Entrepreneurship and innovation in SEA: factors affecting the performance of a start-up

Startup 5

What is the secret sauce to entrepreneurial success? What does it take to be a successful entrepreneur?

Marco Racco
Marco Racco, Management Graduate, Bocconi & ESSEC Alumnus. Currently lives in Milan, and studied in 5 different countries, including Singapore.

These are two big questions, and the truth is that there is not one correct answer to them. Yet, there are some factors that seem to generally impact the performance of a start-up.

Three interesting findings on this topic come from the study Entrepreneurship and Innovation in Southeast Asia recently conducted by Marco Racco:

  1. A founder’s previous work experience in a consulting firm positively affects the performance of a start-up. This isn’t surprising given the numerous similarities between the figure of the entrepreneur and that of the consultant.
  2. The application of a traditional project management approach enhances entrepreneurial success. This stems from the fact that this discipline is highly beneficial in defining and efficiently managing the business processes.
  3. The performance of a start-up is generally better if the founder is a citizen of the country, rather than a foreigner. More specifically, citizens tend to be the top-performing entrepreneurs, except in Singapore, where a different pattern was observed.

Consultants make great entrepreneurs
The study clearly shows that a founder’s previous work experience in a consulting firm could be beneficial to the entrepreneurial activity.

The figure of the consultant shows several affinities with that of the entrepreneur, under both skills and attitudes perspectives.

For instance, they are both great team workers, possess exceptional networking and time-management skills, and are used to very unusual working hours.

Consultants have extraordinary problem-solving and analytical skills that enable them to deal with the problems all start-ups must face, especially in the initial phase. These problems can be of various types and occur at different levels: financial, managerial, strategically etc.

Another key issue in the start-up effort is getting funds from providers of capital. One of the characteristics that investors appreciate the most about the founders is the ability to properly and accurately size a market and to understand the business opportunities behind it, as well as to make reasonable financial forecasts. Therefore, being a former consultant and having acquired these types of analytical skills is definitely a plus for the entrepreneurial activity.

Consequently, let’s debunk the myth according to which consultants are good only at giving advice: consulting represents a fantastic preparation for entrepreneurship. Hence, if you are about to graduate and dream of becoming an entrepreneur, you should consider such an experience.

Traditional Project Management is beneficial to the start-up activity
The study shows that the utilization of certain project management practices tends to positively contribute to the performance of a start-up.

Project management is acknowledged as a discipline that greatly improves the efficiency of the implementation of projects. Therefore, if the creation of a business is considered as a project, then that discipline can be used to increase success for this kind of projects, with beneficial method arising in the areas of planning, budget, risk control, time management etc.

Nonetheless, since the start-up environment is highly dynamic, some experts argue over the application of the traditional project management practices in this field, suggesting it might not be flexible enough to fit a start-up environment. In fact, the start-up process is and should be flexible, but this does not mean that it should consequently become completely disorganized and void of a procedural framework.

This process should rather follow a combination of both approaches: agile and traditional. The first one serves to bring a more customer-oriented approach to project management, while the second is highly beneficial in defining and efficiently managing the business processes.

With this approach, start-ups can make sure to stay flexible on scheduling but strict on controlling, in order to improve the results and efficiency of the processes.

According to pundits in this area, one more reason for the lack of utilization of the project management practices is the fact that founders do not have the skills necessary to implement such techniques. Therefore, before embarking on the entrepreneurial journey, it would be best to make sure that at least one of the co-founders actually possesses some project management skills or, as an alternative, to look for an advisor/mentor that could support the team on this matter.

Citizens generally outperform foreigners in the entrepreneurial effort
The research demonstrates that citizens generally perform better than foreigners in the entrepreneurial effort.

This is a reasonable outcome: citizens face way fewer obstacles compared to foreigners. As a matter of fact, these latter must deal with language barriers, cultural integration, bureaucracy and, unlike citizens, do not have access to all the governmental aids.

However, from a further analysis, it turned out that this relationship seems to be valid for all the Southeast Asian countries, but Singapore, where citizens are not necessarily the ones to perform best. Why is that?

In Singapore, most of the obstacles that a foreigner would face in any other Southeast Asian country almost do not exist at all. The main language is English, governmental benefits/aids are designed to attract international talents, and the paperwork related to starting a business is very smooth (Singapore is the world’s second-best country for ease of doing business). Moreover, Singapore is a very international country and there are people from all over the world, so the cultural integration is not complex at all.

Therefore, we can come to the following conclusion: if a person wants to start a business in a foreign Southeast Asian country, he/she should consider the option to have a local co-founder. Yet, if that country is Singapore, to have a citizen as a co-founder won’t necessarily bring any benefit linked to his/her nationality.

But most important: The ability to execute!
Having experience as a consultant, competence in project managing and being a citizen of the country seem to increase the chance for start-up to succeed, but do not guarantee its success.
At the end of the day, regardless of the founder’s background and of other organizational/environmental factors, it all comes down to founder’s ability to execute.

Read Marco Raccos thesis in full

Marco Raccos LinkedIn-profile

If you are interested in success factors for start-ups, this is an interesting article:

DE MOL, E. (2019). “What Makes a Successful Startup Team”. Harvard Business Review: 1-5