Ecosystem markers v1


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Draft of a set of markers/metrics for a healthy entrepreneurial ecosystem.

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Ecosystem markers v1

  1. 1. Ecosystem MarkersIs there a term we use as much as “entrepreneurial ecosystem” without defining it, let alone measuring it?(Besides “entrepreneurial mindset”, of course.) However, just as it is absolutely critical to nurture a moreentrepreneurial mindset, communities really need to nurture a more entrepreneurial local economy. That meansan entrepreneurial ecosystem that works to support increasing quantity (and quality!) of entrepreneurial activity.What are the markers of a healthy ecosystem? This is a first ‘go’ to identify a reasonably comprehensivescorecard, crowdsourced via some great entrepreneurs, scholars & educators, that is intended to bedevelopmental, not punitive.. please use it to spur discussion in your community!Supporting Emergence of OpportunitiesSo… What do we know? (Other than we all have a relatively fuzzy mental model of a healthy entrepreneurial 1ecosystem.) My favorite soundbite is “a healthy entrepreneurial ecosystem provides a robust, friendlyframework for opportunities and entrepreneurs to emerge.”Entrepreneurial Potential = f (Potential Entrepreneurs)The entrepreneurial potential of any community (or organization) is quite clearly a function of the quantity & 2quality of its potential entrepreneurs . In turn, that means we need to focus heavily on what encourages andsupports potential entrepreneurs to see opportunities. To act on them. To keep going.The infrastructure for entrepreneurship has critical elements that are tangible and entrepreneurs will tell us, if 3we’re listening. But the most powerful elements are intangible: What supports entrepreneurial thinking? 4The very best global data that we have argues there are two, maybe three potent predictors of entrepreneurialactivity – across different time periods, across countries, across different types of entrepreneurship. Entrepreneurial human capital: How many are personally prepared to start a business? Entrepreneurial social capital: Supportive social/cultural norms? (Fear of failure?) (Plus a form of entrepreneurial political capital: How hard is it to start, run or grow a business?)Strategy good; implementation better: If you can ask only one question, make it this one. Are we doing the rightthings the right way and for the right reasons? (And realize that probably means the right people?)These markers have been crowd-sourced, so credit my friends & colleagues for anything brilliant (and blame mefor any stupidities or egregious omissions!) This draft is intended to be critiqued (savagely, if need be) so pleasefeel free to email or tweet me ANY changes, additions, etc. The indented bold items will be put into a formalsurvey once the roster of markers is finalized, we then can start using this roster of markers to spur discussion!I. Policy Formulation If an entrepreneurial ecosystem is developing in healthy directions, then it should be easy to see howentrepreneurship-related policies are themselves being developed. Three markers of healthy ecosystemdevelopment relate then to policy formulation. First, is there a coherent/cohesive strategy to serve as an umbrella to facilitate the emergence of newactionable opportunities or is it a grab-bag of sexy (“ooh, we could try that!”) tactics cobbled together ad hoc? Second, is the policy formulation driven by bottom-up input or top-down design? In other words, howmuch of the policy formulation represents a broad cross-section of the entrepreneurial community or is this theprovince of major institutions and/or “power players”? Third, a good way to see this is whether the form of new initiatives are driven by the new functionalitiesor are they shoehorned into existing governmental/non-governmental structures. (If there is an Iron Law oforganization design, it is “form always follows function.”)1 From Thierry Volery of St Gallen (Switzerland) & I fear I may have embellished it a little ;)2 Krueger & Brazeal (1994), same title3 Cornelia & Jan Flora’s seminal work on entrepreneurial social infrastructure; my work on cognitive infrastructure4 Paul Reynolds’ awesome re-analysis of the Global Entrepreneurship Monitor data (see ‘drivers’ in my blog)
