The stark difference between India and China with reference to expectations of high growth tells us something about the conditions in India. Both the countries have a long history of business, but India can boast of traditional business communities that have kept continuity across centuries in carrying on business in domestic and international markets. Yet the majority in the SME sector feels it does not pay to grow your business too much. Contrast this with recent strides made by corporate India in acquiring overseas companies, launching new products and making mega IPO’s.
Entrepreneurship in a country as a phenomenon is the synergistic outcome of several economic, institutional, technological and socio-cultural conditions. Thus, there are budding entrepreneurs and established business organizations that start new business activities. It would be easier for an established business organization to launch new business activities than it is for a new entrepreneur. Raising finances, organizing resources, managing market entry and dealing with authorities are all handled confidently by established business organizations. It is very clear that a new entrepreneur would require considerable support from the promotional bodies of the government to manage these multifarious tasks efficiently. The GEM 2006 and 2007 surveys of experts show that experts do not find government policies framed specifically to support new entrepreneurs. In the absence of such initiatives, it is the established business organizations that are favoured for new ventures.
Yet we find expectations of high growth to be low in India. Talking to entrepreneurs we find that many believe, it does not pay to grow beyond a point. Even in 2008, you have to deal with 20-odd government agencies of both the central and the state governments, many of whom still function with the command-and-control mindset of the pre liberalisation era. With the number of agencies you have to deal with only rises. Contrast this with China where decisions are not only taken and announced but monitored and implemented speedily. The tax structures in India are in favour of small scale, since that’s how we have been promoting small scale industries. With economic growth, employment opportunities have grown and there is an exodus of talent from the small scale to the corporate world.That pushes a lot of responsibilities on to the entrepreneur and his senior management team, if he has one. As a result the entrepreneur frequently finds himself engaged in fire fighting most of the time, with no energy left for long term planning.
Many entrepreneurs decide to continue on a gradual growth path on account of the unwillingness to face challenges of growth. When initial success translates into personal wealth, they experience elation and choose to remain in that condition rather than take the risk of losing it all in the name of growth or diversification or expansion.
Those entrepreneurs who choose to go beyond initial success of their venture and grow, have to cross an important barrier, that of building an organization to run the business. In the start up phase, the entrepreneur was driving the operations, hitting the market and managing the funds. In the growth phase, he has to build an organization to run the well established part of business activities. That would leave the entrepreneur some freedom to give time, attention and energy to the task of managing growth.
Many equate organization with adding more people. But an organization is both a structure and a process. The process of planning, review and control also calls for management. For entrepreneurs to build an organization, they need to allow other viewpoints to come into play. Openness to other points of view is a very important factor in determining whether the entrepreneur will succeed in building an organization that can take care of itself. Most of the times the start ups begin and end as one-man shows.
The writer is Ashutosh P Bhupatkar, Advisor, Pearl School of Business, Gurgaon and former Director, IMDR Pune