Monday, January 14, 2013

Three Forms of Entrepreneurs: Existential Reality or Hypothetical Paradigm?

Kishore Biyani, Founder CEO of Future Group and considered a pioneer of modern retailing in India with Pantaloon is reported to have said that entrepreneurs are essentially of three types: the creators, the preservers and the destroyers. He said that he was a creator and a destroyer simultaneously. That Biyani has been a fantastic creator of retail format in India is well-known. Established in 1987, his Future Group operates in the Indian retail sector through over 17 million square feet of retail space, serving 300 million customers in 93 cities and 60 rural locations across the country based on products and services supplied by over 30,000 small, medium and large entrepreneurs and manufacturers from across India. Future Group employs 35,000 people directly from every section of our society. The revenues are variously indicated around USD 2 billion annually.

While retail forms the core business activity of Future Group, group subsidiaries are present in leisure and entertainment, brand development, retail real estate development, retail media and logistics. Some of the other businesses include, mobile telephony brand, T24, operated in association with Tata Teleservices, a supply chain and logistics infrastructure company, and a company engaged in providing educational and training services through three Future Innoversity campuses in Ahmedabad, Bangalore and Kolkata. In the financial space, Future Capital and Future Generali companies offer consumer finance and insurance to customers, as well as corporate loans and equity investments to companies engaged in consumer businesses. Where does the concept of Biyani being an entrepreneur of the destroyer type come from?
Possibly, Biyani has in mind the huge debt he had to accumulate in the aggressive attempt to build his retail, finance and services empire. This situation has led to his divestment of stake in Future Capital and parleys to unlock value from the two insurance ventures. Probably, this is also related to an effort by the group to identify core and non-core businesses. This brings us to the broader question as to whether divestments by an entrepreneur are tantamount to destroying of the edifice, or the parts of it, that he or she would have built at great passion. The history of mergers and acquisitions points out, on the contrary, that what appears to be destroying of the edifice ends up creating wealth for the promoters and the broader set of investors and stakeholders. This is notwithstanding the fact that in some cases divestments (and acquisitions) destroy wealth for one or both the parties.
The theory of trinity
The concept of three entrepreneurial types alluded to by Biyani corresponds intriguingly to the Hindu religious concept of the Trinity of Gods who drive the total universal and living system; Brahma, the Creator, Vishnu, the Preserver and Shiva, the Destroyer. While in the Hindu religious mythology, each of the three Gods specific functions in the cosmic system, and rarely do they transgress the respective roles, Biyani seems to indicate that an entrepreneur could be one or more of the three roles rolled into one. While it is great that entrepreneurs are playing God to the growth dependent Indian economy, the concept of entrepreneurs as harbingers of change itself needs to be better appreciated by entrepreneurs and professionals to ensure that each productive activity generates value on a sustainable basis, and never destroys it.
Whether or not there indeed exist three types of entrepreneurs as postulated, entrepreneurs themselves are made up of three unique forces, competence, passion, and gumption. While without doubt, professionals also possess, and are made up of, these three attributes, these attributes are much more specific in respect of entrepreneurs. For example, an entrepreneur’s competence tends to be his or her individual core knowledge that is critical to the establishment of the entrepreneurial enterprise. This is different from a professional’s competence that tends to be multifarious to meet a wide range of business needs, across firms. An entrepreneur’s passion is one of laying out one’s own path to the destination of enterprise creation, often based on an intuitive call, regardless of whether everyone agrees or not. This is different from a professional’s passion that is often system compliant and duty bound. An entrepreneur’s gumption is forever driven by rewards and never detracted by the risks. This is different from a professional’s approach to risk-taking which is highly cautious and consensual.
An entrepreneur who is a creator tends to have an equal mix of competence, passion and gumption. An entrepreneur who is a preserver tends to accord greater emphasis to enterprise management by competence rather than by passion and gumption. An entrepreneur who is a destroyer believes that the limits of competence, passion and gumption have been reached. It may be tempting to hypothesize that an entrepreneur could be in a perpetual creator mold by entrusting preservation of enterprise to professionals, and in the process avoiding becoming a destroyer altogether. Rarely, however, businesses can sustain themselves to perpetuity independent of human, entrepreneurial or professional, errors and oblivious of environmental discontinuities, technological or competitive. An entrepreneur has to reengineer himself periodically to be able to create and preserve more, and even if inevitable, destroy less. If the entrepreneur finds it difficult to transform or play different roles to suit different business contexts, appropriate supplementary measures need to be considered.      
Limits of assumption

While the three Gods, the Creator, the Preserver and the Destroyer are the Almighty Gods, the entrepreneurs who are creators, preservers and destroyers are unfortunately not. They face an environment that variously supports the outcomes of creation, preservation and destroying. Reverting to the case of the Future Group, the genesis of destroying of its own enterprise parts, if the divestment can be so called, lies in its own creation, far beyond what the resources could permit or the investors could appreciate. Unlocking of value in financial sector is taken by the group on the basis that the group should defend its core of retail business in an environment that would see a massive influx of foreign direct investment. The defence could be in terms of further organic growth based on resources generated and/or a partial destruction of even the core by ceding stake to a global retailer. An entrepreneur’s ability or positioning to be a creator, preserver or destroyer could well depend on how the forces of environment shape to support or oppose.
A start-up entrepreneur can almost always be assumptive that he or she would be a creator; for that is all what entrepreneurship is all about. However, an established entrepreneur has to balance the roles of creator and preserver with dexterity so that they do not become destroyers. It is often a matter of choice for the creative entrepreneurs to hand over the reigns of their successful enterprises to preservers to sustain or grow the success. The diversified growth of entrepreneurial groups, be it Tatas or Birlas has been due to the recognition of baton change. In such scenarios, divestment or wind-down of parts of the enterprise tends to be a well considered strategic move, rather than an entrepreneur-dependent or driven action.  
The assumptions on which an entrepreneur can operate are few as a startup enterprise. The startup assumption, driven by an internal core competence and an external opportunity perception, is fairly simple though intense: “I Can”. The number of assumptions that an entrepreneur would need to manage quickly escalates as the enterprise expands, and further as enterprises become a group. The competitive forces increase in numbers and intensity as an enterprise grows in scale.  It would be inappropriate, if not futile, for entrepreneurs to attempt to find out the tipping point when their own combined forces of competence, passion and gumption are overwhelmed by the combined competitive forces of technology, market and regulation. Such tipping point is rarely found out until it is too late to find out. There is a simpler and more enduring strategy for entrepreneurs being in a perpetual mode of creation.
Entrepreneurial freeze
It is now well appreciated that firms, as well as their leaders, need to reinvent themselves periodically to stay contemporary and competitive. Entrepreneurs, by definition, can neither be preservers nor destroyers; they can only be creators. Yet, it is a paradox of business history that entrepreneurs find it increasingly difficult to create new ventures as their ventures become established entities. The reasons are twofold: firstly, entrepreneurs fail to recognize the competitive forces that grow rather exponentially with growth and secondly, entrepreneurs, despite growth of their enterprises, increasingly compete with professionals in the tasks of further growth or consolidation and restructuring. These two tasks are best left to professionals with requisite (not necessarily entrepreneurial level) competence, passion and gumption. Attempts by entrepreneurs to transform themselves into preservers and destroyers would be ill advised. In the competitive business of business, virtually every aspect of organization and every member of organization needs periodical refreshing and retooling. Entrepreneurship is the only aspect of business that has to stay frozen in the context of natural instincts of building startups, and growing them to a particular level, organically.
Posted by Dr CB Rao on January 14, 2013






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