Excerpts from my talk at conference organized by STPI on skill development and entrepreneurship, NOIDA, August 27, 2015
Entrepreneurship is one of the key drivers for creating a modern and successful India in the 21st century. It is the engine that can generate growth and employment for the hundreds of millions of young Indians who will enter the job market in the coming decades. Even more importantly it can give young Indians the opportunity to take their future in their own hands and create wealth and progress for themselves, their families and society at large. In addition, it also provides India the opportunity to leapfrog in the economic development cycle and establish its position as a new global economic super power.
The good news is that it has never been better to be an entrepreneur in India. First, we have a progressive Prime Minister who has given a clarion call for Start-up India and made that one of the center prices of his recent Independence Day address. This along with his call for Digital India and Skills India provide a great framework and encouragement for entrepreneurship in India. Second, we have seen many entrepreneurial success stories (Ecommerce start-ups like Flipkart and SnapDeal and IT companies like Infosys in an earlier generation) that have caught the imagination of the youth of today. Doing a start-up is emerging as a hot career choice amongst graduate students and the average age of our entrepreneurs is getting lower and lower. Third, capital is more available now than was the case 10 or 15 years back with the rise of the Private Equity and Venture Capital industry. If anything it might be the case of too much capital chasing limited set of investible opportunities.
Despite the strong momentum India has a long way to go before we declare our entrepreneurial ecosystem as a success story. There are at least 4 key challenges that need to be addressed to raise the game. The government, industry, academia and other stakeholders will need to work together on these. Now, let’s review these challenges and potential solutions:
- Improving the survival rate
By many estimates 9 out of 10 start-ups fail. We should assess how we can improve this ratio. The key factor that drives start-ups towards failure is the product/service offering not meeting customer needs and/or inability to get access to customers. Mentors and a supportive ecosystem can be a huge help for start-ups in their formative years in guiding them to develop their proposition and linking to the first set of customers. Incubators can be a good mechanism for providing this supportive ecosystem and also minimizing the hassles of provisioning the infrastructure and other administrative issues. There is a great opportunity for the government (center or state) and industry bodies to collaborate to build such incubators. I am very pleased to see STPI taking steps in this direction and setting up incubators. NASSCOM is also collaborating with a number of state governments to set up such incubators.
- Driving Intellectual Property and Innovation
One of the challenges in our entrepreneurial ecosystem is that there are too many “me too” start-ups with little product or business model differentiation. There is a dire need to develop Intellectual property and cutting edge innovation. Only these can provide a sustainable competitive advantage to start-ups. These are not quick fixes and require a major shift in culture in our academic institutions and even corporates (because that is where many budding entrepreneurs get their initial training). Skill development is a priority for the government, but there is need for focus on quality and not just quantity. There is need to invest in and upgrade R&D institutions (both standalone and within academic institutions) that can act as an engine for Intellectual Property development and Innovation. Institutions like Berkeley and Stanford have played a major role in the success of Silicon Valley. We should look to seed such world-class technical institutes in all of our major start-up hubs (e.g., Bangalore, Gurgaon).
- Making manufacturing start-ups successful
India has seen remarkable success stories in the IT services and BPO space and more recently in Ecommerce. Perhaps the reason India has succeeded in these areas is because these are driven by talent, where we have a relative advantage, and the government involvement has been minimal. On the other hand, we have traditionally struggled in Manufacturing where the combination of poor infrastructure and bureaucratic inefficiency become huge barriers to scaling up. Despite the admirable focus on “Make in India” campaign, we will not be able to translate the intent into action unless the core challenges of infrastructure and ease of doing business are addressed. These are the two areas where government has a key role to play. Unless we make real progress in these areas we will struggle to attract foreign capital and start-ups in this space will find it difficult to scale up. The other key challenge for manufacturing is availability of skilled talent, especially on the engineering side. Skilling is already a stated priority of the government, but again an area where intent has to be translated into action.
- Scaling up to World-Class
One of the great disappointments of the India entrepreneurial story is that so few of our companies have reached world-class scale and reach. Despite Indians leading so many of the global tech giants, we haven’t been able to produce a Google or a Facebook out of India, at least not yet. While there are genuine issues around lack of proximity to customers (in western markets) and challenges in market access, I think the root causes are deeper. We perhaps are not able to sustain our ambition and also don’t have enough role models to inspire us. To achieve the ambition of developing our start-ups to World-Class we need to consider at least the following 3 priorities. First, identify emerging areas where India has distinctive strengths that government should focus its incentives and other support on (focus is important because it is unlikely that we will be able to scale up to world-class in all areas). Second, invest in leadership development and create a generation of global leaders from India (and not just Indians who have gone overseas). This is a difficult nut to crack. This area is perhaps less for the government and more for the corporates and academic institutions to focus on. Third, government should invest in brand-building campaign to support the world-class theme.
To summarize, there are 7 areas where I believe government has to step-up and take actions to help the entrepreneurial ecosystem in India develop to the next level. These are:
- Invest in infrastructure to reduce the logistics costs and time to market to support manufacturing scale up
- Make more significant progress on “ease of doing business” by simplifying processes and procedures and minimizing government’s role to the extent possible
- Invest in skill development to ensure both quantity and quality of skills required across sectors
- Invest in and upgrade R&D institutions to spur development of Intellectual Property and cutting-edge Innovation
- Collaborate with industry bodies to set up Incubators that provide start-ups a supportive ecosystem and improve their chances of survival in their formative years
- Identify priority areas where India has the best opportunity of getting to world-class and focus incentives and other support in those areas
- Drive brand-building campaign both on “Start-Up India” to further popularize entrepreneurship within the country and on “World-class from India” to build India’s brand and statement of intent globally.
I feel very hopeful about the growth of entrepreneurship in India. We have built very good momentum in recent years. Government seems to have a real positive intent in this area. If government is able to focus on some of the actions discussed above and industry and other stakeholders also step up, we should be able to raise our entrepreneurial ecosystem to new heights. I am convinced entrepreneurship will be the “golden mantra” that will help realize the unlimited talent potential of India and move the country on the path of economic success and global leadership.
All the best!!
