Finance Industry Today newsletter coverage for new book today – more coverage expected. I have been encouraged by positive reader response from broad range of readers. Planned PR, media and related policy discussions with administration to discuss new policies to help emerging firms starts later this month
Link:http://finance.einnews.com/247pr/232520
We need to do more to reinforce the point that entrepreneurial firms, more so than major corporations, are the real drivers of U.S. job creation and economic growth. I posted my comments titled “Think Small. Create Jobs. Win-Win” on Fareed Zakaria’s Washington Post blog addressing this issue, and will also be discussing this issue in an number of forums. We can be doing much more to support entrepreneurial firms to promote economic growth, and we are well behind many countries as I noted. Comments welcomed.
Here is the link to Fareed Zakaria’s Washington Post blog http://www.fareedzakaria.com/home/Articles/Entries/2011/8/18_Obama%E2%80%99s_Job_No._1__Create_jobs.html#
Here is a copy of my post:
Let me share another perspective on our job creation challenges, what I call the “Think Small. Create Jobs. Win-Win” strategy.
Today we hear we need to provide major corporations with new incentives to jumpstart job growth. We are told EPA, FDA and other agencies are impeding the ability of major corporations to grow and create jobs.
I don’t think so.
Get past the rhetoric from all sides and look at the numbers, always a good approach. And what the numbers suggest is we need a new, aggressive, and what I call a “Think Small. Create Jobs. Win-Win Strategy” offering a more realistic, approach to jumpstart our economy and job creation.
You be the judge- here is my view:
• Most new jobs in the business sector are created by major corporations. False.
Most new jobs are created by entrepreneurial companies that have less than 500 employees- that is a historical fact. SBA statistics show that during the past 15 years, firms with less than 500 employees accounted for 64 percent of net new hires in the U.S. and pay 44 percent of the U.S. private payroll. Exact percentages may vary year to year but these are the facts.
• Most technology innovation is driven by R&D within major corporations. False.
Smaller, entrepreneurial firms provide the rocket fuel driving our technology innovation engine. SBA statistics show small firms produce 13 times more patents per employee than large patenting firms; and these patents are twice as likely as large firm patents to be among the one percent most cited.
• Most U.S. trade is driven by major corporations. True and False
Major corporations do account for the bulk of U.S. exports, representing 71.1 percent of total exports in 2006. But of the total number of firms exporting goods and services, 97.3 percent of the total were entrepreneurial firms with less than 500 employees. And in 2006, the entrepreneurial firms with less than 500 employees accounted for 28.9 percent of the total $910.5 billion in U.S. exports.
The above points are counter-intuitive and I find not mentioned often in the media. Entrepreneurial, smaller firms are fueling our nation’s job creation and economic growth.
Andy Grove, Intel’s founder, estimated that so far we have achieved less than 5 percent of the Internet’s real business and personal impact. Paraphrasing Andy Grove’s quote, my vision is we have only achieved less than 5 percent of the benefits and personal impact that “entrepreneurial thinking”, entrepreneurship programs, and creative strategies and policies will provide, implying 95 percent of the real entrepreneurship opportunities, changes and benefits lay ahead. And these include new job creation and economic growth.
We are concerned about global competition from China and India and we should be, but again look at the numbers here, such as the Forbes ranking of Global 2000 firms, i.e., the 2,000 largest companies in the world with global reach into all overseas markets. Suppose you add up revenues of Global 2000 companies by country where they are headquartered. Next look at the GDP of each of these countries and ask the question: what are the top three countries with the highest total Global 2000 revenue as a percent of GDP? Switzerland ranks highest at 245 percent, followed by the Netherlands at 218 percent, and the United Kingdom at 112 percent. And who do you think are the bottom three? China at 4, India at 5, and Mexico at 11 percent. While the GDPs are higher in China and India, this shows the impact of major companies in the global markets. Global companies, not countries, compete in global markets. And in China and India, emerging, entrepreneurial companies are driving their economic growth tsunamis… And I can cite many other examples which can help us develop a blueprint to jump-start job creation and economic growth pursuing creative “entrepreneurial-driven” policies.
