ESSAY FRIDAY | Africa: Too much entrepreneurship, not enough management

(pic: Hivos)

By Chris Chenga

There is a notion that professionals need to study Management all the way to tertiary level, if they are to one day be competent enough to hold a managerial position of a large corporation.

This seems to be logical thinking, with a fairly convincing sample of evidence.

Many executives of leading companies throughout the world are graduates of Business Schools like Harvard, Stanford, INSEAD, or LSE; having focused their studies on a major in Management.

There is a symbiotic understanding between academics and major corporations on this. Esteemed graduate schools often require three to five years’ experience in some managerial capacity before accepting students into their programs. The mutual rationale here is that to prepare for greater responsibility, individuals should orient themselves with academic Management.

In the UK, professional graduate programs are conventional passage into corporate seniority. In my country, Zimbabwe, many corporations expect managers to have tertiary degrees in Management, especially the MBA; much so, internally promoted executives are assigned the title of “Acting” as they are expected to complete their management degree before assuming a more permanent incumbency.

Man, is there so much corruption in all of that! Anyhow, this degree expectation is the same in public and private corporations.

The intellectual consistency is clear. To manage big corporations, one has to typically study a management degree – well, until, prominent entrepreneurs throw a curve ball to this seemingly well-arranged logic. These people provoke the intellectual convention. And maybe that is the core fascination behind folks like Steve Jobs, Elon Musk, Whittey Basson, and other renegades who are not only founders, but go on to sustain executive management positions in competitive corporations, which they started ground up.

The academic silo

I think, motivated by an identity panic, just to salvage the intellectual consistency that hails traditional Business Schools, this breed of hustlers has subtly been compartmentalised towards an academic silo of their own, that has created programs under the “Entrepreneurship” nomenclature. So, the education you get to be able to manage large corporation like Cargill, for example, is a Management program at a traditionally esteemed Business school.

The education you get to emulate mavericks like Musk and perhaps start your own Tesla is a modern-branded Entrepreneurship program, which traditionally esteemed Business schools now increasingly offer, though with few notable alumni of this supposedly distinct competence.

The identity panic is really unwarranted. It is born out of a paternalism within traditionally affluent classes, particularly in the west, to produce the world’s best. Unfortunately, it is already having far reaching impressions on a continent that has its own misconceptions around entrepreneurship.  

Moses Chipurura, owner of the Plaster Centre. With better governance, an economy can emerge in which private proprietors like him can thrive

My own perspective begins at observing the construct of a relatively smaller economy, like Zimbabwe. Estimates vary according to which source you ask, but generally, there is some acceptance that the country’s formal economy is largely taken up by governmental organizations such as State Enterprises and Parastatals.

Outside of this market share, 67 listed corporations take up a lot of the economic activity in the formal economy. Looking progressively into the future, there is hope that with better governance and less extractive corruption that has become institutionalised within the State, an economy can emerge whereby private proprietors take up significantly greater market share in the formal economy.

Much of that market share can be projected to be in the services sector, with proprietors offering services to manufacturers, administrators, retailers, miners, and other outwardly complementary sectors to Zimbabwe’s economic landscape.

This trend has created a niche for entrepreneurship programs that supposedly prepare future generations for such ecosystems. While two decades ago, kids were nurtured to aspire for acceptance into an esteemed business school’s Management program, there is greater influence today towards making it into Entrepreneurship programs, though still, preferably at esteemed business schools.  

What is entrepreneurship anyway?

Here is the problem; the appeal in Entrepreneurship programs is based on a fundamental misconception of what entrepreneurship is. I would humbly suggest that entrepreneurship is the ability to execute management of a mature corporation, but at an earlier stage of a corporation’s life cycle.

And so, to compartmentalise entrepreneurship and management as two fundamentally distinct traits is flawed thinking, which is regrettably gaining popularity even at the highest levels of modern academia.

The Zimbabwean economy is, amongst other things of course, presently struggling because there are not enough entrepreneurs with management skills. It is a fitting case study of the hazards that come with distinguishing entrepreneurship and management.   

Zimbabwe entrepreneurship
Workers at Bulawayo’s Courteney Boot Company, which makes hand-made boots for export (pic: Forbes)

Most economic activity in the country, such as plumbing, auto-mechanics, catering, and videography, is occupied by early stage businesses. There is a big demographic of small-scale start-ups belonging to entrepreneurs who have seen the overwhelming demand for these services.

Very few recent homeowners, motorists, gathered families, and entertainers can say they sought out these services from large corporations. In fact, a lot of fiscal contribution is lost in the country as these clients cannot trace the tax certification of their contracted entrepreneurs as many operate covert to the radar of the taxman.

This is actually an anecdote of much of Sub-Sahara Africa’s relatively huge services sector. The fact that all these services are actively offered widely on the continent, by start-ups, should suffice to counter another misconception which suggests that the continent is short of entrepreneurs.  

Why do our entrepreneurs fail?

So, why do most of these local entrepreneurs struggle to scale up and sustain their businesses well into maturity, consolidating market dominance to the point of becoming notable large corporations?

