International Entrepreneurship In Eastern Europe

Local champion...

2006-05-02T10:12:00.000+03:00

I have been in Belarus again recently and plan to go again this summer. Since then I have been in an ICT related mission in Romania and I am going now in Mauritius for a mission to support the Government innovation & entrepreneurship systems toward ICT companies (and their internationalization).

(It is my usual “lame” excuse not to be more active on this blog)

Anyhow, to come back on the subject of interest here, the message I wanted to give and discussed is this one.

A part from some noticeable exceptions (e.g. truly born-global start-ups; e-bay sellers; companies coming from tiny countries; etc.), time and time again I have noticed that many entrepreneurs in the region focusing toward international market (because it is more lucrative) and failing to breakthrough, often, at the expense of the survival and local development of the business.

The two main reasons I have identified so far are:

- Lack of proper internationalization process

- And lack of competitiveness!

Internationalization processes are multiples but they do require to be planned and properly executed to be sustainable otherwise successes are often more due to luck than anything else. Luck is OK and even welcome but it is not sustainable!

But the biggest trouble is not an immature internationalization process but the lack of competitiveness. Companies jump-start their international business often before to know if they are competitive locally. It is however highly unlikely that the global markets will be less competitive than the company own local market. In turns it means that even if the international process has been well prepared and executed, it will most likely fail because of the lack of competitiveness.

Hence the advice, that before to go international, young companies should compete locally sometimes (however unglamorous). This will avoid the reverse 20-80 scale result in which 80% of total effort goes toward internationalization and only 20% of results come from it!

How an investor should look at an (young) entrepreneur?

2006-03-17T18:25:00.000+02:00

Of course, the quality of the proposed investment idea and the quality of the ensuing due diligences are vital to evaluate the deal proposed by the innovator BUT above all, an investor invests in an individual, an entrepreneur!
Yet, an important due diligence part, the human side, is often not done or only partially.

We, all, ought to know that there are 3 important parts in the human side due-diligence to be done from a Business Angel or Venture Capitalist perspective:

1. That the chemistry factor is high between the investor and the entrepreneur. This means that they trust each other, they believe in each other, but even more importantly, they appreciate each other.

2. That the entrepreneur has a strong support from his/her close surrounding (family, friends, etc.), otherwise the bumpy road of launching a new venture might become even bumpier…

3. That the entrepreneur is really motivated to the success of the new venture and not just in search of a fantasy or a (first) great job…

About the last one, I often hear students to say that they are ready to sacrifice time (that they will be working for nothing). Although, time is the most expensive of all commodities, to offer to work for “free” is not a real show of motivation. It is undeniably a strong indicator but this is not just good enough nowadays. This is true, for many reasons but here are some:

- No investors would like to see the “investee” of an opportunity to be attracted by another more rewarding one.

- No investors would like the entrepreneur to burn the potential by lurching on other opportunity each time the entrepreneur has a change of situation (got diploma, got married, got a new child, got retired, etc.)

- It is common knowledge that most entrepreneurs work for very little at start (except the lucky ones working for well-funded start-ups) and thus making this kind of “sacrifice” quite a common place.

Of course students (poor by definition) cannot put much cash on the table but there are ways for them to raise their stake (and not necessarily cash wise).

A well-advised investor will require from the entrepreneur a more substantial motivation evidence. Something to be put on the deal table which would “really hurt” the entrepreneur in case of failure (something more than “Well… I lost one / two years of my life but I have learned greatly anyway!”)

How should an Entrepreneur approach an investor?

2006-02-16T17:49:00.000+02:00

The attitude I meet the most from entrepreneurs of the Eastern Baltic region toward fund raising is fear. Mostly, the fear to be unable to raise the much-needed cash to seed their start-up.
There is also greed of course and many other feelings including founded or not variations of fear such as that investors are going to copy the business idea.

This, in turn, makes them poor seller and negotiator during the investment presentation and negotiation rounds.

Actually, a completely different attitude is required. I recommend them –almost every single time – that they should approach the investment process not as a beggar but as someone who is allowing investors a great investment opportunity.
In other words, it is not me - the entrepreneur - who needs you most; it is you – investors – who need me the most!

