Building startups and companies that last

In a previous column (BS, September 25), I had described a progressive and happy society as one where enterprise, education and eudaemonia (well-being) co-exist. Companies, which are designed to last, promote enterprise on the foundation of trust between the ecosystem and the business community. 

Business ecosystem: Elisabeth Kübler-Ross was a psychiatrist journalist, who identified a pattern in the reactions of very sick patients when they became aware of their illness: Denial—Anger—Negotiation—Depression—Action. I call it the DANDA cycle. Many human systems tend to follow this cycle, losing a year or so between the D and the last A.

To understand DANDA, consider the factual narrative about Indian economic growth and jobs. First, the system denied any economic slowdown; it deployed addlepated economists to question the bases and comparability of GDP. Second, the system disapproved the Liberals and Khan Market types for being anti-national. Third, to be responsive, the ministry retracted some illogical impositions in the Budget for FY 2019-20. Then officials reduced corporate taxes, which had effectively been increased over five years, even if inadvertently. After that mendacious acts followed like merging unhealthy public sector banks in the hope of creating a healthy bank and merging unhealthy government telecom companies in the hope of creating a healthy telecom company. Then some influential people attacked India-born Nobel Prize winners for their perceived leanings and marital status. 

Now we are approaching the fourth stage when reality has started to bite: There is an increasing realisation that jobs and growth do matter to voters. Article 370 and Pak-bashing don’t fill stomachs. Finally, we can expect some systemic action as demanded by the last A in DANDA.

The tendency to announce near-victory is a pervasive disease. This is exemplified by the reports on ease of doing business. Spokesmen become laudatory if India moves up in the World Bank index of ease of doing business. The improvement is great, thank you, but let us not ignore the fact that the index is based on just Mumbai and Delhi. Further, the World Bank places India at positions below number 150, at the bottom of the pile, when it comes to enforcing contracts and registering property. Ease of business cannot be viewed quixotically as enthusiastic officials seem to do by relying on narrow “mathiness”. They must test the broader “truthiness”. I have battled a criminal charge with a NBW of arrest on a charge (flawed) of serving more than 10 boards after an amendment to the Companies Act. Come out into the real world and hear real voices, dear administrators. 

What can business do? A lot.

Business community: Business folks should reflect and act on how to build honest startups and companies that will last. The euphoria around unicorns and startup valuations has reached rather ridiculous flights of fantasy. The legendary Masa (Masayoshi Son) seems to be rethinking his strategy of funding losses, based on recent sobering experiences with Uber and WeWork. Since “God” is revising his gospel, the local Indian VC industry will also shortly rethink because a new gospel will soon emerge from the valley. Watch for changes in the approaches of Walmart-Flipkart and Amazon.  

In July 2019, Harvard Business Review carried a persuasive piece entitled, “Building startups that will last” by Hemant Taneja and Ken Chenault. It is a subject that I am obsessed with because I am researching an allied subject. I summarise the lessons of the authors as I remember them.

• Articulate and practice principles for society-first, not just financial achievement.
• Be adaptive and perpetually a learner
• Demonstrate the ability to execute and execute, time and again.
• Move beyond founder-leadership to scalable leadership.

Hang on, these are the same lessons learnt by centurion companies like Unilever, Tata, Nestle, Dabur and Godrej; these same lessons are mentioned in books on long-life Japanese, American and European companies. Do they apply to startups? Are not startups different?

Startups are not a different genetic species, one which you must rapidly fatten and cull in a short time. The avaricious capital of high net worth individuals has converted the startup economy into a sort of Las Vegas for over three decades. We should never forget that yesterday’s startups have become today’s grownups. Today’s startups need to grow up, not bask in permanent infancy.

It is noteworthy that the Prime Minister has emphasised the value of wealth-creators to our economy, time and time again. I feel that the last A of the DANDA cycle should prompt the ecosystem and business folks to think and act differently for the future.

The author is a corporate advisor and distinguished professor of IIT Kharagpur. During his career, he was director of Tata Sons and vice-chairman of Hindustan Unilever. Email: rgopal@themindworks.me