Innovations Technology Governance Globalization (Innovations)
Innovations is about entrepreneurial solutions to global challenges. The journal features cases authored by exceptional innovators; commentary and research from leading academics; and essays from globally recognized executives and political leaders. The journal is jointly hosted at George Mason University's School of Public Policy, Harvard's Kennedy School of Government, and MIT's Legatum Center for Development and Entrepreneurship.
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|Other titles||Innovations (Cambridge, Mass.: Online), Innovations|
|Material type||Document, Periodical, Internet resource|
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Publications in this journal
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ABSTRACT: In the outskirts of Medellin, Colombia, impoverished rural schoolchildren have cause for hope. The Colombian Coffee Growers’ Association wants to hire them. Why? Because these children have developed the independent thinking, communication, and work skills that will make them an asset to the industry. They developed these skills in their multigrade primary schools, where children do most of their learning in competence-based groups, while the teacher functions as guide and coach. In Kenya, a teenage boy is also celebrating. A primary school dropout who once survived outside the law, he now runs his own small business, lives on his own, and even helps support his family financially. He learned the skills he needed in a 12-week entrepreneurship program offered to youth living on the streets in the heart of one of Africa’s largest slums. The life-changing economic opportunities now available to these children are the direct result of the unique quality of their schooling, which has had a direct and positive impact on their immediate circumstances. In other words, these children’s schooling was made relevant to their current life experiences and those they will later encounter. These children’s stories unfortunately are not common. Currently, the dominant view in both developed and developing countries is that education quality is synonymous with content mastery. A Western model of education usually dominates the content of and the approach to both primary and secondary education. School systems evaluate students’ performance based on their ability to achieve international standards in language, math, science, and social studies. As a result, although the life trajectories of students in various locations and circumstances vary dramatically, there is significant overlap across the curricula prescribed for schools in elite North American and European cities and those prescribed for schools in rural African villages. It may seem obvious that, beyond basic literacy, numeracy, and critical thinking skills, the schooling students receive must vary according to their vastly different environments and life trajectories, but that is not the prevailing practice. Children living in impoverished regions need knowledge and tools that will give them the best chance to escape the cycle of poverty. They need to develop daily behaviors and health habits that will help them maintain a good quality of life and ensure their ability to work. For the longer term, children need to develop the capacity to generate an income that meets their basic needs—food, shelter, health care, security. In regions where jobs are available, children must learn the basic skills that enable them to work productively for and with others. However, since impoverished regions have few paid employment opportunities, most children in the developing world must be able to generate their own livelihoods. Thus they need the marketplace and entrepreneurial skills that will enable them to identify, pursue, and produce economic opportunities successfully. Traditional perspectives assume that education plays a positive role in economic development and that universal access to primary schooling plays a critical role in breaking the cycle of poverty (Levine & Birdsall, 2005). However, the benefits of education never materialize for most children in impoverished regions. Even as access to schooling expands dramatically, few children are able to make significant changes in their life opportunities, and their communities remain impoverished. As a result, the pursuit of a higher education seems irrelevant for most children living in poverty. Statistics bear out the expectations that most impoverished children won’t reach college or even secondary school. In Rwanda, for example, in 2007, 2.15 million students were enrolled in primary school, 267,000 in secondary school, and 26,400 at the college level (EFA Report, 2008). In sub-Saharan Africa, gross enrollment rates for primary and secondary schools were 74 percent and 26 percent, respectively, and only 6 percent of students attend college, most of whom are from wealthy families (EFA Report, 2008). Many factors contribute to this problem, two of which are well known and have been addressed extensively—the problems of access and quality. A third problem—the relevance of schooling to the lives of the children—has been largely overlooked. Education lays a foundation for reducing poverty and...
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ABSTRACT: Happy new year sir . . . just wanted to let you know that the cinema business did not work out. Here in the city, no one cares about what one does. Last year December, my team was to have an event under our newly registered company, but it never [was] held because no one was willing to sponsor. This year, we are still planning on the event. We moved it to Easter Sunday, which is March 31st, we have submitted [a] couple of proposal letters but nothing is really encouraging. Right now we are thinking of raising funds ourselves without relying on sponsors but we can’t think of any idea on how to go about this. Please I need your advice because I am about to quit. It’s not funny. I await your reply. Thanks a lot. Since the economic collapse in 2008, youth unemployment has presented a major crisis for policymakers worldwide. Many observers see the notably large youth unemployment rates from sub-Saharan Africa to Spain to the United States as an ominous problem; however, I see this view as a mistake in the orientation of their perspective. Of course there are risks associated with high youth unemployment, but within great risk lies enormous opportunity. This article is about what can be achieved with a labor force that is young, dynamic, mobile, and digital. While the youth labor force worldwide is growing, youth unemployment also is increasing. Over the last decade, the global youth labor force grew from 577 million to 602 million, an increase of 4.3 percent, and it is projected to grow another 55 million by 2015. Most of the world’s youth labor force lives in developing economies, with the highest growth in the Middle East (35 percent), followed by sub-Saharan Africa (29 percent). The youth unemployment rate stood at 13.4 percent in 2009, for a total of 82.7 million young people without work, a 12.5 percent increase over 1999. If youth unemployment continues to grow at the current rate, the global youth unemployment rate will be 15.5 percent by 2015, with 102 million young people out of work. Demographics indicate that most developing nations are experiencing a bulging youth population. According to the UN Population Division, “Young people account for 12 percent of the population in high-income countries and in Europe, whereas they make up about 20 percent of the population of low-income countries and in Africa.” Today, “Africa is home to 17.5 percent of the world’s adolescents and young adults . . . Africa’s share of the world’s adolescents is projected to grow to 31.3 percent, while Asia’s is projected to drop [from 61.9 percent] to 50.4 percent.” The fastest growth of 15- to 24-year-olds will take place in sub-Saharan Africa—Niger, Zambia, Tanzania, Uganda, and Malawi. Innumerable changes must occur to create a society in which young people are empowered and able to find gainful employment. Rule of law, transparent government, peace, health care, and access to a quality education all contribute to human development. Rapid transformational change lies in increasing youth employability. I argue that specific disruptive innovations could lead to massive skill development among the youth population, which will result in higher youth employment and help to reverse social instability and reduce violent conflict, poverty, crime, and substance abuse. Mobile banking essentially has rendered brick-and-mortar banks unnecessary. We must learn from this extraordinary success and what it has done for one-to-one financial transactions. The example of M-PESA is breathtaking. M-PESA is a service offered by Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania, that allows users with a national ID card or passport to deposit, withdraw, and transfer money with a mobile device. Using technology in a similar manner to revolutionize education could produce equally impressive results. The growth of the mobile sector has already led to job creation in sub-Saharan Africa. It is estimated that, in 2011, mobile operators created more than 3.5 million jobs across both the formal and informal sectors. While...
