Entrepreneurship in the Middle East: more risk-taking required
Source: Delta Partners , Author: Posted by BI-ME staff
Posted: Tue June 12, 2012 12:18 pm

UAE. Mr. Philip Anderson, a professor of Entrepreneurship at INSEAD, shares his views with Dalius Budvytis from Delta Partners about entrepreneurship in the Middle East and in the space of Telecoms, Media and Technology in particular.

Mr. Anderson (“PA”) was named “Best Professor in Entrepreneurship” by CMO Asia’s Best B-School Awards 2010 and has extensive experience consulting and lecturing within Middle East for companies such the Abu Dhabi Investment Authority, the Abu Dhabi Crown Prince’s Court (Diwan), the Abu Dhabi Critical National Infrastructure Authority, the Executive Office of the Government of Dubai, the UAE Federal Government, etc.

DB: Philip, you have been in the entrepreneurship field for more than 25 years. How has entrepreneurship evolved during that time, globally and in Arab world in particular?

PA: Globally, the Internet has had huge impact. Literally millions of people, who could never have achieved enough reach and scope to launch a business before the emergence of the Web, have become successful (or in many cases unsuccessful) entrepreneurs. The Internet has enabled an explosion of creative business models as well as lifestyles – we have seen people lose faith in the lifetime corporate employment model, so more and more entrepreneurial businesses are able to attract really high-powered management.

In the Arab world, all those trends are there but to perhaps a lesser degree. It is very important in Arab societies for someone to be well-connected in order to launch a business, and social capital is slower to change. The demographic shift in the Arab world over these years has meant that we see more young entrepreneurs than before. Also, entrepreneurs now are often much better connected internationally, willing and able to export and to use both vendors and channels from foreign countries much sooner than would have been before.

DB: Your experiences in the Middle East are especially extensive. What do you observe as the characteristics of entrepreneurship in the region, and where do you think the opportunities are?

PA: Business in the UAE and the region is still based on a complex web of social relationships. “Know-who” remains the single most important asset an entrepreneur needs, as is the case in many Asian societies. The most successful entrepreneurs tend to do two things: leverage the local ecosystem and exploit arbitrage opportunities.

Leveraging the local ecosystem means taking advantage of the world-class industries that are here, partnering, providing services for them, and being their distribution channels. The region has many important players in sectors such as energy, financial services and logistics, and becoming part of these ecosystems provides a lot of opportunity.

By exploiting arbitrage opportunities, I mean connecting goods and people in order to create value. Bringing in new services or business models or partners that have already been successful abroad is one way to do that. Taking advantage of changes in government regulations and policies is another. Building new global supply chains that deliver better results at lower costs is another.

DB: What do you think are the main hurdles to entrepreneurs in the Middle East?

PA: Historically, the Middle East has been a place where trust is scarce and is earned slowly. It is also a place where investors have historically demanded high short-term returns because they are too accustomed to being cheated or to having circumstances change rapidly.

Getting the first ten customers is difficult for people who don’t have a lot of social capital. Government approval is often important and requires connections. Finding patient capital that is willing to tolerate some early setbacks can be very difficult.

Finally, it is exceptionally difficult for women to become entrepreneurs in more conservative societies — even if they have great ideas and skills, they cannot start businesses if their families will not let them travel abroad or if their families do not wish them to become recognised public figures.

DB: What do you see as the main opportunities in the space of Telecom, Media and Technology, globally and in the Middle East? What new, entrepreneurial initiatives would be the most beneficial to large Middle Eastern Telecoms, such as Etisalat, Zain, Saudi Telecom, Qatar Telecom, etc.?

PA: I think the two biggest opportunities result from the complete reconstruction of the media space on the one hand, and on our ability to use telecommunications to deliver what people want just-in-time on the other hand.

Newspapers and magazines are going out of business, but people want more information and entertainment than ever. Cable and broadcast TV are losing their hold, and people don’t want to be tethered to a specific device at a specific time anyway. The big challenge is not innovative technology or offerings; it is finding the right business models. Entrepreneurs who discover them will be exceptionally successful.

Larger Middle East Telecom organisations are correctly optimised to provide reliable mass service. They are not the organisational form you would pick if you wanted to run an online business with a novel business models. They need to become very good at spawning separate entrepreneurial initiatives in separate organisations that are deliberately configured to do what the larger telecom organization itself is not organised to do well.

They can very profitably benefit from the explosion of online services that will emerge, but need to become great at corporate entrepreneurship and at business development — finding and sponsoring promising entrepreneurial companies that will drive telecom traffic and usage as they succeed.

DB: What are tangible, practical priorities for market participants – entrepreneurs, governments, businesses, investors, etc. – to promote entrepreneurship in the Middle East?

PA: The single most important thing is to promote risk-taking. The financial and social penalties for failure are so high that too many great opportunities are not pursued. The second is to find ways to develop entrepreneurial talent. The best way to learn entrepreneurial skills is at the right hand of an entrepreneur–schools don’t teach those skills, we make you ready to work with an entrepreneur so you get the most out of the experience.

DB: Philip, it’s been a great pleasure to blog for you, we will definitely stay in touch for further chats. Many thanks.

PA: INSEAD is really delighted to contribute to the entrepreneurial growth of this region. We have a campus in Abu Dhabi, and that means we are committed to contributing to the region every day, with the help of alumni such as you.

Notes: Additional coverage of Delta Partners and INSEAD can be found at the end of June on INSEAD Knowledge website - http://knowledge.insead.edu.

Dalius Budvytis is a vice president with Delta Partners Corporate Finance practice in Dubai. He can be reached on dtb@deltapartnersgroup.com



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