Alternative Investments and Pink Diamonds

Aug 17, 2021 | Gazette, The Latest

Alternative Investments and Pink Diamonds

Tuesday, August 17, 2021, by Dr. Mariya Yesseleva-Pionka, PhD

There has always been a great allure to owning diamonds among investors worldwide. Investments in precious stones and gems fall under the category of alternative investments and collectables with a high-risk factor. Argyle mine has been well-known for supplying natural-coloured diamonds, including white, champagne, cognac, blue, violet, and extremely rare and highly-priced Argyle pink and red diamonds.

The Argyle Diamond Mine was established in 1983 in the East Kimberley region in Western Australia. Argyle mine quickly took leading positions and was classified as the largest diamond producer based on the volume in the world. Last year, in November 2020, the Argyle mine announced its closure after 37 years of production and delivering a staggering 865 million carats of rough diamonds. This announcement has made a significant impact on the world diamond market due to the fact that Argyle mine was supplying up to 90% of all pink diamonds. Due to the drastic reduction in supply, the anticipated increase in prices is expected to affect the world diamond market. The 2021 Argyle Pink Diamonds Tender is set to present to the world a final collection of extraordinary diamonds, and all the closing bids must be submitted by the 1^st of September 2021.

There are many layers of certifications that have to be done to assess the precious stones. The price of each stone depends on many factors such as cut, clarity, shape and colour. Typically, darker shades of pink, which are close to purple, are very rare and, as such, have a much higher value. Once you have decided to purchase precious stones from an auction house or dealer, you have the right to insist on independent assessment. Generally, it is common that two different evaluations of stones will provide different prices. Precious stones and gems trading is typically conducted in illiquid markets with quite high sales commissions. There is a drastic difference in the retail and wholesale gemstones prices and quality. It is essential to follow the strategy of buying at a low wholesale price and selling at a higher retail price.

Trading in precious stones presents many challenges due to the lack of stringent taxonomy in the quality standards. For any new investor, it is difficult to distinguish between different types of diamonds and, as a result, they try to seek an expert opinion of value based on the quality of the stone. There are many cases when inexperienced investors become involved in a scam and end up losing their money. Thus, it is vital for any investor to understand, research, and educate yourself about the potential risks associated with precious stones investing choices. For investment portfolio diversification, it is essential to keep in mind not to overexpose their investment position to high-risk investments and keep it to a lower level. Always have proper insurance in place for precious stones and keep in mind that the long-term strategy of owning your investment position might not work to your advantage, should the supply of rare stones, such as pink diamonds, increase due to the findings of new pink diamonds deposits.

Author

Dr Mariya Yesseleva-Pionka is Global Certificates Manager at ICSB, a Higher Degree by Research Supervisor at Excelsia College and Adjunct Academic at the University of Technology Sydney, Australia. Dr Yesseleva-Pionka held teaching and senior academic management positions in Central Asia (Kazakhstan) and Australia. She specialised in general investments, personal and corporate superannuation investments while working for Westpac Banking Corporation and BT Financial Group in Australia. She was invited to join The Housing Connection, a not-for-profit organisation in Sydney, Australia as Treasurer and Board Member from November 2019. Her research interests include entrepreneurial finance, traditional and alternative ways to finance small and medium enterprises (SMEs), corporate finance, policies for the small business sector, innovation and SMEs, FinTechs and Blockchain. Dr Yesseleva-Pionka is the Associate Editor for the Journal of the International Council for Small Business (JICSB).

The Entrepreneurial Journey Part 3 – Do You Have the Right Business Model?

Aug 4, 2021 | Gazette

The Entrepreneurial Journey Part 3 – Do You Have the Right Business Model?

Wednesday, August 4, 2021, by Dr. Frederick Crane

Even if you have the right venture opportunity (discussed in Part 2 of this series), without the right business model your venture is likely to fail. Once you have identified and screened your opportunity well, the next step is to determine how you will make money from this opportunity. This is where your business model decision comes in. In short, a business model is a framework for making money. It outlines the set of activities that the enterprise will perform, how it will perform them, and when it will perform them to create customer value and earn a profit. I have argued for many years that the right venture opportunity always requires the right business model.

