Monday, January 11, 2010

National Entrepreneurial Culture: Systemic and Mindset Factors

Widespread industrial and economic development of a nation is triggered by entrepreneurial initiatives in the country. India which is recognized today globally for its educated and hard working human resource base needs to focus its sights on harnessing entrepreneurial spirit for enhanced economic and social development. This paper discusses several approaches to ignite the entrepreneurial spirit with widespread positive impact for India.

Entrepreneurship defined

An entrepreneur is someone who starts his or her own business, especially when such activity involves risks. The risks relate primarily to market acceptance of business proposition, arrangement of requisite capital, creation of organization and uncertainty of financial returns. An entrepreneur mitigates the risks by developing a unique proposition for his venture in terms of product or service innovation and / or cost arbitrage relative to a larger organization. The combination of innovativeness and competitiveness that is implicit in an entrepreneurial activity acts as the key trigger for broader industrial and economic development.

A study of industrial history points out that each and every global corporation has had its roots in entrepreneurial activity; from Henry Ford’s Ford Motor to Akio Morita’s Sony. That said, it has also been a natural phenomenon for established business houses to start their own entrepreneurial initiatives through diversification projects. While such initiatives lack the main ingredient of a typical entrepreneurial activity viz., personal risk-taking of a promoter, such growth initiatives do involve risks on other multiple dimensions, and contribute in an equal measure to accelerated industrial and economic development.

Entrepreneurship in curriculum

The Indian education and social system is typically geared towards secured jobs, particularly in large organizations. Educational streams are pursued based on potential employment opportunities, regardless of the aptitude and flair of the students. Very few, if at all, of the students are tuned towards starting their own business enterprises. It is important therefore that Indian curriculum from the early schooling days incorporates entrepreneurship as a core subject of curriculum. History has instances of brilliant inventors, whether Alexander Fleming who discovered Penicillin or Graham Bell who discovered telephone, laying foundations of great business empires. The Indian educational system needs creative economic historians who can interpret the history of industrial innovations and business creativity across generations, and identify core entrepreneurial initiatives that transformed business and economy over time.

As a student progresses from a school to a college and later to a professional institution and a university, it becomes appropriate to inculcate the entrepreneurial approach through specific projects. The project work that needs to be undertaken by a student in a real life or in a business setting in partial fulfillment of the graduate or post-graduate study requirements provides an important avenue for entrepreneurial development. Unfortunately, this system has been reduced over time to a grudgingly tolerated formality by both the academic institutions and business undertakings. There is a clear need to revitalize and redefine the system of project work to fulfill a larger entrepreneurial purpose that it can truly deliver.

A reputed business school in India has recently initiated a process by which some of its students could work with industry icons as their understudies. This practice, the school felt, could enable them gain valuable insights into leadership styles. What is perhaps even more urgently required is a system by which graduate and post-graduate students are encouraged to work on establishing pilot scale industrial or business projects based on co-guidance from the academic institutions and business enterprises.

Teams of people from technical and managerial disciplines from within an institution as well as from different technical and business management institutions (say, from IITs and IIMs, to start with) can combine to undertake such projects. This methodology would, of course, require a sea change in how the institutions approach the project work as part of their academic curriculum and how they would provide credits to individual and group work. A revitalized academic industrial initiative of entrepreneurial projects would prepare the students exceedingly well on the entrepreneurial journey.

Entrepreneurship at work

Much has been written about how an executive, manager or leader in an established undertaking also could be entrepreneurial at work. It is possible and desirable for one to be an entrepreneur at work notwithstanding the fact that one is bound by structure, systems and processes in taking decisions and executing them. Being an entrepreneur does not mean being all alone, taking all decisions individually or taking risks all upon oneself. Even an entrepreneur would need to create a vision, strategy, structure and process with a team and raise finances through articulation of the concept to the potential stakeholders. The challenge for an executive at work to undertake new developments, construct new projects, introduce new products or foray into new markets is no different. The challenge even for a corporate executive is one of identifying a new domain based on one’s own experience, expertise, risk-taking ability and communication skills. Entrepreneurial executives can help companies expand and diversify their businesses, reaching higher career heights in the process.

Entrepreneurship at work does, however, require an appropriate organizational eco-system. Entrepreneurially vibrant organizations, in fact, are distinctly differentiated from bureaucratically pedestrian organizations. Leaders and managers in entrepreneurial organizations tend to encourage scientists, technologists and other professionals take risks in setting up new projects or venturing into new domains. There exists palpable latitude in such organizations towards forgiving genuine mistakes or accepting unanticipated outcomes. This objectivity nurtures the ability of people to undertake risky but potentially rewarding projects. Such organizations balance the rigidity of structure and process with the flexibility of innovation and creativity. This requires an organizational culture in which the entire leadership team is committed and aligned towards being entrepreneurial at work. Usually, such total entrepreneurial alignment within the top leadership is not possible given the multiple backgrounds from which various leaders come from. As an alternative, organizations could create entrepreneurship councils as a formal means to encourage executives, managers and leaders take entrepreneurial decisions, as distinct from those related to regular operations and normal business continuity projects.

