I don’t think so. People often tell me that you have to evaluate island entrepreneurs by different criteria, but based on our experience with the Fish 2.0 competition for sustainable seafood businesses, that is not true. We have many small-scale companies competing against large-scale companies, and we find that basic business and sustainability rules apply in all cases.
Island businesses have the potential to deliver great positive impact for their communities. Some of those businesses will stay within their island’s borders and others will expand globally. The criteria for judging potential in both cases are the same, because every business needs a sound growth strategy. The trick with island businesses is ensuring that the strategy is relevant to the island context. This point came into focus for me when reading a new paper, “Business and Family in Micronesia,” outlining what it takes to succeed in Micronesia.
“The issue of family obligations versus good business practice comes up over and over again in Micronesia,” writes C. L. Cheshire, senior business development manager at the Pacific Business Center Program, University of Hawai‘i at Manoa. “One hears about it when a business owner complains of having to give family as well as non-family members ‘credit,’ otherwise they will shop someplace else. Loan officers at the bank hear about it when a borrower cannot make his or her loan payment because money from the business was used to pay for a relative’s trip to Hawaii or a family member’s medical bills. The conflict between family obligations and standard business practices also shows up in personnel matters.”
This is true of most small-community cultures, but it doesn’t have to stall business growth. Cheshire interviewed owners of successful Micronesian businesses and found that a hybrid approach combining features of traditional culture and Western capitalism can bridge these conflicts. What typically don’t work are the solutions international business development organizations offer: incurring debt as a means of financing and subsidizing large-scale, government-run export businesses.
Financing 85 percent of a start-up’s cost with a bank loan—as is typical when island businesses work with local development banks—is often both
unnecessary and a recipe for failure. Business owners struggle to make the loan payments, and pressing family needs always take precedence. The successful business owners Cheshire interviewed were able to start free of any large debts by acquiring “fire sale” or privatized government businesses, starting with small-scale retail or export operations, forming partnerships and spinning off from family businesses.
In the seafood sector, small-scale businesses with an eye on global markets can make a difference in the local economy as well as the environment. Catching reef fish for export is no longer sustainable, for example, but Micronesian aquaculture products such as sponges, corals, giant clams and trochus can succeed by taking advantage of business conditions that supported reef fishing: low start-up and operating costs (family ties and the assistance they bring are an advantage here), coupled with strong market demand and high margins.
Cheshire found that partnerships with people from outside Micronesia are particularly effective because of the dual perspective they provide. This is just the kind of relationship Fish 2.0 facilitates by bringing island businesses together with U.S. and European investors and advisors. Competitors from the Pacific and Oceania tell us that exposure to the expectations and interests of U.S. investors is one of the most valuable aspects of the competition.
“If business development programs follow the example of successful Micronesian businesses, they will look for ways to capitalize on the business development opportunities that are present within the existing businesses in Micronesia,” writes Cheshire. “Rather than continue to spend money on small-business loan programs that quickly go broke or continue to subsidize large-scale government-run export businesses that never earn a profit, they will assist existing Micronesian businesses in putting together the partnerships they need to link local resources and products with local and export markets.”
That assessment lines up with what we’ve seen in our strongest island competitors. Island businesses don’t need a different set of business standards; they need partners who can help them tap the strengths of their community context to build businesses that can succeed in the global economy. Join us at the Fish 2.0 finals in November to meet and learn more about promising Pacific Island ventures in the sustainable seafood arena.