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Entrepreneurship in Indian B-schools

with K. Kumar & Anuj Pradhan

The Entrepreneurship Option

Prof. Kumar: For business graduates, entrepreneurship is more of a mid-career option rather than one taken at the beginning of career. Most B-school students in India come with very little work experience, which is the opposite of what happens in most B-Schools abroad, especially in the US. Their lack of awareness of opportunities or serious insights into any particular industry or domain inhibits them from going into entrepreneurship.
The other limitation could be the kind of opportunity costs that stare at them when they graduate from B-school. As we all know, the start-up phase of any venture is a grinding phase and is not financially rewarding. Therefore, when you compare it with the kind of salaries graduates get through the placement process in B-schools, the opportunity costs are stacked against entrepreneurship.

Anuj: In a B-school, people generally do not want to take the risk of leaving their top consulting or investment banking jobs to do something on their own. I think many people are more confident of working for a top company for about 5 years and then trying to start something on their own. Through this, they also develop their relations and networks in the industry. Hence, an important way to promote entrepreneurship is to ensure that people with work experience join B-Schools.
There is a reverse side to this and one can argue that the graduates straight out of college being younger will have a greater appetite for risk and hence will open start-ups, but my personal opinion is that they still need a few years in the industry to gain confidence and build networks before they plunge into entrepreneurship.

Prof. Kumar: With the student profile in B-schools remaining the same over the next few years, the way to build entrepreneurship would be to build it very strongly into the curriculum - 'Entrepreneurship as a way of management rather than an event'. Again taking a lead from some of the premier B-Schools, around 10 years ago, Harvard gave up a course on general management and replaced it with a course titled 'Entrepreneurship manager'. Today, apart from strategy, which you do in your current core offerings, the only other discipline that gives you an integrated view of business is entrepreneurship.
The second way to promote entrepreneurship is to sensitize students about the fact that they will eventually build up enough expertise, insight and resources to be on their own. So give them enough tools and techniques and build an outlook that their entire career is a preparatory ground to become an entrepreneur and that they should be aware of the opportunities to come..
Entrepreneurship is as much about skills as it is about knowledge - hence we need to introduce courses that impart negotiation skills, networking skills and skills that would help the students deal better with ambiguity and risks. Of course, another important approach is not so much about the MBA program, but what you do after that. You need to strengthen the alumni network, so that these linkages can be leveraged when people get into entrepreneurship.

Anuj: Inside the B-school, more hands on experience should be given to the candidates. Right now, there is a single internship, and the courses are more academically inclined. The theory should be covered but there can be an emphasis on live projects. One idea could be a course on trying to set up your own company.
Each student can get a small corpus to begin with which can be included in the fee structure, and the college can give other resources to aid the process of creating his or her own venture. There should be some lessons to be learnt from the existing start-ups, be it a success or a failure, but greater time can be dedicated in making the candidate gain real world experience through his/her venture.

Anuj: I personally believe that the whole concept of 'Entrepreneurship', 'B-Plans' and 'Risk taking abilities' is highly over-rated. Entrepreneurship for me is something where you do not think that much; you do not say that you will be taking a calculated gamble for 'n' years, etc. You instead say that 'this idea in particular is interesting and let us go for it'. The confidence that you can pull the venture through is what makes it doable.
I do not think all entrepreneurs have a plan either and you can enter into it for many reasons. You can be one because there are no other options, because you think it is really a great idea that will click or probably because you are just bored of your current job. In addition, there is no difference at all among these different breeds of entrepreneurs. The simple fact that more start-ups will be created is a good thing in itself.

Sectoral Focus in Entrepreneurship

Anuj: That is a possible reason. Further, the sectors where start-ups come about are normally sectors where the capital investment is low. This is predominantly in the IT services sector or the BPO Industry, where you can do something more economically in India as compared to the rest of the world.
Another sector where there are many start-ups is the financial services space or the consultancy space, which is more about knowledge intensiveness rather than capital. This also happens because there are few venture funds in India and even fewer Angel investors who are willing to put money into your venture. Overall, there is a lot of enthusiasm about entrepreneurship these days and we will see many successful start-ups in the near future.

