Walker Center for Global Entrepreneurship Blog

 By Robert Hisrich, Ph.D.

 Starting a business while in school or upon graduation can result in success particularly if the idea is a good one and does not require initial outside funding (except from family and/or friends). The advantage is that you do not have to give up a nicer lifestyle that would result from a salaried position. The disadvantage is that you will not have the experience that would result from this salaried position.

 While in school, to prepare for the venture launch:

 1)      Make sure the idea is viable, has some unique selling propositions over competitive products/services filling the same need and has a sizeable market. This can be determined through doing an Opportunity Analysis Plan.

2)      Develop a solid business plan and validate your revenue model.

3)      Take courses in entrepreneurship and additional courses in marketing and enterprise capital (venture financing).

4)      Develop your Web site and know how to manage your and your company’s reputation on the Web. Become well versed in social media.

5)      Obtain a mentor who is older and has experience and wisdom; a successful entrepreneur could be the right mentor.

6)      Learn how to make engaging presentations.

7)      Determine and communicate your values and the core values of the business.

8)      Decide what you really want from your business and then do it.

Robert D. Hisrich, Ph.D. is the Garvin Chair of Entrepreneurship and Director of the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management.  He is the author of numerous publications and books on entrepreneurship including the textbook, Entrepreneurship; the most widely used text on the subject, published in nine languages.  Dr. Hisrish has established and sold numerous businesses in a variety of industries.

By Steve Stralser, Ph.D.

I play ice hockey two or three times a week depending on my teaching schedule (locker room banter admonishes me about my “priorities”). I am clearly in the upper deciles of my fellow ice hockey players. However there is one guy who is yet above me in the age brackets named Ray. Ray embodies Wayne Gretzky’s (actually it was Wayne’s father) “Skate to where the puck is going not to where it is”.  Ray is very tall, not the fastest guy on the ice but he sure knows the right positioning and strategic moves to compete with much younger, more nimble and faster players. 

This week marks the hundred-year anniversary of IBM. To be a company in the volatile dynamic and turbulent technology sector IBM has endured and continues to perform well, and is, to me, analogous to my skating buddy Ray.   Though big, aging and slower than some of its young upstart rivals, IBM has adapted and modified its business model to stay a relevant player in the fast-changing technology and information-driven world.  While we often associate innovation with younger, high growth companies, IBM’s changing business model and strategy represents external focus and adaptation, and presents a teachable example of organizational innovation and knowing where the puck’s going to be.

Steven Stralser Ph.D. is a clinical professor with the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management.  He teaches courses in Innovation, Business Planning and Global Entrepreneurship.  Dr. Stralser is President of TiE Arizona and the author of MBA in a Day.

By Professor Ernesto Poza

I am on my way to Bogotá, Colombia. And just back from a trip to Guadalajara and Mexico City. So I may be thinking Latin America right now. But the thoughts that follow apply equally well to family businesses globally.

Family businesses in Latin America are generally quite good at keeping family unity and preserving the family legacy alive. They are often not as proactive on promoting continued business growth or re-structuring ownership across generations in order to ensure corporate control and a continued spirit of enterprise across generations.

From an ownership standpoint, it is within the rights of owners of stock to focus on individual gain and to retain the right to immediate liquidity. However, multigenerational family-controlled businesses, even those with some exposure to public markets, are largely illiquid enterprises. This lack of liquidity and need for selfless interest can be a burden for family members operating in a society that tends to focus on the short term, the last quarter, the day trade. They will bear this responsibility willingly only if opportunities to acquire information, education, and engagement with important family values of stewardship are plentiful. Investing sweat equity in disseminating information to family members and encouraging multiple avenues of participation gives rise to trust, a spirit of service, and a sense that everyone is in the same boat on the same long journey.