Entrepreneurship at the helm

One would imagine that having an entrepreneur at the helm is one of the best ways to promote the continued entrepreneurial growth of the corporation that he helped to conceptualize and grow. One may even conclude that an organization which has an entrepreneur-founder at the helm as the Chief Executive Officer (CEO) would be the most entrepreneurial, always exploring new avenues. Unfortunately, however, several entrepreneurial organizations as they grow larger tend to become deliberative, if not bureaucratic. They tend to take strategic decisions (for example, integration, diversification, divestiture and acquisition) in a structured manner within the defined industry boundary. The entrepreneur who is also the CEO in such organizations gets bound by accountability to his shareholders and investors and finds it difficult to take apparently radical business and investment decisions, especially if they are unrelated to the current business, in an entrepreneurial manner. Getting stuck as an entrepreneur at the helm of a corporation is possibly not the best way to replicate, in broader domains and with greater resources, what the same entrepreneur could achieve in a much narrower domain and with a much smaller resource base.

The logical solution for the entrepreneurial plateau in decision making seems to lie in each entrepreneur making a decision on continuing to be an entrepreneurial leader vis-à-vis a professional leader. Whether to head and manage his corporation or remain a mere investor turning over the reins of his corporation to a full-fledged professional is a healthy dilemma which every entrepreneur must face from time to time. Remaining as an entrepreneur, choosing to move away from day to day management, would help the entrepreneur to refocus his energies and resources on newer entrepreneurial ventures. The business models, investor regulations and economic system that dominate the Indian business system are unfortunately not conducive to entrepreneurs to establishing newer ventures. In addition, the Indian entrepreneur tends to get emotionally and physically attached to the company he created, often failing to see the larger role he could play in national wealth building. The American culture, on the other hand, is one of entrepreneurs creating value, monetizing it and moving on with new business lives. The American entrepreneurial culture has clearly led to a continuous creation of newer and more challenging businesses of greater value in the US economy. This is perhaps a more appropriate model if India has to utilize effectively its scarce entrepreneurial talent. A true entrepreneur would need to be a serial entrepreneur rather than a static entrepreneur in this model.

Entrepreneurship as CSR

To provide a sustainable fillip to the entrepreneurial movement in the country, corporations need to take up development of entrepreneurs as a corporate social responsibility (CSR). Apart from encouraging induction of entrepreneurially trained graduates and post-graduates into companies, and enabling entrepreneurship at work, corporations need to take up molding of entrepreneurs as a core social responsibility. This could occur in two ways, both of which are mutually supportive to each other. In the first method, each corporation vows to develop at least a few entrepreneurs out of its workforce or from the general public by outsourcing some of the tasks which it has been doing by itself. For example, a company which has been doing all its equipment maintenance itself may choose to let its maintenance chief form an entrepreneurial venture that maintains facilities and outsource the activity to him. There are similarly several possibilities for large companies to outsource their broader supply chain management activities (including materials planning, procurement and logistics activities) or corporate services activities (including recruitment, accounting, audit, customer relationship management) to entrepreneurial ventures led by their own executives. While such activities may run the risk of breeding collusive cronyism, true entrepreneurial spirit should see such ventures break free of their sponsors and growing on their own sooner than later.

The second way of corporate entrepreneurial responsibility is to reach out to the wider society and enable members of the society to set up their own enterprises. Corporations adopting their neighborhoods can help the citizens set up a slew of social and economic ventures based on their capabilities. From simple social activities like tailoring and retailing to more involved infrastructure activities like education and business, corporations can, through their corporate social responsibility arms, contribute to an indigent society evolving itself into an entrepreneurial society. As industrial firms seek to expand aggressively through new industrial campuses and economic zones, the need to support the society with more sustainable means than one-time cash remuneration for the acquired land is self-evident. Typically, companies undertake varied corporate social responsibility activities only. Upon securing of their business models and operations as is evident by the contributions made in this sphere by established companies. However, by integrating corporate entrepreneurial responsibility as part of their entry strategy in new green field projects the companies can seek synergy between industrial development and social equity.


With over ten million graduates, post-graduates and research scholars graduating annually from colleges, institutions and universities of higher education in India, the potential to develop and unleash the entrepreneurial energy of the vast educated work force is immense. Even if a small percentage of the educated human resource base opts to establish its own entrepreneurial ventures, the employment and development triggers for the Indian economy would be immense. This, however, requires significant systemic and mindset changes. From ingraining self-reliance and entrepreneurship as an early family and educational ethic to the development of an industrial and economic system that encourages entrepreneurship both at work and outside work a host of systemic and cultural changes are required to achieve the full potential of a highly literate and highly entrepreneurial educated India.

Posted by Dr CB Rao on January 11, 2010

1 comment:

Narayanan said...

A persuasive article that captures a vision of a truly Incredible India! I believe exploring ways to encourage 'intrapreneurs' (i.e., internal entrepreneurs) in corporate India will add significant value to both economic and social development. Intrapreneurs can provide the catalyst for change within the organization and with the able support of a nurturing ecosystem as articulated in the blog, can open new vistas for the organization. A logical exit point could be a spin-off or an outright sale of the new product or service. Successful intrapreneurs serve as a role models both internal and external to the organization thereby facilitating the cycle of 'creative destruction' and long term viability of the organization.