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ABSTRACT: Despite our current age of unprecedented global wealth, billions of people worldwide still live in poverty. Over the past decade, however, governments, the nonprofit sector, and the business world have explored the ability of small and growing businesses (SGBs) to reduce poverty, particularly in emerging markets. The promise of finding market-based solutions to social problems has generated a good deal of excitement about impact investing—an investment strategy that seeks social/environmental returns in addition to financial returns. According to a 2013 study by J. P. Morgan and the Global Impact Investing Network (GIIN), a total of $17 billion is expected to be deployed into socially beneficial sectors in 2012-2013. However, this capital is not yet reaching many of the innovative small and growing businesses that can help to alleviate poverty through the jobs they create and the products and services they provide. While social enterprises continue to emerge—Village Capital alone has seen over 5,000 applications from impact-focused entrepreneurs worldwide over the last three years—many innovative companies in their early stages have had difficulty getting off the ground. They are still not able to access and take advantage this new flow of capital, or the other types of support and resources they need to succeed. A 2012 report from Monitor-Deloitte and the Acumen Fund highlights this paradox: The Pioneer Gap: While there are thousands of early-stage innovators seeking to launch companies that can drive social change worldwide, very few are able to build the teams, find the customer base, or raise the investment necessary to scale. The so-called pioneer gap specifically refers to the burden shouldered by enterprises that are pioneering new business models for social change. Monitor and Acumen identify four stages that these firms typically go through, from the blueprint stage to validation, preparation, and, finally, scale. The pioneer gap occurs in the early stages of an enterprise’s growth, when it is not yet considered investable by many impact investors. The pioneer gap hypothesis is supported by additional research on the social impact sector. In an industry survey conducted by Village Capital in 2012, of more than 300 self-described impact investment funds, fewer than 10 invested, at less than $250,000 per company. Additionally, a Monitor study of African impact investors found that only 6 of 84 invested in companies still in the early stages. According to a 2013 GIIN/J. P. Morgan report, impact investors cite a “lack of appropriate capital across the spectrum” and a “lack of investable enterprises” as the top two barriers to deploying more impact investment, which suggests that the bottleneck of (a) not enough quality companies in the early stage and (b) not enough effective support to produce later stage investable companies is thwarting the growth of this sector. Over the past several years, actors in the impact investing sector have developed a growing recognition that early stage support—specifically in the form of business incubators and accelerators—is a key intervention for addressing the pioneer gap. Business incubators and accelerators support early stage entrepreneurs by providing them with (a) business development support (e.g., consulting, technology assistance); (b) infrastructure support (e.g., access to office space, shared backoffice services); (c) network support (e.g., access to potential customers, investors, mentors); and (d) financial support (in the form of grants/investments). This study surveys 52 impact-focused accelerators worldwide in order to understand their characteristics, operations, and performance more fully. This research is particularly timely, as the number of accelerators has grown significantly over the past five years—in fact, 73 percent of accelerators surveyed are fewer than five years old. While the role accelerators play in entrepreneurship has been studied to some extent (we review the existing literature in the next section), existing studies are largely limited to those focused on technology companies in developed markets—that is, the U.S. and Europe. There is little research on accelerator activity in emerging markets and almost none on the role of accelerators focused on impact investment. With over 40 impact-focused accelerators founded in the last half-decade, we need an accurate assessment of what accelerators are...
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ABSTRACT: Interest in social innovation is growing, and that’s great news. Meanwhile, our societies are facing extraordinary challenges: increasing inequality, unstable economies, climate change, and a raft of other issues. But, just as social and environmental concerns are reaching a frightening crescendo, technological advances, activism 2.0, and market transformations are changing the world, mostly for the better. The challenges may be daunting, but they offer precisely the right conditions for social innovation to emerge and for social entrepreneurs to thrive. No matter what drives innovation—necessity, altruism, or financial reward—the case for social innovation should be clear enough. The more interesting question is how best to catalyze and support social innovation and entrepreneurship. The Centre for Social Innovation (CSI) accelerates the impact of social enterprises through its powerful theory of change. Our model is entirely focused on catalyzing social innovation, but the lessons we have learned in our work are relevant to entrepreneurship more broadly. CSI is a coworking space, community, and launchpad for people who intend to change the world, with three locations in Toronto and one in New York City. CSI operates nearly 100,000 square feet of space and supports more than 1,500 members by providing the spaces and tools they need to succeed more quickly and to have a far greater impact. Coworking refers to working in shared office spaces using economies of scale to give tenants access to amenities and facilities they otherwise would not be able to afford. Coworking spaces connect diverse organizations and individuals, giving them the chance to collaborate, share knowledge, and develop systemic solutions to the issues they are trying to address. Unlike many other accelerators, CSI is focused on keeping our arms wide open to a broad and diverse range of people working for change. We do not assume that bigger is better. We don’t limit our investments to the projects that seem most likely to succeed. Instead we see ourselves as a platform, as building a community where our members can connect to the people, tools, learning, and resources they need to succeed. CSI theory of change For us, social innovation means creating new strategies, concepts, ideas, and organizations that address social, environmental, cultural, and economic challenges in order to extend and strengthen civil society. Social innovations come from individuals, groups, or organizations working for the public good in the for-profit, nonprofit, citizen, and public sectors. Increasingly, innovations are happening in the spaces between these sectors as their perspectives collide to spark new ways of thinking. Intentional innovation is the conscious effort to develop a more systematic approach to innovation. Rather than wait for social innovations to appear, practitioners and organizations around the world are working to understand and establish methods, frameworks, and processes that can stimulate social innovation and improve the chances that it will succeed. This is an important development. Still, something in the very nature of innovation resists the linearity imposed by many traditional frameworks. It is important to pursue more structured approaches, but innovators should also find ways to embrace the unique and magical quality of emergent innovation. Many researchers acknowledge that social innovation needs the appropriate conditions, but they rarely tell us what those conditions should be. At CSI, our on-the-ground experience with a diverse range of organizations and companies provides unique insights into how to create the conditions that will enable social innovation to emerge. As figure 1 shows, CSI’s theory of change is best understood as a pyramid based on three distinct but integrated levels. • Space is the foundation, and the platform for everything that happens. • Community develops as people occupy the space and form relationships. • Innovation emerges from the connections that people form in the space and in the community. Together, space and community increase the likelihood that social innovation will emerge. Not all spaces are created equal, and some spaces are more clearly conducive to creativity and innovation than others. A space created to foster social innovation must be designed as a social space, and it must have features that encourage people to generate new ideas and connections. CSI’s...
