06/03/2013 11:29 am ET Updated Aug 03, 2013

4 Ways Big Business Can Be a Keystone in Entrepreneurship Ecosystems

Given the sustained challenging economic environment, there has been a lot of focus on how the U.S. can grow and compete, particularly in the areas of entrepreneurship and small business. This does not only include from the government or public sector view point, but very much from that of the private sector.

Role of Business

Research from the Harvard Business School (HBS) U.S. Competitiveness Project delves into the role of the business sector in U.S. competitiveness. One area HBS has recommended for companies is "supporting innovation and entrepreneurship." An example of how this can be realized is a business investing in developing companies related to their supply chain.

Another research area that HBS focuses on is "upgrading supporting industries." This includes "identifying and increasing sourcing from local suppliers" and "mentoring local suppliers to upgrade their capabilities."

This may sound complex. It does not have to be. Business or larger businesses can do this and also take other "little" actions which can put them in the center or hub of an entrepreneurial ecosystem. They can intentionally or by substance play a "keystone" role.

The important role of Keystones

Professor Marco Iansiti of HBS and Roy Levien of Keystone Advantage have previously published research on "keystone organizations playing crucial roles in business ecosystems."

Keystones can increase ecosystem productivity by connecting participants to one another or by making the creation of new products by third parties more efficient.

They can enhance ecosystem robustness by consistently incorporating technological innovations and by providing a reliable point of reference that helps participants respond to new and uncertain conditions. By continually trying to improve the ecosystem as a whole, keystones ensure their own survival and prosperity.

In the context of entrepreneurial ecosystems, who plays the role of the keystone? There can be many, and we often look to government agencies such as the Small Business Administration or small business services provided by local city governments. We also may rely on not for profits such as Chambers of Commerce, as well as banks because of their economic and capital connectivity in the market to play this role. However, corporations can play this position too. Not only exclusive to their industry or direct or indirect supply chains, but even in a broader capacity in the local communities where they operate and have presence.

A fortuitous experience in Newark, New Jersey

I came to the realization of business being a keystone, a provider and connector of resources, in the entrepreneurial ecosystem when I was judging a business competition for the New Jersey Social Innovation Institute (NJSII) sponsored by the Public Service Enterprise Group (PSEG) in Newark, New Jersey. I don't think the PSEG set out to be the keystone in this scenario or in the broader small business community. However de facto, that is how you could view the results of their actions.

The New Jersey Social Innovation Institute held a Pitch Day, which was sponsored by the Public Service Enterprise Group. Thirteen social oriented ventures participated in a business pitch competition where they were competing for one award of growth capital.

The businesses were already in existence, and covered a wide range of industries and value chains such as those in health and wellness, education, recidivism, IT services, sustainable architecture, urban organic food planning, parenting, construction incubation and more.

Passing judgment on innovative solutions

The 13 social enterprises were judged on various criteria including devising an innovative solution to a social or environmental problem, sustainability and job creation. After rounds of judging, 4 businesses made it to the final round of judges from the PSEG. There the PSEG did something very innovative.

They did not grant the cash award to just one business. Each of the 4 businesses impressed the PSEG where they received a reward that was impactful given the stage and context of their respective business.

The PSEG made awards via the following mechanisms: economic grant, mentorship and coaching, opportunity to do business with the PSEG, as well as access to PSEG's network of executives, relationships and resources.

4 ways big business can be a Keystone in entrepreneurship ecosystems:

1. Economic Grant

One way that a corporation can help grow small business is by providing economic resources or access to capital. This can be done by holding a business competition where companies compete for a cash award. The competition could be focused only related to the industry or supply chain of that business. Or in the case of the NJSII and PSEG, the businesses competing were from a broad cross section impacting the local community.

The PSEG had set out initially in the NJSII Pitch Day competition to award a cash grant of $100,000. They were able to split the cash award between 2 businesses in a way that met both of their growth needs. Fathers Now (affiliated with Newark Now) received their requested amount to start the Fathers Now Green Cleaning & Maintenance Services, Inc. The HUB-Health Generator (affiliated with YWCA of Central Jersey) was awarded the amount they needed to launch family-center health & lifestyle coaching services.

2. Mentorship and Coaching

Corporations employ people who are talented and experienced. This equals knowledge, resources and know-how. Most entrepreneurs and small business owners always need mentorship and coaching. Whether it is technical, functional or soft skill expertise, there is always much to be gained from knowledge share and learning. A cash outlay is not necessary here, but a person's time to mentor and coach which is invaluable.

Step by Step (affiliated with Prevent Child Abuse NJ) offers parent education and support services to new and expecting parents. While they did not receive a cash award from PSEG, they were granted coaching services from PSEG employees. The mentoring is to help Step by Step further prepare their pitch and presentation for potential corporate customers.

3. Opportunity to do Business

Companies look for vendors direct and indirect to their supply chains. They look for both large, mid-size and small companies with which to do business and who can fulfill their procurement needs. It can be life altering in the case of a small business for it to get a contract with a large or mid-size company. This creates potential opportunities for the small business to materially advance along the continuum of scale, sustainability, revenue generation and market credibility.

Step by Step will receive the opportunity to pitch their services to the leadership of PSEG's Human Resources - Benefits Department for business. As a small business, to get the break to pitch for and do business with a company, especially like PSEG, is the chance to grow operationally, professionally as it relates to servicing customers and economically.

4. Network of Executives, Relationships, Resources

Any size company, especially large companies have massive internal and external systems. They have domestic and international networks of management and employees, external vendors, partners and joint ventures, customers, and civic and public sector activities. This all translates to access to networks of executives, relationships and resources. In turn, this can translate to the sharing and creation of knowledge, commercial transactions and relationships, value and wealth, and in a nutshell virtuous circles and cycles.

Another business who won in the NJSII Pitch Day was AgriArk (affiliated with Lincoln Park Coast Cultural District). AgriArk is focused on combining sustainable architecture and urban organic food planning. They will receive coaching services from PSEG employees to prepare their presentation for the investor community. AgriArk will also get the opportunity to deliver their presentation to the international senior leadership of PSEG.

PSEG thought that given the vision, nature and type of innovation involved in AgriArk, awarding access to the broader global network of PSEG senior management would create an opportunity for the entrepreneur to dialogue with a level of the organization who could potentially give him significantly more input and create more impact. This provides an opening for the entrepreneur to build relationships with and access the broader community of PSEG executives, their infrastructure of relationships and resources.

Making a difference in your community

This fortuitous case study provides a reference that "little" actions by one firm that did not cost material amounts of their money, time and resources will make a significant difference in the lives of 4 entrepreneurs in the local community.

To any size company out there, why not adopt your community and see how you can be a keystone in your local ecosystem of entrepreneurs? It might be just this easy and who knows what the knock on effects can be!