It is not reaching to suggest that recent plumbing, catering, mechanic, or videography clients would not recommend their last ‘indigenous’ contractor to anybody who they care about. The standard of entrepreneurship on the continent is qualitatively underwhelming. A responsible writer would not be so bold as to advance a seemingly disparaging generalisation without facts or data.

And indeed, a reader familiar with the continent would be correct to warn of similar sentiment that is often used for offensive cultural undertones about our people who are in business. But, while generalisations can be used to perpetuate abusive stereotypes of indigenous entrepreneurs, the lack of data to affirm or refute generalisations about their competitiveness, or lack thereof, leaves no comfortable context to honestly confront the pertinent issue.   

What customer satisfaction tells, or doesn’t tell

Americans, Europeans, and more recently Asians, have found context not only to discuss, but actively incentivise entrepreneurs to enhance competence through customer reviews. Venture capital or private equity financiers, on all three continents, have placed huge emphasis on start-ups in the services sector to include transparent, real-time, customer review in their business models.

It is understood that customer reviews are one of the ultimate determinants of an entrepreneur’s chances to scale over time. An integral part of the financing persuasion carried by successful entrepreneurs of recent years, such as the Uber lads, was the insistence on prompt passenger reviews and driver ratings.

This concept now applies in public investment markets too. In Europe, Zooplus, currently the third largest retailer of pet food and supplies, has a lot of business analysts and investors estimating it to be the largest retailer in that sector in the next three years, simply due to its distinguished customer satisfaction. The company’s market capitalisation has reacted accordingly.

How European companies furiously compete for customer satisfaction

The service sector is not the only one placing importance on customer satisfaction. In the product offerings space too, reviews determine an entrepreneur’s chances of making it to the big times, or missing out!

Tencent, an entity significantly owned by South African company Naspers, recently entered a publishing partnership with Garena, which is the fastest growing digital entertainment distributor in South East Asia. Tencent committed to the partnership due to Garena’s instantaneous evaluation of a new product’s reception by customers.

This implies that even for African entrepreneurs offering products like digital games and apps, customer satisfaction is now the biggest consideration to be able to supply Tencent, which can then license that product to distributors in other markets like Garena.

Evidently, there is increasing disparity between the structural pressure on African businesses to deliver customer satisfaction compared to other highly competitive continents. Not only does this provide one frame of explanation, but it also gives well-considered grounds to proceed with the uncomfortable generalisation that the region’s entrepreneurs run comparatively bad businesses.

Too many entrepreneurs, too few managers

The biggest reason is usually poor management! A good reference is the tendering of services by large corporations. One of the main lines of business sustaining the printing press in Sub-Saharan Africa is large corporations advertising tenders. Large corporations publicly advertise seasonal tenders.

There are very few service providers across sectors who have become reliable entities for large corporations to give jobs to for more than two seasons. Sure, many get one or two jobs – somebody has to be awarded the job, right? – but few entrepreneurs lock-in long term positioning.

Bog standard: Do our SMEs’ branding measure up to global standards?

I am speaking on listed entities offering tenders, conveniently overlooking public tendering where corruption is rampant, as notorious start-ups get the loot and never deliver! The latter are just more visible as there is greater interest and scrutiny in public tendering.

“…some SMEs are too grossly mismanaged to perform above a certain standard…”

However, well-intentioned, genuine entrepreneurs are also failing to capitalise on tendering to scale their businesses. Considering the value of contracts offered by large corporations, it would take arguably just five years for a serious start-up to elevate to become a notable medium size business.

The issue is that these local independent contractors, or what has generically become familiarised as SMEs in the region, are generally grossly mismanaged to perform above a certain standard.

One of the consistent complaints by both executives of multinational corporations operating in Sub-Sahara Africa, and corporations that could be a conduit for African products into other continents, is the lack of entrepreneurs providing services or products at a globally competitive standard to justify local procurement.

These factors include packaging, branding, quality control, and other management deliverables. Imagine how much economic potential is lost on the continent due to these managerial shortcomings.

Large corporations only procure products of global standard

Indeed, I have squarely put the distance between an entrepreneur’s ability to take start-up to large corporation in a rigid context of management. This is not to discount other variables, particularly macro-economic challenges, yet, those challenges are often as harmful as an entrepreneur’s managerial competence.

Poor management shows itself in various aspects of business; financial, operational, technical, and interpersonal. There are many evident features in the region’s business composition that display managerial inadequacies in these facets.

Entrepreneurs may secure franchises to food restaurants or hotel chains, but when you check in, the toiletries from the previous room guest are still there, or the restaurant which opens at 0700hrs still will not let customers in at 0716hrs because the staff is still mopping the entrance floor.

Famed creatives and artistes from many countries would rather go to South Africa or Nigeria, simply because while entrepreneurs in their home countries have started production houses, there is a penchant to missing deadlines to handing over edits to international distribution companies.

Entrepreneurs secure large contracts in various industries such as construction, but because they had not re-invested to capitalise their equipment or expertise adequately, rather taking out personal dividends, they are unable to execute the scale of bigger jobs.

