Earlier I wrote about Paper Cup Warriors – how well-meaning individuals and groups thrust bad business ideas (such as making standard paper cups) on people not equipped to judge the viability of such businesses.
As a business professional, it saddens me to see people who already have unstable economic situations, being enticed into types of businesses that are predestined to fail.
Often, but not always, the would-be entrepreneurs are formed into groups. Sometimes they go through “livelihood” training. They are often told by the NGO or funding agency which products to start, sometimes driven by ideology (“people should use disposable paper cups not plastic”) and at other times by funding agencies.
They newly-established entrepreneurs put in a lot of effort. They stretch their capabilities, learn production, learn to keep books (to some extent at least), talk to customers, etc. But a few months later, the whole thing collapses.
By promoting and helping them start unviable businesses, we are making poor people poorer. Very little thought is given to the risk assessment and loss absorption capabilities of the entrepreneurs. When I say “little thought” I am perhaps being generous. The whole concept of ‘risk’ is sometimes not even thought of in establishing these businesses.
Which brings up something to consider:
If you felt like building a bridge, would you just gather some stones and ask your neighbors to help you build it? Or would you first try to figure out what kind of bridge is needed, if one is needed at all, and hire a team of experts to design and build it?
If the answer is latter, why do NGOs and other well intentioned individuals take such a lackadaisical attitude towards entrepreneurship promotion? Just because they know that businesses can be one means of increasing incomes, why do they just go ahead and start the enterprises without involving any business experts, without any the market, of the financial viability of the business, of operational requirements? (And no, getting college student interns from abroad to do market surveys is not adequate)
And, as I have pointed out repeatedly on my blog, something is not always better than nothing. Starting a business that is bound to fail can leave the poor poorer.
So why such lack of due diligence by NGOs and well-intentioned folk who jump into rural entrepreneruship? Here are the 5 most common reasons that I have seen:
- They don’t have the time to do due diligence
- They don’t have the money (but they have money to start random businesses?)
- They don’t consider it important because they don’t understand the realities and complexities of business. Most NGO leaders have never worked in a business or run a business. They don’t understand the discipline and rigor required to create a successful business.
- Some simply jump on the bandwagon without thinking much about it
- And some unduly constrain their businesses with ideology or personal preferences. “We want to preserve the centuries old method of production. We don’t want to introduce modern technology which comes with a lot of problems.”
The end result? A bridge (or business) is built that may or may not have been needed, that may or may not meet the needs of the community, that may or may not support its own weight, and may not last long, if it lasts at all.