In this guest blog, Loris Raimo, a student at Trinity College, Oxford, argues we won’t achieve the ambitions in the new Industrial Strategy until we fix our education system to create more entrepreneurs.
The latest Government Industrial Strategy talks about the importance of entrepreneurs and the need to identify barriers to entrepreneurship, but it is silent on the actions our universities need to take to help overcome them. It is clear that if we are ever to achieve pre-financial crisis levels of growth we are going to need more entrepreneurs than ever before. The question for universities is, can they adapt to meet the challenge and the market need?
The economic challenge is clear: how do we improve economic productivity to pre-financial crisis levels? The best examples of success come from truly entrepreneurial organisations – so called frontier business like Google, Apple and Amazon, who are once again innovating close to pre-financial crisis levels, whereas most other businesses have seen next to no productivity improvements since 2007. This means that our stuttering productivity growth is accounted for by middling companies which are getting worse at innovating and adopting best practices, skills and knowledge.
In addition to these middling companies, are so-called zombie companies, happily just covering their interest on loans while reportedly taking as much as 5% to 20% of all capital stock, crowding the market out of new entrants, who could potentially become faster growing companies. Alongside this, a recent article by Pymnts suggests that Venture Capital Funds are raising increasingly high levels of capital, which is not being matched by investment in early stage companies – or our frontier firms of the future.
So how do we encourage greater entrepreneurship and new entrepreneurs? While the venture industry says that it has never been easier to start a new business, the data and the Government’s Industrial Strategy suggest we need to make it even easier. As an economy, we need more entrepreneurs to build frontier companies and create the big wins which venture funds crave. We also need to cultivate the innovators who can disrupt the zombie companies, creating partnerships between startups and corporates, identifying profitable mergers, providing mentoring in startup accelerators and creating top insights, as well as anything else which helps diffuse best practice and technical know-how throughout the economy and between frontier and non-frontier firms.
Whilst all of this signals that we need more entrepreneurs, today’s education system is just not geared towards this, especially in our so-called top-universities. University courses are too often limited to the theoretical. While this may develop students’ problem solving skills, most students have no idea how to actually implement a real solution to a problem they have written about in an essay or thesis. This is supported by HEPI’s Employability paper, which describes many academics as not prioritising employability in their courses. Johnny Rich, the author of the paper, interviewed the head of graduate recruitment for a major investment bank that employs some of the UK’s highest-flying students, who commented that even many of these top graduates do not arrive with the soft skills and business practices required to be useful team members, taking between nine months and a year to start adding value. Entrepreneurship needs to be taught at our top academic institutions, alongside rigorous academic courses. You might not be able to teach someone who has no entrepreneurial instinct how to build a business, but there are surely lots of people who have an entrepreneurial spark which they have been too afraid or unsure about how to develop in the real world.
One person who believes that entrepreneurship can be taught is Dragons Den’s Peter Jones, whose eponymous Enterprise Academy set out to be a catalyst for cultural change by bringing the boardroom into the classroom. Jones believes that ‘the development of enterprise and entrepreneurship is grossly neglected’ in the UK and ‘as a consequence hundreds of bright, ambitious young people never get the chance to gain the skills and confidence to realise their business dreams’. This focus on entrepreneurship also needs to be in our top academic institutions where the next Jeff Bezos or Kevin Systrom could currently be waiting. Both Bezos and Systrom, graduates of US rather than UK universities, worked in other companies for several years before founding their multi-billion dollar businesses. Whereas top UK universities, which are currently churning out City bankers and consultants, are failing to develop the entrepreneurs of the future. Many top students do not see there being a better route to success in the business world than a job in the City or a top strategy consultancy and are not made aware of the variety of options available to them, seeing anything related to entrepreneurship or start-ups as not for them.
Alongside the classroom, universities need to provide opportunities for students to work at a variety of startups or corporates, providing a real life education in entrepreneurship, ideation and operations, where they can learn about up and coming sectors like Artificial Intelligence and FinTech and where problem solving skills and content learnt is actually likely to be useful in later life. This type of university education could open students’ minds to new sectors and stop all of the top graduate talent from simply going into the City. There is potential for mutually beneficial relationships for universities and their students with Private Equity, Venture Capital and Venture Building companies like Rocket Internet, which have a large portfolio of companies that could provide students with internships or apprenticeships combined with academic study. This would also benefit firms in the crowded recruitment market, enabling them to spot talent and future employees they might otherwise struggle to find. Lessons should be learnt from schemes like The New Entrepreneurs Foundation which was established to create a new generation of outstanding entrepreneurs to play a key role in driving Britain’s future prosperity. Each year they select around 30 young, aspiring entrepreneurs who take part in a 12-month programme which consists of a paid work placement in an exciting high growth company, working alongside successful entrepreneurs, mentors and networking with business leaders.
A more practical focus to education at the UK’s top universities is needed to drive this change. This requires a reform of courses and the development of university partnerships with leading organisations in the entrepreneur and startup space and a government focus on subsidising and promoting programmes and jobs which encourage entrepreneurship. Without a real focus on reforming education and the graduate job market, entrepreneurship will never be fashionable enough for the wave of top minds needed to work on our biggest economic challenge, the global productivity slowdown.