Your business model is central to the firm’s success. Thus, the right the business model should answer the following questions:

How will the enterprise make money?
How will the enterprise create value?
For whom will the enterprise create value?
What is the enterprise’s internal source of sustainable competitive advantage?
How will the enterprise position itself in the marketplace?

Successful entrepreneurs also ask themselves the following questions with regard to the business model.

Where is the money?
Who has the money?
How do I get the money?
What do I need to provide to get the money?
How do I get it faster than anyone else?
How do I get it time and time again from the same customer?
How can I add other revenue streams later?

A major component of your business model is your revenue model. There are several revenue model options for you to consider including: production model (manufacturing), subscription, licensing/royalty, and franchising. Each has its own strengths and weaknesses, and you should examine which one makes sense to you given your specific opportunity and business context. Voice of consumer is very valuable in determining which revenue model is right for your given the customer you are seeking and how they wish to do business with you.

It is critical for you to target the right customers with the right business model. You must focus your efforts and determine which customers you wish to serve (target market/segment) and how much of each customer’s needs you want to serve. What is also very important for you to consider is not only creating recurring revenue but also obtaining incremental revenue. In fact, many customers can produce more than one source of revenue (e.g., buying a car and having it serviced). Moreover, some customers might wish to buy a product, but others might wish to lease, rent, or rent-to-own a product. An enterprise that only wishes to “sell” its product may be losing out on other potential lucrative revenue streams!

In summary, it is critical that you develop the right business model for your venture. In fact, without one, you are not very likely to attract venture financing. And, just like you would vet your opportunity with your potential customers, you also want feedback from those potential customers about your proposed business model. This input will help you determine how to best configure your venture to create value for your target market as well as select the best strategy for making money and sustaining the growth of your enterprise.

Author

Frederick Crane serves as a Senior Project Manager for the International Council for Small Business (ICSB).

Dr. Crane is an Executive Professor of Entrepreneurship & Innovation at the College of Business at Northeastern University; Former Editor of the Journal of the Academy of Business Education; and co-founder of Ceilidh Insights LLC – an innovation management training, intellectual property consulting
and consumer insight company. He was formerly a professor of marketing and entrepreneurship at the University of New Hampshire and a Chair and Full professor at Dalhousie University.

At Northeastern, he developed the graduate new venture creation course; the undergraduate innovation course – which is now taught campus-wide; and developed the online MBA course on innovation and enterprise growth. He also serves as the Faculty Advisor for the Private Equity and Venture Capital Club. Every semester at least one of his teams from his new venture creation course goes on to commercialize a business.

Citation of Article:

Crane, F. (2021, August 4). The Entrepreneurial Journey Part 3 – Do You Have the Right Business Model? The International Council for Small Business, Small Business Gazette. https://icsb.org/the-entrepreneurial-journey-part-3-do-you-have-the-right-business-model/

Humane Entrepreneurship and MSMEs in a Dynamic World

Aug 1, 2021 | News | 1, The Latest

Humane Entrepreneurship and MSMEs in a Dynamic World

Sunday, August 1, 2021, by Dr. Ayman El Tarabishy

In championing people first, humane entrepreneurship inhabits a unique role in the business world as inherently human-centered. In light of the pandemic, the necessity of humane entrepreneurial practices has become more apparent than ever before. As we contended with COVID-19 head-on, many MSMEs saw governments responding swiftly in support. However, while we seek prosperity in our post-pandemic society, we must ask ourselves three essential questions: Will this government support continue? How can MSMEs recover in the aftermath of COVID-19? Finally, how can we actively support MSMEs, not only from a business standpoint but on a human level? With values of empathy, equity, and environmental protection, humane entrepreneurship provides the answers.

