Fadi Ghandour needs little introduction, if any, in the Middle East. The founder of global logistics and transportation company Aramex is arguably the region's best-known entrepreneur, a mentor and role model for many young Arabs, an angel investor, and one who is more than happy to challenge traditional business and social values. Ghandour's accomplishments have been hailed by many, including New York Times columnist Thomas Friedman who wrote in his book, The World Is Flat, that every Arab should know the Aramex story.
Established in 1982 as an express operator for the Middle East and South Asia, Aramex became the first Arab-based company to trade its shares on Nasdaq in 1997. It returned to private ownership in 2002 and then went public three years later on the Dubai Financial Market as Arab International Logistics. It now has an alliance network of over 12,000 offices, 33,000 vehicles and 66,000 employees, providing freight forwarding, catalogue shopping, magazine and newspaper distribution and other services.
Ironically, 2009 was probably the best year ever for Aramex. At a time when most companies across the world were battling through the economic downturn, it opened new businesses and reported a 25% increase in net profit for the year. Ghandour's no-assets, no-debt policy helped as the the business environment changed rapidly. Ghandour spoke with Arabic Knowledge at Wharton in Dubai about addressing the region's weak business "ecosystem" and what needs to be done to help the next generation of innovators down the often bumpy road to entrepreneurial success.
Edited extracts of the conversation follow.
Arabic Knowledge at Wharton: What are the biggest challenges to entrepreneurship and innovation in the region? Are they purely economic or are there cultural, social and political reasons?
Fadi Ghandour: I don't think there are any cultural, political or social reasons. They are partly economic and partly developmental, like building a "softer" loan structure, [having an] an ability to easily register companies with very low capital, and securing intellectual property rights. On the other hand, clearly there is a need to have venture capital, angel capital and early-stage capital. There is a business culture, as you might call it, in the region that focuses on oil and gas, government contracts, and trading — representing overseas companies.
The story of entrepreneurship here is one without an ecosystem of capital, private-sector support and angel investors. There is also no mentoring, which is really important.
Arabic Knowledge at Wharton: You have been a mentor?
Ghandour: Yes, I do that. You are talking to me because I am an entrepreneur and I understand what they do. I am an angel investor and I find that while capital is important, what they need the most is advice. They need time. It is so much more important if you can tell them how to do things, what my experience has been — all that is not measured in terms of money.
Arabic Knowledge at Wharton: Did you get that kind of advice when you started?
Ghandour: I did and did not. The easiest way of getting a mentor is if your father understands what you are doing, understands business well and is willing to mentor you. I was mentored by a father who was an entrepreneur, but did not have time because he was a traveling man. You have to seek [out mentors]. Some of the networking events, some of the associations popping up for angel investors, etc., are a good step and helpful.
You need to make the private sector and businessmen aware of how important it is for them to give their time. It is like talking to your son or daughter. They need advice and eventually they will run, but you have to help them take those first few steps.
Arabic Knowledge at Wharton: How much time are you able to give them?
Ghandour: Just before [this chat], I was emailing a brilliant lady entrepreneur, telling her that I was traveling but will be in touch to do a conference call. You have to get back to them because they are young. If you believe in this, you have to give it time.
Arabic Knowledge at Wharton: Do you see a lot of young people in the region taking the entrepreneurial route these days?
Ghandour: Yes, I see a lot. The Internet has created all sorts of possibilities that people of earlier generations did not have. [Young people] see what the world is doing. They see the low cost of developing businesses online. They learn from others. There are some businesses that have already been developed in other places, but need to be customized and "Arabized." You will have the copycats and you will have the innovators. That is the nature of the beast.
Arabic Knowledge at Wharton: You once said the governments in the region are like mothers and the citizens are like their spoiled children. Do you see that changing quickly?
Ghandour: (Laughs) Yes, I stick to my position. An overprotective father is going to ruin the future of his child. He will not let him fail [and] he is not going to let him try or expose him to the world. It's a vicious world out there and you learn only when you fail. A mentor, father or mother can tell you a lot of stories, but the best way to learn is to fail. You have to stumble.