Anuj: A few of my friends are into start-ups that are non-conventional in nature. One of them is a socially inclined venture but it is profit making. This idea was in the education space, where exists a group of people who create additional modules for primary schools. For example, these people would go to school and then talk to the students about aerospace, something very interesting but usually not part of the course.
I know that there may be a very strong tradeoff on the profit front between, say a financial start-up and the one we discussed earlier in the education space. The former is most likely the one that would make you the millions that you dreamt of while setting up your own venture. However, it depends more on the reason that you chose for setting up your start-up.

Prof. Kumar: Yes, people should take their eyes off IT and look at it more from a problem solving approach. Use IT as a tool to solve the problem, but if you are more focused on the problem, there are a whole lot of opportunities lying there. For example, Abdul Kalam has been talking about the PURA program (Providing Urban Infrastructure in Rural Areas) - as an idea it is great but when you translate it, it is going to throw up a tremendous number of entrepreneurial opportunities for people here.
Other areas include healthcare, education, water, communication - there are many problems to be solved and this can become a fertile ground for entrepreneurial opportunities and new ventures.

Entrepreneurship and Financial Crisis

Prof. Kumar: Possibly, it is very well recognized that one of the ways people get into entrepreneurship is through negative displacement. That is a very legitimate way of getting into business, but usually such business entities rarely grow into something significant.
Other things being equal, the real high growth ventures or the most successful ventures start with a great idea and the passion to act on it. So, if people become entrepreneurs because of the rocky job market, it may be a temporary solution but not something which gives rise to interesting ventures.

Anuj: I don't know, and it is very hard to say. My feeling is that this will push the people who are slightly senior and who have worked for a while, into entrepreneurship. Venture capital funding is already scarce in India. With the financial crisis, it will just become tougher.
It is very hard for any start-up to get any kind of VC funding and the numbers are not very encouraging. I have four other friends who are into start-ups and who will vouch for this. The people who are already working and have a few years of experience will be more suited for entrepreneurship because they will have more personal funds.

Prof. Kumar: Contrary to the press and popular opinion, very little outside money goes into start up businesses. Many of the businesses are bootstrapped up to a point where they are able to prove their business model, and then the scalability of the model. Only then does the external capital come in. Therefore, the non-availability of capital is not going to be a major fallout of this crisis.
It may affect the situation in a different way; it may suppress demand, in anticipation of a worldwide recession. Some of the businesses that are going to address the so-called discretionary part of a consumer's income may have to wait for a while as there is going to be a tightening of the belt all round, so these opportunities may not immediately be able to build up traction.

Prof. Kumar: If you are talking about India, a whole lot of opportunities lie in the conventional areas. In the western markets, most of the entrepreneurial opportunities, particularly the high growth ones, come out of new technologies; new knowledge, which is able to generate new products, and services, which people can graduate to or start using.
However, in a country like India, where you have so many problems staring you in your face, there are a whole lot of opportunities hiding in those areas which people don't normally look. If someone were to focus on areas like energy or infrastructure, these may become potential sectors where entrepreneurial energy can be channelized.
In that way, India is in a very advantageous situation because entrepreneurially, there are many problems to be solved here. They are very specific to India, to specific geographies and societies within our country, and not necessarily of interest to the global community.

Profiles

Prof. Kumar is a Professor of Entrepreneurship and Chairperson in the N.S. Raghavan Center for Entrepreneurial Learning at IIM Bangalore. He has over 18 years of experience as a corporate leader, consultant and entrepreneur. Prior to IIMB, he was the CEO of Trigent Software for six years. He consulted corporate and family businesses for four years at Tata Consultancy Services. Prof. Kumar has a BE degree from Madurai University and a PG Diploma from IIMB.

Anuj Pradhan (PGP 2007-09) holds a B.Tech from Indian Institute of Technology (IIT) Bombay and was a founder member of Ubiquiti India, the independent technology arm of Ubiquiti Inc, a US based start up, that undertook projects in data analysis and building intelligent software to automate analysis. He can be reached at anujp07@iimb.ernet.in