The journey towards humane entrepreneurship was initiated five years ago by Drs. Ayman El Tarabishy, President & CEO, ICSB, and Ki-Chan Kim, Professor of Management at The Catholic University of Korea and former ICSB president. On the opening day of ICSB’s second annual Human Entrepreneurship Conference, Professor Kim presented research that examined how humane companies retain happier employees, customers, and environmentally healthy communities than traditional business models. These “Firms of Endearment” outperformed the overall market by a nine-to-one ratio over ten years in terms of profitability and performance. This is because companies that invest in human capital as the chief source of innovation create High-Performance Work Systems (HPWS). As a result, employees experience elevated levels of engagement and creative empowerment.

Humane entrepreneurship has a simple recipe, wherein each element activates the next: 1) empathy, 2) empowerment, 3) enablement, 4) proactiveness for an opportunity, 5) risk-taking, 6) innovativeness, and 7) performance. Professor Kim argues that the first element of a successful company is a CEO with a clear mission. When a CEO works not only for profit but also for a philosophical goal, they attract like-minded employees who feel inspired to strive for positive change. As stated by author and motivational speaker Simon Sinek, “Humane entrepreneurship is to hire people who believe what you believe.” This shared philosophy in improving society serves as the backbone of any successful enterprise.

Building upon this mission, the CEO must also be empathetic, positive, and considerate. When a CEO opens discussions, encourages involvement, and supports employees in their responsibilities, they create a culture where employees arrive at work engaged both physically and mentally, motivated to accomplish their communal goal. Essentially, integrating these pillars of humane entrepreneurship creates a HPWS that produces engaged employees who are enabled to take innovative, creative risks and achieve higher excellence. Creativity is the key to a successful company and is achieved with the humane entrepreneur’s superpower: empowerment.

Ultimately, we arrive at three factors for a successful company: 1) a visionary CEO, 2) empathy and 3) empowerment and enablement. When entrepreneurs manage their employees’ experience in light of their mission, they directly affect their sales and performance to achieve the best possible outcome for their company, employees, and community. In his presentation, Professor Kim posed this question: “What is an enterprise?” Citing Colin Mayer, the former dean of Said Business School at Oxford University, we understand that “the purpose of a business is not to produce profits” and that an enterprise is “the most productive place to solve problems on the planet.” In essence, a humane company is a place that challenges the corporate status quo, and a humane entrepreneur is a person who takes action to make their vision for a better world a reality.

To learn more about the humane entrepreneurship model, watch the session below.

Author

Dr. Ayman El Tarabishy is the deputy chair and a teaching professor in the Department of Management at the George Washing University School of Business. His expertise involves entrepreneurship and the creative, innovative, and humane-focused practices existing within the field. Dr. El Tarabishy now sits as the President & CEO of the International Council for Small Business (ICSB), the oldest and largest non-profit organization across the globe devoted to advancing small business research and practices. The Council stands as a coalition of over a dozen national organizations, being represented in over eighty countries.

Dr. El Tarabishy is an award-winning author and teacher. In 2019, the George Washington University New Venture Competition awarded Dr. El Tarabishy the kind honor of being named the ‘Most Influential Faculty.’ Having developed the first Social Entrepreneurship, Innovation, and Creativity courses offered to MBA and undergraduate students, El Tarabishy is constantly striving to find the perfect balance between tradition and modernization in his teaching pedagogy. Currently, Dr. El Tarabishy is the sole faculty member in the GW School of Business to teach in two nationally-ranked programs.

Environmental Sustainability and Global Finance

Jul 20, 2021 | Gazette

Environmental Sustainability and Global Finance

Tuesday, July 20, 2021, by Dr. Mariya Yesseleva-Pionka, PhD

Back in 1987, when United Nations introduced the definition of sustainability, it emphasised that sustainability is about responding to the needs of the present without undermining the ability of future generations to meet their own needs[1]. In the early 1990s, Triple Bottom Line (also known as People, Planet, Profit) was introduced by John Elkington. He advocated for business reporting, which provides information about the economic, environmental and social performance of business entities[2]. In September 2015, the General Assembly implemented the 2030 Agenda for Sustainable Development that includes 17 Sustainable Development Goals (SDGs) based on the principle of “leaving no one behind”[3]. This Agenda emphasised an all-inclusive approach to attaining sustainable development for all. According to OECD data, many countries are taking action, but progress is insufficient to achieve the goals of the 2015 Paris Agreement. The adoption of renewable energy is on the rise; nevertheless, it still represents 11% of energy supply and 27% of electricity production in the OECD[4].

