The Best Market Opportunities for SMEs is Process and Product Innovations

We are now in the age of a market-driven economy, as opposed to the manufacturing-driven economy that dominated in the last industrial-age.   At an African level however, we are yet to emerge from the agrarian model into a full-throttle manufacturing-driven economy.   This means that Africa is not ready to serve the global market directly with its immature industries, under-developed infrastructures and vague policy measures that do not prescribe the level of local private-sector participation.  Africa can only serve the global markets via international partners with the technology know-how; a strong appetite to deliver value to customers; and vision for sustainable development in the African economies they participate in.  This grossly has an impact on African economies supply-side.  Hence, it becomes imperative for SMEs to play a crucial role by becoming the ‘middle-man’ in the market, through process and product innovation.  Hence, there are three (3) aspects to consider when looking at reconfiguring local supply chains: a) import process innovations from BRICs (Brazil, Russia, India, China, and South Africa) countries; b) reallocate R&D to where the researchers and the market growth is, Pankaj Ghemawat, 2007 and c) product and service innovation to cater to under-provided segment markets. 

Importing Process Innovations

In Zimbabwe there is an urgent need to shrink the country’s trade imbalances.  Thus, on the supply side, numerous shifts are already in play.  The rise of protectionism and concerns about high unemployment rate of over 60% in a country that is estimated to account for at least 25% of the global supply of rough diamonds, according to Bulawayo24, (May 22, 2012) is quite unfortunate.  In 2009, the Zimbabwean government is said to have set up a diamond processing plant at Harare International Airport in an effort to process the diamond for immediate export out of the country.  However, according to the Industrial Development Policy (IDP), the key strategic objective is for ALL the sectors to espouse a value addition approach.  This means that exporting ONLY processed diamonds is not what the IDP had in mind.  A total of 2,000Ha of diamonds out of a capacity of 67,000Ha, can be processed, polished and packaged locally.  It is estimated that this could bring about approximately 3,000 jobs in the industry.  Deriving lessons learned from South Africa, India and China about value-addition in such supply chain of diamonds and extraction of natural resources would provide one of the best market opportunities for SMEs.

Re-allocation of R&D

Developed countries can benefit enormously in placing their R&D in the areas in which there is market growth and potential.  Whilst, the Global Competitive report, (IMD, 2011) projects a low number of supply of engineers and other technical personnel in the BRICS country compared to the Western countries; the education sector has a high number of graduates of universities and technical schools particularly in India and China.  Thus, a company in the high-growth industry like high-tech with interest in emerging market economy like South Africa can start thinking about basing their R&D efforts in those countries.  In other words, SMEs can act as an incubator for large corporations with interest these markets.  For example, in 2008, Intel had designed one chip in India which led to the rolling out of XEON 7400 processor worldwide, (Pankaj Ghemawat, 2007).

Product and Services Innovation

SMEs have to start developing products and services that are essentially unlike what they are used to selling.  Hence, how an SME prices, provides an infrastructure for service and even taste of the good becomes very central.  According to a brief in African Business, July 2012, in Tanzania, farmers in Arusha are using a new technology called the Bio-Agtive Emission Technology (BAET).  The BAET has the ability to transform toxic farming machinery fumes into soil fertilizer.  This product was developed by a private company based in U.S.A called N/C Quest Incorporated.  The BAET is described as a paradigm shift way of thinking by both its creators and end-users. 

In conclusion, whilst SMEs continue to be the engines that spur economic growth, it is important to clarify the unit and level of analysis (Linton, 2010) of their contribution to each sector.  What Africa needs more of, are the type of SMEs that develop and improve on existing innovations in the market.  This can either be done by collaborating with large cooperation in need of a type of ‘surrogacy’ to nurture the new product to be developed for the market or alternatively; SMEs gain access to financing explore products and services developments that are both market-driven and offer a value-addition component to the supply chain.   

 Copyright @ August 5, 2012.  This article was first published online on BlogSpot by Tambu Ndoro, Revenue Strategist & CEO-Founder at Hanga Consulting Private Ltd©2011.  www.hangaconsulting.com.  Hanga Consulting  is also a premier member of the SME Association of Zimbabwe: www.smeassociationzimbabwe.co.zw/

Don’t underestimate the value of a sound strategy

We are in our 7-months of operating in Harare.  Since, our inception we have gained three (3) major home-grown Zimbabwean clients.  As a small enterprise it is humbling to have proudly Zimbabwean brands supporting a young small enterprise such as ours.  After all, we have no track record of management consultancy as an organization, although we do so at an individual level.  We have no huge corporate account with multinationals to endorse and/or validate our existence in the market and in addition, we are a young forward-looking new-kids-on-the-block; who is too 'green' to be distracted by the difficulties of non-functional existing networks.  Instead, we are equipped with ambition, hope, bravado and communication skills.  Yes, communication.  Something, that seems to be somewhat displaced in the fabric of our society but more so in business.  This is because as consultants when our client decides to get us on board to assist them on specific initiatives, more often than not, the client thinks that they know what the direct problem is.  They often come to us with pre-packaged solution. For instance, they will come to us saying we need to increase sales in our business can you come up with a market strategy.  However, what they sometimes often do not see is that a market strategy is just a ‘communicative-objective’ from the ‘business strategy’.  What’s the difference?  A business strategy says this is how our organization will work in order to reach our overall objective(s).  A market strategy says these are the promotional activities we will do to attract our clientele.  Hence, before we can draw up a market strategy, we need to investigate what the business strategy is?  Why?  The business strategy is the entire business model, the DNA of the organization.  It stipulates how the organizational system should work in its current economic environment to achieve its primary objective(s).  Failure, to disclose to the consultant or suppliers in the value-chain model how this system coordinates with its various suppliers; value-chain-processes and even to its own shareholders, will result in an entity that operates below its operating performance.  In addition, will not derive profitable returns to its stakeholders.  So, as practitioners, entrepreneurs, consultants in the field of strategy formulation and execution; what are the key factors in identifying that your business model IS attractive to internal and external suppliers; marketplace and the consumers:

  

• Understand your suppliers’ business model.  In emerging markets economy we often underestimate the importance of understanding our supplier’s value proposition.  We often adopt the elitist thinking that if we are providing business to our supplier then they should be profitable.  Think again.  What this results in is an incomplete vision of the partnership.  For example, we were hosting a FREE, networking function and we hired a supplier in the beverage industry to supply alcohol at the event.  When, I asked the supplier what the protocol is in supplying alcohol at an event, they indicated that they had to pay a $350 alcohol license fee just for the 2-hour event.  Having this insight, re-adjusted our outlook on the networking function.  In the future we will include a fee for the networking event so that we can support our suppliers.  Supporting our suppliers strengthens the value-chain.  By doing so, it may free-up the supplier to invest in product-volume or product-variety.  Another example, is when we mistake the supplier's value proposition as it's core revenue-generating activity.  For example, if we were a supplier of wines as a finished bottled product.  We would need to seek a supplier who has a good strong distribution network throughout the region(s).  Whilst the supplier will have strong distribution networks, their core revenue-generating activity will be in their promotional activities of the wine we supply.  You see, the easy part is getting the product to retail outlets but hard part is convincing that customer who walks in the shop to buy YOUR wines over another.  So, in essence, you may find that your distributor may own the retail outlets but unless you support their core business which in essence is strategic product-placement they may as well put your product behind another brand on shelves.  Unless 'incentivized' to do so.  How well do you think you understand your supplier's value proposition?

• Understand your marketplace.  Any marketplace needs to be scrutinized in an effort to adopt a prescriptive or emergent strategy or a combination of both.  Understanding how fluid the marketplace is will assist companies in determining 1) how to price their products; 2) how accessible the product needs to be to the consumer and 3) which products to supply to consumers, when and how.  For example, the Wine industry in South Africa understands that the South African consumer buying behavior and preference of wines changes according to seasons.  During winter, the sector experiences a high growth in red wines, liqueurs, whiskeys, Sherries brands.  In summer, a high volume of white wines, fruity wines, ciders and beers are most preferred.  Understanding the marketplace allows your company to revisit the business model to adjust specific marketing activities that match the current trends.

• Understand your consumers.  Keeping abreast with buying-behaviors is one thing, having customer insight is another.  You can develop a product for the general masses but if it only appeals to a particular demographic or social class; your organization will exert most of its resources on promotional activities on mass media and marketing campaigns that may seem fruitless.  As a result, one can fail to appreciate the role marketing costs places in generating revenue for your organization. Therefore, it becomes important to understand who your clients are and only spend energy on the client that creates value to your organization.

These three points, highlighted above may seem like common sense but one is so often amazed at how uncommon these practices are in developing/emerging marketing economies.  This may be due to the fact that as business’ grow through their business life-cycle from the growth stage to maturity; business’ overlook the simple details that allowed them to prosper and grow their markets initially.  Don’t underestimate the value of a sound strategy!

By Tambu Ndoro, Strategist/CEO-Founder at Hanga Consulting (PVT) Ltd, ©2011.                       Website: www.hangaconsulting.com  Email: tambu@hangaconsulting.com

What is your Individual Contribution as a Zimbabwean Citizen?

Newspaper Clip from Financial Gazette April 5 - 12, 2012

As the long Easter holiday comes to an end hopefully we are more rejuvenated and ready for the second quarter of the year; public listed companies have presented their 2011 annual report to stakeholders against the backdrop of a tough capital markets FQ performance for the banking sector still promising growth to investors.  Whilst the banking sector promises hope in the restoring investor confidence in the market, we were also reminded by the Harare City Library Fundraiser Gala Dinner hosted at the Honourable, British Ambassador Deborah Bronnert (in photo) at her lovely home in Harare.

I had the honor of being the guest at the table of a lawyer, award-winning Zimbabwean author and Chairman of Harare City Library, Dr. Petina Gappah, (PhD).  Dr. Gappah gave a keynote address that explained the history of the Harare City Library, back when it was Queen Victoria Memorial Library and how it played a critical role in shaping her personal development and her love for books.  She also has been exceptionally proactive in obtaining funding for the Harare City Library which has not been subsidized by government for just little over a decade.  It is so inspiring to see Dr. Gappah deliver both a tastefully candid and humble appeal to the importance of rehabilitating such pinnacle historical indigenous knowledge systems.  It is important to take a moment at least once a month and celebrate Goodwill Ambassadors like Dr. Gappah who continue to make a literary difference in the ordinary lives of children and youth in Zimbabwe. 

