Rethinking Entrepreneurship Support

Innovation: Any new idea that has an effective and efficient implementation, to effect a change, of a system's process or device or product that can be applied for the improved result than previously applied. (Rosenberg, 2015)

Strategic Innovation: Creation of new markets and leaps in customer value and reshaping the existing markets to achieve value improvements for customers (Gebauer et al., 2012)

Startup Growth: Concept that focuses on the creation of high-growth ventures, distinct from small and medium enterprises (SMEs) in that they launch and operate in the formal sector, and depend on innovation to create/sustain a competitive edge in the marketplace. (KeNIA, 2022).

Innovation and entrepreneurship are heavily promoted by governments, development actors, and donors as solutions to job growth in Africa. M-pesa is usually touted as the gold standard, but hardly any startups hit this mark in growth and job creation.

Serious Startup Underperformance

The development sector spends $1 billion annually on entrepreneurial training through Entrepreneurship Support Organizations, ESOs, but the continent still lags in the number of viable startups. One program in Africa trained 53,000 youth across four countries. After two years, a study found a 0% increase in earnings and only a 2% increase in the likelihood of enhancing employment (McKenzie & Woodruff, 2023).

Additionally, investors in Africa feel that less than 5% of the ESOs are helping entrepreneurs build commercially viable businesses (Tchoumba et al., 2020). A survey of investment funds in Africa found that the majority also run their in-house accelerator programs, but only source 15% of their investment pipeline from their programs (Witt et al., 2023).

What is most concerning is that in the last five years, startups that had been hailed by ESOs as being successful have been shutting down across Africa (Jackson, 2023). Massive layoffs, decline in sales and eventual closures have been happening in Kenya despite startups having raised over $1 Billion in 2022 (Musau, 2022). Difficult market conditions, funding hitches, lack of adaptability in business models, and unsustainable value chains, particularly exposed during the COVID-19 pandemic, are some of the stipulated reasons for their failure (Mwangi, 2022).

Designing Programs that Improve Performance

Given the heavy promotion of startup innovation as a path to economic empowerment among youth, understanding its impact on startup growth is crucial. I'd like to propose 3 theoretical frameworks that can guide ESOs (a space I operate in) while they design their programs:

1. The Resource-Based View Theory

The first is inspired by Jay Barney's 1991 article, "Firm Resources and Sustained Competitive Advantage," which is seen as pivotal in the emergence of the resource-based view. He stated that for resources to hold potential as sources of sustainable competitive advantage, they should be valuable, rare, imperfectly imitable, and not substitutable, according to the VRIN criteria (Barney, 2013).

The resource-based view suggests that ESOs must design programs that help startups develop unique, firm-specific core competencies that will allow them to outperform competitors by doing things differently. This is particularly relevant to startups whose main competitive advantage is technology and Intellectual Property.

2. Dynamic Capabilities Theory

The second idea, the Dynamic Capability View, stresses the firm’s internal conditions: resources, routines, competencies, capabilities, and accumulated knowledge – as the most crucial factors in explaining the creation, maintenance, and renewal of its market position and competitive advantage.

The term is often used in the plural form,?dynamic capabilities, emphasizing that the ability to react adequately and timely to external changes requires a combination of multiple capabilities. ESOs' Innovation management programs need to be multi-faceted to ensure that startups consider business model innovation, business process innovation, value chain innovation, and technology innovation at the same time.

3. Disruptive Innovation Theory

My final suggestion is a little unusual but holds a lot of promise. Disruptive Innovation describes a process by which a product or service takes root in simple applications at the bottom of the market, by being less expensive and more accessible, and then relentlessly moves upmarket, eventually displacing incumbents. The proponent was Harvard Business School professor Clayton Christensen in the early 1990s. (Christensen, 2024)

Notably, Disruptive Innovations are not breakthrough technologies that make good products better; instead, they are innovations that make products and services more accessible and affordable, thereby making them available to a larger population. This is particularly important in the African context. The success of startups is attributed to disruptive innovation so ESOs wishing to emulate their success within their ecosystems should pursue a similar strategy.

In Conclusion

The necessity for innovation and adaptation in response to dynamic market conditions is no longer an elective strategy but an essential requirement for organizations aiming not merely to survive but thrive in an ever more competitive landscape. Strategic innovation management is the cornerstone of global competitiveness, serving as a powerful force for differentiation, value creation, and market leadership.

Companies globally that invest in innovation regularly outperform their peers. As exemplified by the top 50 companies in the 2023 Most Innovative Companies report, these organizations have surpassed the MSCI (Morgan Stanley Capital International) World Index regarding shareholder returns, highlighting the tangible financial benefits of sustained innovation efforts.

Startups that adopt strategic innovation management are better positioned to identify emerging opportunities, align their resources effectively, and realize their strategic goals.

ESOs must break traditional rules, take extreme measures, and embrace novel strategies for their startups to survive and prosper in volatile markets.