Governments struggling to encourage jobs look to small- and medium-size businesses to be job creators in their countries. But little or absolutely nothing is done. Some may have small business agencies run by – yes, you guessed it – government officials who have never started a business in their lives. Sharp operators sell governments business incubator snake oil and fill their bank accounts with millions for “training” entrepreneurs.
None of this sham boosts small business numbers to a level where sizeable job creation takes place. What really is needed is an understanding of who is motivated enough to take their own business ideas and transform them into products and services.
Well, it’s not the rising middle class. How can you expect people who have shot up into the middle class to start their own business? They study for university degrees and aim for jobs in government or large organisations. Take China as an example. In China we now have unemployed university graduates. Vocational and technical trades are being encouraged in China to create jobs to support increased levels of manufacturing.
No innovation is going to take place from a bunch of shopkeepers. Not the innovation that involves new products and services. Studies have shown that very little, if any, innovation occurs at the level of village businesses such as shopkeepers, lawyers, dentists, garage owners and restaurateurs.
Peter Drucker shows us that innovation is risky but less so than defending what was yesterday. Innovation requires knowledge, ingenuity and creativity. Innovation must always be close to the market, focused on the market and market-driven.
Drucker identified seven sources of opportunity that ultimately drives innovation. Among them: incongruities, process needs, changing demographics, new knowledge and even unexpected failures.
China is not scared to innovate. SMEs contribute about 60% of China’s industrial output and account for 80% of the jobs. China knows it’s changing demographics. It has suspended value-added tax and turnover tax for small businesses with monthly sales of less than 20,000 Yuan ($3,230) from August 1. The tax exemption will benefit about 6 million small businesses and boost employment and income prospects of about 20 million people,, the China Daily reports.
Many of the new start-ups, encouraged by this policy, will come up with new products and services for the local market and foreign markets. Each will be faced with evaluating the viability and value of their new business idea.
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