Because of the myriad ways in which us-and-them behavior can manifest itself, multigenerational families are fertile ground for zero-sum dynamics. Zero-sum dynamics in relationships are characterized by exchanges in which one party’s perceived gain is the other party’s perceived loss. For example, if family members in top management are to be compensated at a fair market rate, those not active in management assume that they will have to settle for lower dividends to accommodate those higher salaries. Even more critically, if those active in top management agree on a growth strategy, family shareholders employed elsewhere may see reinvestment in the business as a forced  reduction in dividends or distributions. This us-and-them zero-sum dynamic can be triggered by any perceived difference: active–inactive,  male–female,  richer–poorer branch, better educated–less educated, older–younger, blood relative–in-law. Zero-sum dynamics become rooted in reality when as the family grows, the enterprise or family wealth stops growing or is in decline—that is, when the pie is not getting any larger. Members of multigenerational families that operate on the assumption that another family member’s gain is their loss are fertile ground for the development of family conflict.

The best treatment for the zero-sum ailment: a growth strategy, plenty of family communication about the company’s strategy and its finances and an ownership structure that prunes the family tree in the next generation. Family unity is the single most important and unique resource of a family business. And not just because family harmony is good, but because family unity gives rise to patient family capital, and these days shareholders with a long-term investment horizon are few but important allies in successful and sustainable businesses.

Ernesto Poza is a world renowned expert on family enterprise. He is a clinical professor of global entrepreneurship at the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management in Glendale, Arizona and the author of Family Business, 3^rd edition.

(Photo of downtown Bogota by David Garzon.)

Professor Melissa Beran Samuelson

Between the oilfields and sand dunes of the Sahara desert in Algeria is a town called Ouargla.  Kasdi Merbah University of Ouargla is a bustle of activity in an otherwise quiet town.

I was in Ouargla last week as a part of the University Linkages program, supported through the US Department of State and through a partnership with World Learning International.  The goal of the program is to enhance cooperation and to support education in Algerian universities.  Algeria is currently moving from a government directed curriculum to a curriculum based on the European model of University education.  It’s a great time to work with them to find additional courses and teaching strategies that will enhance the quality of business education in Algeria.

One of the most enthusiastic professors I met was the University’s sole Entrepreneurship professor.  His energy was contagious and when he talked about teaching Entrepreneurship as key to business education for the students in Algeria, the whole faculty nodded their agreement.

When I asked about the barriers to entrepreneurship in Algeria, I was told that it is not a question of funding.  There is a strong financing system in place for local entrepreneurs, and the students just need to know how to access it.  Further, the business culture of Algeria has not been one of risk-taking or entrepreneurship in the past.  It is now seen as a hope for the future.  “The opportunities to work in the multinational companies in Hassi Masoud [a nearby town] are limited. Entrepreneurship is something they can take advantage of wherever their home is.  We need to motivate the students and show them it can be done.”

Certainly, I saw that the enterprising spirit is there.  In addition to our partnership with Ouargla on developing their business curriculum, they are starting a career center, aimed at creating greater linkages between local business and the University.  Even the students themselves have taken the initiative to fill educational needs: English students at Ouargla started an English club, and from there found support at the University and US Embassy to take a room on the campus to create the “American Corner”, a center with computers, a library, and a circle of tables for discussion and topical speeches.   The students created a campus magazine called Student’s Haven to capture articles and information about life on campus.

As we work with Kasdi Merbah University of Ouargla, we will conduct webinars, faculty trainings, support course development and look for opportunities to link students across the campuses.  The program will connect Thunderbird with a part of the world that few have the opportunity to visit and will give both Universities a chance to learn from each other.

Melissa Beran Samuelson, ABT is a clinical professor at the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management. Her research focuses on enhancing effectiveness of microfinance programs. She teaches business ethics and sustainability in the Entrepreneurship program in addition to a course on Microfinance and Microenterprise in India.  She is in charge of programs enhancing entrepreneurship capacity in emerging economies.

By Amada Bullough, Ph.D.

In addition to the sharing of topic-specific knowledge from professors, a successful graduate program forces individuals to critically think, to expand their minds, and learn in new ways. What happens when you finish school and go back into the professional world?  You’re faced with different life paths and decisions surface that need to be made?  How do you decide what to do next?  The entrepreneurial market looms initially and perhaps forever, whether it’s a job, a new business, or some sort of new initiative.  With the newly acquired critical thinking skills you’ve developed in graduate school, you may find yourself presented with more opportunities than you know what to do with, or more things you’re interested in than you have time for.  Here are some personal pointers I’ve come up with to help with this:

1. Keep your own personal mission in mind – I have a mission to somehow leave this world better than when I found it and I work on this everyday through my research and teaching.
2. Pay attention to what you’re good at, what your strengths are – For example, are you a hard worker? A diligent student? Do you come up with good ideas? Do you evaluate things from lots of angles?  Maybe you have a passion for adventure? Do you try to be courteous and nice to people?
3. Know what your weaknesses and shortcomings are and arm yourself with other people who make up for those. Do your own personal SWOT analysis that never stops getting revised – For example, do you handle stress well? Do you have emotional and social intelligence? Are you experienced with managing budgets? Do you write things in a way that others want to read them? Are you good with statistics and numbers?
4. Don’t forget what makes you happy, what clicks your clock – For example, impacting others’ lives, the feeling of achieving something difficult, love and respect from people you love and respect
5. Open your eyes and ears, and pay attention to everything that might seem like an opportunity – What would really be rewarding for you?  Put out that energy and pay attention to the law of attraction. 
6. Don’t stop learning.  Ask questions. – Never stop being a student and make sure you have the appropriate information before making important decisions.
7. Believe in your abilities – If you need to, remind yourself of your prior accomplishments

Good luck and congratulations!

 Amanda Bullough Ph.D. is the Academic Director for the Goldman Sachs 10,000 Women Initiative and an Assistant Professor in Entrepreneurship and Management and Organizational Behavior at the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management.  Dr. Bullough’s research focus is on women and their potential to be economic producers and business leaders in the developing world.

 By Professor Gary Gibbons

 In October of 2010 Thunderbird Private Equity Center (TPEC), a part of the Walker Center of Global Entrepreneurship, conducted a conference in Ho Chi Minh City, The Socialist Republic of Vietnam.

 The October Conference:

 Jim la Marche the Managing Director of TPEC, Tracy Thomas, a Program Manager at TPEC and I, Professor Gary Gibbons, the Academic Director of the organization, attended the conference.  We were assisted by many “T-Birds” including John Cook, an emeritus member of the executive advisory board of TPEC, Takeshi Kamada, Jessica Tartel, Hao Diep, Ryan Galloway, Tavy Long in-country alums and Loan Ma a first tri student starting spring 2011.  

 The attendance at the conference was excellent (200 government representatives, academics, professionals and business owners attended the conference).

 The program objectives with respect to the exchange of information and the educational goals were met.  Additionally, the forging of new professional ties between Thunderbird and members of the various represented governments and professionals within the Southeast Asian area of economic activity was facilitated.

 Before leaving Phoenix TPEC solicited and received the gracious participation of high members of the Vietnamese, Cambodian and Laotian governments. The center was also able to attract Mr. John Vong a top advisor to Sacombe Bank, the largest bank in Vietnam as a participant.

 Participating as panelists, speakers, or guests were:

 Dang Huy Dong, Vice-Minister, Ministry of Planning & Investment, Vietnam

Phouthaxay Sivilay, Director General, Bank & Financial Institution Supervision Department, Lao People’s Democratic Republic
Dr. Ros Seilava, Deputy Secretary General, Ministry of Economic & Finance, Royal Government of Cambodia
Vathana Daraloy, Acting President, Lao’s Securities and Exchange Commission

Kao Thach, Deputy Director General, Securities and Exchange Commission of Cambodia

As well as leading private sector participants from throughout Southeast Asia. 

Jim and I scheduled personal meetings with these various persons and the result was that we may be able to bid on contracts to provided training programs of different types for these various constituencies.  We invited several of those assisting us to attend the meetings with us.

The Vietnamese Economic and Cultural Environment:

While in Vietnam we were able to gain some insight into the current state of the Vietnamese economy and political environment.  Additionally we were able to gain some understanding of the culture and standard of living currently shaping the life of the average Vietnamese citizen.  What follows are some brief comments that summarize these insights and understandings:

Economy and Politics

• Their system of government is socialist with the state owning many of the businesses and means of production.  The State also is in control of the armed forces, police, education, healthcare, radio and television, economic planning, infrastructure and export and import policy. 
• Major natural resources include, rice, coffee, tungsten, copper, gold and fisheries.  Apparently exploitable oil reserves have been found although no full-scale exploitation has yet taken place. 
• The population is young with about 50 % of the population younger than 30 years of age. 
• According to Vice-Minister Dong the national government controls about 58% of the nation’s GDP.  The government’s ownership includes most banking, heavy industry, mining, energy and transportation services (i.e., airline, rail and shipping). 
• Conversely, the Vietnamese government believes that 42% of the country’s GDP comes from the privates sector of the economy.  This area of the economy consists mostly of services, farming, fishing and handcrafts.
• Tourism is growing and is becoming more important since it provides a source of hard currency.  Germany, Australia and Russia are the source of most tourism.