  2. 2. Cohesive strategy or collection of tactics? Was the policy formulated top down or bottom up? Does form follow function? We also look to see if policy formulation is driven by proven practices, not what we want to be bestpractice. Yes, every community has its unique characteristics but our “best” need not be remotely the bestoption. Also, there are lots of “best” practices. Have we ensured that another community’s best practice is theone that best fits our needs? (Not wants, needs.) Finding one plausible model to copy is NOT enough. Nobody designs the perfect system. Without immediately throwing out the cliché of “we need to engagein design thinking”, it is imperative that we are learning. Are we learning from our mistakes? Are we OK withmaking mistakes to learn from? Is it our strategy to assume this is an iterative, trial-and-error process? Are we really looking for proven practices in a variety of locations? Do we act to embrace this as an intense learning process? Do those involved get design thinking or do they want to get it perfect first? This is the tough one. Would you rather be the “windshield” or the “bug”? (Does anyone ever say “bug”?)Two important truths: (1) much as we’d like to avoid the windshield/bug choice, we cannot. If you do not chooseto be the windshield, you will be the bug. Your choice: Disrupt or BE disrupted. (2) This unavoidably requires bold action and a firm, visible commitment to take bold, disruptive actioneven if it also disrupts long-established ways of doing things. As I said, this one is a toughie. Is there a passionate commitment to bold/disruptive action, no matter whose ox is gored?? (or do policy makers seek to avoid disrupting existing personal & organizational relationships?)II. Networking/Collaborations Healthy economies are heterarchical: A fancy way of saying they are much more bottom-up than top-down. They have top-down elements but the top-down institutions serve the bottom-up emergence ofopportunities, not dictate what can and cannot happen. That means the economy is best represented as, well,as ecosystem: A complex, ever-changing mess of networks and collaborations with a lot more players than wenormally consider. Do our institutional players, especially those with the most power, act to serve the networked nature ofthe economy. Do they serve the bottom-up activities or try to control them (even with best of intentions)? One marker of this is how immersed are the institutions in the ecosystem. Universities aren’t the only‘ivory towers’ out there, How much are the institutions embedded deeply in the community; more important, howdeeply embedded is the community in the institutions? Are institutions co-embedded with one another? Do they play well together? Ask yourself which of your key institutions behave as if collaboration (evenwith seeming rivals) is the norm. Most organizations think they are team players; in realty, very few are. Are key institutions immersed in the ecosystem? Co-embedded? (who is, who isn’t?) Do institutions play well together? (which do, which don’t?) Who guards their turf and clout? (In public sector? Private sector?) Another way to diagnose this is: Are there broad, deep (or both) networks that arise bottom-up? Or arethe most prominent networks driven by institutions? Do institutional players actively support the bottom-upnetworks? One critical role in healthy networks are ‘connectors’ – do the institutions actively support theseindividuals (always people and they always surface bottom-up)? Are your connectors more than just passive/reactive connectors responding to requests or are theyproactive, “pushers” of information and introductions. The latter have the delightful name of “liaison-animateurs”,both fair broker and agent provocateur! Are bottom-up networks supported visibly? Are connectors supported visibly? How many of your connectors are true liaison-animateurs? 2
  3. 3. Does policy formulation and implementation recognize the networked nature of the entrepreneurialecosystem? Here is another toughie, but a very important diagnostic question to ask. Different roles/tasks areneeded to grow the economy. How do we decide who does what? (Please don’t say “Whoever did it last year”) In strategy terms, this means focusing ruthlessly on distinctive competence, not core competence. (Corecompetence = what you’re best at; distinctive competence = your sustainable competitive advantage.) In ahealthy ecosystem, we do NOT assign roles/tasks by what you do best. We look at the task and ask “OK, who isTHE best in our community at X?” That means I am unlikely to do what I think I do best, I do what adds the mostvalue to the ecosystem. (Just like in the marketplace!) It also has the painful consequence that I am definitely unlikely to get to do what I want (or feel entitled todo). We call this “alignment” (And we call the people & groups that press to do what they want “seagulls”, fromthe birds in “Finding Nemo” who only say “Mine! Mine! Mine!”) Is your community committed to alignment (DC not CC)? Are you plagued by “seagulls”? (Are there visible sanctions?) Now we get to some fun stuff. HERE is an area where your state or city can build a terrific competitiveedge over other communities! If there is one tangible tool that every community needs and very few have, it’s