1 The Entrepreneurial League System ® : A New Approach to Developing Entrepreneurs The...

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The Entrepreneurial League SystemThe Entrepreneurial League System®®: : A New Approach to Developing EntrepreneursA New Approach to Developing Entrepreneurs

By:

Gregg A. Lichtenstein, Ph.D.President, Collaborative Strategies, LLC

Presentation to:Presentation to:

WIRED West Michigan Quarterly Meeting WIRED West Michigan Quarterly Meeting

Thursday, June 15th, 20061:30 p.m. – 3:30 p.m.

Location: Alumni House, GVSU Allendale Campus

2© Collaborative Strategies, 2006

The objective of today’s presentation The objective of today’s presentation is to discuss: is to discuss:

1. The “Pipeline of Entrepreneurs and Enterprises”

2. The Entrepreneurial League System® design

3. The Articulation Study to adapt ELS to local needs

4. Links between ELS and other WIRED projects

5. Next Steps


I. Managing the Community’s I. Managing the Community’s Pipeline of Entrepreneurs and Pipeline of Entrepreneurs and

Enterprises: Introducing a New Way Enterprises: Introducing a New Way of Looking at your Business Assetsof Looking at your Business Assets


Entrepreneurs are people Entrepreneurs are people whowho……

Create value or wealth by capturing market opportunities and converting them into business assets;

Are the “engines” of economic development in a community


Three key assumptions about Three key assumptions about entrepreneurs:entrepreneurs:

1. Entrepreneurs are successful to the extent that they have the necessary skills;

2. Entrepreneurs come to entrepreneurship at different levels of skill; and,

3. Entrepreneurial skills can be developed.


If we want to create greater individual and If we want to create greater individual and community wealth, then as a community, community wealth, then as a community,

we collectively need to assume we collectively need to assume responsibility for...responsibility for...

Developing a supply of highly skilled entrepreneurs that are capable of building

successful companies in sufficient numbers to transform our economy.


Before we can answer the question Before we can answer the question of how to develop a supply of highly of how to develop a supply of highly

skilled entrepreneurs, we must… skilled entrepreneurs, we must…

Explore a way to “see” what business assets we have in our community.


We recommend a new set of “lens” that We recommend a new set of “lens” that allows us to shift from seeing an allows us to shift from seeing an

undifferentiated undifferentiated pool pool to seeing a to seeing a pipelinepipeline consisting of variegated stocks and consisting of variegated stocks and

flows…flows…


A A pipeline pipeline offers us a way to map the supply offers us a way to map the supply of entrepreneurs and enterprisesof entrepreneurs and enterprises within our within our

communities. It consists of two key concepts:communities. It consists of two key concepts:

1. Entrepreneurial skills

2. Stages in the development of the business

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© Collaborative Strategies, 2006

Differentiating among Differentiating among entrepreneurial skill levels entrepreneurial skill levels

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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

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Entrepreneurial Levels by Degree of Entrepreneurial Levels by Degree of Skill:Skill:

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

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Critical Insight: moving from one Critical Insight: moving from one skill level to another requires… skill level to another requires…

A transformation on the part of the entrepreneur – a fundamental change in

their abilities.

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Why do we need to know an Why do we need to know an entrepreneur’s skill level? entrepreneur’s skill level?

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

Entrepreneurs at each skill level must be worked with differently

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Differentiating among enterprises at Differentiating among enterprises at various stages of development of the various stages of development of the

business business

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There are six stages in the development There are six stages in the development of a business:of a business:

Stage 0 – Pre-venture Stage 1 – Existence or Infancy Stage 2 – Early Growth Stage 3 – Expansion or Sustained Growth Stage 4 – Maturity Stage 5 – Decline

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Observations about stages in the Observations about stages in the development of a business: development of a business:

Lifecycle stages are independent of the entrepreneur’s skill level

Stages of development are not identical with the age of the firm

Movement to the next stage of development of the business requires a transformation to a different operating structure

The real wealth creation stages are 3 (expansion) and 4 (maturity)

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We put these two variables – skills We put these two variables – skills and stages in the development of the and stages in the development of the

business – together to form…business – together to form…

A pipeline.

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The Pipeline of Entrepreneurs and EnterprisesThe Pipeline of Entrepreneurs and Enterprises

Lifecycle

Skill Level

Stage 0Pre-venture

Stage 1Existence

Stage 2Early

Growth

Stage 3Expansion

Stage 4Maturity

Stage 5Decline

AAA

AA

A

Rookie

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Observations about the Pipeline:Observations about the Pipeline:

There are a variety of possible outcomes: movement to another section of the pipeline, stagnation/arrested development, exit or death.