Money is actually plentiful contrary to lucrative investment opportunities around here. And this is a powerful argument if not use with too much greed or pride.

Change management and entrepreneurship

2006-02-15T15:59:00.000+02:00

Sometime ago I had a conversation with an Eastern European would-be entrepreneur about if his change management skills could be utilized in the launch of a new company. In my own opinion both are very related.
Applying the management change stages to the entrepreneurial phases (of the creation of a new entity), it is possible to draw a match.

Change management stages
1. Anticipation of the change
2. Identifying the change
3. Selling the change
4. Mobilising the resource
5. Breaking down the comfort zone
6. Reinforcing change success
7. Continuous learning of change

match nicely with

Entrepreneurial phases
1. Environmental awareness (passively, reactively or proactively)
2. Vision (identification of an opportunity)
3. Sharing the articulated vision and strategy
4. Mobilising resources
5. Operation pre-launch
6. Operation launch
7. Running the operation

To complete the match it is perhaps necessary to "translate" each stage/phase into concrete entrepreneurial actions.

Entrepreneurial Interpretation
1. Networking, monitoring markets, being close to real life (close to people/organisations to identify and forecast their needs).
2. Vision and articulation of the idea. Matching with the entrepreneur capabilities.
3. Introducing the idea to one-self (first) and then to potential partner, customers, team members, etc.
4. Gathering the resources (financial, technical, etc.) as well as gathering personal support (from founders’ families, etc.). Creation a founding team!
5. Inception of the new enterprise (in the larger sense of the term). Leaving existing routines (family life ones, previous job ones, etc.) to jump into the unknown.
6. Get early success fast such as first sales, first prototype, first partner. This could also include formalisation of a still informal enterprise (legalisation).
7. Acknowledge the rapid transformation (change) and establish mechanism for further growth. Contrary to larger/older organisation, this stage is of little trouble for a start-up organisation since (big) repeated changes are fully part of the early life cycle of an organisation.

This is actually straight forward. However, it is also important to be aware of matching conditions for both a change management project and the ones from an entrepreneurial project.

6 similar conditions are to be evaluated:
- Is there leadership commitment toward the change?
o Is there a highly motivated and convinced entrepreneur?
- Is there a true understanding of the need of change?
o Is there a clear understanding of the entrepreneurial vision? (Why am I doing this? Money? Recognition? Passion? Etc.)
- Is there a mobilization of commitment within the organisation?
o Is the entrepreneur supported by his/her entourage (and society at large)?
- Is there a common understanding of the new vision?
o Is the vision clearly understood, shared and agreed upon by all involved parties?
- Is there a resource commitment toward the change?
o Are most needed resources available to successfully execute the entrepreneurial launch?
- Is there a change management expertise present?
o Is there an entrepreneurial team compensating the weaknesses and the insufficiencies of the entrepreneur?

Failing to meet these 6 conditions endangers the chance of success of an entrepreneurial plan.

Natural French-Belarusian IT cluster!

2006-01-09T10:04:00.000+02:00

If there is a buzzword in the world of promotion of innovation, it is the concept of cluster (Sofia Antipolis in France, the Silicon Valley, Rd 128, Cambridge shire in the UK, etc.). Despite that nobody really knows why things are working sometimes and sometimes not (such as the IT Fornebu in Oslo), clusters are so over-rated that you have public and private initiatives all other the place and Eastern Europe is no exception.

All these initiatives in the Eastern Baltic are of course welcome but unfortunately often inadequate and over-optimistic, sometime they are even misguided. According to the OCDE definition on what is a cluster, there is no to my knowledge any ICT cluster in the Eastern Baltic region despite some marketing noise from Riga.

Knowing this, I was very surprised to discover a natural and real “baby-cluster” in Minsk. It involves 3 independent IT companies working mainly for the French market! This is more than just a punctual collaboration. It is actually quite a cluster for many reasons and one of them is a high-level of interaction between those companies, which have a separate ownership (one is owned by a Belarusian entrepreneur, another is affiliated to IBM, and the last one is the result of a French international entrepreneur). They collaborate on several levels (project level, HR level, etc.). The last reason is essential and missing in most so-called clusters in the region.

