The case for business incubators and innovation hubs

04 Jun, 2015 - 00:06 0 Views

The Herald

Kudzai Mubaiwa Business Hub
Economic development is something every nation desires, for overall economic prosperity should result in the general well-being of its people.

Business incubators and innovation hubs are a very practical tool for bringing the best ideas to life and to a point of scale and commercialisation.

The world’s leading institution on advancing business incubation, NBIA; defines the goal of incubation as “to produce successful firms that will leave the programme financially viable and freestanding . . . with the potential to create jobs, revitalise neighbourhoods, and strengthen local and national economies”. Innovation spaces are in many locations the hub of economic development activity and the key cog in the obtaining entrepreneurial ecosystem – in fact, they should be.

They are a positive jack of all trades, well positioned to contribute at the micro and macro levels as well as ensure that all stakeholders speak to each other towards a common economic goal. They are intermediaries, intercessors, middlemen with the aptitude to, in one moment engage in policy related or high-level strategic dialogue with Government, civil institutions and private corporations; and the other look into advising on the optimum economic model for a start-up.

They can be excellent implementers of obtaining policy, (in our case, the Zim-Asset), as they are able to understand and deal with their community as a special, unique client. It is their mandate to understand the structure of the market, and the subsequent “customer” needs in their geographic locations. As a colleague of mine said, innovation is usually found in the fringes, and indeed, incubators/innovation spaces can easily locate themselves there.

Points of Leverage

Mobile money and mobile penetration is a big thing in our region, and I daresay must be the bedrock upon which much of Zimbabwean and Southern African innovation must occur, in addition to being a strong influencer of payment and marketing channels for non tech start-ups and small businesses.

Such a realisation has worked well in East Africa, with innovation spaces demonstrating understanding of the structure of the market they are in and providing support in that direction for their entrepreneurial ecosystem. It may help Zimbabwe to think more around how we can nurture innovation in other sectors in view of the available technology, rather than try and bring the next big thing in technology.

Identifying and appreciating who we are – the sectors that drive us such as agriculture, mining, tourism, services — is a great start. So is looking at the challenges that are unique to us: inadequate power, irregular access to clean water, health and education systems and building solutions at local level by availing appropriate support to local innovators and start-up founders.

While cognisant of the fact that some spaces have existed and some are emerging, there is no better time than now to bring business incubation and innovation spaces to the fore as the womb of the oft touted “home-grown solutions”. If we were deliberate in our business incubation approach, we would have at least one in each province, a centre that is well versed with the local market structure and customer needs.

Market Structures

Simple indicators usually inform markets, with geographical location, which impacts the nature and sectors of start-ups/small business; being a major one as most businesses/innovations are solving some pain point that may never be understood by a non-resident.

Demographics, in the main, age disaggregation, speak to the general levels of energy and I daresay excitement – both of which are critical for execution. Literacy levels are a contributor, as are the indicative economic statistics such as per capita income and the present Poverty Datum Line which informs spending and individual financial behaviours. These and more macro-level figures such a population will give us a feel for the economy we are dealing with. And profiling of the people that make up this market structure is important

Last, but not least, the progress made with regards to the connected lifestyle, the internet of things in that location is an emerging and yet powerful consideration. Enterprises that are built in this digital age do well to give this factor attention. Recall we made reference to true innovation occurring not in the middle, but at the fringes?

The internet is, in fact, not the same thing for everyone! The innovations built on it, or because of it, are greatly informed by the profile of the users themselves. At about the same time a child in the Europe is enjoying an online video game, another in Zimbabwe is receiving, through mobile money, the $10 they need to pay as school fees.

Both may never have or use what the other has or use it to the fullest; and yet in a true: “each to his own’’ pattern, both enjoy innovations that were created with them in mind. This is why it will not necessarily work to attempt to create a clone/localised version of every globally successful start-up in your region, neither is it wise to push incubator clients in that direction

Frankly, they may be way better off finding an inimitable use of the already present platforms. Doing the very same thing in China has worked a treat, with some social media platforms being built as a reproduction of already popular solutions like Google, Twitter and Ebay.

Even in instances where clones are mildly successful, or perhaps functional; the next headache is achieving scale in the face of the competition of an already proven platform. Not easy, in a market such as ours with small numbers; but other opportunities exist from our largely youthful nation of increasing digital natives.

Customer Needs

In my 2013 paper on youth economic opportunities in Zimbabwe, the research revealed that typical start-ups required a variety of services. In the discussion, the following were identified: a lack of financial capital, inadequate human capital potential, lack of adequate network structures, especially one lacking in access to international networks, and stifling government policies (Jalbert, 2000, Bitler et al, 2001).

The results were further supported by a study in Latin America (Llisterri et al, 2006) which stated that young dynamic entrepreneurs face several obstacles to create and manage their ventures. Gaining access to financing, managing cashflow, purchasing appropriate equipment and technology, finding and hiring skilled employees, and entering the market (finding reliable long-term customers) are among the main challenges for new entrepreneurs.

Research by ZimTrade (2011) identified lack of collateral security resulting to inaccessibility to loans, lack of skills and difficulties in business registration as some of the challenges faced by disadvantaged groups in business in Zimbabwe, again in line with the results.

Comparable studies in Nairobi, Kenya conducted by the Kenya Youth Business Trust identified challenges as start-up/working capital, the youth’s attitude, extended family and community responsibilities, cultural expectations and conventions, the education system, lack of role models and Government policies.

The other studies also clearly exhibited the need for both internal and external interventions to remedy the noted challenges. While access to credit was shown to be important, it would not suffice to avail it without making input to the operating environment and the capacity of the recipient. Youth specifically also mentioned a need for family, community and government support in giving their businesses start-up support in the form of policy, quotas, incubation facilities and initial orders.

The summary of the emerging needs by potential entrepreneurs were capacity building for entrepreneurship through Business and Technical Skills Training, Linkages – in the main Funding Linkages, Market Linkages, Links to Ongoing Advisory Services and Mentoring, Physical Workspace, and Business Support Services.

This would result in a holistic service offering. That whole ecosystem functioning perfectly would allow start-ups to achieve scale, depth and reach. These would be offered to a few (promising) manageable clients periodically to ensure they have access everything required to succeed.

A New Approach to Innovation and Entrepreneurship

Old thinking was numbers, churning out as many “entrepreneurs” as possible and counting the thousands trained under various entrepreneurship development programs as “businesses”. The new is a few good sustainable ones that can confidently articulate what their enterprise is about using a business model canvas, but more importantly, can demonstrate proof of concept, a validated minimum viable product and bring it to scale. (These would also be the best candidates for entrepreneurial funding). No more ticking of boxes – economic opportunities are needed, a sense of contribution by young entrepreneurs and innovators is needed; their products/services requireoff-takers. Co-working, collaboration, community are important as they build their start-ups / small business – and well-structured incubation programs will provide the requisite support to build and sustain enterprises that can support them and employ other not so entrepreneurial youth. This series of articles will thereforeexplore various aspects of incubation / innovation spaces, including the various models, client selection, ecosystem building, sustainability and other building blocks to help us bring economic development policy to life in our communities.

 Kudzai M Mubaiwa is an economic development professional and managing consultant of InvestorSaint Pvt Ltd, a financial education company. She is also a certified incubator manager and cofounder of iZone, a mixed use incubation program that provides a platform for capacity building of youth and women enterprise owners in the digital age. She has participated in and presented at economic development and innovation/tech platforms in East and Southern Africa, Asia, North America and Europe. You can reach her via email on [email protected] <mailto:[email protected]> or twitter handle @kumub

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