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ABSTRACT: In lieu of an abstract, here is a brief excerpt of the content: What do accelerators do? Broadly speaking, they help ventures define and build their initial products, identify promising customer segments, and secure resources, including capital and employees. More specifically, accelerator programs are programs of limited-duration—lasting about three months—that help cohorts of startups with the new venture process. They usually provide a small amount of seed capital, plus working space. They also offer a plethora of networking opportunities, with both peer ventures and mentors, who might be successful entrepreneurs, program graduates, venture capitalists, angel investors, or even corporate executives. Finally, most programs end with a grand event, a “demo day” where ventures pitch to a large audience of qualified investors. You may think this all sounds familiar. After all, don’t incubators and angel investors help nascent ventures? Accelerators certainly are similar to incubators and angel investors. Like them, accelerators aim to help nascent ventures during the formation stage. Thus we might expect that many of the activities provided by accelerators would also be provided by angels and incubators. But accelerators differ in several ways. Perhaps the most fundamental difference is the limited duration of accelerator programs as compared to the continuous nature of incubators and angel investments. This one small difference leads to many other differences, as I discuss in more detail below. (See table 1 for a summary of the differences between incubators, angel investors, and accelerators.) Incubators and Angel Investors According to the National Business Incubation Association, incubators shelter vulnerable nascent businesses, allowing them to become stronger before becoming independent. According to the association’s website, 93 percent of all incubators are nonprofit organizations focused on economic development, and roughly a third are affiliated with a university. While no two incubators are exactly the same, in general, incubators receive rent and fees from tenant firms in exchange for office space and administrative support services. Several incubators also provide introductions to financiers, and connections to legal, technology transfer, and accounting consultants. When they are affiliated with a university, they may also provide services related to intellectual property; the university may also use them to transfer knowledge from faculty members to firms that are commercializing the university’s intellectual property. Click for larger view Table 1. Key Differences between Incubators, Investors, and Accelerators Some of what incubators provide to entrepreneurs, however, might not be consistent with what the nascent firms actually need. For example, ventures might develop in a way that allows them to survive inside of an incubator, but not outside of it, and thus in a manner that is not optimal for the market. Some firms may survive longer in an incubator than they would otherwise. Survival may seem attractive, but if the firm will inevitably fail, then the resources it is consuming might be better used by other, more fruitful endeavors. Moreover, if ventures are being shielded from market forces, they might be missing out on important feedback that could enable them to adapt. Early adaptation is critical for early-stage firms before they become more rigid with age, which occurs naturally. Angel investors also aim to help fledging ventures. Angels are individual investors, or groups of individual investors, who provide seed capital and varying amounts of advice to young firms. According to the Center for Venture Research, 28,590 entrepreneurial ventures received $9.7 billion in investment during the first quarter of 2013. Clearly, angel investors are an important part of the entrepreneurial ecosystem. Often, but not always, they are entrepreneurs who want to help the next generation of entrepreneurs. They also may be friends or family members who provide financial investment. Angel investors help their portfolio firms in a unstructured manner, often providing advice and introductions as needed. The lack of structure often translates into limited involvement and mentorship. Comparing Accelerators and Incubators Accelerators also help fledging nascent ventures. Philosophically, incubators tend to nurture nascent ventures by buffering them from the environment to give them room to grow. In contrast, whereas accelerators speed up market interactions in order to help nascent ventures adapt quickly and learn. Practically, accelerators and incubators differ in four key ways. Duration The limited duration of accelerators, usually three months, is the characteristic that most clearly defines accelerator programs...
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ABSTRACT: More and more, business incubators resemble the roadside wildflowers that bloom in the Texas spring—they seem to be popping up everywhere. Generally considered beneficial, they are often seeded by governments to promote economic activity. However, while the economic impact of wildflower tourism has been well documented, the economic and social impact of business incubators is far more opaque. Given the crucial need to support entrepreneurial ventures both domestically and in the developing world, it is critical to establish an approach based on holistic evidence that will leverage the potential of incubators to propel the small and growing business (SGB) sector most effectively. Business incubators are programs designed to support early stage entrepreneurs by providing them with an array of business development services and access to potential investors. While all incubators have the common goal of supporting and launching viable SGBs into the economy, there is a wide variety of incubation models and a wider variety of business development services provided to participating firms. These services may include but are not limited to access to office space, connections to potential customers and investors, access to legal and accounting services, and business management advice. Over the past decade, the business incubation field has experienced precipitous growth. A survey of business incubators showed that there were approximately two thousand incubators worldwide in 1998 and nearly seven thousand today. The majority of them are in North America and Europe, but businesses incubators in the developing world are growing rapidly. While no comprehensive studies are available, some estimate the annual growth rate of business incubators in the developing world to be over 20 percent. Much of the growth stems from heavy public-sector investment in these incubators, which are, for the most part, nonprofit. For example, 54 percent of Brazilian incubators received financial support from the Ministry of Industry Development and Commerce, and the Indian government recently seeded a $6 million science and technology incubator as part of a larger project that aims to create many such incubators across the country. Infodev, the World Bank Group program designed to support incubators, was launched in 2002. This expanding program supports 242 incubators via its Incubator Support Center (iDisc) and provides research and direct funding to emerging-market incubators. Despite the rapid growth of these incubation programs, there is still little consensus about how successful they have been in catalyzing the growth and development of local entrepreneurs, let alone how this success should be defined and measured. Most incubators in developing countries are nonprofit, thus traditional measures of financial success are ill-suited to evaluate their performance. Many scholars suggest the use of goal-oriented performance metrics, meaning that success can be defined by the extent to which an organization meets its goals. While this approach offers obvious benefits over financial metrics, it is subject to a deluge of semantic disagreements: What is the goal of an incubator? Do all incubators have the same goal? How do you compare a variety of incubation programs that have incongruent missions, models, and funding mechanisms? Even the most common performance statistic—survival of the incubated firms—can be problematic. According to some, the early termination of unsustainable businesses that are participating in incubation programs is beneficial to the economy, as resources will not be siphoned away from higher performing SGBs. Even if appropriate performance metrics can be established and it can be determined that incubators are generally performing well, the relative cost of these programs must be evaluated in order to determine if they are worthy of funding from the public and philanthropic sectors. Research focused on the public cost of incubators in the United States has been relatively inconclusive. Various studies have found the public cost per job created to be anywhere from $150to $12,000, but it is unclear how these figures would translate to a developing economy context. Given the lack of consistent findings and the lack of data available from emerging markets, much more research is required before we can claim that incubators are a worthwhile investment. Finally, assuming that some incubators are successful and cost effective, it is important to understand why, and also to examine which factors may contribute the success of some...
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ABSTRACT: Over the past several years, a number of hubs, incubators, accelerators, and startup garages have sprung up along the Ngong corridor in Nairobi to service the city’s emerging startup ecosystem, which has led The Economist to dub the city “Silicon Savannah” (“Upwardly mobile,” 2012). Caffeine-fueled hack-a-thons and events sponsored by blue-chip IT companies have become recurrent meeting places for “who’s who” on the Kenyan technology scene. Although some in the industry are fatigued by the hype, the excitement at competitions, at informal meetings over coffee at Pete’s, and among the young founders of technology companies remains contagious, as many believe mobile technology has the potential to solve some of Africa’s most pressing problems. While still nascent, Kenya’s rapidly growing mobile technology scene already has produced several success stories. Unfortunately, entrepreneurs in Kenya struggle harder to bring their startup ventures to market or to scale than those in advanced innovation hubs, such as California’s Silicon Valley or Israel, which sometimes is referred to as the “start-up nation” (Senor & Singer, 2009). As ever more young technology entrepreneurs emerge, impact investment and development funds are becoming increasingly interested in sector-driven approaches that focus on scaling entire industries and ecosystem-driven approaches that support cross-sector development in the private sector (Ayrikyan & Lee, 2013; Bannick & Goldman, 2012; Koh, Karamchandani, & Katz, 2012). This new tack reflects a convergence of issues, interests, and solutions in the developing world, and while probably the right approach, it requires a significant amount of funding and substantial collaboration. As noted by Bauer et al. (Bauer, Lang, & Schneider, 2012), coordinating the formulation and implementation of policy even in commercially viable sectors requires managing a challenging and diverse set of stakeholders. In the developing world, the situation is especially difficult, in that core pieces of the ecosystem are often absent and public support is needed until market dynamics can take over. A policy dialogue is emerging regarding the potential of mobile services developed by entrepreneurs to have an impact on end-users at the bottom of the economic pyramid (BOP). Many of the discussions are about resolving the barriers entrepreneurs are facing, such as access to financing, lack of mentorship, and the ability to monetize. Ideas for implementation that are being piloted in various locations range from building developer toolkits to sponsoring hack-a-thons to creating Silicon Valley-style incubators and accelerators. However, before donors and policymakers finalize their strategies to support mobile entrepreneurs in the developing world, it would be worthwhile to clarify the pathways that are enabling end-users living in poverty to realize social benefits from mobile services. This paper proposes a theory of change in terms of how entrepreneurs working in partnership with the mobile industry can deliver these benefits to people with low incomes, especially those at the BOP. We begin with our theory of change hypothesis and describe the enabling factors that make it possible to scale impact using mobile technology. We then introduce several policy approaches to addressing barriers in the entrepreneurship ecosystem that will help to accelerate the development of mobile services that reach the BOP. A 2011 paper by Accenture, the global consulting company, (Bulloch, Lacy, & Jurgens, 2011) presents the increasing reality of and desire for collaboration among donors, private sector, and government on a converging set of issues, interests, and solutions in the developing world. The theory of change we posit in this chapter describes how cross-sector convergence among the mobile industry, the entrepreneurship ecosystem, and development interests can scale mobile services for BOP end-users. As illustrated in Figure 1, we see three important enablers: Mobile networks’ economies of scope has lowered the transaction cost for servicing BOP segments. Mobile user digital identity enables transactions through the mobile network as trusted parties, without limitations of location and time. Open innovation provides a collaborative framework for tapping into consumer needs and providing creative talent to help address those needs. As noted by Hodge and Weeks (2006), large economies of scope exist within mobile networks because creating network infrastructure has a high fixed cost, while providing access to the network...