This cluster, naturally, established to answer the need of each other and the one of very large customers. It was completely spontaneous (the result of the initiative of one actor) and is sustaining and developing without the help of external / public support.

And, that, is remarkable on its own right!

The Belarusian Paradox

2006-01-09T10:02:00.000+02:00

I have again been to Minsk early last month before to fly to France for Xmas (thus my lack of posting in December). After several new meetings in Belarus, it confirmed the particularity of the Belarusian ICT sector, especially linked to the international entrepreneurship issues; a particularity that I decided to call the Belarusian Paradox.

This paradox goes that way: how come in a country frozen in a stage of post-communism, highly bureaucratic, with a relatively poor service culture and having diplomatic rows with western neighbours, how come Belarus is so successful in exporting its IT services?

With an industry, which has already reached by mid-2005 over 100M USD of export (according to the government, a number which can be seen as under-estimated since many businesses do not declare fully or at all their income to the Belarusian administration) and forecasted by experts to be reaching 250 M to 400 M USD within the next few years, Belarus is the little India of Europe for the ITO market!

Partial answers can be found in several facts:
- A government keen on promoting an IST society and thus a strong ICT sector (this can be seen by several presidential decrees in recent years)
- A freedom of movement for people which allow easy international business links (although at a prohibitive cost)
- An historic country background of high-technologies and a high proportion high education graduate

However these factors are only structural and several issues could counter-effect them (such as the insufficient number of IT graduate nowadays or the relative high cost of the IT labour in the capital Minsk, higher than in the neighboring new EU member states, etc. ).

In my humble opinion 2 factors are key explanations for the successful Belarusian ITO sector:
- The local IT market was unattractive to the private sector due to very low contract / tender pricing from governmental/public projects (public sector still represents around 80% of GDP).
- A latent entrepreneurship spirit, which have succeeded to emerge truly because of lucrative global opportunity.

And thus the quite high rate of successful international entrepreneurs in Belarus (in ITO).

Saying that, these 2 factors are only partial explanations and I am still looking for more clues to explain questions such as is this unique to the ITO industry in Belarus (as it seems) and if so why?

Business Angel Network in CEE

2005-11-29T09:11:00.000+02:00

I have been very busy the last few weeks and this explains the lack of input in my blog. With the coming Xmas season, I do not hope to do any better!

Anyhow, one of the big issues for entrepreneurs (from East or West) is to pass through the equity gap (the so called “Valley of Death”). The Valley of death is the time when a start-up deeply needs to raise funding between 25K to 500K Euros.

One “new” investment tool to in Europe address the problem is the development of BAN (Business Angel Network). However, the east-west divide is strongly felt on the subject. In 2005 there are a registered around 240 BAN in Europe (according to EBAN, the European association of BAN). There is only an estimated 10 in CEE countries. To make the matter worse these 10 BANs are concentrated in 3 cities: Moscow (4), Warsaw (2) and Prague (2).

So for entrepreneurs and innovators of Central and Eastern Europe access to this essential tool to pass over the Valley of Death is extremely difficult. This was discussed last week in an international conference on Entrepreneurship in Vilnius (link)

In the Eastern Baltic region there is no known BAN. However, a glimpse of hope exists in 2 initiatives. Connect Latvia is reportedly preparing to set-up the first BAN in Riga. In Lithuania, the Sunrise Valley (in Vilnius) with the help of my organisation (e-coventure) will be launching early 2006 the first BAN in this region.

HR model for CEE (and others…)

2005-10-21T11:54:00.000+03:00

Few days ago, I have been in an exclusive “breakfast” organised by E&Y and Pedersen & Partners that had some HR issues as core subject. Afterward I was puzzled about the inability of participants (senior HR manager of large groups and myself) to articulate a model explaining a common employee behaviour in Central and Eastern Europe. (Almost) no matter what is the HR policy (and in particular the compensation scheme), most employees (but not all) will leave rather quickly a company (2 years seems to be average time) and most are extremely highly cash focus (this goes in-par with a substancial level of emmigration).