And China’s growth was not by accident but through careful planning. As I outlined in a Washington Post OpEd several years ago (“ New Ideas Needed as Jobs Shift”, Washington Post, Mar 3, 2008), clearly many countries such as China are well ahead of the U.S. in implementing successful entrepreneurship programs helping smaller firms “survive and thrive”. For example, China’s smaller businesses drive economic growth, employing about 75 percent of all urban employees, holding about 60 percent of all invention patents and accounting for about 80 percent of new products- China is pursuing a comprehensive plan to create 10,000 mostly small- and medium-size companies each year, hoping to create 100,000 new jobs. Malaysia’s MSC initiative, managed within the prime minister’s office, has an impressive track record, attracting 2,006 companies representing about sixty-three thousand knowledge workers- creative entrepreneurial policies such as R&D credits, tax incentives, strategic financing are some of the policies used to drive growth here. And I can cite many other examples which I believe can help us develop a blueprint to jump-start job creation and economic growth.
So why not here? Offering new creative entrepreneurial programs to emerging companies would not only help diversify our regional economy but also add to the tax base. Imagine 50 emerging firms, each with sales of $5 million. Helping those firms increase their annual growth from a baseline growth of just 20 percent, up to 30 percent adds $361 million new revenue over five years, helping add new employees, increasing tax revenues and, most important, creating a more diversified, knowledge-based regional economy.
I and many others have a vision on the new entrepreneurial directions and possibilities, such as a proposed Entrepreneurship Empowerment Program (‘EEP’) I developed with a colleague several years ago to help inner city entrepreneurs, both young and old, start and grow new business ventures, with both local government and business support. And we have the opportunity to enhance our current entrepreneurial education process, building on best practices now used by institutions in selected overseas markets.
I may be more passionate than most about entrepreneurship driving business value creation and economic growth and do have a vision here. Exciting times lie ahead.
Paul B. Silverman is the author of a new entrepreneurial management strategy book Worm on a Chopstick: Understanding today’s Entrepreneurial Age: Directions, Strategies, Management Perspectives; serves as CEO of Sante Corporation creating a new vision for personal health care management; and is an Adjunct Professor in the Center For Entrepreneurial Excellence in the School of Business at George Washington University
I am pleased to advise my new entrepreneurial management book “Worm on a Chopstick was released on August 5th.
Amazon link http://www.amazon.com/Worm-Chopstick-Paul-B-Silverman/dp/0983537402/ref=sr_1_1?s=books&ie=UTF8&qid=1312598793&sr=1-1
Initial reviews positive – https://paulbsilverman.com/books/reviews/
Advised press release being issued August 9th and expect coverage – now scheduling and will shortly announce speaking engagements starting Sept 15th addressing entrepreneurship, new venture strategies and entrepreneurship drivers to promote economic growth
Creating a winning business plan demands a mixture of precise business thinking, art, timing and luck. Business planning skills such as market and competitive analysis, pricing strategy, organizational planning, financial analysis among others can and must be learned; courses and books can help you.
My experience shows that you should also pay particularly strong attention to the following 10 points to improve your odds of creating a winning and fundable new business plan:
1.Maintain a market and opportunity focus and view technology as an enabler.
Define a tight, focused opportunity with a well-defined target market. Technology may be the enabler used to create the business. Suppose you propose a new wireless data service for remote entry of patient data by health care professionals- the business addresses a real, quantifiable opportunity. Compare this to framing an opportunity for a new 802b.11 wireless data entry service. In today’s challenging market, specific opportunity-driven ventures are preferable to pure technology plays.
2.Understand the difference between feature, function and benefit
Image transmission is a function. Moving high resolution images via telephone lines is a feature. The ability to send a high resolution image in 5 seconds via a telephone line using a $99 device is a benefit. Sell benefits and make this the cornerstone of your plan.