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ABSTRACT: Despite the positive economic news and encouraging trends that have emerged from Africa over the past decade, the troubling reality remains that the everyday livelihoods of Africans have not kept pace with macroeconomic growth, and per-capita GDPs on the continent persistently lag behind the rest of the world. We submit that entrepreneurship can address this stubborn income gap in Africa if—and only if—it is able to evolve beyond its current state of necessity-based informality into one that is vibrant and robust enough to promote sustained economic growth and generate long-term, viable livelihoods across the continent. To gain understanding of the state of entrepreneurship in Africa, Omidyar Network launched the Accelerating Entrepreneurship in Africa Initiative in 2012. To execute this multiphase research project, we partnered with Monitor Deloitte South Africa (formerly Monitor Group). We set out together to identify the challenges facing African entrepreneurs and to pinpoint the most trenchant barriers inhibiting high-impact entrepreneurship. The first phase of the initiative began with a survey of 582 entrepreneurs in six sub-Saharan African countries: Ethiopia, Ghana, Kenya, Nigeria, South Africa, and Tanzania. The survey was augmented by 72 in-depth interviews and then benchmarked against 19 global peers. The survey focused on four critical aspects of entrepreneurial environments: • Entrepreneurship assets: financing, skills and talent, and infrastructure • Business support: government programs and incubators • Policy accelerators: legislation and administrative burdens • Motivation and mindset: legitimacy, attitudes, and culture The initiative’s second phase brought together business, government, and thought leaders to analyze the survey findings and to examine the state of entrepreneurship in Africa more closely. The sessions were held in October 2012 at the inaugural Entrepreneurship in Africa Summit in Accra, Ghana. Convened by Omidyar Network in collaboration with the African Leadership Network and Monitor Deloitte South Africa, the summit drew more than 300 relevant leaders from both private and public sectors to participate in a solutions-driven dialogue on fostering high-impact entrepreneurship across the continent. This article presents the findings of the entrepreneur survey, the outcomes of the workshops in Accra, and the conclusions of the third and final phase of the initiative: the recommended actions needed to accelerate entrepreneurship on the continent. Self finance and family loans are the main sources of funding. We are pleased to report that a culture of entrepreneurship is growing in sub-Saharan Africa, with indicators related to entrepreneurial motivation on par with or higher than global peers. However, despite these positive signs, the business landscape in the region presents a number of challenges that prospective entrepreneurs must transcend. We outline the opportunities and challenges Africa’s entrepreneurial ecosystem is facing, and the key practices that we believe will spur the continent forward. A supply of and access to capital are critical to stimulating entrepreneurship and economic growth. The International Finance Corporation estimates that up to 84 percent of small and midsize enterprises (SMEs) in Africa are either unserved or underserved, representing a value gap in credit financing of US$140-$170 billion. In the Monitor survey, challenges related to accessing finance drew mixed perceptions from the demand and supply sides. Seventy-one percent of respondents believe that not enough equity capital exists to start new firms, but while many “Afro-entrepreneurs” bemoan a limited supply of capital, financiers point out that many projects simply are not fundable. Of the six countries surveyed, Kenya seems to fare the best in terms of capital supply, given that only 52 percent of Kenyan respondents highlight this as a challenge. The cost of accessing capital is prohibitive. Currently, the main sources of capital for small and growing enterprises are retained earnings, credit cards, loan associations, and investments from family and friends. Forty-five percent of Afro-entrepreneurs report that they used family loans to finance their business, and 19 percent say they used private equity (see figure 1). However, once these sources are exhausted, entrepreneurs face the challenge of tapping other sources of capital. The following section explores the constraints facing funders and entrepreneurs, as well as various frameworks that banks, venture...
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ABSTRACT: Extraordinary changes have taken place in the United States since the mid-1980s, when the passage of the Bayh/Dole Act, which allowed research institutions to license inventions coming out of federally funded grants, and the creation of the Small Business Innovation and Research (SBIR) program helped unleash an unprecedented era of innovation and entrepreneurship across the country. It is clear that the larger environment in which entrepreneurial enterprises emerge is critically important to the incubation, growth, and sustainability of wealth- and job-creating companies. We have a long history in this country of celebrating heroes, pioneers, and individual entrepreneurs, based on our deep belief in the power of the individual over his or her environment. However, increasing evidence suggests that environment, timing, and support can either enable or inhibit individual achievements, including successful entrepreneurship. The 21st-century environment for innovation and entrepreneurship has become globally interdependent in terms of inventions, innovations, markets, production, and talent. Discretionary resources are dispersed, rather than being concentrated in the hands of a few individuals or companies. Thus, many of the policies and practices vis-à-vis incentivizing and accelerating entrepreneurship in the 1980s may be insufficient for the challenges of the 21st century. It may be time to rethink what it takes to accelerate innovation and entrepreneurship in a global knowledge economy. My experience working in a community that completely reinvented itself over a 30-year period suggests that accelerating entrepreneurship is as much about community transformation as it is about helping individual entrepreneurs. Enhancing community capacity as it simultaneously supported entrepreneurs was at the core of San Diego’s strategy, especially the University of California, San Diego’s innovative CONNECT organization, which was created to be a catalyst for technology entrepreneurship. Started in 1984, just as the larger environment that enabled more localized innovation and entrepreneurship was unleashed by less restrictive intellectual property and financial policies, CONNECT began with an explicit commitment to enhance community capacity as it simultaneously provided support to individual entrepreneurs. In a nutshell, well into the 1970s, San Diego’s economy had benefited from and leveraged federal relationships while supporting four wars—World Wars I and II, the Korean War, and the Vietnam War—and from the expanding military industrial complex that emerged in the late 1940s and 1950s. The military’s growing appetite for advanced technologies built on good basic science, especially in the naval and aviation arenas, drove the growth of a major R&D sector. All of this activity was animated by concerns about defending democracy in the world and protecting national security on the home front. The remainder of San Diego’s economy consisted of small businesses and booming real estate and tourism sectors. The result is that San Diego’s economy throughout the 20th century and even in today’s “new economy” has been and remains significantly dependent on military expenditures, which were close to 50 percent of the economy during the major wars and is approximately 25 percent today because of the installations and R&D activities going on in the region. However, the city’s business culture has consisted of diverse small enterprises that collaborate and co-invest in a variety of initiatives, among which was assuring continued federal investment in the region. The extent to which the military, and now the federal government more generally, has been the driver of economic prosperity in the San Diego region is the subject of a book I published with my colleague, historian Abe Shragge, Invention and Reinvention: The Evolution of San Diego’s Innovation Economy (Walshok and Schragge, 2013). The story line, which is extremely relevant to contemporary discussions about accelerating entrepreneurship, highlights how important collaborative mechanisms, as well as an ambitious and adaptive civic culture, were to San Diego in its journey to becoming a major innovation hub. Supporting the development of new technology clusters and edgy, risky entrepreneurial enterprises, along with leveraging assets, especially land, has been a key component of the region’s DNA for more than a century. A distinguishing feature of San Diego’s economic character is the fact that it has relatively few Fortune 500 companies, no significant history of...