So last night I had an hour to spare and came up with this model which I believe explain a lot and could be useful for HR manager acting in CEE countries. It is also a way to explain why many Western European companies encounter difficulties to deal with HR issues in the CEE region. And of course it is strongly linked to entrepreneurship!

This blog is although particularly long and is the abridged version (shorter and simpler, without any references) of a real paper.

The model

The model to be presented is founded on the underlying model of Knowledge Worker “principles” from P. Drucker (employee would do well to be self-employed / entrepreneur). This just examines the relationship between employee and company. This is not however only a “brain” view of a particular situation. It is already happening and people & companies are using similar models with various degree of success in CEE countries (such as Siemens).

The basis of the model considers that the employee and the company have 2 main HR strategies:
- Traditional Strategy (TS): It is the strategy of the long-term relationship with a personal career to be almost (if not all) to be done within the company. This is an exclusive relationship.
- Knowledge Worker Strategy (KWS): It is the strategy, which consist of project/need-based relationship. This is a non-exclusive relationship in which the employee can serve many companies (clients) and companies can use many suppliers (employees) to fill in a unique "position".

WARNING: This model does not cover all possible cases. As a model, it cannot and should not be applied without testing the “constraints” and “conditions” of its domain of validity.

The static view

Power Game means we are in a traditional HR relationship with both actors (company and employee) behave as they are “stuck” together and they have to deal with each other (there is no real use of an “exit” strategy). This is very much shown in the past work relations in Japan or France. The two extreme what the power game can be with relation going to “extra bitter” (multiple and hard strike, usage of police force, etc.) to “double sweet” (to extreme when some Japanese corporations were even buying the cemetery land for the worker…. at signature of work contract with the 20+ years old employee!)
This could be regarded as a classical monopoly / monopsony relationship.

Con Game (E) happens in the case the employee acts (conscientiously or not) on the P. Drucker’s KW model. He sees the employer as one of many sources of incomes. On the other hand the employer (the company) sees itself has the only source of income of the employee. In this case the employee is always on the hunt, taking more than one job at a time. Always ready to jump to the next boat, etc… Focus is on a commercial relationship (based on cash in most of case, like most suppliers are)
In the eye of the company, the behaviour of the employee looks like unfaithful because they expect a traditional conduct from the person. This is re-enforced in CEE countries where there is not yet a strong “reputation”-based network for manager selection for example. Highly instable staff behaviours are thus “unpunished” (in a market sense of the word).

Con Game (C) happens when employees expect the company to apply traditional HR (business) model where actually the company pursues a more outsourcing strategy (and temporary employment contract strategy, etc.). The company sees its “most” important asset (as usually stated) as an external asset (a vital supplier) more than an internal one (like team member). Some companies can have a very high degree of externalisation of the workforce.
In this case, employees look at the company as an “untrustworthy” multinational corporation.

Competitive Game means both end of the relationship apply and expect a “knowledge worker” behaviour, a client-supplier relationship. On the HR level, when established, the relationship is somewhat easier to manage (greatly because it becomes somewhat out-of-scope). Market pressures force parties to behave reasonably.
This could be regarded as a classical relationship in perfect market situation.

The Dynamic view

It is clear that “Globalisation” has put a strong pressure on company (and their business model) to move on from a purely traditional HR strategy toward what I called the Knowledge Worker Strategy ("outstaffing"). Employees have been suffering a lot in this case because of the erosion of their comfort zone (in particular in the EU-15). This is seen by the lower-left arrow.

On the other hand, the collapse of the communist system in the CEE countries has put employees into dire situations (no job, not paid job, etc.). The employee comfort zone has been abruptly removed during the transition economic process (upper-right arrow). People had to adapt (and adopt) to a more flexible approach toward employment. The KWS (Knowledge Worker Strategy) was a strong answer to this. Many companies however were not ready for this.

This shows why companies and employees are leaving their previous equilibrium (TS-TS) to reach another one (KWS-KWS).

Applying game theory to this, we could get couple (x,y) which can demonstrate this. Numbers are arbitrary because a real research has to be developed. The couple symbolises the “employment index” such as how easy to find incomes (not how high revenue can be), how is it to find workforce (not how cheap), how easy it is to manage the relationship, etc.

