STARTUP SPECIAL... Old School Vs New Age

Old School Vs New Age   An ET Magazine -MavenMagnet study delves into how startup CEOs, the rockstars of today, stack up against their traditional counterparts Harvard professor Krishna Palepu has had many famous pupils. One of them was Sunil Mittal, founder chairman of Bharti Enterprises, which operates the Airtel telephony brand in India and abroad. When Palepu met Mittal, more than two decades ago, he was a participant in an owner-president programme at Harvard and was known as a seller of telecom equipment. It was the mid-90s and Palepu remembers him obsessed with landing a cellular telephony licence. “Sunil had no idea how to run a telecom company,“ re calls Palepu. “I will figure out if I get the licence,“ Mittal had told Palepu. The brash entrepreneur of the mid 90s is today one of the captains of Indian industry. The outsider of yester day is today an incumbent leading a $16 billion conglomerate spanning from retail to financial services. Spanning continents too, from the Asia-Pacific to Africa. Two decades ago, Mittal created a business, grew it, and he's now nurturing it. Today India is seeing a clutch of equally brash startup artistes take new ventures to billion dollar valuations in quick time.Their enterprises, with an average age of five years, are still in the early growth stage, and it will  take some time to get a handle on how they will play out, what levels of size and scale they will attain, and what their evolving business models will eventually look like. Let's call this startup bunch the creators, who have age, the trust of investors, passion and the risk appetite to push the envelope. Mittal, for his part -along with the likes of Dilip Shanghvi of Sun Pharma –is  at a stage where he would be referred to as visionary in business case studies. Having seen the future, and plunged headlong into it, he's now scaled a business that needs nurturing more than fire in the belly or an appetite for risk. Let's call this brigade, which will also include second-generation promoters like Mukesh Ambani and KM Birla, the nurturers, along with the professional CEOs at the helm of established entities like ITC, ICICI Bank and Infosys, led by CEOs who are poster boys and girls of institutions built over decades. ET Magazine teamed up with conversational research firm MavenMagnet to take a look at a pool of new-age entrepreneurs, and compare them with the captains of India Inc, seeking answers to questions like `How would a Flipkart's Mukesh Bansal measure up against Reliance's Mukesh Ambani?' or `Who will draw a bigger crowd in a college -Cyrus Mistry of Tatas or Kunal Bahl of Snapdeal?' MavenMagnet's Conversa tional Research technology tracks online conversations on open platforms and social media. The founders of the top 10 Indian startups by funding up to August 2015 were compared to the leaders of the top 10 Indian business groups by market capitalisation.These CEOs were chosen to analyse the impact and influence these two groups have and the perceptions about them. The initial answers confirmed the prevalent notion that the ecommerce czars are the rock stars. They rule the mind space of the youth in startup hubs like Bengaluru or the National Capital Region. Explaining the youth connect, Naveen Tewari, founder and CEO of InMobi says: “Even before the youth of India started to connect with the new-age entrepreneurs, we took the first step of understanding and connecting with them. It's simple, we are creating products for the masses.“ On a Different Trip As the study dug deeper for the reasons for this connect, we found how widely divided are the perceptions about Indian businessmen of today -divided between the old and the new. The study also shows that traditional  industry leaders have lost the perception battle in their ability to grab an opportunity. On the other hand the younger founders are seen to be on the  ball.Palepu explains this as an entrepreneur's readiness to jump in and  then hustle his way through a situation when he lacks resources, money  or knowhow. The new-age CEOs are also seen to be more professional than their traditional counterparts because of their ability to deliver top valuations. Clearly they are seen as the value creators and perceived as  being ahead of their seniors on this scale. Adi Godrej, chairman of the Godrej Group, accepts that he has learnt from the startup phenomenon in India and feels that ecommerce will be more successful in India than modern retail. He points out that the conglomerate, whose businesses range from security and storage solutions  to consumer products and aerospace, has plunged headlong into ecommerce  via an acquisition and that the entire group is trying to put more products  including its real estate offerings online. That is also true for the Tatas, the Aditya Birla Group and Reliance. All these groups have a significant stake in mod ern retail and are trying  to get on to the ecommerce bus only now. The most significant tipping of the hat to the startup phenomenon is by Reliance Industries Ltd (RIL), and it helps that the gen-next at the group, Isha and Akash Ambani, are at the forefront of a newage business -the telecom 4G foray under the Jio brand. Just last week the refining and petrochemicals giant let on that it has  adopted another common practice at startups -an open-office system with plain workstations for everyone, including Reliance chairman Mukesh Ambani should he choose to drop by. Others are turning investors. Harsh Goenka, chairman of RPG Enterprises, has set up a `100 crore fund to invest in startups and has manned it with McKinsey type professionals. Goenka told ET Magazine: “I see the startup phe nomenon as a renaissance of entrepreneurship  fuelled by personal ambition and confidence in the India growth story.