With the advent of Prime Minister Turnbull, everyone is talking about innovation and startups – and that has to be good thing. But now we need to go a step further and put the systems in place to support budding entrepreneurs, writes Chris Styles.
OPINION: With the advent of Prime Minister Turnbull, everyone seems to be talking about innovation and startups - and that has to be good thing. But now we need to go a step further and put the systems in place to support budding entrepreneurs, writes Chris Styles.
At age nine, my daughter and a friend set up a lemonade stand outside our house in Bondi after the annual City to Surf. They did well. And the customers were happy.
This short-lived venture involved seeing an opportunity, constructing a business model, putting the resources in place, developing a value proposition, and executing. It also required teamwork, planning, the ability to motivate and communicate, and a degree of resilience when things didn't quite go to plan.
With the advent of Prime Minister Turnbull, everyone seems to be talking about innovation and startups. That has to be good thing. Entrepreneurial activity creates jobs, wealth, and new ideas.
The key questions are how to create an entrepreneurial culture, an environment that encourages entrepreneurial activity and investment, and opportunities for as many people as possible to experience the essence of a free market economy - starting a business.
Creating a culture of innovation has always been a central issue. In the 1980s being an "entrepreneur" was associated with Christopher Skase, Alan Bond, Laurie Connell and the like. Not particularly great role models. However, one of the big issues now has been highlighted recently by US ambassador John Berry in a speech at the UNSW Innovation summit - fear of failure.
In the US, multiple attempts at start-ups are worn as a badge of honour, and are almost a prerequisite to attract investors. In Australia, not getting a new venture off the ground is too often seen as a failure rather than a learning experience that increases the chances of success next time around.
The 2014 Global Entrepreneurship Monitor reported fear of failure in the US as being 30% – that is 30% of 18-64 year olds not involved in an entrepreneurial venture in the US would be prevented from starting a business due to a fear that it might fail. In Australia the level was 39%, meaning we are almost a third more scared than those in the US. In China the level was 34%.
The challenge is how can we instil and reward the same "have a go" attitude we have in sport.
Freelancer.com chief executive Matt Barrie has called it a national emergency and called for action to prevent the accelerating brain drain because of lack of support for industries like tech, biotech, software development and advanced manufacturing. On the other side of the coin, Atlassian co-founder Mike Cannon-Brookes said recently that Australian technology businesses should import expertise from Silicon Valley. This should serve as a wake-up call for all of us.
Creating an environment that encourages entrepreneurship and investment needs to be more straightforward. Abolishing capital gains tax on start-ups is a start. But there are many ideas that should be on the table - and on the agenda.
For example, should we replace the Export Market Development Grant with a "no tax" on international earnings to assist cash flow and accelerate overseas expansion? Incentives are needed to encourage venture capitalists to put money into start-ups, there should be funding pools for young entrepreneurs, less onerous red tape for businesses in their early stages of development, and ecosystems that bring together entrepreneurs, mentors, investors and leading edge research.
Universities can play a central role – innovation centres, pitch competitions, support for student and staff startups, and alumni as mentors and investors.
The new Assistant Minister for Innovation, Wyatt Roy, should work with universities to put in place initiatives and incentives – and remove barriers – to build and sustain these critical ecosystems.
Also, creating opportunities for people at all stages of their careers to get involved in a start-up would help create an entrepreneurial culture and create the necessary ecosystems. It would also result in valuable learning experiences. Whether someone intends to be an entrepreneur and start their own company, or join an established organisation, the experience of working in a start-up is something that can benefit all.
We see this to some extent in our education system. Some schools have market days where students have to set up and run a market stall. Universities run "pitch" competitions so that students can pitch a business idea – with budget forecasts, competitor evaluation and marketing plans - to business people who have managed start-ups or who raise money from start-up investors.
This needs to be done at scale to provide opportunities for a greater number of budding entrepreneurs.
At UNSW Business School we are trialling "virtual internships" for postgraduate students to take part in a start-up in Asia through an online platform. The Orion project gives students the chance to "road test" a career in Asia - without leaving Sydney. More than 100 students signed up within days of the trial's launch. Other business schools should be offering their own students similar opportunities. It could be a low cost, high reward part of the student experience.
What if large organisations routinely offered their employees secondments to new businesses? The start-ups benefit from extra pairs of hands, and experience and capabilities they don't have, while the seconding organisation and the employee benefit from seeing a business holistically, being exposed to innovative ideas, and experiencing new, more nimble ways of operating that don't get bogged down in managerial bureaucracy.
The solution to an ageing population may not just be about finding jobs for older Australians, but also about equipping people of all ages with the ability to create jobs through starting new businesses.
While some talk of the need to create a generation of entrepreneurs, I see the challenge differently. Many who are embarking on their careers already get it. From those who set up lemonade stands early on in life, to young graduates in professional service firms working on their start-up at night and on weekends.
What's important is that they are not deterred if at first they don't succeed. Instead, they are supported by a self-sustaining ecosystem, and are able to draw on experiences gained throughout their professional lives.
Professor Chris Styles is Dean of the UNSW Business School.
This article was first published in ABC The Drum.