It was an occasion to celebrate for the Great Lakes Institute of Management (GLIM) in Chennai. TVS Capital Funds, founded by Gopal Srinivasan, was instituting a chair professorship at GLIM - the T.S. Srinivasan Chair Professorship of Entrepreneurship - in memory of his late father, with an initial corpus of Rs 1.2 crore. As Srinivasan pointed out in his speech, India has the highest rate of people who want to be entrepreneurs. The Chair at GLIM, he said, will enable a scientific study of entrepreneurship and how to measure it and codify the emotional triggers that make people go forth.
And, who better to deliver the inaugural address, than Gopal Srinivasan's former professor, the internationally renowned management guru, C.K. Prahalad, who is the Paul and Ruth McCracken Distinguished University Professor of Strategy at the University of Michigan's Ross School of Business. While GLIM's executive director, S. Sriram, exchanged papers constituting the Chair with Srinivasan, its founding Dean, Bala Balachandran, spoke to the audience via a video link from the US. Excerpts from Prahalad's talk to an audience that heard him with rapt attention:
The first flowering of entrepreneurial opportunity in India is distinctive from what India is today. That opportunity was creating Indian firms, moving from trading and services to manufacturing, bringing technology and skills from the rest of the world to India, mostly through joint ventures. I call that the first transformation of India, where we started becoming a manufacturing player.
But, that was somewhat stalled as the licensing process created a very domestic mindset and limited growth. The first opportunity kick-started the industrial process, but it did not fully exploit the opportunity.
The second wave started in 1992-93 when we opened up the Indian market. We did not open the market to export to others, but we opened the Indian market to MNCs and we called it globalisation - it was not, but it did help. There was tremendous amount of pent-up demand, there was growth and scale and I am happy to see that in multiple industries we have innovated over the past 10 years. In two-wheelers it is obvious, in automobiles it is also obvious, as also the innovation in air travel. And, the telecom story is even more exciting because in less than 10 years, India has become one of the fastest growing telecom markets in the world. And, I look at this growth - the second phase of entrepreneurship - as more of an India-led growth. The focus was inward, except for a few industries where you exploited global opportunity using the Indian advantage, and typically it is the IT industry.
What I find also exciting is that in the IT industry, for most companies 90-95 per cent of revenues come from outside the country and for some top pharma companies, 70-85 per cent of their revenues will come from overseas. The IT industry is changing the computing business and the pharma business is changing the global pharma business.
Two kinds of entrepreneurs evolved during the 1992-93 period. Those primarily focused on Indian demand, looking at domestic business and the other focussed on the export market, exploiting the India advantage. That put India in the third wave of globalisation of Indian firms. If you look at what is happening in M&A, Indian companies have the ability, skills and opportunities to buy overseas companies that are three to four times their size. And, it's not just Tata Corus, it's a whole bunch of companies. Almost all leading companies would have 50-60 per cent of revenues coming from abroad. That's a big transformation from the time Mr T.S. Srinivasan started. Nobody would have believed that there would be a day when 60 per cent of our revenues across the board would come from outside.
Transforming Indian business
At the same time, global firms will be much more entrenched in India. The next phase of growth is not Indian companies exploiting their strengths abroad, but looking at globalisation as a way to transform Indian businesses. I believe that the focus cannot be just on the cost advantage, but how do we get Indian entrepreneurial advantage as one of the positive faces of globalisation. Earlier problems were bottlenecks, regulations, lack of market opportunity, and you can look at entrepreneurship then as trying to manage this complex process and in spite of the limits trying to move forward. But, over the last 15 years, we are starting to find a very different path. Earlier, the software industry, as the lead scout, had to fight negative stereotypes in creating world class quality. Offsite and onsite work is something the Indian industry invented.
Just go back 15 years - we did not have a reputation for quality and we did not understand it. We had to catch up and at the same time provide opportunities in the domestic market. The new game that is emerging for Indian companies is the global game - we are going to fight for scale, scope of scale and global and regional dominance. That is the new emerging opportunity: based on merit, speed of response and quality of innovation; that is the most exciting thing to happen in India. But, I have to also admit that there is little research on this process, not only on the meaning of this opportunity but also on entrepreneurship. That is why investing in research allows us to develop opportunities for young entrepreneurs.
Focus on entrepreneurs
We can ask the question - why focus on entrepreneurs, what do they do differently? I believe in a resource constrained society, entrepreneurs are extraordinarily evolved. They start with aspirations that lie outside the resource base. And, it's true whether it's Bill Gates or Narayana Murthy. In a resource constrained society, entrepreneurs find, multiply and leverage resources and create wealth. They change the game and fight and unseat incumbents. I also believe they find the world different - to shape the future you must first imagine the future.
I also believe that good entrepreneurs do not benchmark against the best practices; they create the next practices. Fundamentally, entrepreneurship is about discovery of wealth. It's not taking what's available, but creating and discovering wealth. It's about courage, passion, humility and humanity. It creates a social legitimacy to wealth creation and the role of business. If that is true, then the role and responsibility of entrepreneurs is changing as India changes. This is an important issue to think through because the nature of entrepreneurship is different in India - it's more complex, complicated and more granular than in the West.
It's not just the Silicon Valley type of entrepreneurship that we have here. There is a lot of traditional family-inspired businesses - almost 45 per cent of the top 500 businesses in this country belong to these categories - that's a significant portion of India's wealth creating opportunity.
Ultimately, we have to learn as a country to celebrate honest wealth creation. If not, we have no hope of eliminating poverty. To me, entrepreneurship of the kind I believe India has - in great pockets of excellence, honest, meritocracy-oriented - that kind of entrepreneurship will make wealth creation a socially legitimate activity. We have to create awareness and advocacy for honest folks who want to make a difference, who want to express themselves and for whom business and institution building is not necessarily for personal glory.