The government is embarked on a campaign to privatize many of the approximately 60,000 businesses it currently controls.  Early problems with the process include a lack of standardized accounting, problems valuing the business and associated land and the ability to include the land in the purchase.  

• The population is about 83 million persons.
• There are no modern highways in Vietnam.  Traffic is congested throughout all parts of the country and in all jurisdictions.  Trucks, motorcycles, autos, bicycles, tricycles, jitneys and pedestrian all compete for the same limited road space.
• Vietnam Air, the state owned airline, seems well equipped and professionally run.  There are three relatively large air terminals (i.e., Hanoi, Ho Chi Minh City and Da Nang).
• A non-stop train ride from Hanoi to Ho Chi Minh City takes twenty eight hours.  The distance is about the same as from San Diego to San Jose.
• There are currently seven navigable ports in Vietnam but none of them are capable of taking modern container ships.  The government is considering expanding one of these ports or building a new modern port that would be container capable.  To do this they would have to raise capital from outside sources like the World Bank.

Culture and Standard of Living

•  Also, according to Vice-Minister Dong the per capita GDP has recently risen to a little over one thousand dollars (US).
• Vietnamese seem hard working and industrious.  An anonymous State Department source states that he and his colleagues believe that there are 52 billion dollars (US) of privately held gold reserves in the country.  Furthermore they believe that much of the economy is underground and that these gold reserves represent the currency used in the underground economy.  So the actual per capita GDP may be significantly higher than the official one thousand dollars (US) reported by the government.
• The current exchange rate (in October 2010) is about 19,500 Vietnamese Dong to 1 dollar (US).
• There are roughly 43 million motorcycles in Vietnam.  Few Vietnamese own autos and it is not unusual to see up to four Vietnamese on one small motorcycle.  Motorcycles play a role in virtually all forms of transportation.  While in-country we saw motorcycles used to haul: pig carcasses (5 at one time), boxes of geese and chicken, fresh vegetables, water jugs (ten 30 gallon jugs), flowers, towering table centerpieces, entire auto engines and enumerable sacks or bales of flower, feed or seed.
• According to one of our young guides, farmers and ordinary people are permitted to own their small farms and homes.  While many persons do work on family farms or at small private business many persons work for state owned enterprises.  The official unemployment rate is about 2.6%.
• Another guide told us that most Vietnamese wait until they are in their late twenties or early thirties to marry and start families.  Often young “marrieds” live with in-laws until they are financially able to be on their own.
• We were informed by a young guide that 60 % of the population does not “have any religion”.  According to our guide, 30 % are Buddhists, 8 % are Christian with other religions accounting for the remaining 2% (including a small Muslim population). Other sources indicate a much higher rate of religiosity among the people.  This data suggests that most of the population (80%) worship as Buddhists.
• The National Museum recounts that Vietnam was dominated by members of the Han Dynasty for over 1000 years starting in 111 BCE.  The term Viet Nam is a Chinese term that means “people of the south”.  However, the museum makes it clear that there are 54 recognized ethnic groups in the country and that the Chinese connection is old and not recent.  Additionally none of the Vietnamese we spoke to seem to view themselves as now having any special affinity with the Chinese.  In fact they seem to view the Chinese as major rivals.
• Although the literacy rate in Vietnam is 97%, among the highest in the world, the post secondary education system is definitely behind the curve.  I spent a day with the leaders of the National University (the school they think of as their best school).  I visited the campus spoke with several of their deans, administrators and students.  The university system suffers from a lack of doctoral level faculty, funds and processes to support graduate level research and poor and deteriorating physical plant and equipment.  They do have a few joint degree programs with British, Australian and American universities but overall they are currently unable to provide competitive degree programs.  Many of their Ph.D level faculty have degrees from Thai universities.

