Entrepreneurship programmes have mushroomed across Africa in recent years. Sometimes it seems as though every government, NGO and university is offering one! But for many years we had no idea whether any of these programmes really worked. The data was scant. In fact, academic research on training for small business in emerging markets has been pretty discouraging. And while some organisations have shifted to supporting entrepreneurs with higher-touch more customised ‘technical assistance’, this usually requires expensive one-on-one consulting and is impossible for organisations wanting to reach scale.
That may be starting to change…
Academic research on entrepreneurship training has delivered some interesting findings in recent years, and we think it’s time for a fresh look at business training and development for SMEs based on real evidence. There’s one particular stream of research we’ve been following closely for several years now, and which we think has the potential to revolutionise entrepreneurship training. In fact we’re so excited about it, we’ve completely reworked our own learning methodology for entrepreneurs based on the findings, leading to the new evidence-based progamme ‘Grow Your Business’, and we’re putting our necks on the line by working with a research team at MIT on a randomised control trial to see if it really works.
So what is this new approach, and why do we need it?
It’s pretty simple. Recent academic research suggests that company performance is impacted less by individual competencies than by embedding effective management practices into the routine of the company. So teaching individual entrepreneurs about business is out. Supporting them to actually transform their business and management practice, and holding them accountable to those practices, is in. We call these practices company habits, and they form the basis of our new approach.
Much of the quality recent research looking at the link between good management and improved company performance is based on an approach initiated by Stanford and MIT economists Bloom & Van Reenen (2007). They showed through a series of different studies in various countries strong correlations between good management practices and firm productivity, profitability, sales growth and survival. Better managed retail stores have higher sales per employee, better managed hospitals have lower mortality rates, and better managed schools have higher test scores. McKenzie and Woodruff (2015) extended the research to micro businesses in emerging markets, surveying entrepreneurs in seven countries on their business practices in marketing, stock-keeping, record-keeping, and financial planning. They found similar results. So there is solid evidence that good business practices DO lead to improved company performance, and ultimately job creation.
But that still doesn’t solve the problem of how to help entrepreneurs and their teams establish those good business and management practices that seem to drive growth. Traditional training, apparently, doesn’t cut it. McKenzie and Woodruff noted that several studies produced disappointing findings about the effect of training on business growth, finding “small, and statistically insignificant, effects on sales and profits.” They point out that the programmes the entrepreneurs attended may have succeeded in increasing the individual business competence of the entrepreneurs, but somehow they failed to translate that improved individual competence into improved day to day management practice. So the training was wasted.
So if training doesn’t work, what does? Or, a better question, how can training programmes successfully help entrepreneurs take their improved competence, and turn that into better management practices for their businesses?
This is the part where we get excited…
At AMI, we think a new approach to entrepreneurship training and development is possible. One that flips the traditional model on its head. Instead of training entrepreneurs and their teams in a series of business concepts and then encouraging them to apply these to their business, how about starting with the business practices themselves?
This is what we have attempted to do with our radically innovative Grow Your Business programme. Despite very positive feedback on our previous blended entrepreneurship training from thousands of entrepreneurs in Kenya, Nigeria and South Africa, we completely re-worked our approach, based on the research described above. We’ve been working with John Van Rheenen, who co-authored the first study in this area, and his team at MIT to create a set of management practices specifically for SMEs operating in Africa. And we’ve developed these into a 6-month learning programme that focuses on helping small businesses adopt simple but effective business practices to grow their organisations, drawing on practical online resources, virtual coaching and peer-to-peer support. When we say ‘business practice’, we’re talking about very practical ongoing habits that underpin business growth, such as ‘track the income of your company every week/month’, ‘ensure each manager holds a one-on-one feedback meeting with their team every week’ etc.
GYB is designed for local small and medium-sized enterprises (2-20 employees with revenues of at least $30k/year) that want to grow and access external financing. Our research-backed survey tool helps business owners and their teams identify the core business practices that will help drive their businesses to the next level using our specially designed tools. We then use AMI’s online platform alongside a peer-based interactive model to provide entrepreneurs and their teams with the tools and support they need to implement these practices.
We recently launched GYB, partnering with a leading Kenyan bank, KCB, for our pilot programme. At our first Learning Lab late last year, participants were introduced to the programme, they were challenged to think about their business in new ways by running a business simulation, and they created their peer-learning groups for the remainder of the programme. Feedback from the sessions was positive as participants engaged enthusiastically in the hand-on session.
“I really enjoy AMI’s approach and how different it is from other training programmes. Most training programmes are very theoretical while AMI’s learning labs are action-oriented, you are able to see the results firsthand. The impact is seen and measured by the tools that we are given.” – Kennedy, GYB Participant
We will also commence another GYB cohort with Equity Bank later this year. We think GYB, with its evidence-based methodology, represents a potential breakthrough for practical and scalable entrepreneurship training and development, and we expect to show that SMEs that participate actively in GYB will increase revenues, improve profitability and create jobs more quickly than those that don’t. We’ll be testing the approach through an RCT with John and his team, with the generous support of the Argidius Foundation. We’ll share what we learn as findings become available, with a final report in early 2019.
To find out more about the research, contact AMI Co-Founder and Chairman Jonathan Cook. To talk about using Grow Your Business with the SMEs or entrepreneurs you work with, contact AMI Co-Founder and CEO Rebecca Harrison