The Entrepreneur in the Tech Economy
by Charles-Edouard Bouée, CEO Roland Berger

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There is no doubt: entrepreneurship has become ‘hip’ in almost all parts of the world. As a matter of fact, the ‘founding spirit’ went from Silicon Valley to Europe and Asia, grasping mature and emerging markets on its way. There are about 70 incubator structures in France today (10 in 2010) and nearly 50 in Germany (12 in 2010)[1]; startup funding has increased significantly in the last years (in the UK: from USD 2bn in 2013 to USD 5bn in 2015[2]). Governments and public organizations at all levels are heavily supporting the creation of new companies (from the French Tech initiative in France, to the Berlin Partner startup program in Germany, to the Creative Economy policy in Korea), incubators, and accelerators, while startup maker spaces are mushrooming all over the globe. Corporates are learning how to collaborate with and even build startups on their own, and public and private investors seem to have unlimited appetite for new ventures.

There are various changes to our current environment that, at least partly, explain these developments.

First, technological progress over the past few years has been huge in all areas of life: This development is fueled by more and more abundant capital, following the decision to pump more money into our economies in an attempt to resolve the global economic crisis of 2008-2009. Investment has become cheap and tech innovation has become the new Holy Grail. The first unicorns emerged in 2009. Since then, their number has climbed to over 180 worldwide, with a total valuation of more than USD 740 billion[3].

This is the ‘acceleration of times’ as described by the German philosopher Hartmut Rosa, since one can today borrow for almost nothing and become rich quickly. The possibilities to create new things seem endless.

Second, digitization and new forms of telecommunications make the world a huge (virtual) marketplace where the internet serves as a platform to exchange all kinds of products and services rapidly and non-bureaucratically. Transaction costs have become negative in many circumstances – i.e., it is very often cheaper to look for a particular service outside your organization than inside, with people even working free of charge in certain cases.

Lastly, the new technologies and tools allow consumers to increasingly take control – over authorities and corporates – because they have constant access to everything (e.g., via their smartphone, the ‘remote control of our lives’) and usually fewer constraints. Thus, we are slowly moving from a B2B & B2C to a C2B & C2C environment. This goes hand in hand with the rise of the generations Y and Z who have learnt to travel the world and want to be free and independent above all. As a consequence, the social contract is changing, too.

All of this leads to two interesting phenomena: 1) the emergence of ‘forever startuppers’, people who create and create again – regardless of whether they fail or succeed with their projects – rather than become employed; and 2) the development of so-called ‘rented execs’, independent contractors who move among organizations to provide their often specialized expertise. Both are fueled by the currently changing ecosystem – it’s cheaper for corporates, provides more flexibility and freedom for individuals, is less of a hassle and energy waste for both sides, and investors are hungry for new projects.

All of this can be easily explained by the concept of fear and greed, the main motivators that drive people in an increasingly VUCA world. Either you are greedy to make it and thus willing to take risks as an entrepreneur – or you fear to lose your job very soon to a robot and thus change out of necessity.

It implies new challenges and has consequences for all of us. Organizations of all sorts work together with individuals in networks and in alliances. Trust has become the new currency. Individuals themselves must become more creative, solution-oriented and take over the decision-making jobs. As a consequence of their newly acquired freedom and independence, they will also have to deal with increasing solitude and pressure to perform. Businesses must create a new sense of belonging for their non-employed staff and partners as part of the ‘Light Footprint Approach’ that implies an advanced organization, full use of technology and a more entrepreneurial corporate culture. Lastly, there are huge challenges for governments, too, ranging from employment market regulation to accommodate new mobility and flexibility needs, to the reorganization of social security and the transformation of their own administration in order to better serve the new demand.

In summary, we are making big progress towards the entrepreneurial society. However, this doesn’t automatically mean that we have solved all our economic problems.

In fact, we have created a large gap between the ‘ordinary’ people and the few ‘insiders’ who are becoming millionaires or even billionaires. This disparity is likely to grow further in the near future, and it will raise many questions of social inequality and justice for which we will have to find suitable answers. For instance, we will have to deal with massive waves of unemployment as technological innovations in hardware and software will require fewer staff – and the people who will be the most affected are those who are currently trying to save their money.

Hence, if we want to avoid what could potentially be serious consequences for our economies and people, it is time that we accept the change and start to actively shape our future by partly reversing the current trends.

For a start, interest rates must rise again. Therefore, we need the economic reforms which make this possible. We must also put a price on the use of private data; we need to manage new cybersecurity risks and define norms and standards for the use of artificial intelligence.

 

Lastly, we should put the focus of our attention back on the human being. This means that we have to ask ourselves more often: do we really need this new technological innovation? Will it help us lead a better life? Or are we just pushing it for the sake of creating something new and fascinating?

Joseph Schumpeter once qualified the entrepreneur as the representative of the ‘real economy’ – as opposed to the financial sector, which is supposed to provide support but not dominate the markets. My query, which I would like to put up for discussion at the Forum, is: are today’s (tech) entrepreneurs as real as they should be?

In this respect, I believe that each of them should be able to answer one crucial question: are you dead or are you alive? This means asking yourself if you will actually be able to reach the breakeven point with the amount of cash you currently own – or if you will need fresh money to continue. Having observed the scene closely for quite a while now, I suppose that many of the new start-ups currently aren’t truly “alive”…

 

About the author:

Charles-Edouard Bouée is the global CEO of Roland Berger and also responsible for the firm’s Asia business. He specializes in reorganization, post-merger projects and corporate improvement programs, disruptive innovations, new technologies and digital transformation.

 

[1] Source: Roland Berger, 2016

[2] Source: EY, 2016

[3] Source: TechCrunch, October 2016

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