Regrettably, these are not isolated micro-transgressions. Such poor practices relate as broad incidents, with most readers familiar with the region perhaps nodding in lament of what is culturally identifiable behaviour.

Of course, these scenarios transpire elsewhere in the world; but businesses with such deficiencies are not afforded more than two breathes operating in more competitive regions. Over here these businesses exist longer, though never thriving, to the prolonged anguish of their embattled founder entrepreneurs.

So, the entrepreneurs with dreams of scaling to large corporations, they would tell you, being a good entrepreneur probably should not be distinct to being a great manager.

Entrepreneurs emulate, or beat, the management of large businesses

Perhaps a better vantage is to analyse large corporations themselves. These are not in any way existentially different to start-ups. They are merely benchmark of potential size and scale at a later life cycle stage.

Here’s an example; large corporations have been structured to mitigate the personnel risk to the delivery and quantity of output or product. Whether employees had pleasant commutes to work or not, are in loving relationships with their kids or are completely estranged, these personnel issues do not show up in a scalable venture’s business models.

Personnel issues do not affect service or product. For instance, Big 4 accounting firms are going to release annual reports on time, large retailers are going to be fully stocked with cereal every morning, mobile banking services are going to be functional 24 hours; consider the probable emotional carnage erased between their employees and customer interface.

Entrepreneurs in Africa often slack precisely because they have not learnt to erase personnel risk from their business models; whether it is hiring, facilitating employee travel, or offering leave time. A successful entrepreneur cannot compete against large corporations, or scale their own business to become one, if they do not erase personnel risk from their business models. And what is it that we are talking about? Management!

Beware of mistaking technology’s contribution

The reason why as a reader you can hope for better spelling and grammatic delivery on this column, as opposed to, say, a personal blog, is the competence by the entrepreneurs behind this publication to aggregate competitive writings from various contributors into well-constructed offerings.  

This is why, along with my work, there are dozens of other pieces of quality on this digital platform. To form a competitive digital platform, the entrepreneurs behind this publication have figured out how to manage scale that gives traditional print domineers a real challenge for market share.

This is the same discipline that Jonah Peretti figured out at The Huffington Post, and then at Buzzfeed; further excelling at the digital art of viral distribution. While modern-branding may posture his competence as merely entrepreneurship, Peretti, and many other media entrepreneurs, like Shane Smith at VICE, practice conventional management that is still taught in traditional business school.

In fact, the mavericks of the digital age are precisely applying mature company management, just earlier in their company’s life cycle. Underlying these dynamics are new tools offered by technology!

After breaking the barriers of mass media, their businesses are evolving through life cycles quicker, and have quickly been confronted with more parity in managerial challenges as their mature competitors.

“…technology has allowed entrepreneurs to go around barriers of entry and grow their businesses faster…”

In 2016, Buzzfeed reached the inevitable personnel fate of worker unions, and third-party content providers started to demand for greater compensation.

As the youth audience of today ages, solidifying its ideological biases and loses exuberance to revolt, VICE will eventually carry a loyal base similar to what CNN presently has. In these instances, it became clear that managerial principles never go away in running a business.

It is necessary to appreciate that technology in the digital age has enabled entrepreneurs to go around barriers of entry and to scale their businesses faster than ever before.

In this regard, if academic modernity is to be held to some sort of reproach, then the sprouting Entrepreneurship programs should be less than a committed Major and merely an elective.

The Elon Musk playbook

At their greatest variance, Entrepreneurship programs can only be as distinct from typical Management curriculum in offering an understanding of how technology enables breaking through what were once insurmountable barriers to entry, and the faster pace in which it takes an enterprise through business life cycles. Even this does not require a fully fledged program.

Once at that point of understanding this very marginal distinction, entrepreneurs are immediately positioned back to practicing conventional managerial discipline. This is true for entrepreneurs like Elon Musk too. Technology has enabled entrepreneurs such as himself to achieve greater scale at a lower unit cost than ever before. Thousands of other entrepreneurs have tried out digital payment systems like PayPal, or electric car software like Tesla, but he has applied better management at early stage life cycles so well to compete with mature competitors like VISA and General Motors.

The successful entrepreneurs of the digital age are, and will for the foreseeable future be, the fantastic managers. Their skill and craft should not be sought after in any extensively varying study from the managerial discipline.

That is merely a fallacy motivated by esteemed institutions who cannot claim dominance to producing this demographic; hence are creating a silo of entrepreneurship curriculum to re-brand themselves to fashionable impressions.

These institutions do not need to do that though; paranoid bunch. Their intellectual consistency has actually not been compromised. Fundamentally, all corporations require managerial discipline.

Technology has merely enabled the best entrepreneurs to apply competitive management at earlier stages of their life cycles to take on mature competitors; many of the entrepreneurs to grasp this just haven’t been prolific alumni of esteemed Business Schools. Africa should keep pressing for management discipline. That is what is lacking; not a new silo of entrepreneurship.