There were times when graduates of premium engineering and management institutes thought of anything other than professional career as the only employment option. Things have changed significantly in current times with young professionals forsaking attractive employment offers and going in for entrepreneurial ventures. There was of course, the more established trend, of moving into entrepreneurship after a few years of work experience and savings accrual. Both segments reflected first generation entrepreneurship. India Bulls, Bharti, Apollo, Orchid, Sun, RedBus, Wellspun, Dusters, JustDial, Flipkart and a host of entrepreneurial companies are examples of such entrepreneurial initiatives. Within the first generation entrepreneurship, the class that jumps into the entrepreneurial journey straight after education needs special kudos. They may be called India’s new age entrepreneurs. While business management and leadership are common across all enterprises, established or entrepreneurial, there are certain guidelines which Indian entrepreneurs must be cognizant of to a greater extent.
Young entrepreneurs are typically full of academic accomplishment and growth aspiration, and typically imbue their immediate environment with high energy and anticipatory excitement. They also tend to dream with the guts that are required to turn their dreams into realities. While it is difficult to hypothesize when and how the young graduates are influenced in favor of entrepreneurship, the placement season, more often than not, tends to be the period when they get to know not only their worth but also whether their aspirations and corporate offerings match. The placement season is not only a time of futuristic direction and career shaping but also a period of self-awareness. That is the period when all students feel equipped to enter industry or business, but some feel inspired to give back to the society in terms of wealth creation through organizations and businesses they aspire to establish. This blog post postulates ten principles which are particularly relevant for Indian entrepreneurship.
Most young entrepreneurs get their entrepreneurial call as they pursue management programs. The reasons are not far to seek. Management programs, in particular, provide students with a unique value addition that puts the basic academic capabilities, be it engineering, science or commerce to even more efficient and effective use. Management program provide one with unique conceptual and analytical skills which helps one view complex business problems in terms of their simple core issues on one hand and at the same time splice them in terms of diverse perspectives with insightful analytics on the other. In addition, the programs equip people with multiple soft skills, the main skill being people skills. The institutes and programs prepare the students not merely to be managers of day-to-day operations but also be equipped to be potential leaders who can shape the strategic future of organizations.
That said, there is a valid concern that scientists and technologists would be straying away from their core if they pursue management programs. The only way this concern can be mitigated is through letting the managerial thinking create the spark of entrepreneurship. India holds great potential; all economists agree that India would be the third largest economy of the world by 2030 or so. Statistics, however, tell only one part of the story. In qualitative terms, our growth has been more in terms of islands of manufacturing excellence, retail luxury or social affluence. We need to do much more in terms of social infrastructure, be it schools, colleges, universities, hospitals or industrial infrastructure, be it power, roadways, railways, seaports and airports. The opportunity for contribution by young professional aspirants to Indian economy therefore stand out, the opportunity is not merely one of a regular job rather it is more of making a difference through an entrepreneurial spirit, of creating wealth and jobs for the society.
The journey as an entrepreneur is not only the most challenging but also the most satisfying one. The journey is challenging because, more often than not, one as an entrepreneur, would have nothing but one’s dream to pursue and convert into reality. The entrepreneur is most likely to lack the organization, the financial resources and in some cases even the support of his or her near and dear as he or she pursues the entrepreneurial journey. That said, it is this challenge of creating something valuable from almost nothing, against all odds, in pursuance of one’s dream makes for the entrepreneurial excitement. No entrepreneurial journey, however, cannot commence without seed capital to support the dream idea. The more fortunate ones step up from the initial security of their regular self-employed businesses, for example pharmaceutical distribution or medical practice, to venture into product development and manufacture or healthcare service; Sun Pharma’s Dilip Sanghvi and Apollo’s Dr Pratap Reddy, respectively, are two examples. Many others leverage their professional employment opportunities, in India or abroad, to generate savings.
Either way, one would have to go through the tribulations and excitement of an entrepreneurial journey. Even the most successful entrepreneurial behemoth cannot be immune to vicissitudes. Dr Reddy’s which seemed to make no wrong move hit a bad patch subsequent to the acquisition of Betapharm in Germany. To be a successful entrepreneur, one may hypothesize a three step process. The first is self-discovery; a recognition of the yearning within to be an entrepreneur. The second is the ability to spot the niche. The third is the ability to raise the seed capital. The ecosystem for entrepreneurs in India pales in comparison to the one that exists in the USA. It is to the credit of the new age entrepreneurs that they are undaunted. For example, Ola, a taxi service startup founded by two IIT-Bombay graduates has succeeded in starting its services and raising funds ahead of someone like Uber making an entry into India. So do the likes of Café Coffee Day in being ahead of Starbucks, for example. Whether it is lateral entrepreneurship or new age entrepreneurship, there exist certain commandments; recognizing them entrepreneurs can institutionalize growth and sustainability in their entrepreneurial ventures.
First and foremost, is the discovery of the intrinsic inspiration and passion within a person to become an entrepreneur. All successful entrepreneurs (and even unsuccessful ones) would agree that there could be no avocation more challenging and exciting than that of being an entrepreneur. The satisfaction of creating a business of value to the society, of building an organization creating employment, and developing a brand that brings recognition to the nation are well worth all the problems one would face in assembling a like minded team, finding progressive investors and creating an R&D, manufacturing and marketing infrastructure. Dedication and commitment of an authentic entrepreneur would be such that even If one were given an option to restart the my life after a degree, he or she would unhesitatingly choose to be an entrepreneur again.
