Creating Jobs in the Post-Covid World

How building an entrepreneurship ecosystem could bring jobs and wealth to the community.

Prof. Rajesh Nair, Asia School of Business, Kuala Lumpur, Malaysia

What will the future look like after Covid-19?

The pandemic has revealed that the world’s economic and social infrastructures are not prepared to contend with the unprecedented crisis or looming recession. In the United States, the Small Business Administration expects half of the 30 million small businesses to close and lose 47 million jobs due to the pandemic, leaving 32% unemployment this year(1). The US is not alone, every other country is bracing for a similar challenge.

Per Okun’s law, for every 1% rise in the unemployment rate, the GDP, the revenue created by a nation, could drop by 2%. The expected rising unemployment would have a devastating effect on any state. This affects government spending, corporate profits, personal incomes, and the quality of life of the citizens. Every nation will be navigating these uncharted waters, facing severe crises, which some economists predict will last much longer than that of 2008(2).

Large and small corporations alike will struggle or fail due to declining customer consumption, turning areas that once had high commerce and a thriving job market into clusters of job-deserts. Businesses could take months or even years to recover from losses, deepening the cycle of unemployment, poverty, and breakdown of social structure.

Can We Bring Lost Jobs Back or Create New ones Anytime Soon?

How can corporations and governments help at this time? Most of the lost jobs will not return in the same form immediately after the virus is defeated. Corporations will not invest and hire until there is confidence in the market. On the other hand, governments could launch large infrastructure programs to create short-term jobs. Nations have already started announcing large stimulus packages to reignite the economy and employment. Typically, a large part of this stimulus goes to help failing corporations and fund unemployment benefits.

But can we also invest stimulus funds to create 'jobs that create jobs'?

How do we use the stimulus funds to create jobs that create jobs?

Innovative Entrepreneurs to the Rescue

Innovation Driven Entrepreneurs are a significant source of employment. They use creative approaches to solve existing or future problems faster, cheaper, and better with new tools and technologies. Companies like Uber and Airbnb solved age-old problems in creative ways with technology and minimum capital (they did not buy a million cars or hotel buildings), while producing extraordinary outcomes. Moreover, they created hundreds of millions of jobs while solving an existing problem and creating wealth for all the stakeholders.

MIT’s Bill Aulet and Fiona Murray made a strong distinction between a Small Medium Enterprise (SME) and an Innovation Driven Enterprise (IDE) (3). An SME is defined as a business with a local market and limited growth potential, like a restaurant. An IDE, on the other hand, can scale fast to provide the same service globally and grow significantly larger. While SMEs use local skills and resources, IDEs can reach around the world to hire talent. When SMEs show linear growth, IDEs often grow at an exponential scale creating a significantly larger number of high-value jobs. These better-paying jobs spawn more secondary jobs and supporting SMEs such as restaurants, dry cleaners, and taxi services. Both SMEs and IDEs take similar efforts to launch but with very different potential outcomes.

In this time of critical need for creating jobs, innovation-driven entrepreneurs are the catalysts we should seek to create. This breed of entrepreneurs, who are multi-disciplined critical-thinkers, looks for opportunities that can be scaled to reach customers far and wide. They work in close teams that are diverse in skills and culture. They are self-learners who are not afraid to learn from failures and build confidence to face future unknown challenges.

My experiments with university students demonstrate that innovation-driven entrepreneurs can be created through interventions that cultivate their mindset and skill set. The boot camp conducted in 2014 at Mar Baselios College of Engineering and Technology, Trivandrum, India, to teach these skills and attitudes successfully turned a third of the participants into first-time tech entrepreneurs. They inspired others to join them to build a thriving innovation and entrepreneurship ecosystem on campus. From this ecosystem emerged 21 ventures in a matter of four years (Fig. 2). All from a college that had one student startup in the previous twelve years since their inception. (Fig 3).

Build an Army of Entrepreneurs, Startups Will Follow

Joshua Lerner from HBS wrote that the majority of expensive entrepreneurship initiatives for building the next Silicon Valley in different regions in the world have failed (4). Current entrepreneurship programs primarily focus on creating startups. The problem with measuring success based on short-term outcomes, such as the number of startups created, funds raised, and company valuation is that this focuses more on building startups for today and not on creating and training entrepreneurs of tomorrow. In this top-down approach, the young aspiring entrepreneur who is the engine of a startup is expected to perform miracles in her first attempt while essentially learning to walk. Such programs do not work to full potential because they do not start at the beginning of the feed cycle by creating aspiring entrepreneurs. In other words, the focus of these programs is on creating hit songs, not nurturing singers.

 The entrepreneur’s primary quality is a mindset of:

●     vision, where she sees problems as opportunities in disguise

●     drive, to bring together resources she doesn’t possess to gainfully execute on her vision

●     empathy, to understand her customer’s challenge deeper to create the right solution.

 Entrepreneurship is also a skill set of:

●     system-thinking, the ability to break down a problem, understand the behavior of the parts

●     problem-solving, of creating a method to address the problem that is acceptable to all the stakeholders

●     value-capturing, of making an impact while creating wealth.

 Can both mindset and entrepreneurship skills be taught? My experiments show that entrepreneurs can be forged from the average population (5). It may take several cycles to learn and practice these qualities - not unlike learning anything else. But, yes, it can be taught, and it is easier to learn at a younger age.

