Everyday Matters: Can entrepreneurship save Malaysia?

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This article first appeared in Forum, The Edge Malaysia Weekly, on December 14 - 20, 2015.


“The object of all work is accomplishment. To get there, there must be forethought, system, planning, intelligence and honest purpose, as well as perspiration. Seeming to do is not doing.” — Thomas Alva Edison


ONCE upon a time, there was a city in the US called Detroit. Its people were hard working and they made cars — huge stately cars, modest people movers, sleek sports cars — Detroit made and sold them all.

As a result, Detroit became one of the richest cities in the world. It even gained a nickname: Motor City or Motown, home to Ford Motor Company, American Motors Corp and of course, the king of the hill, General Motors.

As the car business grew, Detroit’s leaders became myopic. They began focusing on the only industry they knew, much to the disappointment of some of the town folk who wanted to venture into other businesses. Slowly, these disappointed people put down roots in other cities that welcomed entrepreneurs who dared to venture beyond the confines of the automobile industry. And they prospered.

Detroit, on the other hand, fell on hard times. Competition from the East, notably Japan with its cheaper, more reliable cars, began eating into Motown’s market. Slowly but surely, Detroit’s gleaming automobiles were no longer in demand. They were seen as lumbering land yachts with reliability issues that were uneconomical to run. With falling demand, factories began to close and more people began deserting the once-prosperous city. Detroit in the early 21st century is seen as one of America’s most spectacular failures.

The example of Detroit is real. And the cities that welcomed Detroit’s restless entrepreneurs in the late 1980s and early 1990s prospered spectacularly. Chicago in Illinois, Austin in Texas, and San Francisco in California, with their deeply caring and highly engaged business, political and philanthropic leaders, reaped the economic dividends that only successful entrepreneurs backed by supportive principles, policies and beliefs can provide. Great business leaders are like great scientists or great football players — they will respond and accelerate with high-quality attention.

A hypothesis: In developed countries, growth in jobs and GDP are predicated by growth in the number of start-ups and entrepreneurs. The more entrepreneurs there are, the more customers there will be. The more customers there are, the more jobs will be created, and economic growth strengthened. City leaders all over the world are now warming up to that fact.

The next competitive wars are not going to be between nations, but rather between cities: Buenos Aires vs Boston, Tokyo vs Toronto, Kota Baru vs Kuala Lumpur. The reality is, when it comes to creating economic growth and good jobs, local leaderships is far more important than national leadership. These leaders understand how to build a thriving, growing economy — one that welcomes business and entrepreneurship. They care deeply for their cities and are highly engaged in business, political and philanthropic activities.

Simply put, local leaders are better at finding out who in their town is a high-potential, blue-chip entrepreneur with a talent to build a big booming business. This is something our leaders have to think about, because attracting entrepreneurs to set up shop where we are is what it is all about.

It is exactly the above issue that I have a problem with. I believe in Malaysia, we may be building the future of our economy on a faulty major assumption: that inculcating a spirit of innovation is the panacea for our economic ills.

And we are not alone. The conventional wisdom heard at thousands of conferences is that the great economies of the Western world were built on spectacular innovation. Names such as Alexander Graham Bell, Thomas A Edison and Steve Jobs are looked upon as icons of innovation in the 20th century.

I think the conference organisers and even our political leaders have erred massively. Innovation is essential and we need it. But the real magic starts when entrepreneurs, people who are born with the rare gift of building successful businesses, get into the game.

It is absolutely critical that our leaders understand this: an innovation has no value until an ambitious entrepreneur builds a business model around it and turns it into a product or service that customers will buy.

But what is it that differentiates an innovator from an entrepreneur?

An innovator is first and foremost a creator, a problem solver with a deep passion for improving something. Innovators are thinkers. But an entrepreneur is driven to act, to build. This includes building the businesses that make and sell the things that innovators think up, because entrepreneurs are doers.

Innovation has no value until an ambitious entrepreneur builds a business model around it and turns it into a product or service that customers will buy. Look at it as a horse and cart conundrum: entrepreneurship is the horse, and innovation the cart. It does not matter how brilliant the innovative idea is if there is no one to create a business that sells it.

Innovations are valuable and necessary, but they create little to no economic energy in and of themselves until the almighty customer appears. The car, light bulb, transistor, and the internet created little or no economic energy until each invention was successfully commercialised, until the first customer appeared.

We need innovators — of that we have no doubt. Mankind has progressed because of innovators who keep coming up with newer and better ways of doing things.

But we need to ask the right question about every single one of those ideas: “Can we sell it?” Every time an inventor has a new idea, we should ask, “Exactly who is the customer?” “What solution does it provide the customer?”, and “How many customers will love this?”

The problem here is not that there isn’t enough innovation. It’s that there aren’t enough entrepreneurs attracted to these innovations to start new businesses. To get on track, we need to quit pinning everything on innovation, and we need to start focusing on looking for entrepreneurs and business builders.

Our leaders have to be deadly serious about new business start-ups and entrepreneurship. The future of our economy depends on it. Our nation’s economic destiny will no longer be determined just by fiscal policy, job legislation and tax rates, but by whether we can inspire a spirit of free enterprise and connect that spirit directly to desperately needed economic growth.

How effectively we can spark the spirit of free enterprise — a culture of entrepreneurship — in our young people will determine the number of successful entrepreneurs in our cities, the creation of new jobs and whether we have the money for anything else that matters. We cannot afford to go down the path of Detroit, Michigan.

Zakie Shariff is CEO of a state-owned GLIC and co-founder of hCap Associates, a talent search company