Movement to the next stage in the business lifecycle depends on the skill of the entrepreneur and/or his or her “team.”

Movement to any other segment of the pipeline (i.e., cell in the map) requires a transformation.

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Our goal in managing the pipeline is to enhance the Our goal in managing the pipeline is to enhance the performance in each segment and to increase the performance in each segment and to increase the

movement or flow of entrepreneurs and enterprisesmovement or flow of entrepreneurs and enterprises

Lifecycle

Skill Level

Stage 0Pre-venture

Stage 1Existence

Stage 2Early

Growth

Stage 3Expansion

Stage 4Maturity

Stage 5Decline

AAA

AA

A

Rookie

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Two IMPORTANT Points: Two IMPORTANT Points:

1. Entrepreneurship and innovation is an issue at every cell in the pipeline

2. The needs of entrepreneurs and enterprises at EACH segment of the pipeline are different as is the services and infrastructure necessary to support them

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We can broaden our notion of the “business We can broaden our notion of the “business assets” in our communities to include…assets” in our communities to include…

Business Lifecycle Stage Type of Clients

Stage 0 – Pre-venture Aspiring entrepreneurs, potential entrepreneurs, entrepreneurs in search of ideas

Stage 1 – Existence Existing Entrepreneurs

Stage 2 – Early Growth Existing Entrepreneurs

Stage 3 – Late Growth Existing Entrepreneurs, Product Extension

Stage 4 – Maturity Intra-preneuers or Spin-out Ventures from Existing Companies, Strategic alliances bet. firms

Stage 5 – Decline Entr. attempting to reinvent their companies, e.g., 2nd or 3rd generation family members

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Important MessageImportant Message

We are missing valuable opportunities to expand our clientele – for example, by failing to include intrapreneurs (internal corporate entrepreneurs) and “managers” of strategic alliances between companies

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Given this map of the community’s business Given this map of the community’s business assets – where would assets – where would youyou invest scarce invest scarce

resources?resources? Lifecycle

Skill Level

Stage 0Pre-venture

Stage 1Existence

Stage 2Early

Growth

Stage 3Expansion

Stage 4Maturity

Stage 5Decline

AAA 12 ent. 36 enterprises

45 27 60 12

AA 30 69 96 24 42 12

A 45 53 150 6 4 3

Rookie 12 45 30 0 0 7

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What does the process of mapping your What does the process of mapping your pipeline of entrepreneurs and enterprises pipeline of entrepreneurs and enterprises

mean to a community?mean to a community?

You now have a concrete basis for making strategic decisions about how and where to invest your resources – and for how long.

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II. The Entrepreneurial League II. The Entrepreneurial League SystemSystem®®: Transforming Community : Transforming Community

Economies by Building Entrepreneurial Economies by Building Entrepreneurial SkillsSkills

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

1. To increase the rate of new business formation2. To increase the rate of survival and success of new

enterprises3. To increase the rate of development of entrepreneurs

and their new enterprises4. To increase the efficiency of the dissolution process if

a firm fails

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The function of developing The function of developing entrepreneurs and managing the entrepreneurs and managing the

pipeline of entrepreneurs and pipeline of entrepreneurs and enterprises in our region is enterprises in our region is

missingmissing!!

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We have developed a new approach to We have developed a new approach to developing entrepreneurial talent and developing entrepreneurial talent and

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

We call it the Entrepreneurial League System®

(ELS)

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The successful implementation of the The successful implementation of the Entrepreneurial League SystemEntrepreneurial League System®® in a in a

region involves: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

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Developing the region’s pipeline of Developing the region’s pipeline of entrepreneurs and enterprises involves 3 major entrepreneurs and enterprises involves 3 major

activities or strategies:activities or strategies:

1. Performance Coaching and Success Teams

2. Talent Scouting and Pre-venture activities

3. Opportunity Scouts and Market Development Service

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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

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Implementing the ladder of skill development Implementing the ladder of skill development (i.e., pipeline) by creating Success Teams(i.e., pipeline) by creating Success Teams

Ramp-up in ELS Participation Rates:

Year 1: 24 entrepreneurs or 2 teamsYear 2: 60 entrepreneurs or 5 teams

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Talent Scouts and Pre-venture ActivitiesTalent Scouts and Pre-venture Activities

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

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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 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

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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

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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

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Building an Entrepreneurial Culture – Building an Entrepreneurial Culture – start small, allow the change to start small, allow the change to radiateradiate out and out and

influence the entire communityinfluence the entire communityCore folks – lead by example

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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

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What is the role of What is the role of Service ProvidersService Providers in the Entrepreneurial League in the Entrepreneurial League

SystemSystem®®? ?