anaccurate, detailed map (or maps) of the entrepreneurial ecosystem. To do it right, we almost always needmultiple maps. Everyone THINKS they have a map; usually they don’t and almost never have good ones. Wherecommunities do have maps, they are at best static “laundry lists” of those in the ecosystem (usually missing at 5least one important component) . It is imperative that such maps capture the most important dynamics, such aswho is connected to whom, what are the flow of information and other resources, etc. This requires big-timesocial network analysis. (Good thing we know how to do that! We just need to DO it.) Does your community have a commitment to develop great maps of the ecosystem? Do they recognizethat this is not something for amateurs? But that it will pay off handsomely?? Does the community share the map? Do different parts of the ecosystem have a shared (and reasonablyaccurate) map of their world? It’s not that we want everyone to be a connector, but wouldn’t THAT be nice? Committed to developing best-in-class maps of the ecosystem? Are maps shared broadly? So how do we get started? How does a healthy community build from the bottom-up… effectively? Apowerful tool that we see in almost every healthy ecosystem is a well-done process of listening across theecosystem. If the top-down vision for the future of your economy is to be driven bottom-up, then we need tobring together the visions of the different parts of the ecosystem. “Visioning” is such a cornball, touchy-feely termthese days, but there are powerful tools that do just that in ways that prevent powerful voices (or just loud oneslike mine) from dominating the discussion. They also ensure that we focus on what we have, not whining aboutwhat we don’t have. Several years ago, in Twin Falls (Idaho) the Western Rural Development Center held one of over 100listening sessions on how to grow rural entrepreneurship. Amazing process! What was intriguing is that mostcommunities were really successful and converged on ideas that resonated broadly (most frequent #!: Moreyouth entrepreneurship!) This can be replicated easily and… cheaply. Where the process did not work as well, it had been hijacked by “seagulls” who wanted to make certainthat they would be the key players. Or the process focused on the negatives (our liabilities not our assets). Where the process REALLY worked well, the communities (usually a state) took the results, combinedthem with their ecosystem maps and held a “summit” (I know, another cliché word these days) to combine localvisions & flesh them out, creating a tangible action roadmap. In a couple states, they used this as a goldenopportunity to do alignment and everyone comes away with clear action items. Any city/state could do this.Today. Is your community committed to listening/visioning sessions? Is participation truly bottom-up? Is community leadership committed to go “summit-ing”?5 Note that at some level, even the most “entrepreneurial” ecosystem includes both newer & older firms, smaller & larger,high tech & low tech, urban & rural, growing & shrinking, etc. Both private & public, for-profit & non-profitEntrepreneurs, service providers & champions. Ecosystems are messy! Or why multiple maps are in order. 3
  4. 4. III. CommunicationThis may seem obvious but we never communicate as much or as skillfully as we would like. And, we are oftenunaware of where (and how) communications break down. Remember that communication depends on thesender AND the receiver AND the medium. Get any one of those wrong and… oops.Is it a conversation or simple ‘spray & pray’ one-way messages? Is everyone in the conversation? (Everymember of the ecosystem needs a voice.) A great marker of this is how active and how skillful is the onlinepresence of key players in the ecosystem – are websites up to date? Do key players really get the power ofsocial media? (Again, today we’re in the age of conversations not press releases.) Is there frequent communication with and among the entrepreneurial community? Is it a conversation or simple ‘spray & pray’ one-way messages? Are all community/opinion leaders in the conversation? Are entrepreneurs fully represented in the conversation, not just those who speak for them? How significant (and competent) is the online presence of key ecosystem ‘players’? How significant (and competent) are the key ecosystem ‘players’ at using social media?IV. Governance/LeadershipAnother clear marker for a healthy entrepreneurial ecosystem lies with public leadership. Do civic officials takesides with the entrepreneurial community? Is entrepreneurial job creation “Job One” in economic development?Do they communicate that? Do we see them at entrepreneurial events? Does government have a clear, stated strategic intent to grow entrepreneurial activity? Do civic officials take advantage of the bully