The paradigms of economic development keep changing. Centuries ago it was agriculture, a few decades ago, it was industrialization. Then the attention focused on services, followed by technology. Today, the major levers of economic growth are centered on entrepreneurship and innovation – terms that have become part of the common lexicon as a result of the policy focus on these two topics.
Entrepreneurship meaning:
In general, refers to the risk taking ability of the individual, and more specifically refers to people starting their own businesses. Entrepreneurs create jobs and wealth, while producing various products and services that addresses society’s needs and problems. Governments’ support entrepreneurship because of the social benefits that gets generated.
Entrepreneurship can assume various forms. At one end are the ventures, which are essentially technology led innovative businesses that have the potential for fast growth and scale up globally. Most of the large modern businesses, started as entrepreneurial ventures.
Examples include Google, Apple, WhatsApp, LinkedIn, and so on. They began as start-ups and have today become businesses worth hundreds of billions. At the other end are the smaller companies that provide steady income to their owners.
Entrepreneurship does not necessarily mean that it has to result in large global businesses. There are millions of small businesses that are significantly contributing the economy. Lets’ take the example of India. There are around 200,000 start-ups (source: www.ynos.in) whereas the number of micro and small businesses exceed 60 million.
The impact on the individual:
Apart from contributing to the economy, entrepreneurship makes a deep impact on the business owner at the individual level. As a part of my various engagements, I get opportunities to interact with several entrepreneurs. I have asked them this single question at different forum: “Entrepreneurship is a very difficult path. It is a lot easier to get a salaried job. Why did they choose to pursue such a difficult path?”
The answers were revealing. “It has helped me to create an identity of my own. Now people respect me.” “I was deeply impacted by a situation that I faced in my life. I started on my own so that others do not face a similar situation that I faced.” “Instead of being an employee, now I am able to give a job to many people. That is very satisfying.”
All of these responses indicate the multi-dimensional aspects of entrepreneurship on the personality of the individual, very much like that of sports or a stint in the army. Entrepreneurship teaches a lot of things such as how to cope with failures, dealing with day to day uncertainties, importance of humility, motivating employees, taking touch decisions such as dealing with errant or nonperforming employees, and so on.
Digital Entrepreneurship:
What is digital entrepreneurship? Today the word digital is widely used and denotes a variety of things. Without getting stuck up on an exact definition, digital entrepreneurship is used to denote businesses that primarily use the internet, online or mobile channels. E-commerce companies that primarily rely on online channel to get orders are also digital companies, though there might be physical delivery of goods.
Today there are several companies big and small that operate primarily in the digital world, without any physical presence. An example of a big digital company could be Uber. So many riders use Uber to book a taxi, but nobody would have stepped into a physical office of Uber. Same goes with the social media companies that we are all familiar with – Facebook, YouTube, LinkedIn, and so on.
They are all digital companies, primarily operating through the Internet. There are also several smaller businesses that are digital. For example there are more than 200 million business profiles in Instagram, of which many are small businesses. They primarily use Instagram to communicate with their customers, rather than any physical storefront.
Digital entrepreneurship has completely altered the way businesses operate and provided a level playing field for the small entrepreneur. First generation entrepreneurs face a major challenge when they want to set up their business, which has access to capital. Digital platforms have substantially reduced the investment needed to set up a new business, facilitating many young entrepreneurs to set up businesses at a fraction of the cost that it would take to set up a physical presence.
Digital technologies have significantly reduced the cost incurred in so many fields. For example, with the introduction of digital technologies, the costs of movie making have reduced to about one-tenth. In the same fashion, digital technologies have also reduced the cost of setting up businesses. While the location of a store might be an important factor in the real world, in the Internet, all businesses have an equal chance to be visible to the consumers.
Thus a combination of factors, associated with digital technologies have eased the process of starting a business.
The impact of digital entrepreneurship:
By making the process of setting up a business easier, digital technologies have reduced the frustration in setting up a business. For example, a home maker, who would like to cook meals and supply in the neighbourhood can easily do it with the help of social media.
There is no necessity of setting up a physical shop. Orders are received online and deliveries are made to customers directly. There is no intermediary, such as the distribution agency or a retailer involved in the process. Similarly, the challenge of accessing distant markets has also significantly reduced.
Entrepreneurs operating from hinterland areas, can be as much visible to potential buyers as those operating in large cities. Digital entrepreneurship has democratized the process of setting up a business, thereby contributing to the individual development that accompanies with starting an own business. An example would exemplify.
Recently I was involved in a large program of entrepreneurship development among women in remote locations. Hundreds of people participated in the program. Though they were very keen to start a business, there are not enough infrastructure or support to start their venture from their respective locations.
As a part of the program, we trained them on various aspects of starting a business using digital technologies. At the end of the program, there were about 40 women who had started their own businesses, which were primarily digital. And the process of setting up the businesses transformed these women entrepreneurs in unimaginable ways.
While they joined the program with a lot of diffidence they came out with a lot of confidence. Those who have seen them before and after the program were truly impressed with the personal transformation of the women. Without the help of digital technologies, they might have been mulling over, “What can I do?” However, they are now asking the question, “How far can I go?”
The author is Head, Centre for Research on Start-ups and Risk Financing Professor, Indian Institute of Technology Madras thillair@iitm.ac.in
The Head, Centre for Research on Start-ups and Risk Financing (Professor, Indian Institute of Technology Madras).
Email: thillair@iitm.ac.in