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ABSTRACT: Innovation can be anywhere. While most people in the entrepreneurial world define innovation as the products and services that entrepreneurs are selling, Village Capital’s core innovation—peer-allocated capital—transforms the way that investment capital builds companies. Ultimately, our peer-selection model changes the power dynamic between entrepreneurs and capital providers in a way that leverages the comparative advantage of each actor, and enables them to create more value together. Since 2010, Village Capital has launched 22 programs in seven countries and made over 30 peer-selected investments. Through these programs, we have served over 350 ventures worldwide, building disruptive innovations in energy, environmental sustainability, agriculture, health, and education. Enterprises started by program graduates have raised more than $40 million in follow-on funding to date, creating 5,000 jobs and serving five million customers worldwide. While the entrepreneurs and programming have changed significantly over time, one question has always been at the core of Village Capital: What if entrepreneurs could invest in each other? In this case I describe how we developed the Village Capital peer-selection model as a disruptive approach to building and developing ventures: the model’s origin, evolution, results to date, and implications for funding innovations worldwide more efficiently Entrepreneurs need cash—in the form of either revenue or investment—to fuel the growth of their businesses. Historically, when teams launch a business, they are working hard on one side to discover customers, while simultaneously meeting with angel investors, foundations, venture capital firms, and banks. At their best, these processes work together, but all too often the two kinds of activities create wildly different messages for the entrepreneur. The primary reason a firm should raise money is that the current revenue (and underlying demand) from customers is not strong enough—yet—to support the expenses of the company, constraining its operations and growth. Entrepreneurs often need time to find the right product and the right market—and in these early stages, investors typically fund the cost of this discovery. This process can take years. For example, Amazon.com, founded in 1994, did not turn its first profit until 2001, but two years earlier, in 1999, Jeff Bezos, its founder and CEO, was already being named Time Man of the Year. So, on the business side, entrepreneurs are discovering exactly what products or services their customers want, but on the financial side they are looking for the cash they need to deliver those products or services. In theory, these two processes should be linked, but in practice entrepreneurs often face a harmful dissonance. While both activities are equally important, entrepreneurs often find themselves spending more time on raising capital, believing that injecting more cash will ease their operations and facilitate growth more than customer validation could on its own. Too often, “getting funded” is their primary goal, rather than finding authentic demand from real customers. Because of this situation, investors have tremendous power to dictate which enterprises get a shot, and which don’t. This power dynamic is most detrimental to the most innovative businesses that have the potential to be revolutionary but are considered too high-risk. Why? Two reasons. First, banks have little ability, mandate, or incentive to lend to higher-risk concepts, no matter how transformative they may be. Second, because venture capital firms have become more professionalized over the past 25 years, investors are now looking for quick wins, specifically, IT-based consumer technology that can be acquired or go to an IPO in three to five years. As a result, in their early days, entrepreneurs cannot adequately finance their businesses just from customer revenue, and they have a very specific incentive to build the type of business that investors want so they can get the necessary cash from them. I entered the investment world not from a traditional finance background but as an entrepreneur. In 2009, I went to work for a mentor of mine, Bob Pattillo, at First Light Ventures, an independent seed fund affiliated with Gray Ghost Ventures, a large impact investment firm that Bob had created. Bob, a successful entrepreneur...
Article: Accelerating into Control[Show abstract] [Hide abstract]
ABSTRACT: Researchers have generally found that entrepreneurs are more optimistic and more confident than non-entrepreneurs. While it may help entrepreneurs persevere in the face of potential business failure, we cannot mistake their confidence for always knowing what to do with their business idea. Entrepreneurs in fact seek out mentors and other useful connections to help them succeed throughout the growth of their businesses, particularly at the start. Many entrepreneurs seek advice informally and in a piecemeal manner, but some seek more formal assistance through structured or semi-structured entrepreneurship programs. Indeed, we currently are witnessing the rise of the “support ecosystem,” which offers a plethora of entrepreneurship education and training programs. These programs vary in their design and operation; some, for example, are run by universities and colleges, some are offered by nonprofits or the government, and others are offered by for-profit entities. They might operate just a weekend in length, or last several months or years. The scope of a program’s intervention and how closely it works with each entrepreneur or startup varies widely. With this increase in the number and scope of program offerings, we wonder if adoption is outpacing evidence of their effectiveness. In this article, we examine various types of programs, with a primary focus on the accelerator, provide some context for current research and research concepts in this area, and discuss some implications of collecting data for program operators and policymakers. We begin by defining the accelerator: Accelerators are organizations that provide cohorts of selected nascent ventures seed-investment, usually in exchange for equity, and limited-duration educational programming, including extensive mentorship and structured educational components. These programs typically culminate in “demo days” where the ventures make pitches to an audience of qualified investors. For the purpose of this article, we distinguish between accelerators and incubators. While some use the two terms interchangeably, we see them as distinct categories. Incubators lack a mentoring component and have been around for much longer than accelerators. Like other education and training programs, accelerators are also on the rise. We argue that research is lacking in entrepreneurship education generally, and specifically on accelerators, which means from a research perspective we cannot say many definitive things about this type of program. We don’t have concrete evidence of their value. This does not mean we seek to deride accelerators or other entrepreneurship programs as “bad,” or conversely, promote them as “good.” It means at present we are at best ambiguous about the overall effects accelerators have on entrepreneurs. To help entrepreneurs, program operators, and funders of programs, we therefore call for studies that examine what accelerators do well and what they don’t do well. Finally, we review the concepts of treatment and control groups and randomization. One of our primary arguments is that control and treatment groups are necessary to explain the counterfactual—that is, what would have happened to an entrepreneur/startup if it had not participated in a program—and that they are overlooked by both researchers and practitioners. With any given entrepreneurship education program, there are individuals who receive the treatment of the program, and there are individuals who do not receive it. Following these two groups enable researchers to compare results and establish a counterfactual outcome. How the control and treatment groups are constructed determines the strength of any findings. Consider the people an entrepreneurship program attracts. The decision to enter a program not only identifies someone as an entrepreneur, but as an entrepreneur who seeks formal assistance through a program, which is a distinct subset of entrepreneurs. This choice of actively seeking assistance could be associated with a number of factors. For example, we might imagine that someone who feels they could benefit from structured assistance in the startup process has greater potential than someone who lacks such foresight and planning skills. Conversely, the entrepreneur who needs structured assistance could have less potential than someone who perseveres without it. Therefore, this treatment group cannot be compared to just any individual or group of entrepreneurs, as the control group must have characteristics that are highly similar to the treatment group, including the desire to enter a program. Compounding the issue is that many...
