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THE
NEW ECONOMY: GUEST COLUMN
Creating
Enterprise
Corporate
czars of tomorrow need start-up support now
By Rajat Gupta
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The
author is MD, McKinsey & Co; and chairman, board of governors,
Indian School of Business
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India
needs entrepreneurs to capitalise on opportunities and create wealth and
new jobs. A McKinsey & Company-NASSCOM report estimates India needs
at least 8,000 new businesses to achieve its target of building an $87-billion
it sector by 2008. In the next 10 years, 110-130 million Indians will
need jobs, including 80-100 million looking for their first job. This
excludes disguised unemployment of over 50 per cent among the 230 million
employed in rural India. Since traditional large employers-including government
and old economy players-may find it difficult to sustain this level of
employment, it is entrepreneurs who will create new jobs and opportunities.
Fortunately,
today's knowledge-based economy is a fertile ground for entrepreneurs.
Several thousand "new economy" businesses were conducted last
year in India and this is not a "big-town" phenomenon. When
McKinsey & Company launched India Venture 2000, a business plan competition
to catalyse entrepreneurship, many of the 4,500 teams that participated
were from small towns such as Meerut, Siliguri, Warangal and Pollachi.
I believe
India has an extraordinary talent pool with a virtually unlimited potential
to become entrepreneurs. To achieve this, India must focus on four areas:
1. Create
the right environment for success. Entrepreneurs should find it easy to
start a business. Most Indians would start slow with capital borrowed
from family and friends, the CEO playing the role of salesman and strategist,
a professional team assembled gradually and few external partners. Compare
this with a start-up in Silicon Valley: a venture capitalist (VC) or angel
investor would be brought early on; a multifunctional professional management
team assembled quickly and partnerships explored to scale up the business.
To a large
measure, culture shapes this style. Silicon Valley is abuzz with ideas
to build global businesses. The almost unlimited access to critical support
services and excellent infrastructure makes getting started easy.
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* Attorneys,
advisors, accountants
Graphics by Yogesh Chaudhary
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A first challenge
for India is to create such areas of excellence. Some already exist but
need strengthening. One way of doing this is to consider the role of universities
and educational institutions-where excellence thrives. Creating such institutions
by strengthening the IITs and starting new ones is important.
2. Ensure
that entrepreneurs have access to the right skills. A McKinsey survey
reveals that most Indian start-up businesses face two skill gaps-entrepreneurial
(how to manage business risks, build a team and get funding) and functional
(product development know-how, marketing skills, etc). In other countries,
entrepreneurs have access to "support systems" such as universities
that nurture regional businesses. India can move toward ensuring the modification
of curriculum at universities to address changing business landscapes
and build "centres of excellence".
I believe
the Indian School of Business (ISB) at Hyderabad provides a start in developing
entrepreneurial leaders. The ISB's programme is designed primarily to
prepare managers to respond to the challenges of rapidly changing business
environments. ISB graduates will have studied entrepreneurship, strategy
and the impact of technology on commerce. They will have spent time developing
their own projects and utilising state-of-the-art technology to interact
with the industry and experts worldwide. The ISB will also have an Entrepreneurship
Centre founded, led and managed by leading Silicon Valley entrepreneurs.
3. Ensure
that entrepreneurs have access to "smart" capital. In the past
few years, several VCs have entered the Indian market. However, Indian
entrepreneurs still have limited access to angel investors who support
ideas in the early stages before VCs become involved. My experience during
India Venture 2000 showed this to be a critical gap. This is India's third
challenge-creating a global network of "angels" willing to support
young businesses.
4. Enable
networking and exchange. Entrepreneurs learn from experience-theirs and
others. Much of the success of Indians in Silicon Valley is attributed
to the experience sharing and support The Indus Entrepreneurs (TIE) members
have extended to young entrepreneurs. India would benefit from creating
a strong network that entrepreneurs could draw on for advice and support.
The rapid
pace of globalisation and growth of Asian economies present tremendous
opportunities and challenges for India. Through planning and focus, India
can create entrepreneurs who will be the region's-and the world's-leaders
of tomorrow.
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