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The challenges faced by entrepreneurs in The challenges faced by entrepreneurs in working with service providersworking with service providers

E’s don’t know who to go to for what– E’s often don’t know what they need– E’s don’t know who does what; cannot make the right connection (or it takes too long, or is

simply impossible to accomplish) – E’s demanding new services that happen to already exist (i.e., not visible) or can’t get access – E’s don’t know how to judge the quality of a service; many have never used assistance

agencies; quality is often uneven, breadth of offerings, but no depth; E’s often don’t trust service providers (in some cases, for good reason – we have

observed providers that will provide only what they know, not what the E needs; also mismatch in levels, will not provide it how the E needs)

E’s are often overwhelmed by the number of providers and the array of choices; as a result they either do nothing or make the wrong choices

Referrals are rarely made or not made well E’s often don’t know how to utilize the assistance they’ve received E’s sometimes do the right thing but in the wrong order – often with devastating

consequences Many E’s have no map of how to grow their business that can guide them in these

decisions Entrepreneurs don't know how and where to address their requests for new services

that don't exist.

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Demand side issues: problems that service Demand side issues: problems that service providers experience with entrepreneursproviders experience with entrepreneurs

There never seems to be enough E’s with whom to work (e.g., we offer “x”, but no one is interested...; more service providers at events than entrepreneurs; constant trolling for clients, etc.)

The folks that show up (or are referred for help) don’t fit with our mission

E’s just won’t listen to advice E’s blame everyone else for their failures E’s make the rounds of service providers, but never seem to

progress (don’t make use of the assistance) E’s come for help when it’s too late E’s are unwilling to pay anything or don’t appreciate the value

of the help that they receive E's unwilling to cooperate with information requests (e.g., to see

their financials); [requires a need a relationship first]

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Problems experienced by the Problems experienced by the community as a whole community as a whole

Unproductive competition among service providers Service provider goals do not always match the needs of the

community Ideological vs. strategic selection of client targets Inability to determine value, ROI to community as a whole Lack of data on impact of service provision; difficult to know

pattern of needs (due to balkanization). Difficulties in making wise investment decisions among a wide

array of enterprise development activities Concerns about effectiveness, efficiency, equity, sustainability

and scale (insufficient)

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Design principle: Separate the functions of developing Design principle: Separate the functions of developing entrepreneurs from addressing their needs for entrepreneurs from addressing their needs for

technical and financial assistancetechnical and financial assistance

The two functions have different roles and objectives, requiring different skill sets, resources and values– Explain the development function– Explain the service provision function

An integrated and effective enterprise development system requires both systems (or sub-systems, or parts)

These functions must be separated because a single organization cannot perform both effectively (except in rare cases, but one cannot design a reliable system based on unusual people)

There must be a dynamic balance between these two subsystems (explain – neither can dominate); their operation must be integrated

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There must be a dynamic balance There must be a dynamic balance between these two (sub) systems:between these two (sub) systems:

One for developing One for developing entrepreneursentrepreneurs

One for providing One for providing services – meeting needs services – meeting needs entrepreneurs have for entrepreneurs have for technical and financial technical and financial

assistanceassistance

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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 – no matter where they are located in the region.

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Building a service provider system Building a service provider system meansmeans

Moving from no interaction, limited interaction or arm-lengths transactions to an integrated network of relationships among the providers, where…

The performance of the whole is greater than the sum of the parts.

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Example ofExample of Linkages among Service ProvidersLinkages among Service ProvidersI=Informal F=Formal

SB

DC

LC

DB

LM

BD

C

ME

TC

O

LB

RC

KM

SD

C

ND

C

Af.

Am

.Str

at.P

lann

ing

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up

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LW

Co.

-Min

orit

y B

usin

ess

Tea

m

May

or’s

Off

ice

of A

ffir

mat

ive

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ons

Urb

an L

eagu

e

Mc

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ech.

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enter

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.Ven

ture

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ital

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.Cen

ter

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trac

ting

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ept.

