Howard H. Frederick: Entrepreneurs should start at school

COMMENT

New Zealand's entrepreneurs come from every walk of life. We are business entrepreneurs such as Graeme Hart, social entrepreneurs such as Dame Georgina Kirby, even sports entrepreneurs such as Les Mills.

What unites all entrepreneurs is a desire to persevere amid adversity, spot smart opportunities and take risks, and make a recognised difference.

It's no surprise, therefore, that the yearly Global Entrepreneurship Monitor (GEM) report has identified New Zealand for two years running as having one of the highest rates of total entrepreneurial activity in the OECD. (GEM 2003 is due out in November.)

So how do we explain our abysmal ranking in the IMD World Competitiveness Yearbook that puts our productivity (GDP per person) at 24 out of 29 countries?

We need to better understand why New Zealanders, with all of our apparent excellence in starting new businesses, often fail to grow, expand and create new wealth. And is the latest Budget addressing those needs?

Here's the situation. Last year's Digipoll-GEM survey put New Zealand's business start-up rate at one of the highest in the world. We're a nation of "starters-up" at 14 per cent of the adult population. Starting a business in New Zealand is a breeze.

Got an idea? The macro-economic conditions are right. There's technological and financial support from the Government. Just go to the Companies Office website and away you go.

But there is a big difference between starters-up and entrepreneurs.

"True entrepreneurs are people who habitually create and innovate to build something of recognised value around perceived opportunities," says Unitec's adjunct professor of entrepreneurship, John Thompson.

The keywords here are "build" and "create value". Do New Zealanders actually build (or grow) their businesses and do they create value? The rude words in church are that our entrepreneurs are not creating new wealth.

Joe and Jill Entrepreneur typically operate a six-person lifestyle firm in the Auckland area servicing the internal market. They are not the kind of export-oriented, dynamic firm that can exploit innovative venture opportunities and increase the size of the cake for us all.

On the contrary, they are inwardly focused with low horizons. Their dream is to paint "Jim's Mowing Group" across the Hiace. Moreover, our entrepreneurs lack urgency. "More customers? Why should I grow when I've got my bach and boat?"

They don't know about overseas expansion. They lack international marketing and financial know-how. Just look at how The Warehouse and Telecom NZ both got whacked in Australia. Our SMEs face the same challenges with less margin for error.

The good news from GEM is that we are extraordinary opportunity-takers who want to "knock the bastard off". This translates into a high start-up rate.

Also good news are the huge numbers of "starters-up" (281,000 opportunity entrepreneurs and 55,000 necessity entrepreneurs).

But are these people necessarily the right people to go on and create wealth?

The trouble is that most of our entrepreneurs are low horizon: they would rather exploit existing equilibrium opportunities and optimise supply and demand in established markets than exploit innovative venture opportunities and create new markets at home and abroad.

That's the nut that has to be cracked. Many bright ideas never find customers. The business struggles at best and then disappears. It may be inadequately financed or badly managed, but more likely the person starting it is the wrong person for the job or lacks the skills.

The solution is to catch them young and educate them. Young entrepreneurs are greatly discouraged in our society. I can only cite the 15-year-old boy who was expelled from school for selling cigarettes. He knew all about warehousing and humidity, margin and profits, credit and cash, and how to service a market.

But his teachers are in one of the least entrepreneurial job categories.

Korea did it in 12 short years. We need a national entrepreneurship promotion campaign. We need to communicate higher aspirations to our youth and young entrepreneurs. We need more entrepreneurial poster boys and poster girls.

"Hi, I'm Gillian. I had to drop out of school at 16. By 19 I was a millionaire."

"Hi, I'm Malcolm. I'm 23. After varsity I started five and have failed four businesses. My clothing label is www.superdude.co.nz."

Do the Budget and present Government programmes address this? Sadly, not yet.

The current growth and innovation strategy is two legs of a three-legged chair. Get the macro-economic conditions right and then introduce new resources and technologies.

The Budget includes all sorts of amounts for expanded driving clusters, an accelerator fund, an export e-commerce portal, research and development, incubators and such.

We're an innovative country. The problem is that an innovation uncommercialised is an innovation wasted, and entrepreneurs are the people who exploit innovation. But true entrepreneurs are a scarce resource. How do we increase the supply? GEM research shows that New Zealand ranks poorly (with most of the rest of the world) in primary and secondary schools providing adequate attention to entrepreneurship and new venture creation.

Nor are New Zealand universities and polytechnics giving adequate attention to entrepreneurship courses and programmes.

The solution to our dilemma is e-squared: education and entrepreneurship. We need to turn the corner on the innovation framework and talk about where to go next.


Sustained economic development depends on how we develop entrepreneurial capabilities in our youth, especially in women, Maori and Pacific Islanders. It's no accident that Manukau City has the title of New Zealand's Most Entrepreneurial City.

* Howard H. Frederick is Professor of innovation & entrepreneurship, Centre for Innovation & Entrepreneurs and principal investigator of the Bartercard Global Entrepreneurship Monitor report.

www.unitec.ac.nz/gem