Digital revolution and faster economic growth
One very interesting observation of the last decade is how drastically the image of an entrepreneur has changed. The scene was dominated by young founders, most of whom leveraged the growth of smartphones, internet and the expanding digital space, to come up with products that almost changed our everyday lives.
The average person today wakes up and checks either their email or social media accounts (the Facebook founder is 35 years old now and Instagram founders are under 40). Then, if they are people who stress about their productivity, use one of the to do lists or task organiser apps (may be Trello or Wunderlist started in 2011). After having breakfast, they either take their car or calls an Uber (one of the founders of Uber was just 34 when the company started) to go to the office. These first few hours after waking up highlights two very interesting points—the extent to which our personal lives have become digital, and how many of these services were created by young entrepreneurs.
Some of these entrepreneurs have not only changed our daily lives, but have impacted the economy in profound ways. The founder of Indonesian ride-sharing company Grab has impacted the economy in such a way that he has been made part of the government by the Indonesian president. Similarly, Bangladeshi companies like ShopUp and ShebaXYZ, both founded by very young visionaries, have made a substantial impact to the nation's economy. They have helped by contributing to employment (both within their own organisation, as well as through creating a marketplace for other businesses and helping them grow, leading to more employment from these organisations), attracting foreign investments, and contributing both to tech adaption and revenue at a national level. But these are just two companies, there are many such examples.
So why particularly did these digital start-ups make such impact? A very thorough Harvard Business Review article published in April 2016 discussed how business models have changed in recent times. In the traditional view of economics, there is a physical marketplace where buyers and sellers interact with each other and the market forces of demand and supply set the "market-clearing" price. But the 2000s saw marketplaces move online—amazon and eBay. The effectiveness of these markets depended on the number of sellers and buyers. Today, even in Bangladesh, where e-commerce is still mired with a good deal of distrust, the number of e-commerce and mobile transactions have gone up significantly. This shift to a digital marketplace has been aided by easy and secure payment systems through both bank cards and bKash. But what really helped make some of these digital start-ups make an impact was the fact that the services offered by these start-ups were solving a mass problem. Take Pathao for example. There was a certain time in Dhaka when going from one place to another quickly at reasonable cost was almost an impossible challenge. And yet, there was a considerable number of unemployed people who could do this job using their motorbikes. Now, we all know, we will not really trust a single motorbike driver in the locality who is willing to drive us to a destination to do the job most of the time. So, what Pathao did was a simple task of creating a marketplace for bikers to offer their services and for riders to purchase them. Granted, they needed investment to start off with a fleet of drivers, but then the whole concept behind this was very simple—help people move fast at a reasonable cost.
Another good example here is of bKash. They started with the simple task of helping people send money to their homes—a market previously served by transportation moguls and money launderers. Now, thanks to bKash, buying movie tickets, sending money to friends or splitting the bill for last night's dinner, paying bills, all of that has become very convenient.
Both these examples had a few but very important common characteristics. First, they were both addressing problems faced by a large number of people. Second, they both used technology to solve the problems. This was very important. In both cases, getting into the traditional system of business would have led to inefficiencies—either due to a lack of trust, or since the competitor is already entrenched. Rather, both the companies relied on the growth of cell phone and smartphone ownership across the country.
Finally, and very interestingly, both the companies helped build a platform, a marketplace, where they are now bringing in many buyers and sellers for a diversity of services (Pathao—food, delivery etc.; bKash—bills, ticketing, etc.). And this is exactly what was discussed in the Harvard Business Review article—the new era of business is a business of digital platforms—marketplaces which have reached a certain size to serve a considerable population size.
Now let's look at the other common factors that the discussion of the start-ups had in our first paragraph—these are all ventures founded by people who are quite young. What does age have anything to do with the impact and success of digital start-ups? Unfortunately, there has not been scientifically proven evidence of any causal relationship between young age and start-up success, but we can logically attempt to understand this common factor. If we look back a decade, around 2010s, the smartphone that most of us had, and mobile data connection that most of us were so accustomed to, had just been in its infancy. Samsung was still waiting to make an impact, and the app driven life I have described in the first paragraph, would have been considered a ludicrous concept.
But all that was required was a small turning point—the advent of Samsung with its android operating system that stunned the market and led to the era of smartphones. Naturally, this paradigm shift, was very fast, compared to other paradigm shifts in the business arena. The industrial revolution took almost 50 years to take full effect, the internet took 20 years to realise its true potential, and smartphones took only 5 years to lift off and reach its true potential. For businesses which were already entrenched into older business models, it is hard to shift quickly from one model to another. After all, if they are entrenched in one model and are surviving over a certain period, this implies that whatever they were doing were quite successful.