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ent

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ise

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up

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ital

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ess

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up

KY

Wor

ld T

rade

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ter

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Bu

sine

ss P

lus

Bla

ck C

ham

ber

of C

omm

erce

Hum

an R

elat

ions

Com

mit

tee

Min

orit

y B

usi

ness

Out

reac

h

Exp

ort

Ass

ista

nce

Cen

ter

SB

A

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Cne

ter

* G

reat

er L

ouis

vill

e In

c.*

SBDC F F F I F F F LCDB I I I LMBDC F F F METCO LBRC F F I I KMSDC I NDC Af.Am. Srat. Plan.Group I I I I I SCORE I I I I LW Co..-Minority Business team I I Mayor’s Office of Affirmative Action I I I Urban League I F I Mc Conn. Tech.Trans.Center I I I I Af.Am.Vent.Capital Fund I I VA Med.Center –Contracting Depr. I I LCDB Enterprise Group I I I I Capital Access Corp. I I I KY World Trade Center I LCDC –Business Plus I I F I I Black Chamber of Commerce I Human Relations Committee I I Minority Business Outreach I I I I I Export Assistance Center I I I SBA F I I F F

Data taken from Study of Louisville Minority Business Development Service Providers

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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 the system as a whole

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What are the key ingredients or What are the key ingredients or building building blocksblocks for describing who does what? for describing who does what?

1. Type of client (i.e., which part of the pipeline – level of skill, stage in the lifecycle, type of business)

2. Entrepreneurial need (functional)3. The offering – the practices or interventions

used to address entrepreneurial needs

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Skill Level Targeted by Service ProvidersSkill Level Targeted by Service Providers

Entrepreneurial Skill 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.

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Please note: the skill level of the clients with Please note: the skill level of the clients with which you work says nothing about your own which you work says nothing about your own

skills!skills! Few organizations work with AAAs and there is nothing

shameful about that. Blessed are those that work with Rookies and Single As;

they often require the patience of a saint! AAA entrepreneurs were once entrepreneurs at lower

skill levels. It is only by working with Rookies, A and AA entrepreneurs that we can produce AAAs or Major Leaguers.

We need a distribution of service providers at all skills levels in order to have an effective ladder or pipeline.

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CreatingCreating a Service Provider Network or a Service Provider Network or system involves:system involves:

Developing a common language and diagnostic process of assessing needs and understanding customers

Forming relationships of trustFrequent interaction Opportunities to learn and improve performance

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In the ELS, service providers:In the ELS, service providers:

Become specialists engaged to meet specific needs, operating in clear service niches

Undertake their projects within a common diagnostic framework

Provide service “transactions” designed to support the transformation process

Are differentiated according to needs served and league level of clientele

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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

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Our experiences to date: Our experiences to date: Philadelphia, PA: with urban manufacturers, high tech

startups, minority businesses, etc. Louisville, KY with minority service providers Johannesburg, South Africa with micro-enterprises in

the garment industry Advantage Valley: WV/KY/OH: now more than 75

participating entrepreneurs Central Louisiana Western Michigan: WIRED grant recipient Lake Superior region: NE Minn and NE Wisconsin Lucent Technologies Corporate Incubator

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How Collaborative Strategies works How Collaborative Strategies works with communities or regions: with communities or regions:

Our goal is not only to help create entrepreneurial communities and improve their economic performance, but to help communities develop their ability to achieve these outcomes for themselves.

This outcome requires: a well-designed system (which has been created, field tested and vetted), talented people to operate the system locally, and a skill-building process by which they learn the system and develop their skills to execute successfully.

Collaborative Strategies licenses the operating system as well as the tools and provides the training and on-going coaching necessary for communities to successfully operate an Entrepreneurial League System® themselves.

We collaborate with the community to form a team; we are jointly responsible for success.

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Questions and Answers Questions and Answers

“This workforce solution was funded by a grant awarded under Workforce Innovation in Regional Economic Development (WIRED) as implemented by the U. S. Department of Labor’s Employment and Training Administration. The solution was created by the grantee and does not necessarily reflect the official position of the U. S. Department of Labor. The Department of Labor makes no guarantees,warranties, or assurances of any kind, express or implied, with respect to such information, including any information on linked sites and including, but not limited to, accuracy of the information or itscompleteness, timeliness, usefulness, adequacy, continued availability, or ownership. This solution is copyrighted by the institution that created it. Internal use by an organization and/or personal useby an individual for non-commercial purposes is permissible. All other uses require authorization of the copyright owner.”

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For further info, please contact:For further info, please contact:

Gregg A. Lichtenstein, Ph.D.PresidentCollaborative Strategies411 N. Exeter AvenueMargate, NJ 08402P: (609) 487-8488F: (609) 487-8889Email: [email protected] Site: www.entreleaguesystem.com – coming soon.

Please note that this material is copyrighted. Its distribution and use, which is encouraged, should be done with attribution and acknowledgement of the source.

The term “Entrepreneurial League System®” is a registered trademark of Collaborative Strategies

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