The public disclosure of information about the social and environmental impacts of business operations has become widespread since the early 1990s, typically among large companies worldwide. The Global Reporting Initiative[5] (GRI) provides a conceptual framework and guidance for social and environmental reporting. The GRI Reporting Framework provides direction on reporting an organisation’s economic, ecological and social performance. It was created for application by businesses of any size, sector or location.

Climate and environmental impacts will be at the heart of global finance. Can profitability and sustainability co-exist? In answering this question, it is vital to emphasise that long-term profits will not matter if there is no planet. Overall, if we continue to underestimate the importance of environmental resources and our role in promoting sustainable behaviour, this could lead to highly detrimental outcomes for the planet. Thus, there is an immediate urgency for educating everyone concerning climate risk and their role in promoting sustainability.

We are already witnessing green start-ups that provide various tools that measure storm and flood risks and assess the level of pollutions created by businesses. In the financial services industries, many green FinTechs successfully combine finance and technology while promoting and embedding sustainable behaviour among customers. For instance, digital banks allow their customers to round-up their transactions to support tree planting, give cash-back for using climate-friendly business services or products, provide green loans for various solar energy projects and deliver a customised analysis of customers’ spending to emphasise their carbon emissions footprint and sustainable behaviour. Other FinTechs provide online app-based wooden credit cards with the portion of profits going to reforestation projects; introduce loyalty programs based on carbon points that can be converted into products and services with selected business partners that promote climate-friendly sustainable behaviour.

There is an onset of transformative generational wealth handover from baby boomers to millennials, with new business leaders becoming increasingly attentive to climate risks. Thus, they tend to choose sustainability in business operations. According to an EY study, millennial investors are almost twice as likely to invest in businesses or managed funds that target specific social or environmental goals, and 90% of them want sustainable investing as an option within their pension/superannuation plan[6]. Originally sustainable investing started in equities; however, over the years, government and private companies have been issuing various debt instruments to finance environmentally friendly projects.

There seems to be an assumption that carbon footprints and environmental impacts are mainly connected to large organisations. However, the MSMEs account for over 90% of all businesses worldwide. Thus, it is evident that MSMEs collectively are classified as significant polluters globally and there are increasing requirements for these enterprises to participate in and implement sustainable business practices. There is an urgency in educating entrepreneurs, MSME owner-managers and future business leaders in general, on how SDGs require changes to business finance, management and investment.

[1] United Nations Brundtland Commission, 1987

[2] www.hbr.org/2018/06/25-years-ago-i-coined-the-phrase-triple-bottom-line-heres-why-im-giving-up-on-it

[3] https://www.un.org/development/desa/disabilities/envision2030.html

[4] https://www.oecd.org/environment/climate-data/

[5] https://www.globalreporting.org/

[6] www.ey.com/en_au/financial-services/why-sustainable-investing-matters

Author

Dr Mariya Yesseleva-Pionka is Global Certificates Manager at ICSB, a Higher Degree by Research Supervisor at Excelsia College and Adjunct Academic at the University of Technology Sydney, Australia. Dr Yesseleva-Pionka held teaching and senior academic management positions in Central Asia (Kazakhstan) and Australia. She specialised in general investments, personal and corporate superannuation investments while working for Westpac Banking Corporation and BT Financial Group in Australia. She was invited to join The Housing Connection, a not-for-profit organisation in Sydney, Australia as Treasurer and Board Member from November 2019. Her research interests include entrepreneurial finance, traditional and alternative ways to finance small and medium enterprises (SMEs), corporate finance, policies for the small business sector, innovation and SMEs, FinTechs and Blockchain. Dr Yesseleva-Pionka is the Associate Editor for the Journal of the International Council for Small Business (JICSB).

