“What it Takes to Create an Entrepreneurial Region” Thomas S. Lyons, Ph.D. Director, Center for Research on Entrepreneurship and Enterprise Development.

““What it Takes to Create an What it Takes to Create an Entrepreneurial Region”Entrepreneurial Region”

Thomas S. Lyons, Ph.D.

Director, Center for Research on Entrepreneurship and Enterprise Development (CREED)

University of Louisville

© Thomas S. Lyons, 2005

Characteristics of Characteristics of Entrepreneurial RegionsEntrepreneurial Regions

Possess a critical mass of entrepreneurs who are actively engaged in capturing new market opportunities

A group of entrepreneurs constitutes a distinct and recognizable community within the region

The region as a whole is entrepreneurial, not just some of its parts

© Thomas S. Lyons

Prescriptions for Creating Prescriptions for Creating Entrepreneurial RegionsEntrepreneurial Regions

Build Social CapitalDevelop Human CapitalBuild an “Innovative

Infrastructure”

© Thomas S. Lyons, 2005

Our chief approach, to date, Our chief approach, to date, for creating entrepreneurial for creating entrepreneurial regions is something called regions is something called

Enterprise DevelopmentEnterprise Development

Enterprise Development…Enterprise Development…

Refers to programs whose mission is to assist entrepreneurs in forming and

growing new ventures

Enterprise development has four Enterprise development has four measurable objectives:measurable objectives:

To increase the rate of new business formation To increase the rate of survival and success of new

enterprises To increase the rate of development of entrepreneurs

and their new enterprises To increase the efficiency of the dissolution process if

a firm fails

Why Enterprise Development’sWhy Enterprise Development’sachievements are so limitedachievements are so limited

Activities are tool driven, not needs focused. Activities are fragmented and categorical. There is too little focus on execution. The learning cycle is broken. The focus is placed on the business, not the entrepreneur. There is a missing function – responsibility for the

community’s supply of entrepreneurs. Funders, not clients, drive the operations. The impact is not scalable.

Five Elements of a Strategy for Five Elements of a Strategy for Building Entrepreneurial Building Entrepreneurial

CommunitiesCommunities

Take a systems approachCustomize the system for the communityFocus on developing entrepreneursDevelop new roles, skills, and toolsOperate as a “transformation business”

The Mission of an Enterprise The Mission of an Enterprise Development Transformation Development Transformation

Business…Business…

To develop a supply of highly skilled entrepreneurs that are capable of building successful companies in sufficient numbers to transform the economy of the region.

© Thomas S. Lyons, 2005

We have developed a We have developed a newnew approach to approach to enterprise development that can effectively, enterprise development that can effectively,

efficiently, and equitably develop efficiently, and equitably develop entrepreneurial talent as well as build entrepreneurial talent as well as build

successful companies on a large-scale and a successful companies on a large-scale and a sustainable basis.sustainable basis.

We call it the Entrepreneurial League System®

(ELS)

The successful implementation of The successful implementation of the Entrepreneurial League Systemthe Entrepreneurial League System®®

in a region involves:in a region involves:1. The creation of a community of entrepreneurs and a farm system

for continuously developing entrepreneurial talent;

2. The development of a service provider system to meet the technical and financial assistance needs of those entrepreneurs; and

3. The development of community or civic leaders capable of building an entrepreneurial community or region

Entrepreneur Development Entrepreneur Development SubsystemSubsystem

Creating a system for developing Creating a system for developing entrepreneurs is essential: entrepreneurs is essential:

No organization performs this function in our communities or region – it is missing!

Service providers need “deal” flow – a pipeline of qualified customers

Developing entrepreneurs is not the responsibility of service providers !!!!

There is a process of getting entrepreneurs ready to use technical assistance – i.e., there is a process for creating demand

The ability to use technical and financial assistance is a function of entrepreneurs’ skill and level of development

The four dimensions of entrepreneurial The four dimensions of entrepreneurial skill:skill:

Technical Skills – ability to perform key operations of the business

Managerial Skills – ability to organize and manage the operations

Entrepreneurial Skills – ability to identify market opportunities and create solutions

Personal Maturity Skills – self-awareness, accountability, emotional and creative

development

The Entrepreneurial Leagues:The Entrepreneurial Leagues:

Technical Managerial Entrepre. Personal

Maturity

Major

League:

Outstand./

Exceptional

Outstanding Outstanding Outstanding

AAA: High High High High

AA: High Medium Medium Medium

A: High/

Medium

Low Low Low

Rookie Low/No Low/No Low/No Low/No

Developing the region’s pipeline of Developing the region’s pipeline of entrepreneurs and enterprises involves entrepreneurs and enterprises involves

3 major activities or strategies:3 major activities or strategies:

1. Performance Coaching and Success Teams

2. Talent Scouting and Pre-venture activities

3. Opportunity Scouts and Market Development Service

The ELS The ELS ®® Coaching System: Coaching System:

• Classifies entrepreneurs into different “league” levels according to their skill in starting and operating a new business

• Clusters entrepreneurs into Success Teams

• Establishes individualized “game plans”