“ The Question of Ethics The ET Magazine-MavenMagnet study finds that when it comes to people  management, the old school is way ahead. While traditional large conglomerates have a positive vibe of 1.30, the startups have a negative vibe: 0.46. Recent anecdotes prove that it's not an unfair assessment. India's top ecommerce startups have fumbled with their manpower management, over-hiring at first and then issuing pink slips. TinyOwl,  Housing and Zomato are three higher-profile startups that are in the midst  of downsizing. Management consultant Rama Bijapurkar says: “We need to constantly remind our selves that there is the other half or even two-thirds  of India's youth whose dream is a permanent job in a large company with  benefits and predictability of income, increasing over time, so that the family can move up the ladder of living rapidly.“ A common concern around both traditional Indian companies and startups is on ethics. While conversations hover around the personal interest of traditional CEOs, and their inability to maintain an arm's length in conflict of interest scenarios, the new-age CEOs score poorly when it comes to business pricing practices or lack of any display of social responsibility. However, both groups also inspire people in general and aspiring entrepreneurs in particular. As Vijay Shekhar Sharma, founder of Paytm and Naveen Tewari, both write, they were inspired by the earlier generation; today both groups act as inspirations, maybe in different parts of the country. An India-Bharat divide emerges if the data is split along metro and nonmetro lines. The traditional CEOs of India Inc score high in non-metro  cities in the perception battle, whereas the metros seem to be more enamoured of the startups. While 64% conversations about startups originate in the metros, 54% conversations about the leaders or the larger companies come from non-metros. The startup hubs of the NCR (34%) and Bengaluru (25%) contribute 59% of the buzz around startups. Innovation is the New Licence The ET Magazine-MavenMagnet study clearly identifies startup CEOs as innovators. The traditional CEOs are, on the other hand, associated with vision, and tenacity, linked with their ability to nurture their businesses  and keep going over a long period. Even if these large companies innovate,  unlike for a startup, the innovation does not get associated with the CEO. For the startups of today, innovation cuts through the licence regime. Take the taxi aggregation business for instance. A sector that operates with multiple and state-wise licences has suddenly been turned on its head by an innovative business model that can afford to ignore the licensing. Or take the ecommerce retailing model. It has already got the nod from the government to bring in foreign capital, even while the brick-and-mortar modern retail business is denied. Innovation is allowing Indian startups to hop, skip and skirt around licence regimes. One Indian businessman who is working closely with the new-age innovators was also part of the earlier generations.Dilip Modi, son of BK Modi, had worked almost shoulder to shoulder with telecom czars like Mittal two decades ago. Father BK and his 20year old son Dilip had  led Modi-Telstra, the country's very first telecom operator with a licence in Kolkata. Under its Spice brand Modi had three more licences, all of which were sold to Mittal's Airtel subsequently.Dlilp, now 40, makes and sells mobile phones under the Spice brand.His retail venture has tied up with Flipkart for a new offline-online experiment. Modi says: ‘The entrepreneurs today are much more confident. Finance is also much more readily available. Twenty years back we did not have this kind of confidence in ourselves.“ Modi feels that the entrepreneurs of today can  actually ride on the mobile boom to markets that will be a mobile-first market like India. “Africa for instance will be mobile-first unlike the US or China, which have higher PC penetration than mobiles. Indian startups are competing well against global ecommerce companies in India. I am sure they can take this ex perience and conquer Africa and then become the first true Indian MNCs.“ There are signs already. The likes of Zomato and Practo have already moved abroad. Godrej feels the key will be the Indian startups' ability to create business models of their own, not just copying a global business model. In fact he says that it is his advice to the new generation  to go out and find new roads. The journey has already begun, and it will be vastly different from the roads travelled by the generations before them. (Additional reporting by Rahul Sachitanand and Rajiv Singh)
Suman Layak

ETM15NOV15