Breaking Out – How to Kick Our Cottage Industry Mindset

Caroline Mar is successful New Zealand entrepreneur. Over 16 years she has created ‘The Carpenter’s Daughter’, three-store retail chain selling clothes to the ‘bigger woman’. She employs 12 people, has an annual turnover of $1.5 million – and has no wish to expand further. She is, in her desire to remain small, very much in the mould of many other home-grown entrepreneurs.

Brian Peace, on the other hand, the Auckland software developer of energy utility billing systems, Peace Software, has very different agenda. His venture capital backer reckons Peace Software will be one of the world’s top software companies, worth more than $1 billion, within four years.

For any modern nation, entrepreneurship is the lifeblood of its wealth, creating the jobs and salary cheques that dictate how we all live our lives. The New Zealand Centre for Innovation and Entrepreneurship, whose 2001 report for the Global Entrepreneurial Monitor (GEM) gives the country top score at enterprise creation, also puts us near the bottom of the world rankings for moving start-ups out of the small business phase. The survival rate of start-ups is also poor – only 40 percent after four years.

This apparent paradox is corroborated by the typical corporate profile of New Zealand company and the record of the NZ Stock Exchange. hefty 84 percent of local enterprises employ five or fewer full timers. According to its February 2002 Fact Book, the Stock Exchange lists only 132 local companies, down from 274 15 years ago. (In the same period Australian public companies increased from 1147 to 1334.) The average market capitalisation figures for listed local companies, up just $10 million to $320 million during the past seven years, is another indication of the inability to grow and create wealth.

Clearly, there are some real challenges facing planners in government, industry and the education sector.

How does small business nation transform itself into big business economy? Firstly, it is instructive to examine several misconceptions strategists have had about entrepreneurship.

The first misconception is that entrepreneurs are mainly tertiary-educated individuals. In fact, as the international record confirms, most entrepreneurs have never been near tertiary institution. So dependence on graduates, who are also small proportion of the national population, is hardly realistic way to fuel the creation of new companies.

The second misconception is that conventional education and training is the key to job creation. While this helps to provide skills that might not otherwise exist, the more critical element is the ability to first create new businesses, and this is generally not related to conformist job skills. In fact, entrepreneurship is extremely difficult to teach, and the GEM report recognises this with the admission that standard New Zealand business education, which tends to perpetuate the employee mindset, does not focus on the needs of entrepreneurs. In any event, most employees – however educated they are – are by and large content to remain employees.

The people who start businesses are usually not in the conventional employee mould, at least initially. They’re members of that rare, self-starter breed, independent of spirit and, because they’re stimulated by new ideas and the adrenalin of risk, prepared to go it alone. The desire to be self-employed is generally – although not exclusively – an inherited attribute, passed down from parent to children.

If there is not the wish and/or ability in New Zealand to turn business concepts into anything more than cottage industries, how does nation encourage more people like Caroline Mar to think more like Brian Peace?

It can be done by ensuring the emerging generation inherits the experiences of their more successful pre-decessors. In the world of knowledge management, it’s called experiential learning, the process of applying one’s own and others’ experience. One approach would be to inject historical models into the educational and training system, tried and tested examples of how other New Zealanders have either made it or are making it. In business, these models are called corporate histories or, when put into wider context, business or management history.

In practice, every secondary school and higher education student would be asked in his/her final academic year which industry they intended/wanted to work in. The student would then be given several local case studies from that business sector showing how other New Zealanders had created their own businesses. It would be recommended reading and possibly part of formal course work. For example, in the engineering, leisure, retailing, farming, software, or service industries new entrants would, through corporate histories, familiarise themselves with their chosen sector before entry, and not have to start from scratch when they entered the business world for the first time.

Well produced and delivered in variety of formats (electronic media, books, video, audio, etc) as learning tool instead of PR contrivance by the subject companies, this approach has the ability to both inspire and teach entrepreneurship. At one level, it would elicit the reaction “If they can do it, so can I”. At another level it would provide the missing ‘how to’ for future entrepreneurs to apply to their own endeavours. At the tertiary level, where graduates often go straight into big business, students would have the practical opportunity to study how previous mistakes and successes could be handled better, useful counterbalance to the pervasive theoretical teaching style evident in New Zealand.

In fact, the concept of experiential learning already exists in the formal education sector. Political, military and social history are integral to many general curricula. Musicians, artists, architects, soldiers all study the history of their specialist areas. But for the vast majority, who will work in more generalised business world, there is no local corporate and/or wider business history in the education system, not even in the country’s business schools.

Economic history does feature in business education, albeit to declining degree. But it deals with macro fiscal issues as they affect national and international constituencies, discipline only remotely associated with the day-to-day running of business.

Business school educators would probably insist that case studies are form of experiential learning. Almost invariably, however, the examples used are of United States, United Kingdom or Japanese origin and usually no more than summarised snapshot examples to explain the workings of some functional management discipline, an approach that ignores inter-relationships with other management factors and influences. The wider contextual picture, illustrating the more complex and intimate nature of running real business – the real meat of entrepreneurship – is studiously avoided. While not irrelevant as learning opportunities, these foreign case studies are based on quite different business cultures and legacies. Specifically, they do not take account of local conditions, local ways of working and local precedents. People usually learn better from their own experiences than those of others, not least because the context is more familiar.

There is ample evidence that other people’s achievements are prime motivator in life. The enthusiasm for bio-graphy and autobiography is evident in most bookshops. How many New Zealanders (and others) were inspired by the Sir Peter Blake story? The list is, of course, lengthy one – Sir Ernest Rutherford, Sir William Pickering and Alan MacDiarmid in science, Sir Edmund Hillary in exploration, Robert Muldoon and Michael Savage in politics, Dame Kiri Te Kanawa and Tim Finn in music, the actress Nyree Dawn Porter and the comedian Billy T James. Their, and other, histories feature prominently in the libraries of many schools and universities; local cor

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