What Key Development Issues Should Vietnam Focus On?

While the Vietnamese feel that their highest priority is to finance and build a world-class container port there are three main needs that they have that should be developed first:

•  They need a reliable and ground transportation system.  There is only one “highway” in the entire country, Highway 1.  Highway 1 is a two lane road that travels south to north and winds its way through town, village and hamlet.  It is frequented by trucks, tractors, motorcycles, pedestrians, bicycles, tricycles, motorcycles pulling trailers, taxis, autos, busses and sometimes bullock carts.  Anything and everything traveling on the highway is usually stacked high with: car, tractor or truck parts, filled fuel or water containers, sacks of coconuts, cooking oil, produce or animal feed, pig carcasses, clothing, fresh flowers, boxes of seafood, geese or chickens in wire cages and usually people. Average speed on the highway might be 20 mph.  They need a road system that can handle the volume of goods that a container port would engender before they need a container port.
• The train system is not any better.  A trip from Ho Chi Minh City to Hanoi takes 25 hours non stop.  The rail system is limited in its ability to carry either high volume commercial traffic or passenger traffic.
• As we note above, the university system is a problem.  Much work needs to be done to provide the kind of programs that will produce the next generation of leadership.  The training needs to be focused on technical degrees (engineering, agriculture and health) and business degrees (especially accounting, finance, marketing and supply chain management) Also, I would note that the curriculum is over burdened with what I would call “dead wood” units.  Out of a 36 unit MBA program 12 units are what we would consider to be political indoctrination.   
• The electrical grid is the other infrastructure item that needs to be resolved.  Brown outs and blackouts are common.  Hotels, banks and large commercial establishments all need to provide for their own standby power generation capabilities as the public utility’s equipment is old and poorly maintained.  Developing their recently discovered oil reserves is not the challenge; more oil is not the problem.  It is the infrastructure that is sub-par.

Vietnam has youth and work ethic on its side.  On the other side of the ledger, crumbling and over-burdened infrastructure, government regulation of more than half of the economy and corruption, are obstacles to overcome.

Gary Gibbons, Ph.D. is a Visiting Professor and the Academic Director of the Thunderbird Private Enterprise Capital Institute at the Walker Center for Global Entrepreneurship.  He teaches Valuation of the Private Firm and Financing and Valuing your Private Enterprise.  Dr. Gibbons is an expert in investing and corporate finance with extensive experience in portfolio management, securities valuation, financial modeling, and financial planning and evaluation in entrepreneurial firms. 

Robert Hisrich Ph.D.

 As organizations, industries and consumers become more dynamic, corporate entrepreneurship becomes more important. While entrepreneurship has traditionally been viewed as private sector phenomenon, corporate and social entrepreneurship has developed in a number of different domains such as not-for-profits, for profits and public sector organizations.  Entrepreneurship is a universal concept and can be applied in small and medium enterprises (SMEs), large and multi-national organizations as well as social ventures, enterprises, communities and governments.  Entrepreneurship is not limited to a select group of people, any person with the right mindset, drive and motivation can develop an entrepreneurial perspective.  This perspective and mind set identifies a need and transforms it from a creative and innovative idea into reality. 

 In most industries, nations and markets, entrepreneurs challenge existing assumptions and look to generate value in more innovative and creative ways.  Entrepreneurs change the way business is conducted by identifying opportunities and successfully filling them.  Organizations need to renew themselves in order to sustain competitiveness.  This can take such forms as championing innovative ideas, providing necessary resources or expertise, or institutionalizing the entrepreneurial activity within the organization’s system and process.

 Corporate entrepreneurship is an important activity for all organizations to undertake in today’s hypercompetitive environment.

Robert D. Hisrich, Ph.D. is the Garvin Chair of Entrepreneurship and Director of the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management.  He is the author of numerous publications and books including the textbook, Entrepreneurship; the most widely used text on the subject, published in nine languages.  A self-described serial entrepreneur, Dr. Hisrich has established and sold numerous companies.

Jack Rivkin, director at Idealab and director at Neuberger Berman Mutual Funds, discusses private equity in the “new normal” on April 6, 2011, during the Thunderbird Global Private Equity Investing Conference in Glendale, Arizona. Watch the full video on YouTube (55:29).