Conclusion

This model shows that it is vital for both parties to identify as soon as possible the strategy of the other party (Game Theory principle), otherwise the “unprepared” party will be in pursuit of the wrong goal using a wrong strategy.

Typically, the HR department might create/use smart HR tools and compensation schemes to typically see them fail time after time. The employee can also focus very hard on making a career in his/her company to realize (too late) this is dead end strategy.

On the other hand, in the competitive game, big advantages appear as the HR manager does not need to solve the always-hard issue of the alignment of ever-changing companies objectives (quarterly based) and ever-changing employee goals (life & professional) !

People and companies need to change their relationship approach and this means their business model (both parties). This will requires the implementation of new tools to manage the relationship between both “employees” and companies. New sets of practices will have to be used, which will be between the traditional supplier-client relationship tools (CRM, SCM, etc.) and traditional HR management tools (contractual tools, career plan, etc.)

This will re-define also the pro and cons of such link and new problem will be encountered. People involve in such new relationship will have to be dynamic to outweigh the newly discovered challenges. Entrepreneurial skills and strategies are certainly tools which can help in this case.

International HR in Eastern Baltic…

2005-10-17T11:50:00.000+03:00

One of the main barriers when it comes to international business, the ability to “understand” (not only to communicate) the vis-à-vis is big one.

In Eastern Baltic, for the few survey I have conducted myself with international oriented ICT companies; the internationalisation process is often conducted by the entrepreneur himself (women entrepreneur in this sector are truly rare).

It is often based on the assumption that because they did succeed to import technologies and services, that they will also succeed to export those. However in the import internationalisation process, the “export” side of the relationship does the main effort. The import side does little in the process. Thus the learning curve is actually still very steep but often completely ignored by Eastern Baltic entrepreneurs.

In many ways the internationalisation process means to a certain extent the internationalisation of the team. This of course does not only mean the recruitment or contracting of foreigner but it does imply that the team has to get a higher grade of international experience. This higher grade can be obtained by recruiting local people with significant international experience (export-wise) for example.

It amazed me that entrepreneurs in the ICT sector in the 3 Baltic States (and suspect it is true the whole eastern Baltic region), that only one foreigner have successfully be employed for more than a year. This American person although experienced in the Baltic region as had a difficult relationship with the local entrepreneur at the end.

Adding this issue to other existing one, this shows that there is a long way to go for the innovative entrepreneur of the region to successfully go international.

Export oriented International Entrepreneurship issue…

2005-10-10T10:41:00.000+03:00

As most entrepreneurs, one should try to develop (international) business which are different than others. As Chan Kim and Renée Mauborgne demonstrated, it is much better to compete by “creating” or going to a new market niche (innovative way) than to compete on over crowed market (albeit much larger).
This means than the (international) entrepreneur should think out of the box intuitively (as suggested by Kjell Nordstrom and Jonas Ridderstrale in “Funky business”) or methodologically by taking on steps using the schemes describe in (e.g. articles in HBR from C. Kim and R. Mauborgne).

The problem is for any (international) entrepreneur is that to get out of the box, it is important to know what is the box! The box here can be broadly defined as the society framework of the market one is trying to access (such as culture at large including business & legal culture).

One can argue that being outside the box is quite easy for an outsider like the international entrepreneur (shortly IE). However, the problem that international entrepreneurs encounter is that to define the box. Not only one should think “differently” but more importantly not to think too differently in order not to be off the mark.

When talking about the export oriented international entrepreneur from CEE countries, the key markets to explore (like for everyone else) are the US, W. Europe (ex-EU15) and Japan.

With the relatively little experience of export (not related to transit trade), this is not easy because of a lack of referential. After all CEE international entrepreneur are trying this for less than 15 years (compare to 100 years+ experience from some other nations).

Going global is expensive not matter how imaginative one is. However for the ever-bootstrapped IE (esp. from CEE) some ways can be used such as:
- Reading newspaper and magazine from the targeted market
- Researching targeted market using online tools (free or not)
- Getting to know the culture as much as possible (via internet, books, TV, etc.)
- Finding local partner or people who have been there to discuss the matter at hand (from virtual means such as LinkedIn or from traditional means such as business organisations and chambers of commerce)
- Using cheap tools (such as VoIP - Skype) to communicate frequently
- Contracting people with strong international experience
- Of course at the very least to “fly” there for a few days… (at least a few time)

These are not the panacea of travelling abroad frequently and living for weeks on the targets market (like Meg Whitman of eBay spending summer 2005 in hot and wet Shanghai for learning to Chinese market key openers) but they can help.

