Business Analytics Toolkit

Innovation and entrepreneurship support is a complicated endeavor. Entrepreneurs' successes are determined by their motivation, skills, and resources, but also by complex dynamics of the innovation ecosystems in which they work. As a result, business analytics (see box 2 for a definition) for tech hubs face particular challenges and opportunities.

4.1. Using the "Build, Measure, Learn" Principle to Work in Complex Innovation Ecosystems

A foresighted, sound business analytics approach is crucial for the success and sustainability of your tech hub. The importance of measuring and analyzing results is often underestimated, and is often low on a tech hub manager's long list of priorities, especially during the set- up stage. However, infoDev's and others' experiences has clearly demonstrated that there are great risks in keeping business analytics for later (see box 3). When data is only collected ad hoc, it becomes difficult to understand the connection between provided services and their effects; detailed and continuous tracking is usually more insightful. Consistency and continuity, even beyond a tech hub's own clients and beyond the duration of support programs, makes for the greatest possible learning from successes and failures.

What makes business analytics for tech hubs difficult is that hubs shape local
innovation ecosystems and are influenced by them at the same time. They aim to have a positive effect on various elements of an innovation ecosystem, ranging from direct improvements of client start-ups' performances to broad changes in entrepreneurial culture. Tech hubs also design their service portfolios so it can fill those gaps in the ecosystem that other organizations don't fully address, so interaction between hub and ecosystem goes both ways.

Innovation ecosystems in developing countries require support in many shapes and forms, and it can be easy to lose focus. This often means that tech hubs struggle to clearly define their impact goals and rationale. Still, like for any other organization, a clear vision and longer-term, strategic plan is essential for tech hubs. You, the managers and designers, are being called upon to frame clear directions for your hubs, while continuously tweaking business models and adjusting to changes in ecosystems. Resource constraints and the need to coordinate with many diverse stakeholder groups add another layer of complexity. The best tech hubs maintain the highest possible degree of flexibility without losing focus on an overarching mission and strategy.

The "Build, Measure, Learn" approach - a key pillar of the Lean Startup philosophy--is useful in understanding how business analytics can be embedded into iterative business model design. The important insight is that organizational learning never ends, and that business analytics are not an afterthought of implementation. Instead, learning and analytics are part of an iterative process that is at the core of continuous and fast improvement (see figure 1). Another key argument is that start-ups should not spend limited resources on developing elaborate, meticulous measurement and documentation methodologies but instead measure a few simple and clear indicators at regular intervals. Most emerging tech hubs are like to start-ups in that they too need to reconcile measurement rigor and flexibility while maintaining small budgets.

Figure 1: Continuous improvement in the Build, Measure, Learn approach

The "Build, Measure, Learn" approach is particularly suitable for organizations that work to improve innovation ecosystems. Simply put, the more complex and unknown the implementation environment, the more difficult it is to make precise projections and plans. Recent ideas to improve lesson-learning in international development have acknowledged this and begun to emphasize the need for piloting and experimentation as well as failure detection and frequent and fast course corrections (or "pivoting" in start-up parlance). For projects that operate in unknown and complex contexts, this is a superior way to think ahead compared to rigid, static, and detailed long-term planning. Innovation ecosystems, with their many diverse stakeholder groups - from government agencies to freelance software developers - can be understood as complex environments, so tech hubs stand to benefit from flexible, dynamic, and iterative business analytics based on the "Build, Measure, Learn" idea.

4.2. Six Ways for Tech Hubs to Benefit from Business Analytics

Sound business analytics will improve your tech hub in six essential ways (see figure 2):

Figure 2: Six motivations for business analytics

4.2.1. Finding Focus for your Vision and Decision-making

Business analytics help you focus on what matters and make tough decisions to guide your tech hub towards your vision. Tech hubs can pursue a wide range of value propositions and business models. The list of services to choose from ranges all the way from hosting informal gatherings with a handful of coders to managing an investment portfolio for gazelle start-ups. Opportunities and options are endless, and different stakeholders will approach you for interesting projects that are not always an ideal fit. Tech hub budgets are limited, and you will have to make tough decisions on how best to use your resources and in which direction to take your tech hub. Only if you have clear targets for the core results that you want to achieve will you be able to push essential services to maximum effectiveness and say "no" to ad hoc activities that are irrelevant to your unique value proposition.

