportunities, these small businesses could help provide the jobs needed to both keep food on the table for struggling families and spur economic growth at the national level. 

Further, many in the growing pool of unemployed Americans are skilled workers who have been through the training and education for their jobs. The talent is there, what is needed is the capital to invest in these businesses.

The future lies in small businesses

We’re dealing with a once-in-a-lifetime crisis, and we need to work to establish apolitical policies that support our nation’s small businesses. Nearly 50% of America’s GDP output and nearly 50% of all American workers are employed by small businesses. It’s time that we began to recognize and reciprocate the values and utility that small businesses provide to this country.

And it’s not just local, it’s global. For example, Scott Livengood of Arizona State University is part of a team offering Education For Humanity – a program of education, and entrepreneurial skill training for conflict-displaced refugees in countries like Uganda and Lebanon. Entrepreneurship provides a pathway out of not only America’s distressed inner cities, but out of distressed environments of all kinds, all over the world. Over the past half-century, we’ve seen that entrepreneurial and educational expansion into underdeveloped regions and markets is one of the best ways to raise people out of poverty and equip them with the skills and resources they need to prosper.

Across the world, we see just how important creating avenues for entrepreneurship is to keeping economics vibrant and resilient. In 2021, one of our top economic priorities should be to create more of these avenues.

 

77. Ralph Welborn on the Ecosystem-Based Strategy

Business strategy and business model design has traditionally been firm-centric. Entrepreneurs are called upon to establish firms, to make the firm the locus of value creation through value proposition design, assembly of resources, and production; and to ensure competitive advantage in comparison to rival firms pursuing the same customers.

Key Takeaways & Actionable Insights

There is an entirely different way to approach economic value creation (see our E4E Knowledge Map). Ralph Welborn discusses this new approach for the 2020s on the Economics For Entrepreneurs podcast, and in his book Topple: The End of the Firm-Based Strategy and the Rise of New Models for Explosive Growth (Buy It On Amazon).

The innovation of the new strategic approach is the focus on ecosystems instead of firms. The new approach preserves — and, in fact, elevates and intensifies — the Austrian business model principle of customer sovereignty and the deep understanding of the customer as the first step on the value creation path. But it changes the perspective to the ecosystem level.

Defining the business ecosystem.

Ralph defines a business ecosystem as the methods of orchestrating capabilities from diverse organizations to capture new sources of value. Austrians see entrepreneurs as orchestrators, and so we are very comfortable with this starting point. We are equally comfortable with the core analytic action Ralph proposes: studying where value is being created and destroyed within an ecosystem, and taking steps to capture emergent new value.

As an example, think of a consumer’s nutrition ecosystem, and how it might have changed — that is, how new value has been created and old value destroyed — over the past twenty years. In the past, value was created by Big Food firms (think Kraft Heinz) via low prices, convenience packaging (e.g. canned foods and frozen foods), standardization, high volume, and supermarket distribution. But then some consumers sought new value in fresh food, organic food, less processed food, fewer preservative ingredients and fewer additives and new recipes. New brands took advantage of the emergent value opportunities. And even more recently, new value has been created by delivery platforms that can bring the food directly to the home, and escape the “war in the store” for shelf space and distribution slots. You can begin to appreciate how a business ecosystem such as “consumer nutrition” can change, how new value creation can emerge, and how entrepreneurs might take new action.

Ralph mentions another example in his book: the ecosystem in which automobile companies operate has changed from transportation to mobility. The companies must now deliver value in areas such as in-car productivity, entertainment, communications, connectivity and more.

In order to implement an ecosystem-based strategy, Ralph recommends the following steps:

First, shift your unit of focus.

Business schools have told us that our point of focus should be our firm, or corporation, or business unit or department: to maximize the performance of that unit in comparison to other firms or units.

The shift is to focus not on the firm but on the ecosystem in which you and your customers engage, in order to develop a new value perspective.

Step one in business is always to identify and know the customer. The added perspective is to identify, and study, the ecosystem in which you and the customer are engaged.

Second, see the ecosystem as a locus of shifting value.

Once you’ve defined it, observe the ecosystem as a network of economic interactions where value is being created and destroyed via changing customer preferences and needs. A consequence of these changes will be shifts in the competitive environment, and you can observe these too, as clues.

To continue with our nutrition ecosystem as an example, you can observe the shifts in market share between traditional and innovative food companies, and use these shifts as a signal of changing consumer preferences. Of course, you can also simply observe consumer behavior and conduct traditional research. Plug all of this observation into a dynamic ecosystem perspective: where and how is value being created and destroyed in the ecosystem?

Ralph’s memorable phrase is: value seen is value captured. If you can see where value is shifting and where new value is being created (or will be created in the future) you will be able to capture it.

Third, answer the questions: “How can I fit in to the ecosystem?” and “How can I contribute to the ecosystem?”

The changed perspective of the ecosystem approach is the shift from “how can my firm compete with other firms?” to “how can I qualify to be invited into the customer’s ecosystem?” If you have a new line of organic, healthy food products for health- and diet-conscious consumers, how can you engage with the communication channels within the ecosystem to make those consumers aware, how can you utilize those channels to communicate your benefits, how can you engage with ecosystem retailers and distributors to make it convenient for the consumer to buy your physical products, and how can you participate in the consumer’s preparation systems to provide extra service in addition to your physical product? Where is new value emerging? Where is old value being destroyed? How can you take advantage of the shifts?

