GEN Shares Lessons Learned

Over the past 3+ years in operation, GEN has obtained a number of insights worth recounting as we design for the future. These lessons learned cover program delivery, entrepreneur evaluation, business model design, and GEN’s own design. We provide a brief overview of the lesson areas:

Area of Learning Lessons Garnered
Program Delivery
  • Importance of working with local partners
  • Entrepreneur agency and ownership of venture idea
Entrepreneur Evaluation(Contributing Characteristics)
  • Vision and drive
  • Attendance and reporting during program
  • Initiative taken outside of GEN
  • Receptivity to GEN direction
  • Demonstrated savings and reinvestment
  • Technical skills in venture industry
  • Higher education (for SME creation)
Business Model Design
  • Markets with latent demand
  • Defensible models
  • Rapid prototyping
GEN’s Service Model
  • Specialize organization, staff training
  • Balance cost of portfolio oversight
  • Evaluate cost-effectiveness of outcome

Program delivery is the foundation of GEN’s engagement, including recruitment of BoP youth, transfer of entrepreneurship skills, and identification of market opportunities. Working with local partners has proven to be an effective means of recruiting youth, as these organizations are already imbedded in their communities. Much of the effectiveness depends on local relationships, proximity, and corresponding accountability. Cases where Fellows have come from outside the community have proven this point, as those relationships have had inferior outcomes.

In piloting businesses, we found that entrepreneur agency and ownership is essential. Cases where Fellows were pushed to work together or to pursue ideas that they had not generated themselves demonstrate a lack of commitment and engagement, resulting in business failure.

Entrepreneur evaluation has also evolved with each program. Our initial screening has selected for need, drive and integrity to the extent possible, with community (e.g. church) involvement as a proxy for the latter. As explored below, there is a significant difference in characteristics and outcomes between those who pursue entrepreneurship out of necessity (having no other job options) and those who pursue it intentionally (with a vision). Going forward, our selection process will incorporate this aspect.

Once accepted in a program, we learn a great deal about the entrepreneur based on their behavior. For example, consistency of attendance and reporting is a positive indicator of potential. Similarly, the degree of initiative they demonstrate outside of the classroom correlates with later success: Francis Omozuapo propelled his construction businesses despite long gaps in BDO engagement; similarly, Christian mobilized significant assets outside of GEN. A third indicator is the Fellow’s receptivity to GEN counsel per their business operation or direction. A final behavior observed in high-potential Fellows is the practice of saving and reinvesting in their business, as opposed to spending or diversifying.

Beyond behaviors, skills and education are a key factor in establishing a viable business. Some form of technical training and experience is common among many of the successful entrepreneurs: Francis Omozuapo worked in construction; Christian Effiong of Changers trained at a large dry cleaner; Zega of Zest Terdoo is an experienced professional cleaner. Education appears to contribute as well: both Francis Omozuapo and Lameed Olaowula (of Golden Value Fisheries) have college educations. The latter observation creates an interesting tension, as we are focused on creating jobs for those who often do not have university degrees.

As portfolio businesses scale, the ability to develop systems controlling assets, employees, and financials become more important; likewise, entrepreneurs need to be able to evaluate markets and engage in medium-term planning. We’ve found that many Fellows are struggling to obtain them in the time available. The ones that are able to apply these skills generally have greater education and experience. The lesson learned is open to debate, but it seems as though our objective of growing SME’s with BoP youth needs to take into the account the reality of the skills required to build an SME (the result of which could be any number of strategies or tactics, from focusing on a targeted entrepreneur group or designing greater training into the program).

Business model design was highlighted at the prior board meeting and in our work with CEB. Many of our Fellows have launched undifferentiated, “copy-cat” businesses: sale of liquid soap, basic food services, and clothing sales, for example. This tendency is common in BoP micro-entrepreneurs, as their risk-tolerance is justifiably low, discouraging them from attempting unfamiliar businesses. Similarly, the presence of other businesses engaged in an activity is considered a confirmation of their viability, not a suggestion of market saturation. A third factor is the lack of exposure to other models. Incidentally, one of GEN’s businesses with the greatest potential came out of a market evaluation (albeit informal) by GEN’s team. If GEN is to generate SMEs, it needs to ensure the portfolio businesses are in markets with latent-demand and have a defensible model.

Finally, the Lean Startup approach assumes rapid prototyping. Failures (or invalidated hypotheses) are common and embraced. In practice at GEN, that may translate into pilots that should be aborted or services that should be curtailed. Our current model allows the micro-enterprises that do not prove out as SME candidates to continue, which is acceptable. The key is to make these assessments quickly.

We will spend much of our time together discussing observations and options related to GEN’s model. As GEN has trained its focus on scaling businesses, the requirements of staff and organization have changed materially. Unlike a pre-defined training program, business development requires continuous processing of new information and response. Moreover, the skill-sets required are broader: accounting, operations, marketing, and the systems design to support them. As such, GMYEI (GEN’s Nigerian affiliate) has been providing training, restructuring the organization to allow for greater specialization, and evaluating staff.

The cost of portfolio oversight is significant and serves as an externalization of the portfolio businesses’ own costs. While this arrangement obviously helps the portfolio venture, it does not appear to be a scalable strategy due to the high-cost and involvement of GEN staff. We’ve explored transferring the cost back to the business, but most ventures cannot sustain the overhead. The tension again raises the question of whether we should select for greater skill-sets among entrepreneurs to diminish the need for co-management.

Another consideration is cost-effectiveness in terms of outcomes achieved. Data in this category is scant and methodologies are inconsistent and often non-transparent. One study compared job creation effectiveness between SMEs and Microfinance, concluding that SMEs were superior. While it is difficult to make any conclusions, we share the research we have compiled as context.

Measure Microfinance (Study) SME (Study) Africa Bee Co. Program in South Africa GEN
Avg Loan Size $314 $20,000 N/A N/A $1,000
ROA (3.2%) 2.1% N/A N/A NA
ROE (1.1%) 16.5% N/A N/A NA
Cost per Job $211 $67 $1,500 $1,000 $1,000
Jobs created by $1m in financing 4,732 15,000 <1,000 <1,000 <1,000

GEN is a learning organization, continually and intentionally evolving.  As a learning organization, we maintain a commitment to measuring outcomes, testing our assumptions, and regularly evaluating our services.  We will continue to share our insights as we do, and appreciate feedback from you, our friends and collaborators.

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3 thoughts on “GEN Shares Lessons Learned

  1. Great post, Michael. I think broadly sharing our lessons learned — regardless whether the information is viewed as “positive” or “negative” — is a key organizational behavior. It will be interesting to hear the Board’s take on this and other information you’ll be sharing/discussing at the upcoming retreat, and about any possible adjustments to our strategy or operations that may flow from that discussion. Thanks.

    • Hi Paul, thanks for the comment. We do strive to be open and take our experience as neither positive or negative, as you say. Each step teaches us something new, confirms or denies a hypothesis, and puts us in a better position for the next phase.

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