Cross posted from Harvard Business Review Online, February 2, 2012:
As a Davos novice, it was fascinating for me to observe how entrepreneurship was reflected in the Davos dialogue among the world's movers and shakers. Given that the term "entrepreneurship" has achieved cult status in policy speeches, I was disappointed at our leaders' superficiality and misconceptions, and its de facto low priority. That may sound surprising, and the Forum has indeed been working diligently in recent years to address this with sessions such as "Education-Entrepreneurship-Employment," "Innovation Ecosystems 2.0," and "Fostering Entrepreneurship Ecosystems," but it will take time -- and maybe more, to elevate entrepreneurship to its rightful status alongside the environment and corporate governance.
Entrepreneurship is confused with self-employment. Whether it's this decade's declared 100 million MENA job deficit or the 400 million world job deficit, the implicit assumption in the Davos dialog was that the brute force of self-employment and small business will somehow do the trick. Why? One reason is that "idleness is the root of mischief" and self-employment will get the idle, incendiary youth off the streets. This obviously reflects the conflicting views of youth movements as agents of change versus youthful mobs as threats to the status quo. The second reason is what I call the "Large Numbers Fallacy": millions of self-employed hair dressers and delivery wagons and hawkers will naturally evolve into tens of thousands of high growth and high employment creating ventures. No one at Davos I spoke with has a realistic plan for how entrepreneurship will breach the employment gap.
The jury is out on both of these assumptions, and the reality of this is very complex; but at present there is scant rationale for either assumption. Every country indeed has its example of the cell phone kiosk owner who made it big. In fact experience and some research shows that the mindsets and skills, as well as social and economic implications, of high growth entrepreneurship and self-employment are in general cut from completely different cloth; in many cases attitudes of the self-employed are in fact anti-entrepreneurial: "If only we had real jobs." But the jury has ruled that it is high growth entrepreneurship that creates the employment and most of the other social benefits.
Entrepreneurship is conflated with innovation. Those Davos leaders who do recognize that entrepreneurship is distinct from self-employment and small business, fall into the other trap of equating entrepreneurship with innovation and, by default, technology. In fact, although innovation and entrepreneurship often co-occur, neither is a prerequisite for the other, and again, they are conceptually and practically distinct. In fact, most entrepreneurship is based on what I have called "minnovation," small tweaks and excellent execution. Many prospective entrepreneurs are deterred by intimidating messages that they need to have big innovations, otherwise forget it.
Entrepreneurship ecosystems are not checklists. Several other fallacious assumptions were embedded in the Davos dialog, such as young people are better entrepreneurs, despite evidence to the contrary. However the most surprising to me was that despite the new popularity of "entrepreneurship ecosystems," the term is broadly misunderstood as a collection of diverse entities: if there are universities, venture capitalists, an incubator or two, as well as some government funding, voila, there is an entrepreneurship ecosystem. Thus, designing one is an engineering task. In fact, the term ecosystem refers to a self-organizing and self-regulating interaction of independent organisms; it is not a checklist of the local flora and fauna. And in nature, biological ecosystems are usually not designed, they evolve naturally.
But at the other extreme, some of the Davos delegates viewed entrepreneurship ecosystems as completely impervious to intentional influence, and when dysfunctional, actually are the entrepreneur's "enemy": Entrepreneurs are responsible for all the good things that happen despite the hostile environment. The bad things are because of the government and its errors of commission or omission.
As I have written elsewhere, leaders can indeed impact ecosystem evolution, but this requires both a mindset, and a methodology. The mindset reflects an understanding of how the visible and invisible hands of the market, and a plan for leaders to become less interventionist as the elements of the ecosystem, and their interaction, take root. The methodology, which we have been developing, is a set of processes for meaningful engagement of all of the relevant stakeholders, and the facilitation and acceleration of the self-organizing process.
The good news is that many changes in reality start with changes in terminology, and the fact that corporate giants and public leaders at Davos have indeed been paying sincere attention to entrepreneurship and its social and economic impacts, is hopefully a harbinger of actions and new realities that will someday exist on the ground.
The Babson Entrepreneurship Ecosystem Project (BEEP) is part of Babson Global, the global action research subsidiary of Babson College, the world leader in entrepreneurship education. BEEP creates projects around the world to foster substantially greater levels of entrepreneurship in specific regions. For more information contact Dr. Isenberg at firstname.lastname@example.org. More information can be found at www.entrepreneurial-revolution.com and www.facebook.com/entrepreneurial.revolution. Daniel Isenberg has a Ph.D. in social psychology from Harvard University.
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