The answer to the question “How can I contribute to the ecosystem?” requires an analysis and articulation of what are the capabilities required to meet new needs, who has those capabilities (if your firm does not have them all), and how can you orchestrate these capabilities in service of those needs? Perhaps home delivery is required for ultimate customer convenience. Who does that and how can you orchestrate that capability on the customer’s behalf? Perhaps food preparation videos will help the customer get the most value from your product — who can prepare the content (a celebrity chef, perhaps) and which is the best platform to host and deliver the content to the kitchen? Perhaps your packaging can be recycled — how can you orchestrate that to make it convenient for your customer (as Nespresso does, for example, with recycling bags for their capsules, which can be mailed back free, or dropped off at a Nespresso boutique).

To fit in and contribute, choose a bundling or un-bundling strategy.

Austrian economics directs entrepreneurs to assemble resources to facilitate customer value in a unique manner. In the book Topple, Ralph Welborn calls this a bundling versus unbundling decision. If you decide to be a bundler, you improve customer value by providing multiple services around the desired benefit — such as amazon does with retailing and delivery, making shopping more convenient. Unbundling refers to a focus on a single benefit-delivering capability, such as manufacturing a new organic food product that is clearly differentiated from the preservative-laden portfolio of the Big Food company. You can choose to be a bundler or an un-bundler based on how you want to deliver value to customers.

Fourth, audit your own capabilities and identify the 20% that deliver the majority of your value.

The capabilities underlying your product or service (skill sets, software, distribution, customer relationships, media channels, process) decay over time, often at an accelerating rate. Ralph points out that entrepreneurs should be creating new capabilities continuously, and making those new capabilities into the 20% that drive explosive growth. This is pure Austrian Capital Theory — identifying the business assets that most contribute to customer satisfaction and keeping them refreshed and up-to-date as customer preferences change.

Ralph cites Uber as an example: the new capabilities are mobile connectivity (from carriers), payment transactions (banks and credit card companies) and dynamic GPS and mapping software (from Google and others).

These capabilities are:

  • Centered around what the customer wants to do.
  • Taking friction out of what it is they want to do, making it extraordinarily convenient.
  • Orchestrating different capabilities from different types of actors and organizations.
  • Reserving the enabling orchestration capabilities to Uber.

The implications for business are to: (i) identify your assets and their half-life — the rate of decay; (ii) identify where to play in your newly understood ecosystem and how to develop the new assets and capabilities to do so. This is a continuing process.

Free Downloads & Extras From The Episode

“An Ecosystem-Based Development Strategy” (PDF): Click Here to Download

Ralph Welborn’s book, Topple: The End of the Firm-Based Strategy and the Rise of New Models for Explosive GrowthBuy It On Amazon

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A Nation Has Lost Its Way. Entrepreneurship Will Put Us Back On The Right Track.

A nation has lost its way. On July 13, 2012, in a political campaign speech in Roanoke, Virginia, United States President Barack Obama uttered the sentence: “If you’ve got a business—you didn’t build that”. Successful entrepreneurs and businesses, he implied, owed their success to government spending and public infrastructure.

President Obama’s statement has been used to justify a view of economics that is dominated by government planning, intervention and regulation, and has contributed to public vilification of entrepreneurial success. The result has been a “new normal” of stagnant economic growth, the dullness of over-regulation, and growing socialist sentiment.

Contrast this with the story of one entrepreneur, Steve Jobs. Jobs was an entrepreneur from the beginning of his adult working life. He co-founded Apple in 1976, and co-created the breakthrough Apple Macintosh in 1984. He introduced the desktop publishing industry. He helped to develop the visual effects industry. He helped to develop a line of world-changing and culture changing products including iPod, iPhone, iPad and iMac. He launched a series of digital services like iTunes and the App Store. Today, Apple provides employment for tens of thousands directly, and hundreds of thousands more working for suppliers, vendors and app developers. Few human beings have done as much good in the world as Steve Jobs, entrepreneur. He did build that.

You and I have the opportunity to do the same, and the nation and the world have the opportunity to re-experience the glories of entrepreneurial action, exciting innovation and surging economic growth.

We will do so by rediscovering and re-asserting the economic role of entrepreneurship. Entrepreneurship is voluntary action: individuals energized to activate their ideas, create new benefits, and build new firms and new capabilities. The ethic of entrepreneurship is betterment: serving others by improving their lives, and delivering unprecedented experiences of health, wealth, comfort, convenience, speed, and augmented capabilities. The result of entrepreneurship is value for all: greater feelings of satisfaction, confidence, opportunity and optimism. Entrepreneurs elevate the achievement and aspirations of the nation. That’s what Steve Jobs did.

We’ll accomplish this return to the entrepreneurial spirit that built America by following the entrepreneurial method. We’ll start by sharing the knowledge of what entrepreneurship can achieve and how individuals embrace entrepreneurship. We’ll release young people from the constraints of the educational institutions that don’t teach entrepreneurship, and show them how to learn the new way. We’ll build a community of entrepreneurs who share the enabling knowledge, ideas, skills, tools and techniques. We’ll celebrate the success stories that light the way. We’ll teach entrepreneurs how to embrace the uncertainty that seems to deter them today.