What is entrepreneurship? What is a start-up? What is e–commerce??
As an MBA student, I am not supposed to raise these questions today. People expect me to know their past, present and future, inside out. These terms are supposed to make me excited, feel good about everything that’s going on in this space. True, they’ve got me jumping up and down like a cat on a hot tin roof. Because I feel sanguine and safe? Because I see infinite opportunities in the $ 38 billion market? No. Given the huge work-force and capital at stake, I feel concerned, very concerned. So should you.
Why? Through our series of reports on entrepreneurship and e-commerce, we shall try to pin-point certain aspects, if not everything, that we feel are wrong, with broadly the startup space in India, and specifically the Indian e-commerce ecosystem. We shall gradually try to come to a conclusion, a future path that can be a sustainable one for all the stakeholders related to this industry.
Before starting, one thing we must understand. This report is in no way belittling what the Indian entrepreneurs of the new century have achieved. Paytm (Fintech), hyperlocal delivery startups, e-tailers, all of them are making life easy for Indians. But what about their own lives? The lives of their ventures?
We all know the facts. We have quantitative data at our fingertips. Valuations, funding and what not. Maybe, we should take a qualitative view first. This is precisely what we attempt to do in our first episode.
“It is better to burn out than to fade away”. Decades have passed since Kurt Kobain from Nirvana made this line immortal in the history of rock and grunge music. This sums up the ideology of the Indian e-commerce startups today, who seem to have taken it too seriously, for with each passing day, these firms move closer to “burning out”. The analogy is too simple to miss. With billions of dollars of investor money being burnt collectively by these unicorns and smaller firms alike, without any credentials to show in return, the situation is getting alarming now. It’s time for a reality check.
Wasn’t starting up supposed to be the cradle of innovation? One that satisfied ambition and intellect? Since when did cut, copy, paste become a part of innovation? If replicating established business models is innovation for us, then India’s fall of rank from 74 to 81 in the 2015 Global Innovation Index is fully justified. How else do you justify a decrease in this index, at a time when the Indian startup ecosystem is as active as it has ever been? All of it seems so disjoint, so irrational, defying the very foundation of innovation.
The Oslo model defines innovation as “the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations”. Thus, innovation has a commercial value. What’s your innovation? The deep discount model? A bit like the China story. Isn’t it? Resorting to cheap exports-led growth (read as the discount based strategy to capture market share) and then getting caught in the vicious circle (read as the inability to grow without it). If ever there was a concept of negative commercial value!! Outcome? A business that refuses to adapt, fetches a lesser price. Digressing, look at the Finnish giant Nokia, valued at $ 7.2 billion at the time of its sale, humiliated by Facebook’s $ 22 billion acquisition of WhatsApp, a startup seemingly so tiny against the might of Nokia. Clearly something went wrong strategically. Wrong decisions were taken by Nokia and the right ones by WhatsApp. What? Why? Not important in our context right now.
What’s important is to understand that the pathway for most of the startups today was set up by the dotcom boom. Despite being responsible for catapulting India onto the global map of IT and software services, the fact that investors irrationally converted this boom into a bubble is embarrassingly true. Is it happening again? Economists vary in their opinion. Nevertheless, the birth of SaaS (Software-as-a-Service) changed everything for us Indians. It was responsible for a host of positive changes that happened to us. However, startups today just don’t look beyond it. Given the opportunities and benefits for the users, it is totally warranted.
But let’s just think as corporate managers for once. Being a computer engineer, I know that a software is just a good code away from being destroyed by its competition. Software needs to be updated continuously, it can be a vital support in functioning, but for how long can it be your bread and butter? There is always someone who can create better code than you. It doesn’t end, ever. The analogy may not be perfect, but careful observation is bound to pin down most of these startups to the Startup Graveyard, an unwanted, self-explanatory SaaS sales model wherein your costs overshoot your complexity (read as the average selling price). Their discount-run model is impacting both these ends negatively.
Herein arises the next question. What is the aim of most of the small sized startups today? Before answering this, let us analyze their options. Firms today seem to have only two options – either to keep growing or to move out and exit. But with the red ocean filled with blood hungry sharks, with jaws ready to rip you apart (read as the Flipkarts and the Amazons, loaded with bagfuls of investor cash) and no “blue ocean” easily visible, the entrepreneurial spirit shudders for a moment today. This moment of indecisiveness is often the deciding factor. At a time when investor funding, and not the firm’s performance, let alone profitability, has become a determinant of its success, you start realizing the ideological fallacy.
Entrepreneurship used to be about passion and vision. The passion exists, but the vision is overcrowded and hazy. The business models are not based on specific USP’s, but upon the amount of risk the promoters, or the investors (as in some cases) are comfortable with. Suddenly, growing to a limit and then selling off, even if to a larger competitor, doesn’t seem a bad proposition at all for the average Indian entrepreneur amidst the cut-throat battle for funding. But doesn’t it defeat the very purpose of being an entrepreneur? True entrepreneurship is supposed to be all about overcoming the fear of failure, facing it head on, enduring it, the learning flow-back that happens, and eventually emerging victorious in doing what you love, irrespective of the number of times you fail. Again the top brass of the firm and their decision-making comes into reckoning. The first things we learn in accounting tell us that a business is a going concern. In times like these, you wonder- is it anymore? A cynic would say it is not business at all!!
Thus the three common questions raised at the start seem really relevant today. Definitions that never existed need to be defined (ask the Indian Government, “What is e-commerce?” and you’ll know what I’m talking about), some need to be rephrased and markers need to be laid out clearly. Essentially, the whole environment needs to be purged of any sort of existing and established prejudice that hampers an entrepreneur. The point here is that being a developing country, we were always supposed to be good at reverse engineering. Then only could the product life cycles, global supply chains, and the modern day trade models between the developing, developed and under-developed countries be as stable as they are today. However to progress into the developed nations group, “reverse innovation” needs to occur. Reverse innovation is not one for the startups, mind you. It is best exemplified by giants like GE, Levi’s and P&G. But then, a little “entrepreneurial spirit” never harmed anyone!
We’ll be back soon with the second report in the series. Stay tuned for more on the Indian start-up space.