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ABSTRACT: With a strong culture of giving instilled by Microsoft’s cofounders, Bill Gates and Paul Allen, corporate citizenship and philanthropy have always been a part of our DNA. With the founders’ involvement more than 30 years ago, Microsoft started an employee matching gifts program, which so far has raised more than $1 billion. Fast-forward to the start of the new millennium, when Microsoft was just 25 years old. We were already investing in a wide range of corporate citizenship projects around the world. Each project was making an impact, but the efforts were decentralized and not able to take full advantage of Microsoft’s broad expertise, acumen, and resources. To expand the effectiveness of these initiatives, we began exploring how to unite our efforts around a central strategy and audience and to align Microsoft’s corporate giving programs more effectively around the company’s core competencies. At the time, the international technology community was becoming increasingly aware that simply providing access to technology, or bridging the “digital divide,” was not enough. Beyond learning to use computers and the Internet, people needed the knowledge to apply those skills in ways that were relevant to their lives and economic needs. We were adamant then, and still are today, that technology in itself is not a means to an end but a tool. If we could create an approach for our corporate philanthropy that focused on teaching technology skills that people could apply to improve their own communities, we felt we could begin driving real and lasting change. Aligning our philanthropic efforts to reach more specific goals also would allow Microsoft to respond more effectively to local leaders’ expectations and needs. In 2003, Microsoft announced the first round of grants of a new global initiative, Microsoft Unlimited Potential (UP), which donated cash and software to 82 nonprofit organizations around the world. UP focused on providing people of all ages and abilities with free or low-cost access to technology skills training that enabled them to develop job-related technology skills, explore new careers, further their education, and become more connected in their community. Microsoft invested more than $80 million in cash and software grants during the first 12 months of the program. Ultimately, UP donated more than $400 million in cash and software to establish 70,000 community technology learning centers in at least 100 countries, working in partnership with more than 1,000 nonprofit organizations. Over its decade of existence, the key to UP’s strength has been its unified, strategic approach that has enabled people to succeed using technology. UP gave underserved rural and urban communities access to information technology (IT) for the first time. Where an Internet connection was available, communities leveraged this access for both economic and personal benefit. Many used the Internet to obtain market prices for their products or to sell their art and crafts outside their communities. Women were learning to use IT as an empowerment tool or to interact in new ways with their children, some of whom were learning to use computers and the Internet at school. Studies from the University of Washington detail how, in Europe, immigrant women were trained and empowered through the access to information the UP centers provided. In Asia, women, girls, and boys rescued from trafficking operations were able to train through our UP centers and then work from the safety of their homes, earning an income doing such things as designing business cards and letterheads for small companies. In Australia, the aboriginal community was able to preserve its traditions by linking elders to the younger generation through technology. We saw that people in underserved communities around the globe were using IT to gain social and economic benefits in ways we never imagined. As we had hoped, access to technology and the Internet was opening up a whole new world of information and opportunity. One key lesson from UP was that we could help people and communities even more effectively if we structured our work to align with their core business objectives and competencies. This understanding helped us become more effective at running programs and communicating our objectives and outcomes to communities, governments, schools, and other constituencies.
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ABSTRACT: One of the abiding ironies of business education is the now decades-old teaching of industry "best practices" to improve the performance of any organization, including how to improve the innovative capacity of a profit-seeking firm. For the uninitiated, this concept is as simple as its name suggests. To improve your company's performance, you look for the organization that does something better than everyone else and then copy it. If Procter & Gamble runs its packing line better than you do, by all means, copy its practice. Such thinking may be a reason we are concerned about the slowing rate of innovation in America. If today's best practice is the standard for emulating, do any firms feel comfortable out on some "better than best" frontier? The very notion of "best practices" suggests the acceptance of a grand average. Except, of course, for those firms that are deemed the best practitioners of "innovation." In a recent book, Inside Real Innovation , Gene Fitzgerald and Andreas Wankerl and I argue that most older and larger firms forget how to innovate, a finding suggested long ago by Max Weber. Perhaps this is why we have, over the last three decades, intuitively embraced entrepreneurship as a way to bring more innovation to our economy. Indeed, as I have detailed elsewhere, it was the resurgence of entrepreneurial capitalism in the 1980s that got us out of the prolonged recession that characterized the Carter years. But the word "entrepreneurship" is beginning to sound a little like the concept of best practices—a phrase that is valued for its inchoate sense of being logical and a self-evidently valuable pursuit. What we mean when we speak of entrepreneur-ship appears to evade definition. Of course, entrepreneurship is connected to creating new profit-seeking firms. That's what might be called the conventional or "economic" meaning. But common usage permits non-profits to claim that they are entrepreneurial (indeed, many college students want to be "social entrepreneurs"); faculty members doing research self-proclaim that they are "intellectual entrepreneurs," and, my favorite, "bureaucratic entrepreneurs," is a classification for innovative public employees thinking up new programs that cost taxpayers more money. The risk in all this is that when everything is entrepreneurial perhaps nothing is. Is it time to speak with a new term? Maybe those who undertake the risks of starting a new for-profit company are really in the business of "firm formation." After all, as Daniel Spulber suggests, real entrepreneurs know the special skill of objectifying an idea into the productive realm of commerce. They can bring forth a new concept in a manner so concrete that it can be tested in a market context — people will pay for it in a pecuniary exchange? The business of firm formation is not for scaredy cats. There is no gloss of higher motive that many social entrepreneurs implicitly seek as they go about seeking donative funding—a market test of an entirely different nature. The promiscuous use of the terms "entrepreneur" and "entrepreneurship" in the face of unsettled questions relating to the critical experience of creating new firms seems hardly to bother experts who are absolutely certain that they know just how to teach people to start them. Among this population are government policymakers, venture and angel investors, a plethora of mentor/investors who run new business "incubators" all over the country, and many academics who profess with certainty how the process unfolds as if starting a businesses yields to a prescribed and predictable path. The typical university course introducing students to entrepreneurship is taught as if it were a settled, path-specific process, one that might parallel a surgeon's knowledge of how best to resect an appendix. In fact, there really is no settled knowledge of how firms are formed and become successful and achieve what Robert Litan and I call "scale growth." Notwithstanding the fact that at least six thousand professors teach and do research in the field, there is no fully developed canon of actionable insight. A process that is essentially creative should be considered in, say, the model of how we teach musical composition. It cannot be done apart from writing music. Entrepreneurship...