In order to venture to newer business models, either they had to perceive the new models to be a big enough threat to their ways of doing business, or they had to perceive these new models as very profitable to invest in. But as history shows us (failure of Xerox when personal computers and jet printers were on the rise), most of the large businesses are a bit slow to radically shift. This leaves us with the small businesses. Even for a small business, the venture of changing a business model to be digital is drastically hard to come up with, unless they are already having their backs pressed to the wall and have nothing to lose. But still, the cost and risk of changes are considerably less. Furthermore, in order to establish a business model based on technologies that have just been introduced, a good deal of risk aversion is required. As such, the lure of digital entrepreneurship was highest for the young aspiring entrepreneurs, who saw the digital arena as a potential game changer. And it has turned out to be a game changer, as we can see from the countless examples around us.
Putting the above two paragraphs together, we can get a sense of why the young digital entrepreneurs have been able to make such an impact in our daily lives and in our economies. But is this impact sustainable? In order to understand that, a quick review of the concept of sustainable impact is required.
In order to make an impact sustainable, the scale of the impact and the nature of the impact need to be recurring over a certain period of time. Now, it is natural that the impact will be very high when the digital marketplaces have just reached a critical stage, and such astronomical growth might not continue in the future. But, even after reaching a level of maturity, digital entrepreneurship still shows a potential of sustainable steady impact for the future of Bangladesh.
Both in the private and the public fields, there is still a great need for mass services that physical infrastructures cannot provide, and for which there are many potential good uses of digital services. And this need spans across various industries. Our education is on its way to being digitally accessible through the herculean efforts of Robi Ten Minute School. Similarly, the field of human resources, manufacturing and logistics, are starting to understand the need for digital services. There are many ways these digital services can help consumers become more aware of their purchases and lead a healthier lifestyle. As such, the potential impact that digital entrepreneurship can have on the economy and development of the country is limitless if seen from today's vantage point. But at the same time, the challenge of nurturing youth entrepreneurship during this time of the digital revolution comes in.
The very first challenge is that of nurturing the entrepreneurial spirit among the youth. Unfortunately, my experience as an educator has shown me that at the school level, our education is still very bookish, aimed at regurgitation of memorised materials, and individualistic. In order to nurture youth entrepreneurship, we need to start with the very basics—update our curriculum. We need to update our curriculum to a multi-dimensional assessment system, not just based on examinations. Introduction of science projects, art projects, performances, and many other activities that are at present considered as extra-curricular, need to be included as part of the assessment. In this way, school children will be driven to learn beyond just books—they will learn organising skills, they will learn to be a team player.
University curriculum has a lot of group work, but the major portion of psychological development comes from the early schooling stages of a child. Another important step will be to connect school children to what is happening in the entrepreneurial field. There are organisations such as Young Founders School, that help children foster entrepreneurship skills in school children. At present, the organisation has gotten access to a few schools, but a large-scale collaboration with schools can help develop the entrepreneurial skills early. Additionally, university curriculum can be upgraded to include experiential learning—for example, students can be required to come up with business plans or even open a simulation of their business plans in entrepreneurship courses, and these courses should not be limited to just business school students.
Second, funding and support needs to be made available for youth entrepreneurs. At present, a lot of work is being done in this arena from private sector—GP Accelerator, Robi Ventures, Upskill, etc., and from public sector—ICT funds. Brac university also helps its entrepreneurial students with a seed fund through their Centre for Entrepreneurship Development. This work needs to be continued, and if needed, further infrastructure support should be given by the institutions. Thanks to the efforts of Robi Ten Minute School, and platforms such as Upskill, Shudokkho, skills needed for start-up ventures are now available online. Besides, consultancy firms such as Light Castle Partners are offering industry overview and other start-up support through their plethora of projects. So, the entrepreneurial ecosystem and platforms have made good progress in Bangladesh—and this pace needs to be kept up. A big challenge will be to ensure the proper flow of funds to the start-ups, both through local investments and foreign investors, an area that still requires a lot of work.
The future of youth entrepreneurship, especially in this era of digital revolution, is very promising. And if we can prepare our future generations, and encourage them in this field, we can see a faster growing Bangladesh, with more convenient services, more employment, and with ventures that will define the world of tomorrow. But just like any other opportunity, it needs to be utilised—with the help of proper education and proper policy, in order to enjoy its great benefits in the future.
Khan Muhammad Saqiful Alam is a PhD Researcher, National University of Singapore and Analytics Adviser at Intelligent Machines.