Creating a new entrepreneurial curve
Jan 07 2013
Uncertainty gives hope to mankind. It allows individuals and organisations to strive for a better future. If the world was an all-certain place, the casualty would be mankind’s happiness. In the 2011 sci-fi movie ‘In Time’ where the world’s currency is ‘TIME’, every transaction (even a phone call from a public booth) is through exchange of time minutes of life. People know exactly when they will die (initial longevity is 25 years at birth) unless they can earn (or steal) some more time units. There are private banks that charge time-usury rates. It is indeed a dystopian world, where everyone lives in a state of permanent worry! The expectations and animal spirits in such a society are dimmed.
Managers understand that success (and failure) is governed by how well they manage uncertainty. Systems and rules are created for the purpose of regulating the known uncertainties and known outcomes. For some of us in India, it is not difficult to visualise a road-crossing where vehicles disobey the red signal with impunity. The result is chaos, accidents and traffic jams. When everyone obeys the rules, the result is smooth traffic flow and saving of resources and time! However, if a biker were to suddenly jump the red signal, then he multi-fold increases the risk of an accident (it could have happened even while standing still, but then the chances would have been relatively very low)! This example of ‘known-known’ gives us some idea about the range of probabilities (and margins of error) that describe risks. Embracing more complex processes means adding more variables that can lead to ‘known unknowns’. In a gigantic set-up, governments manage through rules and bureaucracy. An uncertain or rigid economic or regulatory environment, such as fluctuating foreign exchange rates or tax-laws, can kill investments.
A business entity mimics life in terms of uncertainties. Even a simple one-man shop faces uncertainty every moment — issues like demand and supply (including pricing, competition, policy), customers accepting the product and buying it, manufacturers and suppliers meeting production schedules, quality specifications and delivery dates, technological relevance, exchange rates, manpower availability, taxation issues and interpretations, and so on. A manager’s role is essentially to manage uncertainty often through his superior intellect, domain knowledge or judgment. The irony is that if managers decide to maintain stability (risk averseness), then they are mostly commoditising the business resulting in low margins. The investors are happy only if company managers assure them growth and performance. This is where the conflict arises. In an uncertain world, managers are judged on their promises made in the prospectus. Leaders have to manage expectations and create an organisational environment and structure where entrepreneurial practices can flourish. Without this pre-requisite, organisations cannot move forward.
In a larger set-up, as the business grows other challenges arise where the hands-on entrepreneur can no longer keep pace with the increased flow of information and decisions. He then requires layers of organisational structure and systems. As an evolutionary process, harmonisation between different functions and competing talent becomes essential. As a corollary, a human being is made up of some 60 trillion cells that are independent yet collaboratively work with each other in order to sustain life. A complex system exhibits properties that cannot be predicted by considering its subcomponents in isolation.
Entrepreneurship takes the society forward, and entrepreneurs essentially are risk-takers — they invest their time, energy, and money in expectations for profits earned through for superior value-creation. The uncertainties and potentialities of capitalism allow innovation and technological upgradation. The digital revolution has affected our work-life in multitudinal ways directly and indirectly. It has speeded up life, and made real-time collaborations possible. On a broader scale, ICT has influenced societal change through social networking.
The 1990s saw India having a large number of pioneering entrepreneurs who created good wealth, global-scale enterprises, and global recognition to India across a spectrum of industries (though visibility came mainly hogged by the ICT-IT sector). Somehow, this pipeline of role models seems to have dried up of late. India and Indians need to create a third curve of entrepreneurs to take the country forward.
Getting the zeitgeist right is crucial. We teach certainty in our schools: if only the young minds were taught to deal with uncertainty in our country where systems are usually absent or fail to perform. India today belongs to the young. As the recent countrywide demonstrations show, our youth are highly aspirational and impatient. They want good education and challenging jobs. However, they have no means to either understand the requirements of setting aspirational goals or the ways and means to achieve them. Our higher education system must develop courses on managing uncertainties, environmental complexity, and pioneering entrepreneurship. There are huge rewards on the table for those who can combine Maa Saraswati (knowledge and wisdom) and Goddess Lakshmi (wealth).
(The writer is a professor of strategy and corporate governance, IIM-Lucknow)