At the end of the day, export oriented activities are culturally constraints (this refers to the cultural distances). Any experienced IE would be telling you it is vital to break the cultural distance as fast as possible and as best as possible!

About Belarus

2005-09-23T18:32:00.000+03:00

4 weeks ago, I went to Minsk to interview ICT companies and their entrepreneurs in this country. It is very interesting to note that the Belarusian IT industry is internationally focus. Almost 80% of companies there are acting on the international market with a very high proportion of them having almost all income from foreign clients.

I was positively surprise by the country. I was expected a worse situation (especially since the Orange revolution in Ukraine) and the recent negative international media coverage did not help.

However, I found a thriving international entrepreneurship spirit in the IT sector. Saying this, it is important to notice that for any entrepreneurial activity in Minsk really needs a local presence. To be Belarussian or foreigner is no matter. It is important to have a local presence because the legal framework is changing way too fast and what was legal one day, might not be the day after. This requires not only a great flexibility but advance warnings that you can only get by having a local partner, representative, lawyer, etc.

I am planning to return there and then publish later this year a short article about my findings there. I will keep you posted!

2 international conferences related precisely to this blog

2005-09-23T18:19:00.000+03:00

I have participated yesterday in 2 very good conferences in Kaunas (Lithuania) which had several interesting presentations on innovation in Eastern Baltic, SME situation in Lithuania and Eastern Europe, intercultural issues, etc.

If you have missed them, you should visit the 2 following links:
- International Scientific Conference (European Management Association and VDU university)
- RIS-Lithuania (EU FP6 supported project, English site not updated!)

and perhaps get some useful information for you…

Topping Google!!!

2005-09-15T09:43:00.000+03:00

Wow! Using the brand new google service specialised in Blog search (http://google.com/blogsearch), my blog topped it for the key words "international entrepreneurship"!

Funny surprise! :)
(The related blog section: Top of the page)

One model of business “innovative” entrepreneurship during economic transition of Eastern Europe.

2005-09-14T17:04:00.000+03:00

Anyone who spent sometime in Eastern Europe would have noticed that many of the successful company created at the beginning of the 90s (just after the fall of the soviet block) where the brain children of middle age academic men. This is somewhat surprising and do not fit so much current description of opportunistic entrepreneurship profiles (stigmatised by the Californian young innovative undergraduate in his parent’s garage or the 50+ European executive creating his company using his life time savings and personal network).

Puzzling for some is also that the successful model of middle age academic entrepreneur did not survive the end of the transition period.

Of course one can argue that no opportunistic entrepreneurship existed at that time and place, and that those university professor where forced to become entrepreneurs with the fall of the communist system. This is quite true but there is more to this. As argue previously most people would grade (objectively or not) their entrepreneur profile in between the 2 “pure” types (forced and opportunistic). This is true for these academic-entrepreneurs.

At the beginning of the transition, professors have still a significant innovative power. More importantly due to the old system, they still have important access to the few resource available (often state owned or managed). Also they have easy access to the new generation of student and can select from them the most suited for “modern” management (which is during this stage a significant improvement in compare with the communist pool of expertise but still far off to real management skills). Altogether they can expertly use the 3 components and connecte them adequately to create successful companies.

During the transition economy, general conditions evolve (more or less rapidly). Growing number of resources are available. Management skills are improving. In the same time, the power of innovation is decreasing with private sector research stuck at zero level and the public sector crumbling fast (and consequently with the university staff moving abroad or to the private sector). However the innovation component is still the dominant one and more importantly the one having access to the 2 other components (via public or international funding for example).

At the end of the transition economy period, resources available are now significant and the management skills have increased too. The innovation component keeps decreasing in importance (comperatively to the 2 other companents and also absolute "quantity") but more importantly it loses the controlling position its used to enjoy and has little access to most resources and management. This is why that at this stage professors are not any longer the leading entrepreneurs type in Eastern Europe.

