Innovation at the Frontier — What We Can Learn from Global Entrepreneurs About Resilience and Ingenuity

Idriss Rifai founded Fetchr (formerly MENA 360) to solve logistics challenges for shippers, small businesses, and delivery services in the Middle East. The Magrath brothers founded Zoona to facilitate money transfers in Zambia. Thomaz Srougi launched Dr. Consulta in Brazil to give patients access to routine healthcare services.

Spread out over three continents and operating in three distinct industries, each founder transformed a market gap into an opportunity to build a stronger and more resilient local ecosystem. Alex Lazarow, an investor and thought leader in market-creating tech ventures, describes these founders as “camels” in the recently released Out-Innovate: How Global Entrepreneurs from Delhi to Detroit Are Rewriting the Rules of Silicon Valley. Venture capital seeks the “unicorn” — the company that can achieve a $1 billion valuation and an IPO — thus bringing fortunes to founders and investors. Frontier innovators, however, operate in different environments from their cousins in Silicon Valley and other mature startup ecosystems. Like camels, these innovators must demonstrate resilience and adaptability to survive in harsher environments.

Out-Innovate was released in early April, as the world began to feel the full effects of the COVID-19 pandemic. I chatted with Lazarow about his work and what entrepreneurs, investors, and startup ecosystems can learn from his research and interviews with frontier innovators as they all adapt to the new normal. What follows is a summary of our conversation.

Why did you write “Out-Innovate”?

While teaching courses in frontier entrepreneurship and impact investing at the Middlebury Institute of International Studies at Monterey, I had to contextualize everything. The Silicon Valley-centric literature didn’t capture how frontier entrepreneurs see opportunities and scale ventures in the midst of a lack of capital, constant macroeconomic instability, and more violent shocks. The thesis of Out-Innovate is that that the best lessons in entrepreneurship are global — innovators and investors around the world are now in a position to evaluate the status quo and learn from others.

We hear about the disadvantages of launching a company in Latin America, Africa, South Asia and Southeast Asia. What are the advantages?

“Chapter 5: Be Born Global” tells the story of SkyAlert, an app-based earthquake prediction service founded by Jesus Cantu in Mexico. By operating outside of a mega market like India, China, or the U.S., entrepreneurs like Cantu learn how to be creative from the beginning. While operating in a smaller market like Mexico, they have to think about building a product, organization, and company culture that will scale across markets. When starting a business, entrepreneurs should think about tester markets and how to grow beyond those borders. D-Light won the solar lantern market in India, demonstrating that if the company could win India, it could win other markets, too. In short, the “product + service + culture = scale” formula is the foundation for iterating in new markets.

You use the term “cross-pollinators” to describe frontier innovators in Chapter 6. What is a cross-pollinator?

Cross-pollinators have experience across industries and sectors that gives them excellent critical problem-solving skills. They leverage global networks to build talented teams and raise capital. By working in multinational companies or attending universities outside of their home countries, they gain the ability to adapt solutions to different markets. They have a long roster of contacts to call on for expertise, talent, and early stage capital. Entrepreneurs everywhere should invest their time in becoming cross-pollinators.

So many of us are working from home on account of the COVID-19 pandemic. One of the recurring themes is that frontier innovators have to build adaptable and flexible teams. How should entrepreneurs think about business continuity and team management?

Frontier innovators have been able to develop advantages when it comes to building remote and distributed teams. Conventional wisdom has favored local teams because most developed startup ecosystems have deep talent pools and the first customers are local. In Winnipeg, there are many fewer seasoned C-suite executives who can take a growth stage company through an IPO. The lack of ready talent necessitates flexibility and allows frontier startups to build robust distributed teams and prepares them for operating across markets and cultures. This is a huge cost advantage and enables companies to identify and remedy problems more quickly, because teams have to be in constant communication across time zones. Hiring and promotions are based on results and less so on what a CFO or COO should look like, for example.

Startups at the frontier have to find ways to build local talent pools. Toronto-based Shopify and Nigeria’s Hotels.ng both do this. Shopify employees can earn a degree while working for the company. Hotels.ng candidates go through paid training. These programs give companies more robust talent pipelines and increase staff diversity.

Based on your experience as an investor in markets where shocks are more common and severe, what advice do you have for entrepreneurs who are trying to grow in the midst of the pandemic?

It’s important to manage risks and growth. Regardless of the context, entrepreneurs should think about the risks they are willing to take to pursue growth and experiment thoughtfully. This is where the idea of the camel comes in. Entrepreneurs should be thinking about resiliency and sustainability in their business models from day one:

1. Charge the price that captures the value of the product, don’t subsidize or give away products, and focus on unit economics to prepare for scale.

2. Manage costs and don’t grow at any cost.

3. Take the long-term view. The current crisis will pass.

What characterizes successful entrepreneurs at the Frontier?

Entrepreneurs are creators. The biggest problems and opportunities are where there isn’t an existing industry. Creating a new product, service, or market segment is where the biggest opportunities are yet to be found. Zola is doing that right now by addressing the 1.2 billion people without access to electricity. That also gets investors out of bed in the morning.

We are all in the midst of a new frontier — and the world needs innovators now more than ever. Out-Innovate highlights the opportunities global entrepreneurs have to build high impact ventures, even in the less than ideal conditions brought on by COVID-19. Like camels, entrepreneurs must learn to be resilient and adaptive in the face of a crisis; and based on my discussion with Lazarow, these are the main points of advice entrepreneurs should keep in mind both now and post-COVID-19:

· Focus on new market opportunities. Understand your customers’ needs and offer a new product or service that enables access to the market.

· Build deep and extensive global networks. Your time and your contacts will add tremendous value to your business and become lenses for seeing growth opportunities.

· Know the unit economics of your business and understand how they will change at each stage of growth.

· Think of your business as global from the very beginning. This applies to how you approach your first market, regulatory frameworks, managing talent, and fundraising.

Written by: Julia Turnbull, Assistant Director, Student Programs, MIT Legatum Center

Out-Innovate is available here. Do you have a story about finding opportunity at the frontier? Share your story with Julia at jturnbul@mit.edu.