When she described how she was able to read 200 Enid Blytons in a year some of us were able to relate to the extent of the abundance of literary resources that we all had the privilege of being born into.  As we approach the 32 years of Independence in the week to come, it is important for each of us to reflect what individual contributions we have made in Zimbabwe, no matter how small or large.  We all have a part to play.  Though governments largely are responsible for the markets and societies that they create for their citizens; we can no longer continue to let our mouths run the show; inevitably giving wings to the arm-chair politician syndrome but instead let our hands and/or feet do the deeds.  From a private sector development point of view this means continuing to create employment, investing in infrastructure development through private-public-partnership (PPP) and continuing to be the positive leaders that all our civil servants from all levels have either seem to have forgotten or are overwhelmed and burdened by a dysfunctional governance structure.   That is why, it is always exciting times in Zimbabwe to see the passion and persistence of local private sector business owners striving and enriching the lives of Zimbabweans through their professions.  Those still suffering from the when-we’s syndrome are missing out on the journey and vision established by one of the movers and shakers of the private sector, Mr. Farai Mutambanengwe, the founding Chairman of the SME Association of Zimbabwe and Managing Director of Adway Financial Services (Pvt) Ltd.  In his latest article, From planners to implementers, this week’s Financial Gazette, Mr. Mutambanengwe challenges the economic trio: Government, Businesses and Society via   four key points:  1) align strategy to specific tasks and resources 2) cost competitiveness or also better known as the import-export dilemma in business 3) Public sector performance management and/or monitoring and evaluation and finally 4) misallocation of talent and skills in sectors (a micro-economic model).  Without delving into the details of the article, let’s just focus on the last point, when he aptly points out: “We have a country in which doctors are running farms, lawyers oversee finance, accountants are in-charge of providing energy, Zimbabwe Junior Certificate graduates are overseeing municipalities and the engineers are just nowhere to be seen!”  Mr. Mutambanengwe reminds us of the stark reality that Zimbabwe has found herself in.  In essence, the message is we are mostly educated but allocating that intellectual investment in the right areas of the country seems to be a major area of concern.  This is further compounded by a recent research conducted by Chingarande and Guduza (2012) who identify that the main causes of unemployment and underemployed/misemployment as per the case above, there is an “incompatibility between the curriculum and the needs of the industry in changing times, “ (Anthony Jongwe, Financial Gazette, April 5-12, 2012 Issue).

 
It always amazes me when I meet those who benefitted tremendously from scholarships of the highest standards at the University of Zimbabwe in the early days, have rarely done anything meaningful in giving back to the academic institution that allowed them to gain access to a quality of life that they seem to continuously languish in.  Are we a nation of self-centered individuals that we can no longer see the value and the benefits in enriching each other’s lives in a way that make us rise out of our very own poverty-bounded mindsets? 
As we celebrate our Independence on the 18 April, 2012 let us all take a bit of introspection into our roles that we have set for ourselves either as caregivers, business leaders, captains of industry, Civil Servants etc., and ask yourselves, what individual contribution have I made as a Zimbabwean Citizen!

Copyright @ April 11, 2012.  This article was first published online on Hello Harare magazine on April 11, 2012.  BlogSpot by Tambu Ndoro, Strategist at Hanga Consulting and Principal Director of Ndoro Resources (PVT) Ltd, ©2011.  www.hangaconsulting.com.  Tambu is also a member of Research and Development Committee of SME Association of Zimbabwe ©2011

Making Wise Partnerships in Business

How important is building healthy business partnerships to your success and satisfaction as a small enterprise?  Business owners need to be just as discerning about a prospective client they choose to work with just as those companies are selective about whom they choose as their supplier for products or services. 
For example, I had a promising lead on a client with quite a market presence in Zimbabwe.  I had finally met the key person.  Whilst this company would have been an excellent look on my company profile I somehow had my doubts given the pace of the procurement process.  You see, I had learned my lessons about choosing the right employer some several years ago to my detriment, so why would choosing the right client be any different.  According to the article by Sue Simons, National Manager of Drake International, Choose the right employer ‘the key reason for employees leaving an organization has little to do with salary dissatisfaction and is more about incompatibility of goals.’ So, using the same prescriptive insight, how does this differ in choosing the right client?  A profit-driven strategy is no longer the key determinant especially when our company’s mission statement is Think Ahead: Sustainability First.  Issues such as compatible working partnerships that complement a business model are now more than ever more important than money.

As the industries move to a customer-centric, Age of Consumerism, Martin et al., 2010 organizational model in the 21st century, what does this mean for organization’s strategy with internal customers and/or suppliers?  This means that we should also see an increasing trend to building strong supply-chain management; value chain processes for the organizations; in essence, building strong regional economic models.  Leading companies in sustainable strategies in the Nordic countries, Germany, UK and South Africa are recognizing the importance of building regionally competitive economic models; as this strengthens value chain process; supply-chain management that business partnerships must deliver value to each other beyond profitability.

