The Makings of a Successful Entrepreneur
By Amir Gal-Or
What does it take to be a successful entrepreneur? And, whatever it takes, are these skills ones that we can learn? Or do we, quite simply, need to be born with them?
As a background, it is important to remember, that entrepreneurialism in China is a relatively new concept, born from the economic reforms introduced in the country over the past 33 years. Until the late 1970’s, there were a small number of entrepreneurs in China. And, as we all know, the economic reforms introduced in 1978 changed all of this. In the late 1970s and early 1980s, the government introduced de-collectivization of agriculture, the opening up of the country to foreign investment, and gave permission to would be entrepreneurs to open start up businesses. Then, in the late 1980s and 1990s, the Government took even greater steps including privatization, the contracting out of state-owned industry and the lifting of price controls, protectionist policies, and regulations, although state monopolies in sectors such as banking and petroleum remained. At the end of the 1980’s, China established special economic zones, including the famous Shanghai Pudong zone. According to the literature, the private sector grew remarkably, accounting for as much as 70 percent of China’s GDP by 2005.
As reported by Xinhua, the 11th Five-Year Plan period (2006-2010), saw China’s economy expand at an annual average of 11.2 percent despite global economic turmoil. And, on April 20, 2011, Chinese Premier Wen Jiabao detailed key areas for deepening reforms in the country's economic system, all part of the 12th Five-Year Plan (2011-2015). These reforms include balancing government with market, economic growth with social progress, deepening reforms while maintaining stability, and addressing current challenges in improving systems and mechanisms. More specifically, the government plans to turn state-owned enterprises into stockholding corporations, and formulate open and transparent market access criteria and supporting policies for non-government investment.
In addition to the economic reforms over the years that have made entrepreneurialism possible in China, it is also necessary to consider that there are different types of entrepreneurs. And that perhaps these different types require different types of skills sets –some that can be learned, others that are innate. Naturally, categories differ from country to country, depending on political, economic and social structure and of course are defined differently depending on the source. Literature pertaining to entrepreneurs in China is no different.
Take for example the following: in a lecture called “The Chinese Economic Reform and Chinese Entrepreneurship” delivered at a Jornada d’Economia symposium in 2005, Vicky Hu, then president of HD Biosciences in Shanghai and CEO of China Capital Investment Groups (CCIG), argued that Chinese entrepreneurs come from four types of companies: state-owned companies, former state-owned companies turned into stock companies, private companies and foreign fund companies or joint ventures.
Yasheng Huang, professor of international management, who holds an international program professorship in Chinese economy and business at MIT’s Sloan School of Management, approaches the issue differently. In an article in the World Economic Review, he writes that there are two types of entrepreneurship in China, catch-up entrepreneurship and frontier entrepreneurship. The former copies that invented by others and recreates at a competitive cost. Huang argues that the majority of Chinese entrepreneurs fall under this category, which is all about job creation.
Frontier entrepreneurship, he defines not as replicative, but innovative and inventive, and explains is more about creating breakthroughs in science and technology. “Frontier entrepreneurs….need a multi-tiered financing structure (early stage venture capital to late stage public market financing); they constantly need fertile ideas from multiple sources; they need the freedom of expression to state their views and make their cases.”
I tend to agree with Professor Huang. I also believe that these categories can be applied not only to China, but universally. I also think that the skills associated with catch up entrepreneurs, or what I would classify as those working in a “structured” environment, can be learned. This type of entrepreneur has generally worked in an industry for a decade or more and has the experience and the relationships to reinvent an existing product for an existing market. Other contributory factors to potential success include the nature of the market, the level of innovation needed and how much one needs to rely on others. However, the stronger the entrepreneur’s network and experience, the greater the chances are to succeed.
In comparison, frontier entrepreneurs, or those who work in what I would call an “unstructured” environment, push the limits. They are the risk takers who ride the wave of new regulations to create new technology that creates new markets. It’s about character. They thrive in operating in a less structured or completely unstructured market. They have an abundance of confidence, make assumptions and exercise a high level of creativity and a high degree of flexibility in order to achieve. In my opinion, these are traits that one either has or does not have. These you are born with.
The story of Israeli company ICQ is an excellent example of entrepreneurialism originating from an “unstructured” environment.
ICQ is an Internet chat program founded by Yair Goldfinger, Sefi Vigiser, Amnon Amir, Arik Vardi, and Arik's father Yossi Vardi. As described in Start-Up Nation: The Story of Israel’s Economic Miracle by Dan Senor and Saul Singer, Vardi is synonymous with the world of Israeli Internet start-ups and is credited with helping to rebuild Israel’s Internet sector from the ashes of the global technology market crash of 2000. The book also describes ICQ, a play on the words “I seek you”, as one of a handful of companies that transformed technology forever, just like Netscape, Google, Apple, Microsoft and Intel.
ICQ was introduced in November 1996 and backed with seed funding by the senior Vardi. What the “guys”, all in their early 20’s realized, was that although everyone was logging onto the Internet, there wasn’t any way for everyone to instantly connect with each other. ICQ was the first program to allow Windows users to communicate with one another live. As Senor and Singer detail in their book, America Online had also invented its own chat program, but this was only available to their subscribers. ICQ, which was available to just about all users and free of charge, spread much faster. By the end of 1999, ICQ had a total of 50 million registered users, making it the largest international online service and the most downloaded program in the history of CNET.com, with 230 million downloads. AOL bought the company on June 8, 1998 for $407 million in cash. According to present day owners Time Warner, today, ICQ has over 100 million accounts registered.
The founders of ICQ were young men when they started, and didn’t have much, if any, experience in their chosen industry. They were adventurers willing to take a risk. They worked in an unstructured environment, sailed unchartered waters, and in doing so created a brand new space and a brand new market that revolutionized communication. These gentlemen were clever, ambitious, fiercely dedicated to their work and focused, all innate qualities- you either have them or you don’t.
Vicky Hu said in her symposium address that “Chinese entrepreneurs are courageous and resolute and they adore their work. Most of them see entrepreneurship as a life-long responsibility and a pleasure….Chinese entrepreneurs are … eager to learn. They learn from experience and they apply management innovation and technological innovations.”
I think she is right. I also think these are universal traits of entrepreneurs that if given the proper financial backing and the environment to explore, be the environment structured or unstructured, have the potential to achieve greatness, assuming the entrepreneur is highly creative, persistent, and has the ability to except fast change- all essential qualities.
In words we all know and which were well articulated by the great Chinese statesman Deng Xiaoping, one of the architects of China’s economic reforms in the 1970’s, “be the cat white or be the cat black, it is the clever cat that will catch the mouse.”