However main issues during and just after the transition economic period are:
- Lack of opportunistic entrepreneurship culture (see previous blog)
- Lack of opportunistic relays which ensure a smooth network between each components (see another previous blog)

If you are interested...

2005-09-13T09:15:00.000+03:00

If you are interested in international entrepreneurship research, I recommend reading this document from Patricia Mc Dougall and Benjamin Oviatt.

" Some Fundamental Issues in International Entrepreneurship " is an excellent place to get many research references and also get acquainted in current issues on the subject. You probably know some of the authors mentioned and referenced works but nevertheless this is a great document to most scholars in the field.

One view on opportunistic entrepreneurship…

2005-09-13T08:40:00.000+03:00

I remember my training in the French army and in particular the one about on fire fighting. It was said if the 3 components of the triangle of fire (Air, Combustible, Heat) were in the same vicinity, then the risk of fire was high to say the least.

Opportunistic entrepreneurship triangle

For entrepreneurship, it is pretty much the same. There are 3 essential components on the triangle of the opportunistic entrepreneurship; resources, innovation and management skills.

Resource (R) means all kind resources needed to succeed in an entrepreneurial operation such as (of course) financial means, but also personal network, entourage support, etc.

Management skills (M) are the business skills necessary not only to launch an enterprise (in the general sense of the term) but also to run it in the early years.

Innovation (I) in the case of entrepreneurship is the capability to identify opportunity (business or not), to articulate a vision in a coherent manner. This does not describe truly innovative solution on a global scale (product or process), but also include a truly innovative step on a local level.

An opportunistic entrepreneurship model

In the most advance economies, the less common of the 3 components is the one linked to innovation (as seen in the figure beside). Indeed there are ample resources to be accessed. This is also the case of management skills. More importantly, they are actively interconnected by various means (technological, governmental, private initiative, etc.). The key of all this is the entrepreneurship culture (existing or promoted) which make the whole system efficiently.

This can be seen has the original life soup in early earth life (4 billions years ago). Life key elements became more and more abundant (the 3 key components), floating in some kind of “soup” (our entrepreneurship culture, the blue square) where interconnection where made (the circle). Each time, our 3 components are connected, a enterprise can launch (life can appear).

This is, however, not the case in emerging economies (look at a coming soon blog).

Entrepreneurship culture in Eastern Europe during and after transition economy.

2005-09-12T16:56:00.000+03:00

If you asked a French mother what she would like her child to become, you stand a good chance to get “(high level) civil servant”. “To be an entrepreneur” will be far down on her list of favoured job.

Of course in the US, with the more understanding attitude toward failure and the media circus around the rare self-made billionaires, entrepreneurs would be much higher in the US mother list.

As far as Easter Europe is concerned, entrepreneur will probably close to the bottom of the list (the top would be occupied by lawyer, marketing director and other IT job). The main reason would not be the “soviet” brain formatting as it could be easily thought. Although, the ex-communist framework has certainly an influence, I would argue that the main reason the entrepreneur “job” would bottom the list because of the transition economy effect.

At the beginning of the transition period in CEE countries, many lost their position and there was no option to get any regular income. Being entrepreneur was synonym of deep struggle with little hope of success (forced entrepreneurship). The rare case of success were often linked to ex-communist party connection (KGB, etc.), illegal trade (metal smuggling, etc.), or even worse (petty crime or even organised crime).

For all these facts, “entrepreneur” is most likely to bottom the list of CEE mothers.
And because of this the (opportunistic) entrepreneurship culture in the Eastern European countries has some way to go before to emerge as their economy are currently doing.

A view on entrepreneurship types

2005-09-12T08:47:00.000+03:00

Before to write something in the situation in Eastern European Entrepreneurship, I think it is useful remind in a few coming blogs some common information.

There are mainly 2 kinds of entrepreneurs:
- Necessity Entrepreneur
- Opportunistic Entrepreneur

Necessity entrepreneurs are people who have no or little alternative of income. There is often a depressed job market in such situation or even a total failure of the institution and/or society mechanisms. To self-start some kind of activity is often the only choice to simply survive.

