One mystery about new businesses relates to their high mortality rate. Most of them die within five years. Yet when you examine why businesses fail, the last thing that comes up is entrepreneur characteristics.
Most entrepreneurs cannot look introspectively and criticize themselves. Therefore, they are unable to come up with corrective measures before the enterprise collapses. Failure is blamed on anything and everything, including the government, financial organizations, markets, and even non-performing employees.
Now, these excuses may soon be over. Technology is beginning to assist in managing small and medium enterprises (SMEs) better.
Research has shown that most failures arise from entrepreneurs' inadequate understanding of the real insights into the market; inadequate understanding of technical requirements; poor financial understanding; lack of venture uniqueness; and ignorance of legal issues, to mention but a few of the most common mistakes that often lead to failure.
Software developers have for the past few years tried to create solutions to these problems by leveraging technology.
Microsoft4Africa, for example, launched a new online hub for Kenyan SMEs at the Connected East Africa Summit in Diani on March 31. The portal will provide a one-stop shop for information and business services for SMEs and improve regional trade.
Another portal, Biz4Afrika, is an Africa-wide network of SMEs designed to enable a sustainable and connected community of entrepreneurs that will have a meaningful impact on job creation, global competitiveness and wealth creation in the long run.
The solution comprises nine thematic areas of intervention, including finance and insurance, accounting, legal services, marketing, administration, business services, business opportunities, technology and people that are critical in the success of SMEs. Each of the nine categories has detailed modules divided into sub-categories, totalling 35 modules for managing SMEs.
For example, the category of technology has nine sub-categories including communication, collaboration, business applications, devices, security, connectivity, productivity, maintenance and support and web presence.
Delivering a keynote speech at the annual conference, Kunle Awosika, the country manager of Microsoft Kenya, the title sponsor of the summit, focused on the importance of the SME sector in boosting intra-African trade.
“East Africa has already been cited by Harvard University as having surpassed the tipping point from primarily exporting raw materials to creating and exporting value-added goods and services. The continued shift from a labour-based economy to a knowledge economy will require increased online presence, particularly by SMEs, (which) contribute about 45 per cent of Kenya’s GDP.”
HIGH PRODUCTIVITY, LOW COST
Technology is increasingly becoming a great enabler for businesses, regardless of size or activity sector. Businesses are leveraging technology to improve productivity.
On expansion, businesses use capabilities such as social networks, cloud-based services and data analytics to expand their business reach to new clients and markets. Technology has become essential for all types of businesses, but more importantly for SMEs.
According to Kenya’s Vision 2030, SMEs will be a major driver of social development and youth employment, as well as a key lever in the enhancement of the country’s global competitiveness. However, due to various challenges, a majority of SMEs close their doors within the first year.
“The Biz4Afrika.co.ke online hub aims to meet the needs of every start-up, small business and medium-sized enterprise at three entry points; the start, growth and acceleration phases by aggregating freemium offers and relevant online services, complimented by valuable information, resources and learnings in one place,” says Kunle.
Biz4Afrika's baseline services are offered in a "freemium" format. Under this format, basic services are provided free of charge while more advanced features must be paid for. This will enable SMEs to become familiar with pay-as-you-go services that help entrepreneurs maximize their productivity while minimizing their costs.
CLOSER INTRA-AFRICAN TRADE
SMEs can also join the hub as service providers for other businesses, thereby building a pipeline of potential clients. In the past year alone, Microsoft has helped 150,000 SMEs go online across Africa to offer, and to consume, ICT services, says Awosika.
Darius Waithaka, acting head of the SME Solution Centre at the Kenya Institute of Management, told the conference:
“We are privileged to be associated with Biz4Afrika.co.ke online hub that brings together East Africa’s public and private sector to play an important role in creating a conducive environment and harmonize policies that encourages the growth of the SME sector and provide healthy competitiveness to ensure quality and affordable access to markets, technologies, financial services among others, hence promoting and enabling smooth cross-border trade amongst the traders.”
According to the African Development Bank, currently, intra-Africa trade stands at only 12 per cent, compared with 61 per cent within the European Union. But the International Data Corporation predicts that 2015 will see closer intra-Africa trade facilitated by ICT initiatives such as payment systems, financial inclusion initiatives, and cross-border payments.
Microsoft has launched several programmes aimed at developing SMEs across the continent. They include BizSpark, an e-commerce portal that is a partnership with Skrill, and Africa’s first Intellectual Property Hub in Kenya to help entrepreneurs protect and monetize their innovations.
ACCESS TO TECHNOLOGY
The launch must be accompanied by deliberate efforts to take the solutions to the people both in urban and rural areas. Once the people begin to realize the opportunities that come with digital solutions, the effort will grow abundantly. The critical time is now.
Necessary training needs to be done now and supported in many ways by the government. There must be deliberate policy changes to remove tax on hardware as well as on broadband to enable wide access to technology. The success of these projects depends on the levels of access to various technologies.
There is a need to deepen such technologies to cover production, especially for small-scale farmers, through imparting better knowledge at the grassroots to help such farmers understand what it takes to be more productive.
The Microsoft solutions should be integrated with emerging technologies that leverage big data to enable farmers to predict such issues as rainfall patterns or matching soils with crops to increase output. From financial solutions in the market, it is evident that farmers have the capacity to adapt to these new technologies.
We have the best chance to create an enterprise revolution in Africa and create jobs and wealth. We need the discipline to apply scientific rigour into our archaic traditional methods that are often blamed for impoverishing Africans. Given its leading position on mobile financial solutions, Kenya must be the spark of this change.
As Steve Ballmer once said, “The number one benefit of information technology is that it empowers people to do what they want to do. It lets people be creative. It lets people be productive. It lets people learn things they didn't think they could learn before, and so in a sense it is all about potential.”
Let us exploit the African potential.
The writer is an associate professor at the University of Nairobi’s Business School.