In today’s Zimbabwean market, being a supplier of choice has become a key imperative for larger organizations looking to tap into the innovations of small enterprises via various project-partnerships.
So, while you are busy building your small enterprise and building up your portfolio, don’t forget to thoroughly understand your customers/project-partners of how their customer plans to use your services.  This enables your business to choose clients that support your value proposition and only deal with customers/project-partners that truly create value to your organization.  So, before making your final decision in choosing the right supplier/partner consider the following:

Does your prospective client know what their objective is in the project-partnership? The easy part is identifying your prospective client’s strategy.  The hard part is identifying what their tactical plans are in achieving their strategy.  It is important to find out how they are currently doing it.  I had a situation with a prospective client that when I asked them what exactly is their current TNA (training needs assessment) to achieve corporate strategy; their response was well ‘what do you currently have to offer us’ that can help us out?  Unfortunately, I am not in the product-business I am in the service business.  That means I can’t sell you my ready-made package consultancy service if I do not understand the nature of your current departmental problem?  Otherwise, it will be like selling candy, to a diabetic without a proper diagnosis. 

A decision to partner up with a client who doesn’t understand how you fit into their business model will only eat into TIME and EARNING POTENTIAL which are both a resource and an asset to any organization particularly a small start-up enterprise.  Indication of this is a long drawn out procurement process, with meetings after meetings of sales-pitching, business lunches, back and forth email correspondence of the next meeting and hoping that eventually everyone’s diaries co-ordinate.  This traditional model of procurement in the 21st Century is costly to a small enterprise, and these prospective clients are insensitive to the small enterprise’s income statement. 
 
Solution:  Since this is a project-based partnership, a practical approach to testing the longevity of the partnership is to adopt a pilot-phase approach.  This way, you and your client are able to manage your risk exposure to each other.  It’s like having a marriage certificate with an expiration date that is subject to renewal, should both parties want to continue the partnership.
 
Is the partnership mutually beneficial to both parties? This is essential, particularly between the partnership of a large corporation and its suppliers (a combination of small and medium sized suppliers).  As a small enterprise, the goal is not only to procure the deal but also be to be able to reinvest the profits in the business so as to build stronger capacity.  As a large corporation, the goal is to find innovative; thinking out-of-box approaches to execute the project with minimal resources. I am reminded of a supplier briefing I attended hosted by an International NGO and one of the panel tender-adjudicator stated the organization’s objectives for the project-based partnership: ‘we want to support SMEs in Zimbabwe that is why we issue tenders, however our objective is, not only do we want the successful recipient of the tender to deliver good quality reports but also we would like to see that their monetary gain from the project, also has a developmental impact on how they run their business’; in other words, do not remain a small enterprise bidding for the same tenders for year-to-year; grow your enterprises so that you be of better use to our various projects that require innovative approaches.
 
Solution: Again, as a project-based partnership, does the supplier seek to improve their process’; services in a way that the internal customer/partner benefits indirectly.  Are you both ‘growing’ from this partnership operationally and strategically?
 
Do you like and trust each other?  Whoever came up with the adage that ‘business is not personal’ was a scrupulous businessperson, refusing to be accountable to even his own values or moral compass.  People do business with people they like and trust.  The partnership will not survive if at least your heart is not in it.
 
Solution: Everybody comes with a ‘price-tag.’  The more desperate you are for business the cheaper you are.  Unfortunately, money can’t buy you loyalty and trust.  Therefore, it is important to be relationship-builders especially in forming new partnerships.  Quick assumptions and unspoken expectations are the quickest way to establishing disappointing partnerships.   Consistently, give each other the benefit of the doubt.  Who knows, after a couple of projects you will be able to determine whether you like and trust your supplier(s).

In conclusion, starting a business is never easy.  So, often you are in full go-mode and any client will do. Should you manage to land that high profile client, would be an added bonus as it will boost the profile of your company exponentially.   However, there is ‘no such thing as a free-lunch.’  The question is, as a small enterprise do you have the resources and capabilities to cope with the demands of that large corporation (i.e. expecting to deliver big projects, but they fail to pay your company on time due to the nature of their approval-payment process) or are you willing to choose your partnerships carefully and methodologically, one-success at a time? 

By Tambu Ndoro, Strategist/CEO-Founder at Hanga Consulting (PVT) Ltd, ©2011.                        Website: www.hangaconsulting.com  Email: tambu@hangaconsulting.com.  First published on Hello Harare online magazine - www.helloharare.co.zw

Women and Social Entrepreneurship

“..to be truly empowered, women must develop their power base, advocate for reform, and exert their own leadership to change their operating environment politically, culturally, and economically.” - The Center for International Private Enterprise (CIPE).

The South African saying, ‘You strike a woman, you strike a rock’ comes from the South African liberation struggle, “Wathint’ Abafazi! Wa thint Imbokotho!” has come to be a vision shared by its Southern African counterparts, particularly Zimbabwe.  This year will mark the 32 years of Zimbabwe’s democratic rule.  Zimbabwe became empowered politically and economically during the industrial age, but as the world moved to the information age of technological advancement and knowledge sharing globally, Zimbabwe slowing struggles behind.  In the midst, the struggle of the empowerment of Women to effectively contribute and participate in the economy over the years has moved from a concept of ‘free will’ to an essential need that is required to building sustainable national economic models.  This is as a result of two historical factors: (1) increasing global awareness of economic and social benefit of encouraging women to be more productive and contribute to national development and promoting their own family welfare, Strategic Management Journal, (2008) and (2) Zimbabwe’s Independence in 1980, the goal of the new government was to achieve growth with equity on the basis of socialist principles, World Bank (1991). 