The stimulus funds for rebuilding after the pandemic should be seriously considered for creating entrepreneurs from the bottom-up who create IDEs that change communities.

Building Ecosystems for Innovation and Entrepreneurship

To paraphrase the proverb, it takes an ecosystem to raise future innovators and entrepreneurs.

The conventional top-down concept of an ecosystem consists of supportive players such as active government agencies, industries that demand innovation, universities, and entrepreneurs (5). The bottom-up ecosystem suggested here consists of:

●     Community: Made of similar thinkers, makers, entrepreneurs, mentors, and peers

●     Resources: Access to equipment, materials, talent, learning tools

●     Space: A safe place to meet, exchange ideas freely, and work on projects in teams

These bottom-up ecosystems are robust because they are created and run by inspired players who are also participants and beneficiaries.

While the top-down approach creates structures, policies, and funds required to build companies, the bottom-up approach is trying to transform individuals by building skills and confidence required to create entrepreneurs.

Even though both top-down and bottom-up approaches are equally required to build a buzzing ecosystem, the current process consists largely of the top-down one, which leads to a limited number of aspiring entrepreneurs entering the system.

Even though both top-down and bottom-up approaches are equally required to build a buzzing ecosystem, the current process consists largely of the top-down one, which leads to a limited number of aspiring entrepreneurs entering the system. The bottom-up approach can significantly amplify this number and help create a constant feedstock of aspiring entrepreneurs for the next phase.

We have created small makerlabs in communities for youth to practice the design and fabrication of technology products. After learning the basics of product creation, the youth seize opportunities to build products to solve problems faced by their communities. Subsequently, they realize the potential value of such products and learn to monetize them. For an individual to go through these experiences, she needs a nurturing environment and mentors, or an ecosystem. Several of these new entrepreneurs may fail, but the ecosystem acts as the support system to help them recover and reboot. 

 Bottom-up innovation and entrepreneurship ecosystems are cheaper to build and sustain. Experiments of building entrepreneurship ecosystems, like the one at Mar Baselios College in Trivandrum, have already shown significant results (6).

 Conclusion

Both the bottom-up and top-down initiatives are essential. While one builds entrepreneurs, the other helps build ventures.

A bottom-up approach that trains youth from communities in creativity, technology, problem-solving, and entrepreneurship builds local innovation and entrepreneurship ecosystems.

The social upheaval that the Covid-19 pandemic leaves in its wake will last well beyond the current pandemic. Unemployment will emerge as the prime factor that hinders rebuilding, leading to poverty and social unrest. The economic stimulus will see greater payback by going beyond the current short-term objectives to build sustainable, high-value job creation through innovation-driven entrepreneurship. But how?

1. Create Bottom-Up Ecosystems: Train youth from small local communities in creativity, technology, problem-solving, and value capturing. This sets the foundation for the creation of an ecosystem for innovation and entrepreneurship. We have built and sustained such ecosystems with meager investment (7) that have shown a broad impact on individuals and the community. Similar initiatives will be very effective in the post-Covid rebuilding plans.
2. Scale across Communities: Create bottom-up ecosystems in as many rural and urban communities to expand the economic and cultural impact across regions, and nations. While a significant number of aspiring youth may take up entrepreneurship and innovation paths, all of them will build new skills through increased training in creativity, technology, and problem-solving skills to make them more employable.
3. Link with Existing Entrepreneurship Programs: Both the bottom-up and top-down initiatives are essential. While one builds entrepreneurs, the other helps build ventures. Connect the local ecosystem with existing top-down initiatives bringing together investors, industry, universities, and government to create innovation-driven businesses that will be required in post-pandemic efforts.    

An army of innovators and entrepreneurs can be created cost-effectively. They can create jobs, generate wealth in the communities, and help rebuild economies. This is an essential part of any post Covid recovery plan.

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Rajesh Nair, Professor of Practice in Innovation and Entrepreneurship at Asia School of Business, Kuala Lumpur, is an engineer, product designer, and entrepreneur who conducts innovation and entrepreneurship boot camps at schools, universities, and corporations to introduce them to creativity, critical-thinking, problem-solving, and entrepreneurship.

References:

1. Jeff Cox, “Coronavirus job losses could total 47 million, unemployment rate may hit 32%, Fed estimates” CNBC

2. Kenneth Rogoff. “Mapping the COVID-19 Recession”, Project Syndicate

3. Bill Aulet and Fiona Murray, “A TALE OF TWO ENTREPRENEURS: Understanding Differences in the Types of Entrepreneurship in the Economy”, The Ewing Marion Kauffman Foundation, 2013

4. J. Lerner, “Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed--and What to Do About It”, 2009

5. P. Budden, F. Murray, “MIT’s Stakeholder Framework for Building & Accelerating Innovation Ecosystems”, April 2019, Published by MIT’s Laboratory for Innovation Science & Policy

6. R Nair, W Smit, J Enrique Corpus, “The Ripple Effect of Maker-Training Impact: A Longitudinal Study among Young Latent Entrepreneurs in Rural India” Fab 15 Conference, 2019

7. R Nair, J Corpus, “Incubating Future Innovators and Entrepreneurs”, Asian Development Outlook 2020 (ADB)