Kenneth Morse is the co-founder of 3Com Corporation, Aspen Technology Inc. and a number of other startup companies. He is also the former managing director of the Massachusetts Institute of Technology’s Entrepreneurship Center and currently holds the chair of Entrepreneurship, Innovation and Competitiveness at Delft University of Technology. Executive caught up with the business guru during a tour of the region promoting entrepreneurship to gather his insight on how governments and young business leaders can spur the creation of new and innovative enterprises.
- What steps should governments in the region take to promote entrepreneurship in their respective countries?
They need to become good customers, meaning that they quickly make decisions to buy, and then pay on time. Governments have a tough time making quick decisions because they are rewarded more for not making mistakes than for doing the right thing — and because the press love to jump on mistakes.
This makes them risk averse. In the Middle East, the worst thing about governments is that they don’t pay their suppliers on time. It is easy to kill start-up companies by being slow customers who pay late.
- But what about e-procurement models that we have seen some governments adopt in the region?
Do you think that is really happening? Every small company that I have found tells me that it is impossible to sell to governments. And the corruption problem compounds the challenge. They take a long time, then they want a bribe; you have to pay somebody off, so your profit is all lost in the bribe. Or, hopefully, the small company says it will not pay the bribe. Compare that with North America and parts of Northern Europe where governments like to buy from start-ups because they are more innovative. Of course, corporations need innovation and they love to buy from start-ups.
- The bureaucratic processes that are part and parcel of governments in this region don’t give new businesses that luxury and facilitate corruption inside of government itself. Have you seen any progress on this front?
I have seen both some very exciting start-up companies here and some sincere commitment to start-ups.
- In terms of public policy?
The leaders in the United Arab Emirates, Jordan and Lebanon know that the public sector has reached its limit in terms of its ability to create meaningful jobs. So they have turned to the private sector. Large companies in the private sector are growing and are so the small companies. It’s simple Aristotelian logic.
- We have seen an increase in the amount of aid being supplied to the region by the United States since President Barack Obama’s 2009 speech in Cairo. Could there really be a paradigm shift in the US’s strategic policy for the region, or is it more likely that this is a public relations stunt?
There is a paradigm shift in thinking for sure. For example, one of the proposals in [Obama’s] speech in Cairo on America’s relations with the Muslim world was to have a conference on entrepreneurship in Muslim Majority Countries.
- But these are just conferences. They may look good on paper but they don’t necessarily have effects on the ground.
Entrepreneurship is still a good thing for America to export to the world. It’s not controversial. However, I’m not sure how well implemented the new policy is.
- Why are you not sure of the implementation?
Well, not if they work it through the United States Agency for International Development (USAID). USAID is reluctant to pay any of their consultants more than $565 a day, and I don’t think [they] are going to be able to attract fantastic entrepreneurs at those rates.
- So you think there needs to be more funding?
The funding is there but they won’t spend the money because they are not willing to face up to the fact that [$565 a day] is a low sum.
- But does it have to be done through USAID?
There are competing forces in Washington but USAID claims that [the funds] should go through them — and they are brain-dead. Still, entrepreneurship is a message of hope and an export from the US, and there is plenty of interest in importing entrepreneurship.
- So where do we go from here?
There is a program that builds on all the current initiatives. It’s called the ‘10 by 20 program’ where each year 10 companies form a paragon [of companies] and commit to achieving $20 million in annual revenues within 5 years. This is an ambitions target; if you are not ambitious you need not apply.
The firms involved are given training and helped to access markets through the diaspora and other means. You were also talking about another model: public private partnership. The public sector could provide the money — it could be through the central bank — and the private sector would administer it because they [are more efficient], and then those companies that were in the program could take off like a rocket.
- But many governments are in debt and may not be willing to put up the capital.
The payback on the [similar] Quebec program took one year; after that it was tax revenue. It’s about job creation — you take people off unemployment and onto the payroll.
- When do you think young entrepreneurs should take the dive and start their own businesses?
The ambitious small and medium-sized enterprises of today are the big companies of tomorrow. I am not in favor of having kids start companies right out of school. They don’t know enough to achieve sustainable growth.
I am more a fan of having young people participate in business plan competitions to taste what entrepreneurship is about and then work for well managed, rapidly growing companies, where they learn how to sell, get a purchase order, how to move though an organization and how business processes work, and then start a company with a large team and a critical mass.
- Where do you see the greatest growth potential in the Middle East?
Women. Female entrepreneurs in the Middle East are [proportionally] the highest percentage in the world. I teach at Delft University (in Holland), where only one in 112 CEOs that I have taught during my tenure [are women]. In the Middle East it is 25 to 30 percent.
This is because entrepreneurship does not suffer from a ‘glass ceiling’. When there is no glass ceiling, you start your own company, you are the president and you are all set.
Women entrepreneurs in the Middle East are doing well for other reasons. They work harder, they are more dependable and the men tend to be lazier.
Who would you rather buy from? Someone with hustle, or someone who is complacent?
- Do you think this is a long-term trend?
I have observed it for seven years; I don’t know what you think long term is. It doesn’t seem to show any signs of letting up.
- If you could speak to policy makers in the region about entrepreneurship, what do you think would you say?
Promote ambition. Fix the bankruptcy laws. Become good customers.