together we can change ourself

together we can change ourself

On Entrepreneurship — N.R. Narayana Murthy

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Chennai February 08, 1999
The Fourteenth Anantharamakrishnan Memorial Lecture
by
N. R. Narayana Murthy
Chairman and Managing Director Infosys Technologies Limited Bangalore, India
On Entrepreneurship
I am indeed honoured by this generosity on part of the MMA and the eminent judges that chose me for this prestigious award. Mr. Vaghul has been a hero in corporate circles and it is the dream of every CEO to be blessed by him. I am really grateful to him for considering me worthy of this recognition. 1 am also very grateful to other members of the jury, to the MMA, and to members of the Sri. Anantharamakrishnan family.
It is only recently that there is some acceptance, in India, of the idea that creation of wealth is the only way to solve the debilitating problem of poverty. Mahatma Gandhi’s dream was to wipe the tears of every poor person in the country. In my opinion, fulfilling this dream requires a consensus among all political parties on the following tenets:
a. The only way we can solve the problem of poverty is by creating new wealth legally and ethically; not by redistributing existing wealth.
b. There are only a few people who can lead the task of creation of wealth, just as there are only a few good surgeons, professors, and lawyers.
c. These people are human beings and they need incentives to create wealth.
d. The job of the government is not to create wealth but to create an environment where these leaders are enthused to create more and more wealth.
There are two kinds of wealth creators – those that add to existing wealth passed on to them by the previous generation of wealth creators; and those that create wealth from scratch. I belong to the latter category and have very little idea of the former. Hence, I will talk a little bit about creating wealth from scratch. Entrepreneurship refers to such a creation of corporate wealth by leveraging sweat equity. In general, entrepreneurship translates to leadership and innovation. Lack of adequate finance forces an entrepreneur to take a path hitherto untrodden and create a niche for himself. A necessary but not a sufficient condition for entry of entrepreneurs into an industry is that it must afford opportunities for innovation executed with sweat equity at least in the initial stages of the enterprise. The software industry world-wide is full of successful entrepreneurs. Rapid advances in technology and the consequent productivity gains have opened great market opportunities for innovation and, thus, ensured a steady stream of entrepreneurs in the American software industry. Whether it is Bill Gates of Microsoft or Larry Ellison of ORACLE, the common factors are: sweat equity, innovation, a brilliant vision, a well thought out strategy and flawless execution.
I have studied entrepreneurship in the Indian software industry for over 20 years and have come to some conclusions. During 1979 – 1981, ten to twelve entrepreneurs (professionals) started software companies for operating in the domestic and export markets. As of today, only one or two of them have survived, succeeded and been consistently among the top five Indian software export houses. A case study of these ten to twelve companies is a great education. We can draw certain conclusions from these case studies and can define some criteria for success.
The physiology of successful companies and pathology of unsuccessful companies bring out the following criteria for success:

Shared vision:The founders of the company must articulate a clear vision of what they want their company to be in the long run. This vision must be something that provides for a clearly definable synergy between corporate objectives of the enterprise and personal aspirations of the entrepreneurs and the professionals working for the enterprise.

A marketable idea:Unless you have a good idea that adds value to a customer, there is no Point in proceeding further. Your product or service must provide one or more of the following benefits – reduce cost, reduce cycle time, improve productivity or improve free time – for users of the product. Most failures are due to negligence of this cardinal principle.

A sound strategy and an implementable action plan:Strategy is about making oneself unique in the marketplace. A strategic plan that clearly brings out the competitive advantages of the idea of the entrepreneurs, that masks the weaknesses of the entrepreneurs, that. is realistic, and that ensures sustainability is needed. A realistic action plan that has the required resources is needed to put this strategy in to action.

A layer of competent management:The bane of most entrepreneurs is that they are primarily technocrats and hardly understand managerial issues in building an enterprise. Indeed, 1 have come across entrepreneurs who cannot read a balance sheet and hardly distinguish between term loans and working capital! They have a healthy contempt for anything other than technical challenges! Such an attitude is a sure recipe for unmitigated disaster. A successful enterprise will bring together complementary skills in technology and management. Surely, success in an enterprise requires a good understanding of human motivation, finance, leadership, technology, quality, and a host of other skills.

A shared value system:A value system for a group of entrepreneurs is like the rudder for a ship. The temptation to bend your own set of Do’s and Don’ts is very compelling but the ability to stand firm in the face of an adverse situation is what separates men from boys. 1 have seen many an enterprise flounder because the entrepreneurs could not come out with a shared value system.

Professionalism:I have seen several budding entrepreneurs criticise their employers and do exactly what they criticised when they start their company. Professionalism is drawing a line between personal needs and company resources, treating all your colleagues with respect and dignity, being issue-based and not personality-based, establishing and following person-independent rules and procedures in the company and showing integrity and honesty in all transactions with your customers, colleagues, vendor-partners, government and the society.

Divorcing control from management:Indeed, if there is one critical issue in succeeding in entrepreneurship, it is the ability to divorce control from management. In the US, any entrepreneur will know that his venture capitalist will put in a management structure independent of his shareholding in the company. You, as the entrepreneur, will be asked to perform the role best suited to the organisation’s needs. We all know the story of Steve Jobs and how he himself brought in John Sculley to head Apple when he realised the need for professional leadership. You must recognise your strengths and contribute to the organisation only in that role.

Spirit of sacrifice:Nothing can ever be built unless there is some sacrifice at least in the initial period. Most entrepreneurs fall prey to the trappings of the so-called “Industrialist syndrome” and end up jeopardising the interests of the enterprise.

Pride in creation of wealth:I have met several entrepreneurs who are very apologetic about creation of wealth. For heaven’s sake, there is absolutely nothing wrong in creating wealth by legal and ethical means. Do not ever confuse creation of wealth with charity. First, you create wealth efficiently and only then can you donate your share of the profit to any charity.

Ideology, intellectual arrogance and the enterprise:I have seen several instances where my entrepreneur friends have destroyed their enterprise just because they went on an ill-founded ideology trip. For example, one of my good friends felt that his company must produce compilers and word processors in India and compete with Microsoft’s and Borland’s even though it was clear to everybody but him that such a strategy was absolutely unwise and disastrous. His whole argument was that we Indians are second to none and that we will prove to the world that we can produce system software better than anybody else. Obviously, he did not succeed as much as his superb intellect should have enabled him to.

R and D and the bread-and-butter stream:It is a truism in any business that the bread-and-butter stream of your enterprise pays for all costs includingR and D. A smart enterprise derives its revenues from a bread-and–butter stream, pays for the operational costs and uses a small percentage of this revenue (usually 5% to 10%) to conduct R and D in promising new streams. Some of these new streams will, in the future, become bread-and-butter streams for the enterprise. 1 have known a couple of entrepreneurs who tried to derive a large part of their revenues from R and D and, I am sad to say, they are in serious trouble.

Leadership-by-example:In enterprises dominated by white collar and knowledge professionals, you must lead by example. Today’s professional has global level skills and opportunities and he is aware of it! Any discrepancy between what you preach and what you practise will be easily analysed by your younger colleagues and articulated well enough to create a dissonance, After all, Mahatma Gandhi was not wrong! Let me close by saying that speed and imagination are the two hallmarks of any successful entrepreneur. Those who leverage these two attributes will survive and succeed in the coming millennium of intense competition. I have no doubt that the dynamic members of the Madras Management Association will use speed and imagination very effectively to become the leading wealth creators for this nation. Thanks for your generosity in listening to me.

Written by Bhushan Kulkarni

December 27, 2006 at 10:55 am

Posted in Management

Tagged with ,

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