The reluctant entrepreneurs
Unemployment, pay cuts and the disappearance of whole sectors of the economy are prompting more Spaniards to start up companies
Ask any entrepreneur the recipe for success and they'll tell you that you that one of the main ingredients is an innovative business model. A great idea is also helpful, but it won't be much use unless you know how to put it into action.
Take Facebook: a way for former students to keep in touch with each other. What made it such a success was the business model behind it. Which isn't to say that all businesses these days need to be driven by new technology, although technology can help change the way we do things, improving efficiency, reducing costs, and without compromising quality.
These are the guidelines that the experts are offering the new type of entrepreneur, those setting up their own businesses out of necessity, who have lost their jobs, and for whom being an employee is no longer an option. With time on their hands, they are looking for opportunities in a shrinking market, in sectors they know and in the hope of converting the existential challenge of joblessness into an opportunity.
The first two years of the current crisis - between 2008 and 2010 - saw a decline in entrepreneurial activity in Spain, according to the latest Global Entrepreneurship Monitor (GEM) report, produced in conjunction with IE Business School in 54 countries worldwide. But GEM also notes that last year saw a 35-percent increase in the number of people starting their own businesses in Spain, representing almost six percent of working-age Spaniards. This may sound like good news but GEM points out that this does not represent "economic recovery," instead noting: "Entrepreneurial activity has increased because of need and unemployment."
Jordi Vinaixa, academic director of the ESADE business school's Institute of Entrepreneurial Initiative, admits that the growing number of entrepreneurs in Spain starting their own business are "making a virtue out of necessity," adding a note of caution: "Necessity means that the circumstances may be right, and the obstacles fewer, but most importantly, there has to be a good idea."
The failure to find a job, or one that matches one's expectations, also pushes many people to think about setting up their own business.
"Many people are encouraged by the belief that they will be to a large extent in control of their own future, and of course that they will be doing something that they like - something they have chosen to do," says Vinaixa. "It's also the case that if you are also unemployed there are fewer obstacles to setting up your own business. If you are absolutely sure you want to do it, and you can find the financing, then when you are jobless is certainly the moment to do it, because you can dedicate yourself full time, and put all your energy into it."
Vinaixa says that we are also seeing growing numbers of people determined to make it as an entrepreneur, even if they fail the first time with a venture. And they aren't limited to the self-employed: "The serial entrepreneur can be found in a corporate environment as well; these are people who are good at getting projects off the ground, and they enjoy it. They know how to launch an idea, to set up a business model and how to develop and apply it. In reality, entrepreneurship is a process that can be learned and improved on."
This is not the first time that the business initiative is being seen as an alternative at a time of recession. During the downturn of the late 1970s, the European Union supported programs to help entrepreneurs, setting up teams and physical infrastructure to help them get started.
One of the oldest such initiatives in Spain is Barcelona Activa, set up 26 years ago and run by Barcelona City Hall. Its team of professionals will advise anybody who believes they have a viable business idea, helping them to prepare a business plan and look for financing.
"Our vocation is to listen and to help by using the contents of our website and through individual attention. As a result of the crisis, and particularly over the last year, we have witnessed a significant increase in the number of people coming to us. But we won't really see the impact of any of the projects that have been set up for a couple of years," says Barcelona Activa's Montse Basora.
Barcelona Activa helped entrepreneurs set up 700 businesses in 2008, more than doubling that the following year to reach 1,700 by the first quarter of 2010. "We are seeing the creation of many companies that operate in the digital environment, because they do not require a huge amount of investment and are less risky," says Basora, highlighting online selling, services, and mobile applications.
Juan José Güemes, head of IE Business School's International Entrepreneur Management Center, says that the new technologies are encouraging Spaniards to set up their own businesses in recent years.
"One of the biggest changes that we are seeing in terms of entrepreneurship in Spain is that academics now understand the need to transfer technology to the marketplace. This represents a major shift in attitudes from 10 years ago when it was still quite normal to hear people in education saying that science shouldn't be used for commerce. We should obviously respect different points of view, but we also need to remember that scientific research is largely being financed with our taxes and that it is only fair that society should want to convert that into creativity, wealth, and employment. The other big change is that it is increasingly the case that technological development is a commodity. So if 15 countries are involved in technological development at the same time, what sets them apart is the way that they execute that development, their ability to take that technology to the market through entrepreneurship, which is what is so amazing, for example, about Israel, or the Massachusetts Institute of Technology, or Stanford, places that have set themselves apart in terms of technology and that are revolutionizing the world by using technology in the market."
In which case, is entrepreneurship necessarily dependent on technological advances? "That depends," says Güemes. "It isn't necessarily the case that the project with the most potential is linked to technology. Think about the businesses that have created the greatest impact in recent years, such as Facebook, Google, or Instagram, none of which are, technologically speaking, disruptive. But the type of entrepreneurship that we can help develop, and that adds value, always has a certain element of innovation to it, even if only in terms of the business model, and normally there is a technological aspect to it. It is not unusual to meet students who have developed some kind of technology, or who have links to a group that is developing new technology, and that is something that we should be happy about in Spain."