Opportunistic entrepreneurs are in totally different mind frame and often in a totally different environment. They are not forced to start an activity. They are convinced they have an innovative approach to solve a problem. They thus choose to become an entrepreneur (business entrepreneur, social entrepreneur, etc.)

Of course blend of entrepreneurs exist, mixing to some extent both categories of entrepreneurship. Also any entrepreneur breed can be found in any social/economic environment (although it is clear that different environments stimulate different entrepreneur types). At any rate, most people would grade their entrepreneur type between the two “pure” categories.

In today’s world with Schumpeter ideas dominating this arena, especially in the European Union (dixit the Lisbon Agenda), the focus of research is very much on the opportunistic entrepreneur type. It is also the more “sexy” type, which get the attention of media (not much of a journalistic story to write about a middle age man creating a poor-looking shop-booth selling second-hand metal part just to have some income to provide food to his family).

We always start somewhere...

2005-09-06T16:15:00.000+03:00

So here is the first blog! Let’s hope it will be the start of an active blog where people will comment inputs publish here…

Through my doctoral studies and my professional experience, I have noticed that many papers, studies or consultancy works, just do not include the Eastern European situation while working on entrepreneurship (or on SME management for that matter), and a fortiori on international entrepreneurship!

The reason I got hooked is that I have been active in this area for many years seeing different situation in different countries (from “old Europe” to “new Europe”). Meeting, interviewing and working with many leaders and entrepreneurs of many companies in countries of the Eastern Baltic area gave me precious insights of this exciting place. The fact that I am not from Eastern Europe (I am French) offers me a unique perspective in this.

If most entrepreneurs from CEE countries suffer the same lacks than their "western" counter-parts, they usually get that in a higher factor. Typically, main issues are:

- Lack of management skills
- Lack of financing means
- Lack of innovation transfer capability
and to add to this often a lack of outward internationalisation experience!

Modern business course curriculums are rather young here. In Eastern Baltic, first business master degree graduates got their diploma only a few years back (around 2001). Not only courses offer are of unequal quality, they are also rare. This means that the management culture is not mature and still very influenced by old practices. These practices do not only relate to Soviet habits but also relate to the special circumstances and attitudes that have been developed in the height of transition period (such as for example, the lack of business focus so common in that economic stage).

To make matters worse, not only the management skills are missing (with often very sketchy business plan or strategy), but also the financing relays are not present. Banking sector is at best maturing and have not yet the habit of supporting entrepreneur, States are too poor to be able to sustain entrepreneurship schemes, VCs are rare (in the 3 Baltic States, less than 10 are really active) and they are focusing on second investment round. There is no – to my knowledge in the high-tech sector – any VC active on the seed stage and only one (recently established), which declared interest in first round size of investment.

Alternatives are in their inception phase such as a Business Angel Network initiative in Lithuania. Moreover, the lack of good stories and the plentiful of bad ones made BA to be called business devils in this region of the world.

Finally the innovation level is still very low because so far it was far cheaper and efficient to import it from abroad (there come from their inward internationalisation skills). Also the high-growth of local economy made local innovation not so relevant for local entrepreneurs. Copycat strategy was by far a more sensible strategy.
It is also worth to notice that despite the fact that R&D from universities is at a reasonable level, they are often not in tune with industry needs (and researchers average age is dangerously high and getting worse). This is not helped by the fact that R&D budget in private companies are almost non-existent or not focus in most cases.

So why to call this environment, an exciting place?

I am personally convinced that within 5 years, the world will see the first born global start-ups from Eastern Baltic area (Skype despite having its own development centre in Estonia, can not qualify, although in my opinion this is a truly European start-up spanning from Denmark for founders, Luxembourg as HQ, UK as a base for sales and Estonia as a production centre, a remarkably and truly EU start-up!).

The technical capabilities are here but more importantly the will to succeed is very high. Moreover, local companies management are feeling more and more that the survival and development pass by internationalising their operation (as I argued in an article in 2004).

Things are moving very fast here (with sometime GDP growth over 9% the last 5 years). I will keep you posted on progress in this arena and on the latest development of my research and professional experience in Eastern Europe.