4.2.2. Learning and Improving

Continuous learning about what works and what does not is a necessary condition for improving. You as the manager or designer of a tech hub are in the best position to understand the hub. However, even the best manager's capacity is limited, and as the hub becomes larger and more complex, the less likely that ad hoc lesson learning will be enough. You will also improve your joint decision-making with your consortium members or advisory board if you can present them with well-documented information. If you want to continuously improve the value that you generate for your clients, you will need to measure and analyze your performance as best as you can, much beyond your daily experience. This is particularly true with tech hubs like mLabs and mHubs, which can have unanticipated, but important indirect effects. (see box 4).

4.2.3. Fundraising

You will need compelling analytics to fundraise and "sell" your tech hub to your funders, clients, and

partners. Just like any other organization, you need to market your tech hub to potential clients, funders, and other stakeholders. Your documented successes are the best argument to convince new client entrepreneurs and developers to join. In tech hub business models, access to clients is often what is relevant for partners and sponsors, so there should be synergies in your stakeholder management strategy. It is a good strategy to combine storytelling and qualitative evidence with hard results numbers. If you have a compelling and clear value proposition, and if you track important results numbers consistently, it would be easy to summarize and frequently update your pitch in short brochures, graphics, or videos. Infographics, as a tool to make complicated and dense information accessible to a wider audience, have become particularly popular in recent years. You can also include a simple real-time tracker that automatically imports selected statistics onto your website (see the website of Kenya's leading tech hub, the iHub, at http://www.ihub.co.ke/). Beyond informing readers, this helps to convey immediacy and transparency of your website as a whole.

4.2.4. Showcasing Clients

Analytics help to showcase your clients, giving them visibility and improving their chances of success. Your own success as a tech-hub manager is tied to the success of your clients, whether you are leading a community or incubating start-ups. Moreover, you play the role of a broker and marketer for your client companies. Start-ups and early-stage entrepreneurs often do not have the resources for outreach and partnership building, but tracking and marketing their stories will benefit both clients and yourself.

Business analytics provide you with good arguments on the substance of your clients' successes, making your joint outreach and communication easier.

4.2.5. Sharing Success with Clients

Your clients' success determines your future revenue, and business analytics help you show them your added value. Most tech hubs - especially those directly supporting start-ups - generate part of their revenues directly from client entrepreneurs. Community members and co-creation space users might pay a fee to attend special events or use desk space, and business analytics will help you show them what you have to offer. Analytics are even more important to manage royalty and equity agreements with incubation and acceleration clients. The issue here is that your revenue only starts to flow a long time after you provide your services. For instance, an exit from an equity position might only make sense years after the start-up has left the program and, also, royalty schemes may kick in only after the start-up achieves a certain threshold turnover or profit. In these cases, long-term, reliable analytics will help you make your case that you have actually added value to their businesses. Secondly, analytics record and document when your clients received support, what kind of support, and the consequent results. This makes interaction and relationship with your clients more transparent and creates accountability on both sides, which will make it much easier to claim your fair share of your clients' success even months and years after you supported them.

4.2.6. Being Accountable

If you receive funding from governments and donors, and if your tech hub is governed by a consortium, business analytics makes it easier to fulfill additional accountability and reporting requirements. Public and private donors in international development as well as governments have a responsibility to use their funds judiciously, and to ensure high levels of accountability and transparency. At the same time, these organizations often manage large budgets, and the funding they provide to tech hubs might only be a small part of their overall portfolio. As a result, they often require data to assess their own impact and accountability that might go beyond the data that is immediately relevant for you. But with solid business analytics in place, it is much easier for you to service your government and donor funder information requests. Similarly, your consortium partners might be crucial supporters of your tech hub, but they too have an obligation to ensure that they selected the right tech hub manager to run day-to-day operations, which they are usually not intimately familiar with. Business analytics can help you illustrate and create documentation of your work and its impact. Creating more extensive accountability and tracking structures might also have positive side effects in professionalizing and formalizing your operations (see box 5).