On 23 June, 2012, The Economist newspaper featured an article,”African entrepreneurs: Parallel Players,” which described the phenomenon of African business owners simultaneously entering into multiple lines of commerce.
The article even featured a quote from a prominent Liberian businessman, Cyril Allen II. The article reports that “he and his family farm cocoa and coffee, run a cleaning business, lease out property, manage logistics for international companies.”
While its not every day that little Liberia is mentioned in The Economist (especially in a positive light) it does seem like every day that the Building Markets staff here in Monrovia interacts with such “parallel entrepreneurs” among the local business community of Liberia.
Many of the more prominent commercial actors here in Liberia operate wide-ranging conglomerates. It is common that wealthy, established families have the very sort of diverse business estates that the article describes, usually a combination of wholesale trade and importing, retail, construction, and real estate, which normally involves hotel and residential properties. Most do so very successfully, employing a competent management team to run each operation independently.
However, such complex arrangements are not without drawbacks, especially with smaller, newer businesses, where, as the article mentions, one entrepreneur is trying to manage multiple ventures, and perhaps can’t give sufficient attention to all of them. Also, it is unusual for any single person to bring equal talents to multiple commercial pursuits. Since Building Markets began our Liberia Business Directory last September, we have interviewed nearly 1,500 local businesses. It has become clear that there is such a thing as “overdiversification,” and that although it may come out of a rational response to multiple market opportunities, it can ultimately be a hindrance to entrepreneurial success.
These are just the sort of issues that are mentioned in Building Markets’ first annual Market Overview Report on Liberia, published in April. This report featured comments from 12 international buyers, many of the major concessionaires as well as UN agencies. Repeatedly, these procurement officers expressed wariness at one individual business pitching solutions to multiple purchasing needs across their supply chain:“Three buyers stated that they wanted to do work with suppliers that are specialists with a technical knowledge of the goods or services they provide. These buyers all said that they much preferred a supplier with a speciality to one that can sell a wide variety or large quantity of sub-standard goods.”
In our tip sheet to local entrepreneurs, we passed these buyers’ sentiments along. Specialization is key, especially in more technical sectors such as construction or transportation, which are two of the major areas where large buyers will typically seek the engagement of local entrepreneurs. Firstly, there is an understandable bias against a “jack of all trades,” in terms of an aversion to the negative stereotype of the “wheeler-dealer.” And in comparing the abilities of similar vendors, large buyers tend to favor demonstrated expertise and a proven track record in one service line as opposed to an entrepreneur that seems intent on grabbing multiple profit opportunities ahead of performing well on an appropriate scope of work.
Entrepreneurial talent, hard work and experience, a good team, and a verifiable roster of previous, satisfied customers can overcome these negative perceptions, but that proves the point: parallel entrepreneurs are only problem solvers for large companies if they can truly perform to perfection.
Tags : Market Overview Report The Economist