Entrepreneurship in the Context of Indonesian National Development

Rama Manusama

Entrepreneurship ???• No consensus on definition• Persons who are ingenious and creative in

finding ways that add to their own interest (Veblen, 1904)– Own interest could be wealth, power, prestige, or

mental satisfaction

• Persons who take risks in the name of an idea, spending much time as well as capital on an uncertain venture (Knight, 1921; Drucker, 1970)

• In this session, let’s narrow down the definition of entrepreneurs to business entrepreneurs only

Natural Resources

Entrepreneur

Value-added goods

Human Resources

Capital

Entrepreneurs mix resources and use them to create valueA (very) simplified model

Importance of Entrepreneurship in the Indonesian context

Indonesians always complain about this

• High unemployment–9 million documented–2 million have university education

• Low wages–Average National Minimum Wage Rp.

414,500–Average Starter Wage in Jakarta, with

University Education~ Rp. 3mln p/m – Low wages are necessary to keep

unemployment under control

Adding value = job creation• Too many people competing for too few available jobs!!• Indonesia has abundant natural and human resources, but lacks

entrepreneurs and access to capital• In 2008, entrepreneurs only accounts for 0.18% of total population

(Source: Ministry of Small Business and Cooperatives)• The United Nations recommends at least 2%• More entrepreneurs are desperately needed to create jobs• Are we lacking entrepreneurs??

Natural Resources

Human Resources

Entrepreneurs Value added goods

Another look into entrepreneurship

• However, when incorporating the informal sector, it is documented that in 2006, 16.3% of Indonesian people in productive age

• At a glance, there are ~16.2% gap between “informal” entrepreneurs and formal ones

• This would imply two things:• Entrepreneurial spirit already exists somehow• But most of them lack the ability to innovate and add

significant value• What is missing??? What do you think??

The missing entrepreneurial mindset: value creation

Ciputra:I soon realized what was missing from our education system. We don't teach entrepreneurship.

In more than fifty years in business, I learned not only how to emerge from poverty, but also how to generate wealth and create prosperity.

“I call entrepreneurship the ability to turn dirt and scrap into gold.”

Do you remember what they taught us at school??

In other words, entrepreneurs have to aspire to make impact

• Entrepreneurship must include opportunity creation, innovation, and calculated risk taking (Ciputra)• In this context, value creation comes from innovation• Informal entrepreneurs already have the foundation, but

it is driven by necessity not opportunity

Natural Resources

Human Resources

Entrepreneurs

Value added products

Capital

+ =

•What is innovation?

InnovationChange in the thought process for doing something or "new stuff that is made useful“ – a contrast to invention(McKeown, 2008)

Types of innovation according to Schumpeter1.New product / new quality of product2.New method of production / better method of production3.Opening of new market4.Conquest of new supply of raw materials5.The carrying out of new organization

Stages of development according to Global Entrepreneur Monitor

• Stage 1 - Factor-driven economies• Stage 2 - Efficiency-driven economies• Stage 3 - Innovation-driven economies

• Do we have to wait until stage 3 to start innovating intensively?

Simple, cheap product, high value

Affordable and valuable for these people

How about this?

Innovation to prevent ecological degradation

As long as the world remains imperfect, there is always room for innovation

The Innovative Entrepreneur has to be Passionate and Strongly Motivated

• There is something more in entrepreneurship, which is to make meaning (Guy Kawasaki)– Although sounded romantic, companies set out to make

meaning tend to be more successful• Steve Jobs – motivated to increase the quality of life

of the users• Bill Gates – motivated to take the computer to every

single household• Profit is the reward for a successful value creation• By believing in something strong, the entrepreneur

is more likely to withstand difficult obstacles

Most probably, these guys only care about making money

You don’t have to be Bill Gates

• “Celebrity Entrepreneurs” only account for minority of all entrepreneurs

• There are many unknown “everyday entrepreneurs” who successfully make a difference

• 12% of the American working force are entrepreneurs, 9% claim to be driven by opportunity not necessity (Kaufmann Foundation, 2003)

• We never heard of them, but they seize new opportunities

Innovative Entrepreneurship is on the rise in Indonesia

Conclusion

• Entrepreneurship is about creating value by implementing ideas and taking risk

• Innovation is a key factor in value creation• Indonesia needs more entrepreneurs• Start planning your venture !!