Managing 21st century startups

Young managers are finding it easy to set up businesses and earn quick money at a young age. This was not the objective of 20th century businesses. The 21st century managers are encashing this startup boom, which may lead to bubble sooner than later, if the present trend of having startups only in services sector continues

The present market momentum in India is moving in the direction of startup businesses. It is encouraging startup ventures by attracting young intellectual human capital, seed capital from angel investors and also from HNI’s (High Networth Individuals).

The present ruling government is also supporting building of an eco-friendly system for startups through which it is planning to achieve the dream of “Make in India.” This unexpected shift in markets raises the question of management of these startup ventures.

The last decade created the Silicon Valley which has set up technology enterprises. That shift of technology in America created a substantial business transformation in India from the manufacturing sector to the services sector.

During that time, the Indian economy had reported more than 7% growth due to the growth in information technology sector and the market also anticipated a double digit growth. It was also observed that due to that technology bubble, the market underwent shocks due to which thousands of jobs were lost in the beginning of the 21st century.

Later the Indian markets recovered rapidly as compared to the global markets, and also it resulted in a huge increase of the Sensex touching 30,000 points from previous 3,000 points, just in a span of 12 years i.e., 2003-2015. It was a huge value creation for the market participants across the globe in comparison to the developed nations.

A good number of popular management theories, models and principles supported in the management and the grooming of the 20th century ventures. On the other hand, it raises the question of application of those good old theories, models and principles, in managing the 21st century startup businesses.

It is very important to sustain the startups in the country, even the government is offering tax benefits and also relaxing some stringent norms for a period of three years. It is also a serious concern for the country when money from capital markets moves out to support startup ventures. Hence, managing the resources to improve the performance of startups is essential.

To assess the performance of startups in the country, one should compare the businesses of the 20th century with the 21st century startups. The major driving force is the presence of information technology, during the present times, which is supporting in establishing and developing startup businesses, while it was nonexistent in 20th century businesses, due to which it took little longer time to make business successful.

The other important distinctive feature is the availability of intellectual capital i.e., the bright younger technology geeks, who are explicitly showing the desire for establishing startup ventures, even without the family background of business and also financials. The present-day youth are dreaming to become chief executive officers (CEOs) and chief financial officers (CFOs) at a young age.

Under such circumstances, to face the severe challenges in handling startup businesses, one should be able to adapt to changing market dynamics to make successful businesses. Since youngsters are aggressively targeting these startup ventures, there must be mentors, gurus in guiding them.

The success story of 20th century businesses in India was emergence of family owned businesses as global companies like Ambanis, Tatas, Birlas, Bajajs and Hindujas etc.. During that period handholding was a major factor in running family businesses. There is a necessity for the same kind of handholding even now apart from experience, age and financials in order that ventures successful.

One must also think about the hype created about startups in the country. Startups cannot be successful without carrying innovation, and research & development. The statistics says 90% of the startup ventures are in services sector, providing either e-services or m-services or both, using smart phones. Startups will sustain when innovations like that of Apple Inc., happen.

Young managers are finding it easy to set up businesses and earn quick money at a young age. This was not the objective of 20th century businesses. The 21st century managers are encashing this startup boom, which may lead to bubble sooner than later, if the present trend of having startups only in services sector continues.

To conclude, startups should grab the market opportunities in tier-II and tier-III markets, in collaboration with government agencies, different NGOs in the areas of agriculture, education, health, finance and also infrastructure developmental projects, which are very essential to realise the dream of “Make in India.” Finally, startups must be hard not smart. (Prof Mishra and Chandra Shekar are Director and Asst Professor respectively of Institute of Public Enterprise, Hyderabad)