• Sunday, June 23, 2024
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Why entrepreneurs should treat business as science, not art

Why entrepreneurs should treat business as science, not art

Business is a science. If you treat it as an art form, you will get into trouble, according to Oswald Osaretin Guobadia, SSA to the President, Federal Republic of Nigeria.

This edition of My Family, My Business, features an interview with Guobadia, who is also the team lead on the Nigeria Startup Bill; first recorded as part of PwC Nigeria’s NextGen Podcast series. The Nigeria Startup Bill has since been enacted into law. Excerpts:

“North Stars build businesses that last. They select the right structure for their businesses and choose board members and partners wisely.” an excerpt from your book, ‘In Pursuit: Journeys in African Entrepreneurship’ read. Can you shed more light on that quote?

The idea that chapter particularly conveys is looking for somebody who has set up their business in a way that you admire. We kind of gave some examples, Boards of course. These are things you want to do for your company. For example, when you have the right boards, you get the right feedback and the right board to executive interaction.

There is an age mate of mine who has been on several boards. I look at her as my North Star. If I ever get a board of that caliber, she’s the first person I’ll go speak to, and say, hey, what should I do? She’s been a North Star for a very long time. That’s something about North Stars, they don’t have to be older. We are mates but her exposure is different from mine. From that perspective, I look at her as a North Star for a lot of things.

Can you explain the concept of North Star and mentorship?

Having a North Star means having someone you admire and look up to in your field or industry. They don’t have to be your mentor in the traditional sense of the word.

People often make the mistake of approaching their North Stars and expecting them to be their mentor, but that’s not always effective. Mentorship is about building a relationship and understanding each other but it is hard to give advice to someone you don’t know well.

Your North Star can be someone you learn from afar without any formal mentorship agreement. They are just a source of inspiration and guidance in your journey.

What does the statement ‘North Stars build businesses that last’ mean?

The statement is personal and subjective. It’s about finding a role model, a North Star, who embodies the character traits you want to emulate in your business journey.

North Stars are not just successful entrepreneurs, but also good leaders who treat their staff well. They inspire and guide you towards building a lasting business. The statement encourages you to look beyond just the business results and focus on the values and principles that drive success.

What is the difference between African entrepreneurship and entrepreneurship in other parts of the world?

Nigerian and African entrepreneurship involves creating something that never existed before, building from the ground up with limited resources, and dealing with unique challenges such as high rent costs.

Unlike Silicon Valley, African entrepreneurs cannot rely on credit cards to extend their capacity.

I was listening to an entrepreneur who basically created an app that everybody was using. He was doing a talk where he spoke about how he started his business. I wanted to listen to him and be inspired.

He said: “Oh, when I started, it was so difficult. I was living off my credit cards.” That’s nice, but I couldn’t relate to that. Don’t get me wrong; I have sort of a dual lifestyle.

One of the biggest problems the book is meant to address is that we’re not telling our own stories. What happens is that our young crop of entrepreneurs are now reading stories that don’t apply to them. “I started Apple in a garage”. We don’t have garages. That right there is already the wrong story.

It’s important to tell our own stories and not rely on stories that don’t apply to our environment.

Was the person telling the story Nigerian?

No, he was an American entrepreneur telling his story on YouTube. When I heard that, something clicked in my brain; this guy can’t teach me much. It’s a case of the environment itself being different, and then you also have a lot of opportunities.

The necessity model for innovation does not always apply in Africa.

How do you define innovation?

Innovation is about solving problems and moving forward beyond that. It involves creating something new that leads us to new possibilities.

Instead of spending time solving problems that don’t matter, we should focus on creating new things that can change the world. This includes developing new technology like batteries, wireless charging, or renewable energy. While solving problems can feel innovative, true innovation involves being proactive and creating something new.

Can the African entrepreneurship journey be defined by the environment?

Yes, essentially what is being said is that the African entrepreneurship journey is defined by the environment. Our experiences are shaped by the realities of our environment, which allows us to tell our story differently. The introduction of the book speaks to this section that focuses on one of the biggest killers of the acronym entrepreneur, which is losing focus due to the overwhelming amount of things that need to be done.

What are some reasons for broken focus among entrepreneurs?

Broken focus among entrepreneurs can occur for multiple reasons. It could be due to feeling overwhelmed and not knowing which problem to focus on, or it could be because you become tired of trying to solve one particular problem and think that jumping to the next will provide a solution.

Additionally, some business ideas fail for different reasons, and the lack of human capital and a strong supporting cast can also contribute to broken focus. It’s important to get used to the idea that you may not be able to achieve everything, and focusing on too many things can derail your business.

If focus is a problem among entrepreneurs, how do you preach the importance of it?

