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Entrepreneurship and the corporate challenge Part 1

​It is accepted worldwide that entrepreneurship and SMMEs have an important role to play in the creation of jobs and wealth and in bridging the gap between the rich and the poor.  South Africa’s Gini coefficient, a measure of the gap between the rich (‘haves’) and the poor (‘have-nots’) counts among the highest in the world and it seems that the gap is still increasing. According to the well-known Global Entrepreneurship Monitor (GEM) reports, South Africa is not performing well in the arena of promoting entrepreneurial activity and SMMEs.  This does not mean that nothing is being done in this area, but whatever is being done is not enough and not having the expected impact. It is as if there is still an important ‘missing link’ to be found in the search for a more effective solution to this challenge.

When analysing the situation, it seems that potential and emerging entrepreneurs in South Africa do have fairly good access to training and support services and even financial support (funding). However, from my vantage point in the field of entrepreneurship and SMME training and support, it has become clear to me that many promising entrepreneurs find it hard to get access to really feasible and sustainable business opportunities. They are simply ‘crunched out’ by the super economic forces of the corporate environment. This raises the question about how this ‘gap’ can be addressed effectively and whether the responsibility to create more SMMEs should be left to potential entrepreneurs and entrepreneur support programmes alone, or whether corporates should play a more active role in this?

In searching for an answer to this intriguing question, I would like to refer you to an article published some time ago in the Harvard Business Review (Jan-Feb 2011) by Michael Porter and Mark Kramer under the title Creating shared value. How to reinvent capitalism and unleash a wave of innovation and growth.

Porter and Kramer mention that although capitalism is viewed as an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs and building wealth, business has been increasingly criticised for not being able to solve the socioeconomic challenges of modern society. Companies are widely perceived to be prospering at the expense of the broader community.  As a matter of fact, in recent years business is viewed as a major cause of social, environmental and economic problems. Added to this governments and civil society have often exacerbated the problem by attempting to address social weaknesses at the expense of business.

What is needed is to redefine the purpose of companies away from profit per se towards the creation of shared value. This, however, may not take place very easily as it seems that most companies themselves are trapped in an outdated approach to value creation that was vested over a long period of time.  Many companies tend to view value creation very narrowly, focusing on optimising short-term financial performance while ignoring the broader impact their ‘successes’ have on the socioeconomic landscape and the distress they cause to the communities in which they produce and sell.  How else could companies think that by simply shifting activities to locations with ever lower wages was a ‘sustainable solution’ to the competitive challenges of the modern economic landscape?

According to Porter and Kramer, companies and their leaders need to take the lead in bringing business and society back together.  This will require some strong thought leadership among our business leaders.  In this regard, companies will need to move out of the paradigm of ‘social responsibility’ that they are stuck in.  Businesses need to find a way to reconnect company success with social progress.  The solution lies in the underlying principle of shared value.  Shared value is not social responsibility, philanthropy or even sustainability.  It is a new way to achieve economic success.  It does not lie in the margin of what companies do, but at the centre.  We believe that this approach can give rise to the next major transformation of business thinking.

In the next article I will explain in more detail how Porter and Kramer define this new wave of thinking and how it can be ignited and driven.

De Wet Schoeman heads up the Centre for Applied Entrepreneurship.

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