pulpit to encourage entrepreneurs? Do civic officials have a visible presence in the entrepreneurial community?Connecting to other states/countries is another important dimension. In part I, we asked if the community wasobsessed with learning from the experiences of others. Here we ask if the community’s leaders are not just opento ideas from elsewhere but also do so proactively, through staying tightly connected with sister communities toshare successes (and, um, “learning experiences”).Personal contact is good but simply listening to expertisefrom a wide range of cities, state & countries can be enough. Does government actively promote exchanges of ideas with other cities/states/countries? Do they listen and actually use information from diverse sources?Accountability is clearly important too. Does government keep a close eye on the right metrics, quantitative andqualitative? Are they clearly the right metrics, accurate/timely and not self-serving? Are these metrics easilyaccessed by the public? Does the community have the right metrics? (Good metrics on the right things?) Has there been a rigorous, comprehensive effort to identify the best metrics? Are these metrics well-communicated to the public?Maybe most important: Does a community’s leaders truly and visibly “get it”? Do they really understand whatmakes an entrepreneur tick? If a leader mouths the words but does not really understand what makesentrepreneurs (and entrepreneurial job creation) “go”, then it isn’t likely that even great leadership skills will keepthe ecosystem moving forward. In the eyes of the entrepreneurial community, do leaders “get it”? Visibly? Credibly?How can leaders show that they “get it”? It’s important that they understand the economic dynamics of their localeconomy. Do they know where jobs come from? (what % from startups, from growing firms, from migration?) Butdo they also understand the social and human dynamics? Do they also understand the importance of theentrepreneurial mindset? Do they understand that it is much different than skills or knowledge? Growing 4
  5. 5. entrepreneurial human capital has little to do with teaching facts and even skills; it’s about moving citizens from amore novice toward a more expert entrepreneurial mindset. Hence, you want to see that leaders (includingeducational leaders) understand this is about deep cognitive change. And that they understand that we knowhow to facilitate that. Do their policies push this very different educational approach? It’s a great way to looksmart to entrepreneurs. Similarly, do your community’s leaders understand that a truly entrepreneurial economy requires anincreasingly entrepreneurial society? Do their policies reflect the reality that a healthy, growing entrepreneurialecosystem is about social capital and that means a firm focus on culture change? Are leaders OK that social andcultural norms will be changing? Do they encourage it? Doing the right things the right way and for the right reasons… do your community’s leaders encouragebold, disruptive action? Do they take such action themselves? But do they do so for the right reasons – notbecause of the threat of being disrupted, but rather because of the opportunities the community gets becausethey take bold, disruptive action? Do a community’s leaders support policies that emphasize growing the mindset (not skills)? Do a community’s leaders support changing to a more entrepreneurial culture? Is bold, disruptive action considered the norm in economic policies? Is bold, disruptive action driven by threat or by opportunity?Once I get ample feedback, a revised version will go out, accompanied by a survey instrument that includes theindented items in bold.Again, please send your comments by email (Norris.krueger[at] or Facebook or Twitter[@entrep_thinking] : What needs to be added? To be cut? To be changed? (including language, syntax/grammar and especially the ordering of items)Equally important: The intent here is to create a rough first cut at a set of diagnostics that communities can use to assessthe health of their entrepreneurial ecosystem. Intelligent, honorable people can (and will) disagree about how torate their community on many of these… so please consider this as a tool to spur discussion on what’s reallyimportant about encouraging the most critical element of your local economy: Entrepreneurship!(of course, if you want to use this to drive policy changes… let me know; I’ll join you on the barricades, LOL) 5