• Provides entrepreneurs with performance coaches who work with them on a one-on-one basis and as a group

• Helps them focus on execution

• Facilitates their transformation as entrepreneurs up the ladder by helping them develop their skills

Talent Scouts and Pre-venture Talent Scouts and Pre-venture ActivitiesActivities

Recruiting aspiring and talented individuals to become entrepreneurs and participate in the ELS – just like in sports

Orienting them to entrepreneurship and the ELS Helping them with the pre-venture activities of identifying a

market opportunity, developing an offering and preparing to launch a venture

Opportunity Scouting and the Market Opportunity Scouting and the Market Development Function ActivitiesDevelopment Function Activities

Opportunity scouts are responsible for identifying market opportunities that can be capitalized on by local entrepreneurs (multiple sources)

Developing and maintaining an “opportunity register” Matching opportunities to potential entrepreneurs with

the appropriate skill set Structuring the “deal” Pursuing opportunities for strategic alliance among

startups to capture new business as a group

The ELS benefits entrepreneurs by The ELS benefits entrepreneurs by providing:providing:

A map to know what fundamentals of success to focus on and when (i.e., way of setting priorities and managing time)

A structure of support and disciplined performance A set of reference points by which to benchmark their

performance and to expand their vision about other possibilities

Financial and technical assistance that is integrated and customized according to level of skill

A way of developing skills and a ladder of progression

Service Provision SubsystemService Provision Subsystem

The ideal service provider The ideal service provider systemsystem is is one that…one that…

Provides the entrepreneurs in our communities or regions with the right kind of help (i.e., technical and financial assistance) at the right time and at the right price.

How do we do that?How do we do that?

1. By describing and comparing who does what

2. By identifying and filling the service gaps

3. By improving the performance of individual service providers and the system as a whole

4. By effectively evaluating performance

League Level Targeted League Level Targeted by Service Providersby Service Providers

Entrepreneurial League Level Type of Enterprise Development Assistance Providers

Majors Venture capitalists, professional consulting practices, investment bankers, etc.

AAA Angel investors, emerging business consulting practices, university tech transfer offices

AA Manufacturing extension programs, small business development centers, small specialized venture funds, high technology incubation programs, etc.

A Microenterprise programs, small business development centers, business incubation programs, etc.

Rookie Microenterprise programs, youth entrepreneurship programs, etc.

TransformingTransforming Service Providers into a Service Providers into a System: Managing the change processSystem: Managing the change process

Requires a neutral, 3rd party facilitator Motivation to participate – external as well as internal Development of a common language and diagnostic

process Forming relationships of trust Frequent interaction Opportunities to learn and improve performance

The ELS benefits service The ELS benefits service providers by:providers by:

Creating demand for services and improving utilization Linking clients to providers and providing them with

qualified, pre-screened clients Facilitating access on a proactive vs. reactive basis Linking different kinds of services for synergistic effect Enabling services to be delivered more cost-effectively Fostering coordination among service providers

There must be a dynamic balance There must be a dynamic balance between two subsystems:between two subsystems:

One for developing One for developing entrepreneursentrepreneurs

One for providing One for providing servicesservices

The ELS benefits the community by:The ELS benefits the community by:

Enabling a view of the economic community as a whole, not just parts

Focusing on all levels/kinds of entrepreneurs - neither “trickle-up,” nor “trickle-down”

Connects all rungs of the skill development ladder together, so that movement is possible

Produces a continuous stream of new companies and business leaders

Operates on a large enough scale to have impact

Regional Entrepreneurial League SystemRegional Entrepreneurial League System®® Performance Scorecard - 2010 Performance Scorecard - 2010

League Level:

No. of Participating Companies

Change in

Particip-ation

Annual Growth Rate (in revenue)

Annual Growth

Rate (in

jobs)

Profitability (Net Profit Margin)

Growth in Profitability

Growth in No. of

Customers

Change in Skill Level

Special Outcomes

Majors

25 10% 300% 200% 15% 55% 150% 50% Patents, JVs, new CEO

AAA

45 15% 200% 125% 12% 35% 120% 45% Global sales, merger

AA

75 25% 100% 75% 5% 45% 100% 35% Certified supplier

A

95 35% 50% 35% 3% 65% 75% 35% Franchises granted

Rookies

60 20% 25% 10% 0% 0% 55% 0% Rookie of the year

Total

300 Weighted Average

Weighted Average

Weighted Average

Weighted Average

Weighted Average

Weighted Average

Weighted Average

““Take Home” PointsTake Home” PointsChief objective of the ELS is the development

of entrepreneursEntrepreneurs are made, not bornDeveloping entrepreneurs skills involves a

transformationInterventions should be practices-basedBuilding entrepreneurial communities involves

everyone

Contact Information:Contact Information:

Thomas S. Lyons, Ph.D.

Professor and Director

Center for Research on Entrepreneurship and Enterprise Development (CREED)

University of Louisville

426 W. Bloom St.

Louisville, KY 40208

502-852-8256

[email protected]

http://creed.louisville.edu