Arabic Knowledge at Wharton: But failure is not taken too kindly in this part of the world, is it?
Ghandour: No, it's not. Maybe it is in the U.S., the mother of all entrepreneurial countries. It has created that thing about an underdog. It is easy for people there to fail because that is seen as learning. If you tell people that it's fine to fail but to get [back] up and run, you have to create the ecosystem that helps. Mothers can never take failures, families can't.
An entrepreneur, who has just started, was telling us about what his family had to say about the Maktoob-Yahoo deal [in which Yahoo bought the Arab portal in 2009]. His mother or father said they did not know what Maktoob does, "but why don't you try and do something like that?" It catches on. It slowly becomes legitimate to try, which means that you don't work for the government or a big company that gives a secure job, but try something on your own. That, by definition, means that it might work or it might not, and possible failure means I am at least trying.
Arabic Knowledge at Wharton: Are people in the region averse to risk because of the fear of failure?
Ghandour: Entrepreneurship is something that is learned. I am a product of that process. Entrepreneurship is not something you are born with. You learn not only by doing, but also by having the skills — making financial statements, the discovery, logical thinking. This is stuff you have to learn in schools. That's where you get exposed to these things. You can throw somebody in the water and he can only become a good swimmer if he knows how to breathe. You have to give people the skill sets. You can teach people the rules of football and they can understand and enjoy it, but they can only play when they experience it themselves.
Arabic Knowledge at Wharton: How do you find the right idea?
Ghandour: A right idea is a product of exposure, learning and curiosity, which are essential for any entrepreneur. The status quo has to be unacceptable and that's what I keep saying in the organization. I tell people they need to question things. You can always do better by questioning anything that is in front of you. You can do something that is totally different if you have a plan that is acceptable. A new product can change the face of an industry.
Entrepreneurship is all about questioning because that's where ideas come from. You also have to look closely at what is happening in your industry and learn from it. Any technological advancement in an industry can have a huge impact. For example, with the arrival of email, a whole industry around sending letters from one place to another almost vanished.
Arabic Knowledge at Wharton: Do you believe that entrepreneurs have only one good idea and tend to lose interest in innovation once they have achieved the first goal?
Ghandour: No, there are many serial entrepreneurs. They exit one thing and start another. It depends entirely on your skills, exposure and mind. I started my business 28 years ago, but I do a lot of intra-department entrepreneurship. But there are some who make their money and go on a vacation. Human beings make their own choices. You don't always have to be an entrepreneur.
Arabic Knowledge at Wharton: What are the better entrepreneurial stories in the region?
Ghandour: You have Orascom, which is a fantastic story, Maktoob, Consolidated Contractors Company – one of the biggest [diversified construction firms] in the world today — and Rubicon, one of the best animation companies. The region needs more but there are examples and role models. We need to document and celebrate them, and make people aware of them. There is nothing to be ashamed of in highlighting entrepreneurship stories in the region.
But the more relevant story to our youth is the small entrepreneur. You don't need to be worth hundreds of millions of dollars. At $2 million or $3 million, you can create jobs and value that is attainable. I don't want to scare people [by saying] entrepreneurship is about creating mega companies. It is about innovating the value and product you offer. You create wealth for the people who work for you, and [for] yourself.
Arabic Knowledge at Wharton: Are governments in the region doing enough to encourage entrepreneurship?
Ghandour: No, they need to do much, much more. They need to start with education, the regulatory environment and the enabling environment putting up seed money. The Arab world is facing a huge challenge of unemployment and the only way you can create jobs is by partnering with the private sector so that it becomes a public-private partnership. All those young people graduating from universities need to become job creators. That means creating companies and changing the tradition of working for governments.
Arabic Knowledge at Wharton: What are the three things you would tell a budding entrepreneur?
Ghandour: I would tell them they are in it for the long run, watch out for your cash and find a mentor. Finally, stop complaining. Don't worry about government regulations. Go and do it. I know it is an issue, but it should not stop anyone. Just do it, as Nike would say.