Over the past two decades Zimbabwe has invested in skills development in the form of Entrepreneurship training to equip both men and women to be effective leaders in the market economy.  Hence, as we celebrate International Women’s day on the 8th of March let’s take a snapshot of Women’s role in Zimbabwe’s economy over the last past decades and highlight the characteristics of Entrepreneurs with a social perspective.

Women’s role in Zimbabwe
There are many factors that have contributed to the increasing number of Women Entrepreneurs in Zimbabwe of which I will only highlight three as follows:

• Average Annual Real Wage Trends – In 1980, the average annual income in Zimbabwe was US$950, and the Zimbabwean dollar was worth more than a United States dollar, according to Guest reports. In 2003, the average income decreased to US$400, and the value of the Zimbabwean dollar was worth 20% of a United Sates penny (cent).  Today the average annual income is approximately US$200, (Salary Survey 2011/2012).  As a result of declining real wage Women have been obliged to take up new income-earning activities to support their families. 
• Distribution systems in Zimbabwe (Transportation) – As a result of continuous foreign exchange shortage in the country, the transportation system has taken a strain as a result of transport vehicle capacity being unable to reach rural areas and some urban areas thereby cutting off supply to the major centers.   This has shifted the burden to the local residents to become creative in growing and making food to supply to the immediate rural communities such as making bread/buns or growing vegetables and fruits.
• Agricultural Production and household management – Increasing levels of formal education within agriculture has heightened awareness for women’s capacity to participate in non-traditional roles in agriculture production and household management, largely in the informal sector.

Entrepreneurship with a social perspective
In the early 90s approximately 80% of women in Zimbabwe lived and worked in the rural areas, World Bank report (1991).  Women’s work load, then was increasing as a result of male migration.  The estimate of female literacy in Zimbabwe in 2010 has increased to 89% from 67% in 1982, World Bank (2010).  Earlier research shows that women from the rural areas who mostly work in informal sectors are highly literate.  This shows that in spite of education system’s success, the formal and informal sector has not provided employment opportunities for school leavers at all levels (primary, secondary and tertiary).  The good news though is that given the high literacy rate it would be fairly simple for these women to benefit from training in entrepreneurship, business and management skills training.  However, not all women can be entrepreneurs but most can be encouraged into it. 

So, what is social entrepreneurship? The role of social entrepreneurs has come about as a result of market and government failure to respond to providing the basic needs (water, electricity etc.) and even bank loans at an affordable price/no-interest loans to the low-income consumer.  Whilst an entrepreneur has the ability to identify opportunities in the market; a social entrepreneur has the ability to identify social opportunities in the market.  The social opportunities are characterized by five aspects:  prevalence, relevance, urgency, accessibility, and radicalness, Strategic Entrepreneurship Journal, (2008):

1. Prevalence – This is how a company responds to the prevalence of the needs in the human society.  For example, approximately, 50% of the world population of 7 billion live below the poverty line, earning less than $2 a day, UN Human Development report, (2011).  Therefore, it is not surprising to see social ventures listed by Schwab Foundation, and Plan Zimbabwe (Plan International) engaged in economic and enterprise development activities. 
2. Relevance – This speaks to the nature of how the entrepreneur values, skills and resources are compatible with the social opportunity. 
3. Urgency -‘Urgency is often found in social entrepreneurs’ responses to unpredicted events, such as hurricanes, typhoons, wars, genocide, tidal waves, or brush fires,’ Strategic Entrepreneurship Journal (2008).
4. Accessibility – a social entrepreneur identifies social opportunities to the social problems where they are unlikely to be met through traditional means provided by the market.  The nature of accessibility is much like the barriers-to-entry concept in strategic management.  However, in seeking social opportunities, it works in the exact opposite way.   This is because high barrier-to-entry serves to protect existing companies in the market from new comers trying to enter and compete in the market, Porter, (1980).  In the context of social entrepreneurship, low barrier-to-entry/low accessibility increases the feasibility of the company.  In essence, this parallels the benefit of a focused-niche strategy, Strategic Entrepreneurship Journal (2008).
5. Radicalness – Social entrepreneurs establish business models and organizational structures that are unconventional in an effort to respond to social change.  Therefore, often times these firms adopt radical innovations that traditional business models and organizational structures are inflexible to accommodate.  For instance, contemporary Social entrepreneurs like Nobel Peace Prize 2006, Muhammed Yunus, founder and manager of Grameen Bank offer microloans to vulnerable rural women in Bangladesh who otherwise would not currently qualify for a small loan; Bill Drayton, ex McKinsey & Co consultant, the founder of Ashoka, a global non-profit organization (NGO) scours the world looking for social entrepreneurs and invests in them when no one else will.  Jeroo Billimoria is just one example of an Ashoka fellow.  She launched Childline in 1996, India’s first 24-hour emergency telephone service to provide police assistance and healthcare for homeless children. “When she approaches commercial organisations she does not ask for a cheque, to her that is charity. She goes in asking for their expertise and offers her own, thus creating the possibility of forming a partnership for long-term change,” Hartigan (2006). 