Although focus is a problem, it is still critical for entrepreneurs to focus on what they’re working on. Even though there are so many different things to do, it’s essential to pick a specific focus and stick to it. You cannot be an oil guy in the morning, a clinic runner in the afternoon, and a cargo person in the evening. Choosing a specific area to focus on is crucial for success.

You seem to work in many different sectors and industries. How do you bring it all together?

A lot of times, people do things for a certain purpose. In my case, I’ve always loved entrepreneurs, and I’ve been mentoring them for years. I wrote a book about entrepreneurship, and then took on a government role where the first thing I did was work on a bill.

Although it may seem like everything is all over the place, there’s a line that brings it all together. Sometimes, you don’t see it forming until you look back on it. If you stay true to yourself, you will eventually see the connection between all of your different experiences.

Another interesting fact in the book is, it talks about SMEs being the backbone of any economy, but in Africa, they tend to become the ground that the corporations walk on. Can you explain how big corporations do so?

Big corporations in Africa often use SMEs as their foundation, causing them to become the ground that the corporations walk on. However, instead of having one or five big companies, an economy needs hundreds or thousands of smaller companies to thrive.

This is why I support the Nigerian Startup Bill and encourage the formation of more small businesses. India has a lot of success with this model, having thousands of smaller companies that hire 20 to 30 people and create value.

Doing business in Nigeria has its challenges, from tax issues to unexpected fees. Many entrepreneurs struggle with cash flow problems, and they may not even know about cash conversion cycles.

Cash conversion cycles are the periods in between paying someone and getting paid. If a bigger company pays you one million but you have to pay out 200k, the shorter the period in between the better for you. However, if a larger company deliberately prolongs this period, it can lead to the destruction of smaller businesses.

Business is a science, and entrepreneurs need to study it to succeed. I read books to help me solve problems, and attending a Harvard Business School meeting taught me about cash conversion cycles.

By understanding these concepts, entrepreneurs can avoid being taken advantage of by larger corporations and build sustainable businesses.

What is it about large corporations? Is it out of just not taking the smaller businesses seriously, or just them also trying to manage?

I think the case is of them also trying to manage their cash flow. It may get to the point where it’s not value generated. I know people who, during COVID, closed down parts of their businesses that bigger companies rely on.

How can we address the issue of people focusing only on one thing and not seeing the bigger picture?

We should set up a payment system to incentivise people to broaden their perspective. It’s necessary to establish a payment system that ensures timely and automated payments, even if it’s just for a single contract.

Read also: Solutions to family business issues from an African perspective – A review of Nike Anani’s Lifetime to Legacy

Can you explain what you mean by a payment system, specifically? I’m thinking about invoicing and reminders for small businesses.

It goes beyond that. I recently listened to a podcast about cryptocurrency and blockchain, specifically Ethereum. It was originally developed as a blockchain contract that allows for automated payments once a service is completed and confirmed. This idea has potential for business efficiency and cost hedging, which is often overlooked.

For instance, you receive a contract worth 100 million naira. When you got the contract, 100 million naira was equal to $500,000. You start doing the work, and as the exchange rate between naira and dollar fluctuates, the cost changes completely.

Someone should be hedging, but the vendor responsible for hedging is not in a position to do so, making everything more expensive. If a laptop was actually priced at $500, you may be forced to price it at $800 because you know that between the time you purchase it and the time you get paid, the exchange rate may shift.

Why hasn’t this payment system been implemented? Is this an issue unique to Africa or Nigeria?

I can’t speak for the rest of the world, but I know that other countries have established systems in place to prevent people from owing money. In England, for example, it’s a systemic issue with credit reports and other measures to deter people from defaulting on payments. This needs to be implemented more widely.

That’s why we have the startup bill to influence these kinds of things. What are two key recommendations for successful and sustainable entrepreneurship in Africa?

First, it is important to understand the risks involved in entrepreneurship and have a clear understanding of why you are pursuing it. Second, it is critical to understand the environment in which you are operating and learn about market opportunities, competitors, avoid pitfalls and other factors that can impact your business.

For example when I came to Nigeria to start my business. It is something that I had a passion for when I was working in Goldman Sachs. I was sitting in Goldman Sachs looking at Nigeria, I said, wow, I see the opportunity. What am I going to do? I started taking frequent trips to Nigeria. I come in April to Nigeria, and I come to Nigeria for a weekend. You have to be intentional about it. I came in and I took a job, because I still needed to understand the environment. Learn who said what, who offers the service, where the opportunities are in the market? Who’s not doing what. 15 years later, we’re still doing the same set of things I wanted to do.

What I hear you say is know why you’re doing what you’re doing. Understand the landscape, and that essentially, those two things are very important.

It’s a science. If you treat business as an art form, you’ll get in trouble.

What is the importance of treating business as a science rather than an art form?

Treating business as science allows entrepreneurs to use data and empirical evidence to make informed decisions, rather than relying solely on intuition or creativity. This can lead to more successful and sustainable businesses.