3.The “So-What” Tool
A very important consultant tool and not used as often as it should be for new venture development. A simplified “so-what” analysis goes something like this. Our new service offers a unique encrypted data solution for e-commerce applications. So what? We can provide authentication using voice recognition. So what? Our voice authentication technology instantly identifies buyers’ interests and demographic profiles. So what? We can identify and route e-commerce customers based on voice response and past history. The results? Using the “so what” tool, we refocused our thinking to create a more unique, defensible opportunity.
4.Sensitivity Analysis
You need to ‘exercise’ your financial model, examine “what-ifs” and boundary conditions. Reduce sales and/or increase costs by 10, 20, 50, 80 percent-what happens? Delay product launch plans, reduce competitors’ costs-how do these impact IRR and total cash needs? Formal analysis tools exist to complete these analyses, but you can also do this with any financial model. Properly done, these analyses show that you understand your market, business, elasticities and sensitivities.
5.Advisory Board
Develop a “hands-on” Advisory Board. Carve out roles and responsibilities. Provide incentives, typically options, vested based on time served and milestones achieved. Powerful, well-known names and impressive marquees may look great, but you need contributors who can help you move the business forward.
6.Strategic Alliances
Same points as for Advisory Boards. Developing marketing alliances with GE, IBM and others sounds impressive, but make sure there is defensible substance here. Are there any revenue guarantees? What staff and other resources have your partners committed to the venture? Any joint promotion plans among their respective customer bases?
7.The Sanctity of the Business Plan
Another important point. The completed business plan looks impressive; GBC bound, laser-printed, color charts, and maybe 200 to 300 hours to prepare- sure looks and feels like a finished product. The reality is this document is probably out of date before the ink is dry. The plan is only the starting point, a work-in-progress, showing what your team is thinking, assumptions, strategies and projected results. These will tested, attacked, defended and changed as your business proceeds. A hard lesson sometimes for those investing more than 200 hours in developing a business plan and financial models, but that is reality. As you progress, create sales, make products, encounter competition, see new opportunities, you will refine strategies, providing the foundation for the revised plan. There is no sanctity of the Business Plan- revising adds value and is the norm.
8.Adapting to Change : Avoiding the Icarus Paradox
Strategic management courses relate the story of the fabled Icarus from Greek mythology. Icarus’ greatest asset were wings of feathers and wax that let him soar higher and higher closer to the sun. He kept going to the sun, ignored warnings about getting too close, the wax wings melted and he crashed and burned. This is often used to explain management failures such as pursuing a single-minded business strategy even in the face of disaster, and also believing that achieving great past success ensures future success. (it doesn’t). Avoiding the Icarus Paradox means that new business “trajectories” must be examined, refocused and assumptions reviewed even when performance is strong.
9.Precision
Don’t say you are addressing a large, growing market. Instead say “ … the market for ‘gizmos’ is $20 million in 2011, increasing to $65 million by 2014.” Specificity and quantitative precision shows clarity of thinking and understanding of your market and business. And also improves your ability to secure funding.
10.Frugality
Running out of cash and inability to secure new funding is most often cited as the reason new ventures fail. Studies show however, that ventures funded with minimal capital have a higher probability of success, implying that a “frugal” investment structure demands tight management and strong financial controls at the outset. The message here is to tightly define cash needs, operate parsimoniously particularly in the early months, and demonstrate that you know how to manage cash and resources to win. Achieving this objective often smooths the path to secure new funding.
There are plenty of minefields and absolutely no guarantees in the entrepreneurial world. Follow the above guidelines however and you may improve your probability of creating a successful new venture.
Clearly our health care sector has lagged behind all others in using leading edge technologies to improve operations- vested interests have really not worried too much about costs; these were just passed on to consumers, directly and indirectly. But new tools and technologies are rapidly emerging in the health care sector and these are driven by emerging entrepreneurial firms rather than the traditional major players. No surprise here- statistics show more than 95 percent of all radical technology innovation in the past 60 years has been developed by SMEs (small medium enterprises) not major corporations as you might expect.
Bolder options are needed now to address today’s health care problems – the prescription: deploying new technology and capital on global best practices.