Secondly, and this is as important to established businesses as to entrepreneurial start-ups, the right business choice is one which helps an entrepreneur secure a toehold; and within the business the product choice is what makes or breaks a business; and a right product choice backed by the deployment of efficient process technology, provides the sustainability to business. The success of new age entrepreneurs lies in reinventing the ordinary services into new customer-centric services deploying new technologies of development, manufacture and delivery. Even ordinary businesses like recruitment, coffee serving and ticket booking can be viable entrepreneurial activities with a dash of technology and a feel of customer-fulfillment, achieving differentiation and sustainability in the process.
Thirdly, nimble execution is as critical as differentiated strategy, especially to entrepreneurial firms. Execution cannot be at the cost of quality though. Ability to establish a quick but perfect beachhead not only optimizes the investment-revenue equation but also raises entry barriers to the others. Many successful real estate firms began their journey by delivering their first projects fast and perfect. Great Lakes Institute of Management in Chennai, set up by Professor Bala Balachandran has to its credit the fastest execution time frame for a high quality academic infrastructure of its kind. Establishing or accessing world-class R&D and manufacturing infrastructure in record time frames, developing products and securing regulatory approvals in the shortest time frame is a sure prescription for success in the scale-up phase of an entrepreneurial startup.
Fourthly, sustainable competitive advantage is derived by operating at opposite ends of spectrum without compromise to any one factor; for example, being the highest quality producer with the lowest cost position, being lean in organization but powerful in delivery, balancing efficiency requirements of high throughput with market needs of low batch sizes and high product variety and driving high revenue and market share without compromise to profitability and sustainability. It is important for the entrepreneurs to focus on the critical parameter that differentiates one’s competitiveness and then reinforce it. An icecream maker, for example, has to focus on two essential parameters: access to high quality milk and integration of a cold chain. Everything else, comes next.
Fifthly, technology ought to play a major role in whatever we conceive of, and execute. If Flipkart, despite being a first generation enterprise, could secure a leading position in the highly competitive e-retailing format, it is in no small measure to its unswerving emphasis on high technology, including certain quality and compliance differentiators specific to Indian e-purchase environment. Entrepreneurs often are forced to make choices between technological competitiveness and resource optimization. Those who persevered with technology eventually end up successful. The case of MTR Foods in terms of newer technologies driving value despite the limitations of a family enterprise is an example.
While the above are significant positive lessons for a successful entrepreneurial journey, there also exist some pitfalls one must be aware of. Firstly, as a first generation enterprise, it is an eternal struggle to overcome financial resource limitations. Given the classic preference in the Indian stock markets that promoter should stay invested in the company with high promoter share-holding, it is a challenge to raise risk capital without dilution. Perforce, one is required to depend on debt. The race to become what one is capable of in terms of product, manufacturing and marketing canvas has to be tempered by prudential norms of debt-equity structure from time to time. Dilution of equity and monetization of non-core assets would become inevitable, to restore balance sheet stability and sustain future growth, however emotionally painful such options would seem to be.
Secondly, as a company evolves from being an entrepreneurial start-up to become a more organized enterprise it is important to keep developing organization structures and talent profiles as well as systems and processes that move in step with changing business requirements. The art of management and leadership vary significantly between a start-up and an established enterprise; the leadership teams must display a high degree of self-awareness and sensitivity in this important aspect. Even a highly successful company such as Infosys struggled with reinventing itself to changing levels of competition and the increasing levels of internal aspirations of people for positions of influence and power.
Thirdly, all organized activity, including its competitive advantage, will stem from people, and only people. The success of a first generation enterprise such as Orchid Pharma in becoming a globally recognized pharmaceutical major has been directly linked to the founder’s ability to attract and leverage some of the stalwarts in science, engineering and business in achieving aggressive technological development and business growth. The real source of competitive advantage of an entrepreneurial firm would lie in its ability to attract the best talent with inspirational goals and empowering ecosystem. The day a front ranking organization loses the ability to attract such talent, one may say that the organization has lost its soul!
Fourthly, as entrepreneurs scale up their organizations and businesses, they must learn to evolve from the science of making right product choices to the art of making right business choices. As a successful entrepreneur, once he or she brings up a business to a critical mass, he or she must learn how to forego control, entrust it to other professionals and redirect his or her entrepreneurial entry and passion into newer vistas of growth. Inability to make this transition in a timely and graceful manner could cost you the business dearly and also sub-optimizing future potential immensely. The recent split announced by Indiabulls’ three promoters indicates their realization that their business has outgrown the desire to stay together.
Fifthly, entrepreneurs at least the successful ones, would need to look beyond their own firms and businesses, and consider how they can contribute to creation of virtuous ecosystems in the country that institutionalize entrepreneurial spirit. This requires establishment of a positive climate of angel investing, start-up investment and equity investment besides an institutional framework for incubation of ideas. This requires that entrepreneurs should not be lost in the success of their enterprises but must interact with the broader stakeholder community so that our nation can be truly a nation of entrepreneurs. While N R Narayana Murthy’s Catamaran is an example but the hugely successful entrepreneurs and entrepreneurial groups can do much more, if they put their heart to creating an Indian entrepreneurial ecosystem.
The growth of India’s private sector has been that of India’s entrepreneurship, right from the historical days of Tatas and Birlas. Indian entrepreneurship has been less flamboyant than it ought to have been, given its successes. The potential to maximize new age entrepreneurship is also less recognized than it ought to be. India’s future still has several challenges of scarcity and inequity, but with dedicated and diversified entrepreneurship each challenge is an opportunity of development for both established businesses and entrepreneurial startups. As one embarks upon an entrepreneurial journey, the ten themes of entrepreneurship of this blog post should be of some inspiration and guidance.
Posted by Dr CB Rao on July 13, 2014