It is great to see hundreds of enthusiastic creative youngsters trying to
live their dream and start their own ventures. The start-up culture is picking
up in India and has seen a reasonable success. Many like Paytm,Ola, Zomato, Cure-Fit,
Bombay Shaving Company, Native Chef, etc have seen a reasonable success. At the
same time there is long list of failures. I am not here to discourage the idea
of start-up but based on my limited research and hands on experience working
with few start-up firms, I wish to express a word of caution and talk about
possible pitfalls leading to a failure of a great idea or potentially
successful venture going nowhere.
The studies conducted by Forbes across the world
and Institute of business value & Oxford Economics in India suggest that
90% of the start-ups fail within 5 years of its inception. They don't grow to
make it big. There are many reasons for failures such as lack of unique idea,
IPR issues, finance, marketing etc. I wish to talk about entrepreneurial
ventures with initial phase of success but have failed to capitalize further
and pitfalls leading to the limited success or failure.
I feel there are two major reasons.
- Failure of success
- Satisfactory
under-performance.
Both these concepts were elaborated by Dr. Sumantra Ghoshal in his best seller, “Managing the Radical
Change”.
Failure of success
We are aware of famous phrase, ‘Failure is the first step of success’ at
the same time, the critical analysis of certain cases show that the success
could also be a main reason for failure. Therefore, success could be a step to
failure. Let us examine this phenomenon.
It is important to note that, it is easy to handle failure. The Firms are
aware of the reasons for failure and also know, what the key elements that lead
to the failure. It is exactly opposite in case of success and it is difficult
to handle. Things seems to be under
control and what I call it as "All is
well" syndrome sets
in. The firms’ tent enjoy the success and attention that they receive, which is
natural at the same time we can't afford to ignore issues which need attention.
Even if it is smaller problem, it need to be attended and resolved.
There is hierarchy of success leading to failure. Success may lead to Complacency, which is 1st stage. The
firms start believing that that they are doing everything right. There could be
a tendency of ignoring suggestions by mentors, critical views of well-wishers
and denial of the possible problem area.
This is 2nd stage i.e. Denial.
This would lead to escalation of problem and a smaller issue turns out to be
major hurdle in the growth of the firms. At this stage there is propensity of
finger pointing.
The 3rd stage is Finger Pointing. In this stage, the
firms accept that there is a problem but believe that there is nothing wring
within the firm and start blaming factors outside the firm for such problems.
Which is perfect recipe for failure. Hence, success may lead to complacency
that leads to denial, denial leads to finger pointing and ultimately ends up in
failure. Let understand this phenomenon with a case. Nokia is a classic case of
Failure of Success. Once an undisputed market leader had to sell their mobile
hardware business to Microsoft. At the core of this failure was failure of
success. The market leader Nokia continued to manufacturer the feature phones
when the market was moving to smart phone business. Firms like Samsung, Sony had
started adopting android platform whereas Nokia continued to use Symbian OS.
For a very long they were in a denial mode which ultimately lead to failure.
I feel all start-ups must remember this pitfall and make sure that they
don't fall into this trap. They must be alert about small issues faced by the
firm and avoid living in the glory of success. Enjoy the success but don't get
blinded by the success.
Satisfactory Under-performance
The second issue is Satisfactory Underperformance. Not many start-ups
end up becoming as big as that of Paytm or Ola etc. If we analyse the reasons,
we realize that most of the start-ups are happy with the small success and
don't scale up to make it a big achievement. There could be many reasons but
one issue that I wish to highlight is Satisfactory Under-performance. This is linked to
the firm’s assessment of the Ecosystem, Peer Group & Competition. You must
have heard the ancient phrase, कूपमंडूक - frog in the well,
for the frog the well is the world. The same may happen to the start-ups. This
happens because the assessment of success is relative.
The Firms’ judge thier success based on comparison with others whom they
consider as their peer or competition. When the firm is doing better than peer
competition, then the tendency of contentment may creep in and they are happy
with limited success. This may results in slow down and firms limit their efforts
to scale up and stop aiming at higher orbit. It kills the appetite for growth
and ends up dwarfing the success. It is important to be vigilant about what business
the firm is in and what is considered as competition. Identifying direct and
indirect competition is imperative.
There are many firms which began its operations in late 60s almost at
the same time as that of Reliance Industries but very few have seen success
that Reliance Industry has achieved. The difference could be satisfactory
underperformance. Many had the capacity and possibility of becoming big but they
did not. It is matter of investigation and research. This hypothesis needs a
testing.
It is important to keep these pit falls in mind
so that the start-ups can avoid these traps by being cautious.
I wish all the youngsters and particularly the start-ups,
the very best. May India become a start-up hub of the world. We have talent,
capabilities and skills. It is the attitude that needs to be shaped.
Thank you.
Dr. Sushant Joshi