The traditional entrepreneurship model has had more of a positive outcome in advanced economies where there governance structure are more mature and the social disparity is not so high.  One is able to measure the favorable impact it has on the social welfare in those economies. That is why, when you look at the economic model of Zimbabwe and its African counterparts; whom it shares a high degree of social disparity and immature governance structure aggravated by an ineffective innovation management system; revisiting the traditional entrepreneurship model to adopt the social entrepreneurs five behavioral attributes becomes essential. Based on budding research findings around social entrepreneurship it becomes essential for Zimbabwe to encourage such a model in private sector development as it will help to bridge the wide gap created by private sector inability to deliver to low-disposal income consumers; and public sectors incapacity to deliver basic needs (clean water, electricity, transport systems etc.) to rural and urban areas.  In addition, women generally possess these attributes at a familial level.  Remember the saying that goes: ‘Give $1,000 to a man, and he will spend it on himself, give $1,000 to a woman and she will spend it on her entire family’ is the model that international funding organization have come to know and recognize the importance of acknowledging women’s economic activity and contribution in a given country.  That is why, logically it makes sense for Women to be the drivers of social entrepreneurship in Zimbabwe and beyond.  We will see a better quality of life for all and look forward to a socio-economically transformed nation. 

Happy International Women’s Day Zimbabwe and to Women around the world!

Copyright @ March 7, 2012.  This article was first published online on Hello Harare magazine on March 7, 2012.  BlogSpot by Tambu Ndoro, Strategist at Hanga Consulting and Principal Director of Ndoro Resources (PVT) Ltd, ©2011.  www.hangaconsulting.com.  Tambu is also a member of Research and Development Committee of SME Association of Zimbabwe ©2011

Why SMEs Need to Thrive, Not Just Survive/SMEs Spur Growth)

Figure 1: The missing link: Transition gap of SMEs to High Growth Business

SMEs in Zimbabwe contribute approximately 90% to the growth of Zimbabwe as per report in 2011. However, they remain largely informal as a result, of banks unable to provide long-term loans.  In response, the Zimbabwe Government is raising US$50 billion from the sale of Government Treasury bonds.   It is only a short-term solution.  This makes the transition of an entrepreneurial business (start-up) to a high-growth business extremely difficult.  The current liquidity crisis in Zimbabwe is not simply a problem with our financial system.  Instead it reflects the lack of innovation management systems in the country’s pinned growth sectors.  Some executives I have met are paralyzed with uncertainty, seeing it as a threat; whilst others see it an opportunity.  Zimbabwe’s liquidity crisis has called into question not only how companies will survive to live another day but also the requirement of leadership capabilities and sustainable organizational model to thrive in the future. 

The irony is the financial crisis is not a new phenomenon to the global market economy.  It stems back all the way back to the Panic of 1837. So, if history keeps repeating itself, why are we always trying to reinvent the wheel, instead of driving lessons learned at a macroeconomic and microeconomic level? Why is it that when all has been said and done SMEs are the ones placed with the burden to progressively grows faster in their business lifecycle, so that they generate and contribute value addition to restore liquidity in the market?  This is because, so often, during the good economic times Banks, venture capitalists and investors are willing to invest in both SMEs and high growth enterprises.  According to study by Bain of US companies’ performance, during 1996 - 2001, monitored 74,000 acquisitions, 57,000 alliances financed by Banks and venture capitalist.  It reflected a total value of acquisitions to be $12 trillion.  However, most of these acquisitions did not create the value expected.  Many are said to have destroyed value.  Market value declined by ‘10% over the 5 year period after the financial merger transaction was completed; share price dropped from 0.3% to 1% and 48% of alliances had failed within 24  months,’ (Applegate, Herald 2009).  This is due to the fact that though large firms were happy to acquire the innovations and emerging growth business from the SMEs that they acquired, the leadership and organizational model of the acquiring company most times stunted growth causing most acquisitions to not deliver the value expected. If that is what has happened before, why do we continue to see a scenario where by Banks and investors continue to put their money in such organizations whose leadership and organizational model is questionable, during the liquidity crisis?  The transition from an entrepreneurial SME to a high growth business is always laden with difficulty.  So, what is the solution?

Lead with ‘Disciplined’ Innovation

Research shows that during the liquidity crisis companies adopt short-term strategies that are necessarily unhealthy to the viability of that entity.  For example in the case of IBM during the IT bubble in the 1990s, Lou Gerstner, CEO at the time discovered that the majority of IBM employees focused ‘on selling current products serving current customers, and executing current operations,’ (Applegate, Herald 2009).  In addition, IBM’s innovation mechanisms where non-existed, therefore they were unable to identify and nurture new business opportunities; marketing and advertising approach to gathering and using market insights was insufficient for emerging markets; IBM lacked well-organized processes for selecting, experimenting, funding and termination of new business growth;  if however identified or funded, many IBM ventures failed due to poor execution.  As a result, a business lifecycle approach to leading innovation was developed.  This approach to innovation enabled the company to foster leadership and organizational capabilities needed at varying business stages, thus understanding the consumers’ needs long-term rather than short-term needs and identifying opportunities to adopt them; growing the business in a way that allows the business to generate cash, resources and capabilities for future business transformation.  In essence, IBM’s approach recognized that different categories of innovation have different risk profiles and required different leadership to manage risk during the implementation stage.  Using the insights of the IBM case, how can investors be encouraged to invest in the Zimbabwe markets; enabling the SMEs to move from informal to formal sectors?  There are 3 critical aspects that Banks, Venture Capitalists and Investors should consider looking at in addition to political uncertainty when it comes to investing in the Zimbabwean market:

1.    Assess the SMEs Know-Your-Customer (KYC) Strategy
How well does the business venture/SME understand its customer?  SMEs/Business’ need to use the crisis to go back to the drawing board to thoroughly understand how their customer’s use their products and services.  This enables the business to reduce their exposure in the market in managing customers that do not create value to the organization.  By thoroughly understanding how customers use your products or services, a company can better anticipate what future breakthroughs are required and determine where to place their market research.  A practical approach to understanding the customer is to adopt the ‘Pilot phase’ approach used by B2B programs, or ‘Test Wells’ approach used by oil companies when prospecting for oil.  Through this process, investors are able to manage their risk exposure in the SME.   As a result, managing and facilitating the process of a SMEs migration from operating informally to operating formally in a sector.

2.    Leadership & Organizational Model
Does the leader possess Entrepreneurial competencies to be able to identify and exploit business opportunities in the high growth sectors?  Research conducted by UNDP, World Bank, IMF and other international organizations shows that Entrepreneurship and Business Training is critical in fostering SMEs that can contribute effectively and meaningfully in African countries.  In the past, Banks only invested in SMEs whose leadership had undergone Entrepreneurship training via specific training providers. Though, the approach provided bank loan incentives, it was limited in analyzing or assessing the execution of the SMEs strategic plans.  Thus, Investors need to insist on obtaining the SMEs leadership and organizational model in achieving its market penetration.  That is, in addition to Entrepreneurship training, how often will the company hold ‘Strategy Leadership Forums’ to enable their business to challenge their own strategies?  How often will they monitor and evaluate their causes of performance and opportunity gaps in the market.  How often do they develop actions plans?  These insights need to be a requirement in the SMEs Business Plans.

3.    Business Transformation
Does the existing organization structure have the capabilities and the resources to manage the opportunity of growth when it happens, since it chooses to perform in a high growth sector?  For an SME (start-up) either in the informal or formal sector means having the resources and capabilities to manage your current customers.  However, if an SME’s goal is to move into a high growth business, for example, the diamond business in Zimbabwe is thriving, how can they contribute meaningfully and effectively, in a way that they create value addition in the procurement and distribution of diamonds in the sector?  This requires SMEs to develop mechanisms and incentives for themselves to keep up with trends and disruptive innovation taking place in the industry globally.  In addition, investors need to be able to identify SMEs that actively participate in identify emerging business opportunities and breakthrough innovations in relations to their sectors and provide financial support to enable them to achieve it.  This means, that SMEs that are able to identify new ventures, but also have the insight to protect those new ventures from current internal budgetary constraints should be supported to avoid starving these new innovative oriented projects that offer creation of employment, improved education systems, new market development, profitability to the SME of which Government benefits via managed and calculated tax reforms.

In essence, the liquidity crisis requires a paradigm shift in the way we have always done business.  Being part of the global community means that SMEs not only require financial support but also knowledge support as the world we live in requires new leadership and organizational models that are flexible in responding and exploiting new market opportunities.  This means, as Business Owners if your staff/employee identifies an business opportunity, do not think along the lines of ‘Who asked you to think?’, ‘They are trying to take my job,’ or simply put them through the lengthy political organizational system of approval where various stakeholders need to be onboard to finally take advantage of the opportunity.   Thus, SMEs need help not just to survive to thrive: life after the liquidity crisis; SMEs are in fact, the innovation management systems that continuously provide engine for growth in the country.  They need access to formal marketplace which means that SMEs must be nurtured via economically sound policies, and their transition to becoming high growth business’ needs to be managed.  In addition, business’ that reach the high growth stage, that is, they have outgrown being SMEs, need to be monitored to ensure that they continue to deliver value (resources and capabilities) to the markets they serve.

By Tambu Ndoro, Strategist/Consultant at Hanga Consulting and Principal Director of Ndoro Resources (PVT) Ltd, ©2011. First publish on www.entrepreneurship.com on 28 February 2012  with original title: Why SMEs Need to Thrive and later published on www.southerntimesafrica.com or http://www.southerntimesafrica.com/news_article.php?id=6913&title=SMEs+can+spur+growth&type=67 Website: www.hangaconsulting.com  o Email: tambu@hangaconsulting.com