The Entrepreneurial Journey Part 2 – Do You Have the Right Opportunity?

Jun 29, 2021 | Gazette, News | 2, The Latest

The Entrepreneurial Journey Part 2 – Do You Have the Right Opportunity?

Tuesday, June 29, 2021, by Dr. Frederick Crane

The entrepreneurial highway is riddled with the fractured bones and broken dreams of aspiring entrepreneurs who failed to mine the right opportunity. Why? Because some opportunities are simply better than others. Ultimately, you need the right opportunity and exploit it effectively or you will not achieve entrepreneurial success.

There are actually three views regarding entrepreneurial opportunities. That is, opportunities can be recognized, discovered, or created. With opportunity recognition, the entrepreneur recognizes (deduces) that supply and demand are known to exist. The entrepreneur simply matches up supply and demand through an existing firm or a new firm (e.g., a franchise). When the COVID-19 pandemic hit us, you didn’t have to be a genius to recognize that there was going to be demand for facemasks given government mandates to protect the population! So many entrepreneurs jumped on that opportunity to supply masks.

With opportunity discovery, the entrepreneur inductively determines that either supply or demand exists (not both), and the other side has to be discovered. For example, there is demand for cures for certain illnesses but no supply, and there was a supply of personal computers (when first invented), but demand had to be discovered. Again, with the COVID-19 pandemic, pharmaceutical firms rushed to be the first to supply vaccines given that there was and is plenty of pent-up demand for such. Finally, with opportunity creation, the process used by the entrepreneur is abductive (inference), and neither supply nor demand exists in any obvious manner, and one or both may have to be created (e.g., new social media platforms). This is the concept of market creation – real newness.

I suggest that the right opportunity should possess the following characteristics:

It creates significant value for customers by solving a significant problem or filling a significant unmet need for which the customer is willing to pay a premium price.
It offers significant profit potential to the entrepreneur and his or her investors—enough to meet their risk/reward expectations.
It represents a good fit with the capabilities of the entrepreneur and the management team—that is, you have the experience and skills to pursue it.
It offers sustainability over time.
It can obtain financing.

Also, the right opportunity will have validation from the intended customer. In short, the true litmus test for the right opportunity is whether or not the customer thinks it is a good idea, finds it valuable and distinctive, and would be willing and able to pay for it. Therefore, voice of customer (VOC) plays a major role in determining whether or not you are mining the right opportunity. You might think you have the right opportunity, but it is confirmation from the customer that is most important. So, you cannot sit in your room crafting a business plan. You have to get out there, in the marketplace, immerse yourself with the intended customers – and listen! Then, you will know if it is the right opportunity. And, if is it then the hard stuff begins; constructing the right business model; crafting the right brand, and executing the right go-to-market strategy. These are opics we will cover in the next parts of the entrepreneurial journey.

Author

Frederick Crane serves as a Senior Project Manager for the International Council for Small Business (ICSB).

Dr. Crane is an Executive Professor of Entrepreneurship & Innovation at the College of Business at Northeastern University; Former Editor of the Journal of the Academy of Business Education; and co-founder of Ceilidh Insights LLC – an innovation management training, intellectual property consulting
and consumer insight company. He was formerly a professor of marketing and entrepreneurship at the University of New Hampshire and a Chair and Full professor at Dalhousie University.

At Northeastern, he developed the graduate new venture creation course; the undergraduate innovation course – which is now taught campus-wide; and developed the online MBA course on innovation and enterprise growth. He also serves as the Faculty Advisor for the Private Equity and Venture Capital Club. Every semester at least one of his teams from his new venture creation course goes on to commercialize a business.

Crane, F. (2021, June 29). The Entrepreneurial Journey Part 2 –Do You Have the Right Opportunity?. The International Council for Small Business, Small Business Gazette. https://icsb.org/the-entrepreneurial-mindset/