  6. 6. Another (Shorter) Approach If you want a shorter version, here is another (and easy to remember) way to assess your ecosystem.The key to growing a more entrepreneurial ecosystem is to: Celebrate Educate Initiate In a healthy ecosystem, we miss few opportunities to celebrate what we have – not just entrepreneursbut their allies & champions – not just successes but learning. We also miss few opportunities to educate, toincrease human capital across the community (again, not just entrepreneurs but the whole community). Finally,in a healthy entrepreneurial ecosystem we see lots of things being initiated by community members – it’s notjust an entrepreneurial community, it’s a “happening” community.Celebrate? Are entrepreneurs & their allies/champions celebrated regularly? In events, formal & informal? By the media? By civic officials? Are the events both broad/Inclusive and deeply focused in key areas (like youth, rural, etc.)?Educate? Are we educating the public about entrepreneurship? Educating opinion leaders? Holding regular briefings/policy forums to share the state of the art? Are we explicitly & intentionally growing entrepreneurial human capita?l Are we obsessively emphasizing transformational learning (mindset, not skills)? Are we getting youth entrep training across the state? How broadly offered is entrep training - Targeting key groups? Rural? Veterans? Women? Seniors? Creatives? Techies?Initiate? How much activity Is ‘bubbling up’ from entrepreneurs outside of organizations? Does government actively support these autonomous initiatives? Does the ecosystem intentionally focus on growing entrepreneurial human & social capital? Human Capital: Do public (or public/private) activities focus on deep changes in the mindset/culture? (not just learning ‘stuff’) Social Capital: Do public (or public/private) activities focus on growing the ecosystem (not just favored players) Political Capital: How often do we ask about what entrepreneurs need/want? How often do we act on it? Most important, is it the political/bureuacratic norm to encourage bold/disruptive action? 6
  7. 7. …this set of markers has intentionally focused on relative intangibles…Consider this page to be VERYmuch a work-in-progress! ;)But Don’t Forget the Tangibles“Show me the love” usually means “show me the money”… Even if money isn’t being spent well, spendingmoney is a way to “prove” that we are serious about it. Certainly across cities, states and countries, the amountof public & public/private money spent per capita (or per job) varies wildly. Just as education spending per pupilis not a predictor of student performance, the dollars spent on entrepreneurship or on high tech is not a greatpredictor either. In fact, greater spending is often the consequence of tech-based entrepreneurship.Having said that, there are elements of the infrastructure for job creation that are tangible and physical assetsare rarely free.Readiness for the New Economy (e.g., Broadband)For example, one of the best predictors we have for rural economic development is access to broadband. Evenimpoverished urban areas can find some access but rural areas can be left isolated from the New Economy. Andas with electric power, the question is not whether there is access, but is there enough access? For decades,youth entrepreneurship training has generally been considered the #1 “no-brainer” for economic development,especially rural. However, entrepreneurial success requires ample access to the internet. (footnote for checklist) How many entrepreneurs in your community would say that broadband access is easy, offersenough bandwidth and is affordable?Access to Tangible ResourcesThis is usually about financing. However, there are other barriers to resource acquisition that range from thephysical (e.g., location) to the political (e.g., regulation). Tax policy can also play a role. (In Idaho, there is aproperty tax on business assets that presents both a tax burden and an often-oppressive paperwork burden.How does this encourage firms to grow their fixed assets? In many industries, growth in fixed assets correlatesstrongly with growth in employment.) Is money available on reasonable terms? At different stages of the firm’s life cycle? (Where are there gaps?) Do lenders and equity investors really understand what entrepreneurs need? More important, do entrepreneurs fully understand the game? How hard is it to start a business? Run a business? Grow a business? [ has a detailed list of metrics on this] Do entrepreneurs know how to access resources? Do they know where to find them? [this overlaps with the earlier questions about connectors.. Do you have liaison-animateurs?]Access to TalentMaybe the most important tangible resource is talent. Surveys of existing firms rate their #1 headache as humanresources; this is even stronger for firms trying to grow. Are there mechanisms in place for entrepreneurs to find the right talent? Is the workforce development system responding quickly to talent shortages? [Are entrepreneurs effectively communicating their needs?] Is the workforce development system nurturing entrepreneurial employees, comfortable with working in small, new or fast-growing firms? 7