Why Affirmative Action is also an Institution

I recently attended a commemoration of Black History Month hosted by the Embassy of the United States of  America in Harare.  The U.S. Ambassador Charles Ray spoke aptly about his personal and professional background; and his perspective of the impact of Obama’s Presidency on race relations amongst other things.  At the end of the proceedings Ambassador Ray was asked a question with respect to how Affirmation Action (AA) has played a role in the success and the mobility of the likes of Colin Powell in the Military and Defense force in America.  In a nutshell, Ambassador Ray’s response was “Affirmative Action is a benefit and not an institution in America,” and that Colin Powell’s success’ was based on his own merits.   Whilst that is his individual perspective on the issue, it is important to consider the historical events of America that has brought the country to a point where the country has a President elect Obama.  The Civil Rights movement led by the big six A. Philip Randolph, Roy Wilkins, Martin Luther King Jr., Whitney Young, James Farmer and John Lewis,  fought against institutionalized racism that manifested itself both in access to power and material conditions.  Material conditions include differential access to education, housing, gainful employment, appropriate medical facilities and a clean environment, (Camara Jones, PhD 2000).    Access to power involves access to information (including one’s own history); resources (including wealth and organizational infrastructure); and voice (including voting rights, representation in government, and control of media), (Camara Jones, PhD 2000).  Research has long shown that the relationship between socioeconomic status and race in the U.S. has its association in institutionalized racism.  How, do you explain a time when black slaves had no right to owning property or even their own bodies?   Hence, it is important to note that current socioeconomic status and race in the United States has its origins in its very own historical events.  That is why, in Africa, countries like Zimbabwe and South Africa, Affirmation Action commonly referred to as “Indigenization” in Zimbabwe and “Black Economic Empowerment, (BEE)” in South Africa will continue to persist because of existing structural factors that perpetuate those historical injustices.  Thus, as an SME or, start-up in Zimbabwe shouldn’t it be important to understand how your business benefits from Indigenization as opposed to it being a customary or established way (institutionalization) of doing business. 

In strategic management it is important for a company starting up to analyze both its resources and capabilities before competing in a market. For example, a surplus of resources but the absence of organizational capabilities will empower the start-up company to the extent of equitable ownership and control of the resources.  Thus, as a start-up company one is already disadvantaged has one does not have prior/inherited or acquired resources to build on the strengths of an existing and established company.  According to John Kachembere, in an article, “SMEs hold key to economic growth’ in October 2011, the “SME sector in Zimbabwe accounts for about 90% of the country’s population.”  However, due to current liquidity constraints most banks to do not have the resources to provide long-term loans.  In recent, Reuters news, Nelson Banya states that, “the country has been battling a dollar shortage since the start of 2012 due to a lack of dollar inflows on foreign investor concerns over government policies.”  As a result, the SMEs continue to remain largely informal, limiting their contribution to the sector.  So how does an SME benefit from Indigenization is such a situation?  This is when existing structural factors such as legal and regulatory frameworks in financial institutions can affect SME development in a country.   This leads us to the next side of the coin.  Having the organizational capabilities but lacking the resources will enable a start-up to develop innovative capabilities to the extent of establishing or capturing a market but not necessarily being able to neither grow the business nor sustain it as a result of inability to secure appropriate resources or have resources that deliver a true competitive advantage over the competition. Again, this highlights the concern of how do SMEs benefit from Indigenization in such a situation?  That is why; institutionalizing AA acts a socioeconomic mechanism to restore equitable ownership within the market.  Governments are responsible for the market mechanism they create.  Most European governments understand that.  That is why, when it came to various FDI programs implemented in Sub-Saharan Africa, some European countries have their government generously subsidize their SMEs seeking foreign business partnerships in those regions despite their inability in majority equitable ownership in the venture. Why? It’s simple.  In the past decade production is those European countries have increasingly become too costly for an SME with a value chain that has a manufacturing component.   European governments understand that for SMEs to continue to contribute to their economies they have to invest in them even beyond borders.  Understanding this global strategy executed by international government allows countries such as Zimbabwe and South Africa to build institutional frameworks that support local business’ to become equitable owners of their business.  However, there is an inherent danger that comes to life when the local SME loses the benefit of being able to manage and control the resources that they have acquired as a result of the transaction.

Drawing from the insights of strategic development in resources and capabilities of an organization, institutionalized indigenization has a dual purpose:

1)    Delivers Value-add – The fundamental role of resources in a company is to add value.  From a public sector point of view this is done by government selling government bonds to raise capital to finance its various projects.  For example, this week the Zimbabwean government said would soon launch a $50 million bond to raise funds for infrastructure projects.  From an SME/private sector point of view this is done through debt and/or equity financing.  The SME Association of Zimbabwe seeks to create an SME stock exchange and investment in Research and Market Development of formal markets to promote fair competition, amongst other things.  Please visit http://www.smeassociationzimbabwe.co.zw/ for more details.

2)    Delivers Competitive advantage – the fundamental role of organizational capabilities in a company is to gain a competitive advantage.  As a country, what is our competitive advantage?  In business there are some proved sources of competitive advantages e.g. quality, service offerings, product differentiation however, do not underestimate the importance of culture, leadership and style of an organization.  It is not new that Zimbabwe has been criticized by the global community that we lack competitive advantage in this specific area.  That is why; institutionalizing AA is one way the current government can gain domestic support from SMEs.  However, does this incentivize a fast response from local and foreign investors for new market developments?  Perhaps, in the mining industry.  This area is a challenge to quantify, which is more the reason why the impact of institutionalized AA on SME development in Zimbabwe should not be minimized.

In conclusion, AA whether in the U.S., or Zimbabwe or South Africa, it’s a benefit, AND an institution; an institution that strives to restore and accelerate the relationship between socioeconomic status and race in these countries.  Whilst we have seen the benefits in the U.S. only time will be able to show the societal and economic benefits in African Governments, maybe after ten generations or more.

Copyright @ February 18, 2012.  This article was first published online on Hello Harare magazine on February 18, 2012.  BlogSpot by Tambu Ndoro, Strategist at Hanga Consulting and Principal Director of Ndoro Resources (PVT) Ltd, ©2011.  www.hangaconsulting.com.  Tambu is also a member of Research and Development Committee of SME Association of Zimbabwe ©2011