Let me share a vision on the possibilities. Suppose we create a new national eHealth program. Program objectives are to commit to use leading edge information and communications technology to improve patient safety, accessibility and quality of care; enable patient mobility nationally and internationally; meet the increasing demands from our citizens and healthcare professionals; and use eHealth as the main tool for renewal and improvement of our nation’s health care services. We will use telemedicine and other technologies to support creative, cost effective new solutions to improve our health care system. Consider some possibilities:
Your patient records are stored as secure Electronic Health Records or ‘EHRs’. Just like your secure on-line bank account transaction records, you can access this information, identify issues, alert your practitioners, and if needed, request your EHR be sent to another physician or laboratory. No more going to a physician’s office to pick up copies of imaging data and records, paying extra costs and using ‘sneaker net’ to move this data between offices.
Patients with heart disease, diabetes, hypertension and chronic illnesses, are monitored using at home telemedicine devices including ‘smart beds’ which automatically monitor and transmit diagnostics and vital signs to remote telemedicine centers.
Patient monitoring services are enhanced with predictive analytics and decision support systems that monitor all patient diagnostics, including ECG sensors transmitting data via mobile phones. Using intelligent, real time, secure predictive analytics technology, the diagnostic system helps assess patient status, identify any deviations and alerts the appropriate medical resources, including emergency services.
Telemedicine systems will provide rural, remote regions with access to practitioners, including specialists. The same infrastructure will be used to support ‘mobile’ health care clinics to treat some of the 42 million people in the United States who have no health insurance.
Remote consultations among practitioners and patients can be easily accomplished using secure, on-demand multimedia eHealth communications channels.
You have a wide range of online eHealth physical and wellness program alternatives available offered within the national eHealth program.
The above sounds impossible or ‘decades away’ to many. Not really. The eHealth vision above is widely promoted within EU countries now making excellent progress in deploying these new capabilities throughout Europe. And the specific program objectives above were cited in a speech by the Swedish Minister of Health in December 2007, less than four years ago. One EU study reported that about 70 percent of European physicians now use the internet and 66 percent use computers for consultations. Administrative patient data are electronically stored in 80 percent of general practices which is impressive. European physicians transfer about 40 percent of their data to laboratories electronically and about 10 percent to other health centers. Electronic prescriptions (‘e-prescribing’) is widely used in only three member states: Denmark (97 percent), Sweden (81 percent and the Netherlands (71 percent). Sweden has an impressive track record in deploying new national technology solutions such as ‘Sjunet’, their secure national information and communications technology or ‘ICT’ infrastructure supporting eHealth applications in Sweden.
‘Intelligent’ remote telemedicine technology may sound far off, but these services using predictive analytics are now offered. One example is the Kiwok BodyKom Series™ technology which offers patients in Sweden capabilities going well beyond traditional patient monitoring, such as ability to detect early disease symptoms; to follow up treatment processes for patients out-of-hospital; to follow and predict care demands in pre-hospital services; to directly transfer the information to a patient’s individual Electronic Health Record; among other features.
Summarizing, all would agree our health care system is broken. We can argue about policies, but we need to fix the systemit. The prescription: establish national level priorities to develop and deploy creative new technology solutions. Recognize that entrepreneurial firms will be a key driver in our progress and we reap significant benefits by more effectively leveraging our nation’s entrepreneurial assets. And we should learn lessons looking at global best practices of others are well ahead of the United States in developing an effective health care solutions. That is the recommended prescription to fix our ailing health care system. No need to call me in the morning.
I am pleased to welcome you to the NextGen Entrepreneurship Forum which I will use to promote an exchange of ideas on new business directions, strategies, issues and opportunities emerging as our entrepreneurial economy accelerates. The Forum will offer perspectives addressing the launch and growth of early stage ventures, as well as assist major firms seeking to understand and capitalize on innovation and entrepreneurial “thinking.”
You will see a number of posts in coming weeks dealing with what I believe are key entrepreneurial issues. My mission is to use the new Forum to share views and promote an exchange of new ideas on entrepreneurship which I believe will play a key role in shaping companies in all market sectors and drive both regional and national economic growth.
I look forward to hearing from you.
Welcome aboard!
Paul B. Silverman
