Creating an Entrepreneurship Culture

Though it may be debatable to which degree an entrepreneurship culture can be created as opposed to it developing naturally, examples from Munich once again indicate that regions may possess large amounts of unleveraged entrepreneurial potential. However, this potential may be unleashed through measures such as business plan contests and the "importing" of an entrepreneurial culture by large corporations. When designing measures to support the creation of an entrepreneurship culture in a region however, be aware of "entrepreneurship killers" that may be inherent in the form of local culture or the political environment.

Business Plan Contests ” An Initial Spark Ignited from a McKinsey Study

In 1996, only 2% of Munich region university students were willing to start a company. In the U.S. at the same time, the number was around 40%. In Germany, large and established companies remained the way to go for students after graduation. The initial spark that enabled Munich to create new regional wealth based on its substantial existing innovation potential was a study conducted by the management consultancy McKinsey & Company in 1996. The study indicated that creating an entrepreneurship culture would help to leverage the region's intellectual capital and to promote an economic structural renewal.

The McKinsey study found that one of the constraints on entrepreneurship in the Munich region was the German mindset. According to Dr. Frank W. Strathmann, managing director of Gr ¼nderRegio M, ^[11] the organization responsible for promoting entrepreneurship at Munich's universities, this mindset can be described as follows : "I am an engineer, I have a small company, a secretary, and maybe one or two other employees and that's it. I don't need more and I don't want more," which is in clear contrast to the U.S. "think big" attitude of trying to "think outside the box" and aggressively expanding product/service scope and expand markets, which is all entrepreneurial by nature.

Based on a model that had already been successfully implemented at MIT in the United States, McKinsey teamed up with Munich's universities, among others, to launch the Munich Business Plan Contest (M ¼nchener Business Plan Wettbewerb), ^[12] a concept that was unique to the region at the time. Its initial aim was to increase the entrepreneurship quota at Munich's higher academic institutions. However, the contest eventually led to a paradigm shift in the entire region. It quickly became apparent that the entrepreneurial potential of Munich and its surroundings was just waiting to be released.

The MIT concept was aimed at contestants with serious business ideas and implementation capabilities. The traditional German lack of interest in "starting small and making it big," was addressed with another, more playful contest that borrowed the 1-Dollar Business concept from the University of Calgary (this approach assumes little or no available investment capital and forces creative marketing thinking to develop instantly profitable businesses), and renamed it to the more appropriate 5-Euro Business Contest. ^[13] Since the two concepts' successful implementation, they have been spread to universities throughout Bavaria and Germany. Dr. Strathmann provides his insight on how effective the Munich Business Plan Contest was.

Frank W. Strathmann

Replicating foreign business plan concepts ” The Munich Business Plan Contest

Even though people were already working to position Munich for the information age in the mid-1990s, the region at the time was characterized by a general lack of money and competencies in this respect. The initial feat of getting things off the ground was the biggest challenge. One possible solution was to create an entrepreneurship culture around the university-based business plan competitions that had already achieved considerable results in other countries .

Within this context, McKinsey played an instrumental role in transferring the implementation know-how for the contest from the United States to the Munich region while helping to win commercial sponsors for the project. During the first year of the contest's operations, its fundraising amounted to a total of approximately $500,000 donated by companies such as Allianz, BMW, Deutsche Bank, the Frankfurter Allgemeine Zeitung, and Microsoft. By 2001, this sum had risen to approximately $1.6 million.

The contest immediately achieved results that more than met its founders' initial expectations: 40 technology companies were launched in conjunction with the 1996 “1997 contest alone, a result that proved how successfully knowledge and research results from universities could be integrated into the process of generating innovations in business. By 2000, the contest had created 103 new companies in the Munich region, employing 740 individuals. These companies were financed by a total of approximately $81 million, consisting of $55 million of venture capital, $20 million of government funds, and $6 million of business angel funds. The 1999 “2000 contest generated a total of 483 entries by over 1,000 participants , of which 126 business plans made it to the final selection at the end of the third round. Once the success of the contest in the Munich region became apparent, it was implemented in Berlin as well. Today, numerous start-up contests operate all over Germany.

The Munich Business Plan Contest's concept is built on knowledge transfer, coaching, and team-building . Participation is open to anyone . The contest covers a period of several months, during which the business plan is developed in three stages, from a rough 10-page business plan draft to a fully detailed business plan capable of accompanying a team through the actual launch of its business.

Throughout the process, more than 100 coaches are available to the participants, providing them with one-on-one advice free of charge. Numerous crash-courses, lectures, cocktails, and a regular meeting accompany the process, enabling comprehensive networking. The contest's contact office is fully staffed, providing participants with comprehensive printed information and literature referrals.

The 5-Euro Business Contest

The contest invites students from Munich's universities to gather in small teams and to participate in four crash courses on the subjects of idea generation, project management, marketing, and legal/finance. With an initial investment of five Euro (approximately four U.S. dollars), the teams have five weeks to build a business, in the process of which they are continually coached. At the end of the five-week period, the students present their results to a jury of business people for the chance to win prizes valued at about $3,000.

Addressing students and scientists from diverse technology sectors, Munich's business plan contests have helped to spread a new entrepreneurship culture throughout the region and all of Germany. However, for such a culture to change the economic face of an entire region, strong initiative is required from additional players. For instance, large technology companies can help by coaching their employees about the imperatives of the global Innovation Economy. Our discussions with executives of Siemens indicate that the company is trying to import America's entrepreneurship culture to within its own four walls and to the Munich region.