Perhaps more than any other era, today's world is in the hands of self-made men and women. Sitting at the top of the Forbes 100-wealthiest list in the United States are entrepreneurs who revolutionized the world, who changed the way that we use the telephone, listen to music, or even drink coffee. "The entrepreneur who innovates is more important; those who change the way that we do things, like Inditex's founder Amancio Ortega. And innovation is often as much about the business model as it is about using some new technological advance," says Güemes.
But at the same time as the depression is prompting more people to consider becoming entrepreneurs in Spain, state support is drying up, says Basora: "The regional governments are no longer providing any subsidies and there is little official help. But in response, the private sector is increasingly stepping in to help entrepreneurs, from individual investors wary of the stock exchange, to the growing phenomenon of crowdfunding, whereby large numbers of individuals put small amounts of money into projects-until now, something largely related to cultural projects. Business schools are also helping, by bringing together pools of investors."
Vinaixa accepts that entrepreneurs are unlikely to receive much support from the state, but says that for the truly driven, there is always a way to bring a project to fruition. "One of the key things that entrepreneurs need is access to resources. These can be found by contacting those with them and by the entrepreneur convincing them that he or she deserves them; the same applies to money. In some cases, resources are absolutely essential, but in others not so much. What an entrepreneur needs to do above all else is identify what he or she needs and then go out and find it: a good entrepreneur is also somebody who knows how to manage what they have to their best advantage."
Juan José Güemes insists on the need to define how to put an idea into practice clearly: "The world is full of people with good ideas, some of them brilliant, but they are never put into practice, never executed. I don't accept the idea that the idea is the most important thing." He says that one of the reasons so few ideas are put into practice is a lack of determination.
"I see it all the time at meetings of entrepreneurs. One of the other major problems is that when people have a good idea they are often reluctant to share it, and to get input from others."
The experts also say that entrepreneurship is a way of life. "Now, more than ever, we have to think like entrepreneurs, whether we work for a company, an organization or for ourselves. There is a lot of talk about the crisis, but the reality is that we live in a world in which we need to think in entrepreneurial terms all the time," says Güemes, adding: "This country needs entrepreneurs, not just in terms of creating businesses, but in terms of the way that we live, to be always on the lookout for opportunities, and not simply accepting the way that things are."
But Güemes admits that few companies are willing to accept an entrepreneurial approach by their employees, and rarely welcome innovation: "Even companies that were set up by entrepreneurs eventually tend to consolidate into large, static organizations whose structures and working practices are not able to incorporate innovative thinking and give room to entrepreneurs."
Vinaixa says that there is no hard and fast definition of an entrepreneur, nor of the requirements. "Typically, they are in their thirties, which is the age when we optimally combine energy with experience. That said, although youth is an important factor, because it's a time when we are less aware of risks, and when we are prepared to push ourselves to the limits or when we are not even aware of limits. Older people also have many qualities that are useful, particularly in terms of experience."
Güemes says that while there is no shortage of research about the ideal profile for an entrepreneur, there are countless exceptions to any rules. "There are people who have decided to become entrepreneurs because they have seen an opportunity; others because at a particular moment in their lives they have felt the need to do something for themselves, on their own, and who are now running large companies. Nobody is born with the genes or with the word entrepreneur written on their forehead. Being an entrepreneur means learning, and teaching; it's really a matter of attitude as much as aptitude."
If there is one hard and fast rule the experts agree on, it's that anybody trying to start their own business should choose an area that they already know and understand. "Either you have the necessary knowledge and experience, or you know how to manage that knowledge and take it to the marketplace. The most important thing is your vision. You have to ask yourself, what do I know that I can do," says Vinaixa.
Adding value to coffee or a cellphone
Starbucks offers more than just a cup of coffee; and an iPhone is more than a cellphone. So what is the secret of entrepreneurial success? "It lies in the well-known SWOT analysis: strengths, weaknesses, opportunities, threats, which consists of seeing these factors in your company. Not that this is by any means easy," explains Jordi Vinaixa of Madrid's ESADE business school, adding: "Although in reality, there are many more opportunities to generate value than we are aware of."
Juan José Güemes of IE Business School says that the key to success lies in innovation. "Entrepreneurs need to find their place, and to do that they have to do something better than anybody else is doing it; something that gives the customer more than they can currently find around them. You have to think of the client, who is after all the person who will buy your goods or services. You have to constantly ask yourself why somebody should pay money for what you are producing rather than what somebody else is producing or offering."
Güemes says that the underlying message that the business school teaches tomorrow's entrepreneurs is that they must constantly innovate.
"The first thing that we do is ask them to identify what they see as the major problems around them that are still not properly being addressed, or needs that are not being satisfied. The bigger the problem or the need, the bigger the business opportunity," Güemes argues. "And having identified the problem, you build a solution, a value proposition that really adds something, that resolves the problem. That can create a business opportunity, which we then have to evaluate on the basis that we fully understand the market; who it is we are addressing, with names and addresses; who we are really going to sell this to, to make sure that these people have an unsatisfied need, or one that isn't being properly met by the market at that moment; and where you can really make a proposal based on a superior product. If you can do that, you're ready to set up a business."