By Professor Ernesto Poza, written from Hong Kong.

Family firms are complex enterprises. The superimposition of family and ownership on the management of a business gives rise to significant challenges. How family businesses manage these challenges equip many of them to be long-lasting engines of economic growth and true models of long-run sustainability. These firms represent the leading-edge of business management and not the economic dinosaurs that family business stereotypes would have us believe. Their financial results prove it.

Smucker’s, S C Johnson, News Corp.,Toyota, Grupo Modelo in Mexico, Reliance Industries in India and New World Development in Hong Kong, have all faced challenges successfully recently.  They are all family-led companies, companies that on a 5 and 10-year performance basis, are outperforming other forms of enterprise by between 6.65 and 16% annually on return-on-assets and return-on-equity. The returns vary by country. The research has been carried out in the US, Japan, Poland, Chile, the EU, and individual members of the EU like Germany, France and Spain. Recent studies also show that family businesses carry much lower debt levels (which helped them tremendously during the global financial crisis) are more responsible citizens in their own communities and remain patient investors for more than a generation versus the average share holding period on Wall Street of only 9 months. Oh yes, their CEOs lead for a longer period too, about 18 years, versus the 3 year average for S&P 500 companies these days; which could be a conservative estimate since a full 34% of the S&P 500 are family-controlled.

There may be some lessons here for management-controlled firms.  Shareholder trust, patient capital with a long-term horizon, longer-term CEO leadership, lower administrative cost structures and risk-management rooted in focus and deep knowledge of the industry rather than the more fashionable diversification, may all be part of a globally successful and quite sustainable business model; the family business- business model.  It creates jobs, generates wealth and is the darling of faster-growing emerging economies all over the world.

Professo Poza is one of the world’s leading experts in family business and a professor of family business and entrepreneurship the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management.  Ernesto Poza is the author of Family Business 3rd edition.

Admiral Bill Owens former, CEO of AEA Holdings, former CEO of Nortel Networks and former Vice Chairman of the Joint Chiefs of Staff shared his thoughts on doing business in China at the 7^th Annual Global Private Equity Conference held on Thunderbird’s Glendale campus. 

Private Equity in China is changing fast, today is different than a year ago with the PE market becoming more sophisticated and more mature in rapid fashion.  More and more people – both inside and outside of China are starting to understand what private equity is in China. 

What is important is the interest from Chinese government in developing private equity.  The twelfth five year plan author Liu He, vice minister at the central government’s Office of the Central Leading Group on Financial and Economic Affairs, understands investing and private equity and intellectual property and the importance of investing.  The 12^th  five year plan will make China a viable play in the world of investing.  Outward bound M&A is the key in this new five year plan.  They are seeking the acquisition of technologies and management expertise, finding a way into multi-national businesses.  Currently Owens is seeing the proliferation of R & D funds developing in China.

Historically private equity monies invested would have to stay inside the province.  Now there is evidence that the funds are not as restricted in terms of geography.

China is keen on finding partners from the west to participate in private equity and private equity investors in R&D funds.  Deal flow is spectacular, but for the government a key to working within the Chinese systems is finding and building a relationship with the Assistant Party Secretary in the province. This Secretary will know about PE deals in the province.

R&D funds in China are looking for matching dollar funds.  The deal structures may look like 400 million RMB (Yuan) matched by 100 million Euros or US$ for example.  These funds would to support outward bound M&A. This matching structure fund is very popular now.

One of the keys in the enforceability is to recognize the importance of relationships in the Chinese system.  Links to authority are significant when it comes to enforceability of a deal. Owens believes understanding the interplay between authority and the law are essential to successful investment in China.

Admiral Bill Owens is the Chairman and CEO of AEA Holdings Asia overseeing all Private Equity, and Real Estate investments in Asia for the company.  Owens is also a chairman of privately held Intelius, an information commerce company based in Bellevue, Washington. Owens was an admiral in the United States Navy and later Vice Chairman of the Joint Chiefs of Staff.  Since leaving the military in 1996, he served as an executive or as a member of the board of directors of various companies, including Nortel Networks Corporation