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ABSTRACT: Twenty-four years ago, I fell in love for the first time—with a Macintosh Plus computer. It had a tiny 9-inch screen, an 8-MHz processor, 1 MB of RAM, and no hard disk. It was the computer for “the rest of us,” and it profoundly altered the course of my life. As Steve Jobs said, you can only connect the dots looking backwards, and I now realize how significant the Mac was in shaping my anti-establishment, anti-war, pro-freedom worldview. The Mac became a portal into myriad subcultures, from beat poetry to the Yippies, fueled by the dark meanderings of Pink Floyd. My mother, Mahenaz, stoked my socialist tendencies, and my mentor Zak, who was in attendance at Woodstock, introduced me to Lenny Bruce, Abbie Hoffman, The Whole Earth Catalog, and a host of revolutionary Urdu poets. I slipped into a solitary stupor for a couple of years and taught myself programming and the essentials of graphic design, while living the counterculture dream in my head. Who needed people when one had MacPaint, MacDraw, MacWrite, Tetris, Pink Floyd, and Party Slims Chili Chips (Karachi’s equivalent of Jolt Cola)? I spent my college years, the early 1990s, valiantly trying to drop out. Just about everything, however mundane, was more exciting than the stifling confines of a classroom. Around this time, I started developing a conscious, virulent distaste for traditional education. I wrote a lot of bad poetry and started getting involved in protest movements. Whenever I returned to Karachi from Lahore, I’d run straight to Solutions Unlimited, an Apple Computer dealership where I learned how to solder wires, install hard drives, and swap motherboards, for intellectual respite and rejuvenation. Zak would further corrupt my mind and make me believe that it was entirely possible to recreate the hippie movement of the 1960s in Karachi. After college, I spent the next several years developing multimedia products and exploring the intersection between technology, art, literature, and music. The dotcom boom brought with it a deranged sense of empowerment that led me to believe that anarchism could work and that the Internet would enable us to topple corporations. Then many bubbles burst and reality set in. I built websites by day and picketed by night. But, by the mid-2000s, consumed by my awareness of the military-industrial complex, I was getting increasingly restless. Karachi was a cesspool of chaos, “clean-up operations,” and fragmentation. People were leaving in droves, our politicians continued to make promises they had no intention of fulfilling, and the country lurched from one military dictatorship to another. People had become apathetic and a sense of hopelessness engulfed the city. All my friends had gone to university abroad and had chosen not to return. I began to wonder why I was wasting “the best years of my life” helping behemoths like Unilever and Shell peddle toothpaste and motor oil. It was a depressing time and I experienced my first existential crisis. I accepted an offer to move to Delhi to oversee web strategy for a public interest journalism initiative. While waiting for my visa to come through, I started fantasizing about creating a public space for free speech and creative expression. I had long conversations with myself: How could we become agents of social change if our theater practitioners had no rehearsal spaces, if our underground musicians had no venues to perform in, if our emerging artists had nowhere to hang their work? How could creative dissidents even learn of each other’s existence, let alone build and cultivate a community, without physical spaces where people could talk politics? In fact, years of military rule, terrible violence, and a range of other events had stripped people of their political will and the desire to be the change they wished to see. I had grown up hearing stories about Pakistan’s teahouses where poets and revolutionaries would gather, and I had seen countless photographs of inspirational leaders from the women’s movement being tear-gassed for demanding their rights. What would it take to create a space that espoused liberal, secular values through its programming and projects? I wondered if I...
Article: It's All About the Jobs[Show abstract] [Hide abstract]
ABSTRACT: How are social entrepreneurs ensuring that programs designed to help youth find employment go beyond training or coursework to actually ensure that young people obtain meaningful employment? In the complex global arena of youth unemployment, no one brilliant idea or innovation will solve the challenge of youth unemployment but flashes of insight that fundamentally change how we approach a problem can catalyze a solution. This article describes one such important catalyst in addressing the crisis of youth unemployment in the Middle East and North Africa (MENA) region: reimagining education, not as an isolated endeavor but as one with points along the school-to-work continuum that are informed by a number of key stakeholders. This article discusses the experience of Education For Employment (EFE), an organization that a decade ago channeled a flash of insight to revamp the conventional “supply-driven” approach to youth education to become an approach to education for employment . For a year after she graduated from university, 26-year-old Ilhem Zaghdoud from Tunisia could not secure a job. Despite having specialized in economics, her situation was, as she described it to EFE, “precarious” and her education “way too theoretical and not related to the reality of the professional world.” Ilhem then spent four months in a training program where she learned goal-setting, teamwork, critical thinking, communication skills, and sales techniques. The program, delivered by EFE-Tunisie, also helped her land a job at a leading multinational that was expanding its operations in North Africa. More than six months later, Ilhem was still working, convinced that the training had given her a strong commitment to her customers and her employer, and a foundation that continued to influence her performance. She felt the training had transformed her beyond her professional life as well, enabling her to contribute to her family’s income and building her confidence and her ability to adapt to challenges. But the most important aspect of her training, she said, was learning “how to plan my career and take ownership of my future.” For the first time since she left university, Ilhem is now excited about her future and about what she can do for others to “pay forward” the impact the EFE training has had on her life. The instability and frustration of Ilhem’s situation is familiar to many youth living in the MENA region. With the world’s highest percentage of youth—approximately 33 percent of the population—and the highest youth unemployment rate, one in four of the region’s 100 million young people is unemployed, and a young person is four times as likely as an adult to be unemployed. The issue has become an increasingly urgent priority for countries in the region and for the international community alike, as millions of Arab youth are in need of an economic future that can support human development and social cohesion. Counter-intuitively, the youth unemployment crisis coincides with a demand for skilled labor that is growing faster than supply. By 2020, McKinsey & Company estimates, developing countries could have 45 million jobs for workers with secondary education that will go unfilled. Young people’s frustration with the unemployment problem, as well as with corruption and a desire for political, social, and economic reforms, triggered the 2011 “Arab Spring,” which erupted in Tunisia and spread across the MENA region. Without better youth employment prospects, the risk of ongoing social turmoil remains high. Addressing the region’s youth employment challenge is not simple. The International Monetary Fund contends that poor education content and delivery are critical factors that are exacerbated by demographic pressures. Because education in the region does not equip youth with work skills, it also does not necessarily lead to employment. In fact, having an advanced education often increases a young person’s chance of being unemployed. In Tunisia, for example, 40 percent of university graduates like Ilhem are unemployed, compared to 24 percent of youth without university degrees. Moreover, there are virtually no mechanisms for connecting underserved youth to a first job after they complete their education. Without that first job, a crucial stepping stone into the professional world, young people face a cycle of unsuccessful job...
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ABSTRACT: The slums of Lagos, Nigeria, are a world away from the sunny campuses of Silicon Valley. But Lagos, not San Francisco, is where we went in 2009 when we decided to launch our startup. After years of economic development research, strategy consulting, and engagement with at-risk youth, we, Clara Chow and Lily Rubin, had gone from friends, colleagues, and fellow social enterprise nerds in Washington D.C., to excited (and apprehensive) founders of a youth-run photo studio in Lagos, Nigeria—one of the world’s fastest-growing megacities. Our photo studio not only would develop headshots for aspiring “Nollywood” stars, it would give the street youth of Lagos—the infamous “Area Boys”—work experience, skills training, and, for top performers, access to microfinance, putting them on the path to becoming independent entrepreneurs and socially responsible community leaders. We raised over US $25,000, developed the business model and rotational training program, interviewed some 200 local youth to gather baseline data, and conducted extensive market research. We had a plan. Of course, nothing went according to plan. Years later, on Clara’s first day in Steve Blank’s Lean Launchpad class at Stanford, she’d be reminded that no startup business plan survives its first contact with reality. The only way to find out what works is to get out of the building and test it with real customers. Fail fast and cheaply. And adapt (“pivot” in startup speak) until you hit upon a model that the market wants, and can scale. This is the story of how we tested, failed, learned from our failure, and adapted the model for our youth organization over four years, 40 trips, and thousands of volunteer hours. What started as a quest to help a Nigerian activist bring microfinance to urban youth became a photo studio that provided on-the-job training and credit assessment for its youth employees. That evolved into a business boot camp for government vocational training graduates. And that became Generation Enterprise today: a global network of community business labs where aspiring youth entrepreneurs refine their business ideas through the same prototyping and testing process our organization went through itself. In Nigeria we have screened over 1,000 youth, trained 300 young people, partnered with two state governments, and launched 19 businesses, 10 of which are in our growth portfolio. This year we’re piloting our business lab model in India with the support of the World Bank. We continue to make adjustments, closing in on a replicable method for launching youth-run businesses that grow beyond the micro level. What hasn’t changed, however, is our mission to integrate unemployed and underemployed young people into the formal economy and unleash the potential of a generation—a generation we call Generation Enterprise. It was 2004, and Clara was an undergraduate volunteering at a social enterprise program. There she met a young Nigerian with a big dream and a vague business plan. He had grown up hawking newspapers and candy on the streets of Lagos, a city notorious for its roving gangs of “Area Boys,” and wanted to start a microfinance bank for street youth. After all, microfinance was lifting millions of women out of poverty in Bangladesh and India. Was it also the key to getting youth off the streets of Lagos? Microfinance involves making small loans to borrowers viewed as too risky for traditional financial services. Muhammad Yunus’s Grameen Bank and other microfinance institutions (MFIs) developed various ways to reduce the risks associated with lending to the poor, such as lending to groups within a community (where social pressure encourages repayment), and taking nontraditional collateral (with great sentimental, if not monetary, value). The World Bank estimates that some 160 million people in developing countries are currently served by MFIs. Lagos is very different from rural Bangladesh, however. The megacity is a perfect storm of urbanization, informal sector growth, and youth unemployment. Over six thousand people flood into the city every day, and its population will swell to over 25 million by 2015. Seventy percent of the population lives in slums, and over 60 percent of the city’s economic activity takes place in the informal...
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ABSTRACT: For at least the last 100 years, each generation has come of age in the face of unique challenges and opportunities that have ultimately defined it. In the early 1900s, it was the emergence of industry, which enabled young people to rise above their economic circumstances in ways their parents could not. Generations raised in times of war developed much different values and worldviews than those raised in more peaceful eras. For the current generation of young people, the defining characteristic may be the rampant unemployment that has spread across the globe. True, the 2008 financial collapse created employment struggles for all generations, but none more so than youth. According to The Economist , nearly a quarter of the world’s youth are currently unemployed and not in school or training. In Africa, young people make up more than 80 percent of the unemployed population; in Greece and Spain, unemployment among people age 25-24 surpassed 50 percent in 2013; and in the United States, the youth unemployment rate is more than twice the national average. While the issue of youth unemployment is universal, the drivers of this trend are unique to each region. In the United States, six million young people are unable to find jobs, whether a high school student who cannot find afterschool work or a college graduate who must settle for an unpaid internship. In Africa, the problem takes on a much different texture: the continent’s bulging youth population has outpaced job creation, and longer life expectancy means workers are remaining in the workforce much longer than before, resulting in fewer opportunities for youth to enter the workforce. Despite economic gains in South Asia, nearly one in three young person is out of work, due to gender inequities, cultural norms, and a complex web of laws and regulations that tend to keep young people out of jobs in the formal economy. No part of the world has been immune to the youth unemployment crisis, and both the immediate and long-term implications could be severe. Young people who are not on track to secure employment are often stuck in a self-perpetuating cycle of poverty and instability. Their future earning potential is stilted, and they are likely to settle for part-time jobs or temporary work. As a result, today’s youth, many of whom are concentrated in urban areas, face high levels of social exclusion and lack clear access to the safety nets that employment can provide: health benefits, retirement accounts, and pensions. As the United Nations Human Settlements Program has noted, “urban youth life tends to take place in worlds that are largely separate from the rest of society,” and as more young people resort to crime and other illegal activities to generate their livelihoods, the danger can be extreme. Long-term youth unemployment also has a dramatic impact on the economy at large. In Canada, jobless youth are estimated to miss out on $10.7 billion in wages; in the United States that number could be as high as $18 billion. The economic and social consequences will likely weaken the next generation’s ability to be resilient as they face their own shocks and disruptions—natural, climate driven, and man-made—which will only increase in frequency, scale, and impact over the coming decades. Many already have termed the current crop of young people a lost generation, but with the right approaches and the will to act, the global community can find new opportunities that not only create jobs and boost incomes but also improve livelihoods and business practices. The Rockefeller Foundation’s mission, unchanged since its founding in 1913, is to promote the well-being of humanity. Youth unemployment is among the most detrimental threats to human well-being around the world, in terms of both the immediate economic impact on individual livelihoods and how it can affect entire systems, particularly in cities. As such, for the last several years, the foundation has explored new solutions to the challenge both in the United States and across Africa, where the youth population is set to double by 2030. In the United States, we see the greatest opportunity in helping put those...
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ABSTRACT: The financial crisis of 2008 exposed serious weaknesses in the world's economic infrastructure. As a former aide to a mayor of New York and as deputy chancellor of the New York City Public Schools (the largest public school system in the United States), my chief concern—and a significant concern to IBM and other companies interested in global economic stability—has been the impact of global economic forces on youth employment. Across the United States and around the world, youth unemployment is a staggering problem, and one that is difficult to gauge with precision. One factor that makes it difficult to judge accurately is that many members of the youth population have yet to enter the workforce, making it hard to count those who are unable to get jobs. What we do know is that the scope of the problem is overwhelming. Youth unemployment in countries such as Greece and Spain is estimated at over 50 percent, while in the United States the rate may be 20 percent, 30 percent, or higher in some cities and states. Why is this problem so daunting? Why does it persist? And, most important, how can communities, educators, and employers work together to address it? While we can take some solace in the fact that U.S. high school graduation rates are higher than they were 10 or 20 years ago, this good news is tempered by the reality that the high school diploma alone is no longer adequate preparation for a middle-class career. Young people who enter the workforce with only a high school diploma are expected to earn no more than $15 per hour, and many will earn less. The foundation of the problem is that America's school systems—largely controlled by states and local school districts—have not evolved their education models sufficiently to keep pace with the new demands of the global, knowledge-based economy. There is no "silver bullet" in the effort to improve education. Investments in early childhood education, expansions and restructurings of the school day, and efforts to improve teacher quality all have been important. But some specific, focused, and targeted efforts directed at high schools are long overdue. As local, national, and global economies have changed, fewer "living wage" jobs have been created or sustained for those who have only high school diplomas. Today's reality is that young people need postsecondary education (either a two-year or a four-year degree) and the requisite skills to be prepared for the jobs of the 21st century. The high school diploma is now the first step toward career readiness—not the last. We also must focus on the relevance and rigor of America's high school programs. The acid test for the quality of our high school programs is the postsecondary success rate of their graduates, and the statistics are not encouraging. Currently, only 25 percent of young people who possess a high school diploma and register for community college will successfully complete their "two-year" degrees within six years. That means that 75 percent of community college registrants leave without their degrees and enter the competitive global workforce with neither the credentials nor the skills to earn a living wage. In some locales, the failure rate is even greater, as community college graduation rates hover in the single digits. And so the question becomes, why do so many American young people with high school diplomas fail to complete a two-year postsecondary degree? An examination of one community college freshman class using IBM data analytics yielded some intriguing insights. Chief among them was that nearly 100 percent of community college freshmen who required two remedial courses—with one of them being math—failed to complete even one postsecondary semester. More than 50 percent of these students dropped out of community college within two months of matriculation. This drives home the point that unless a high school program is academically rigorous—in addition to being economically relevant—it is inadequate preparation for either the demands of postsecondary education or the training required to participate in the 21st-century economy. According to the U...
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