Of course, this is just an essence of Pai’s hour long talk at the conference. What preceded it was a journey through the history of mankind, from the emergence of the industrial revolution world over to its disruption through technology and how it will impact our ecosystem today. How is that relevant? You may ask. As Pai says, we need to know what happened two hundred years ago, to understand what is happening today.
(Narrated in first person)
Be paranoid, because the best people worry about their business every single day
The bygone era
200 years ago, the first disruption in business began when the industrial revolution made its foray world over. With the invention of the steam engine, people began using motive power (something more powerful than muscular or animal power) to manufacture products. It meant, from a single place, businesses could procure raw material and cheap labour from different parts of the world, setup assembly lines, manufacture and sell globally. In other words, they could do centralised production. Along with this came the rise of global supply chain. In fact, during the 80s and 90s, with this strategy being adopted by Great Britain followed by China, businesses saw the creation of a global manufacturing and supply chain market.
As companies began creating a global network (of ties between producers and customers), the next big challenge in business emerged; identifying the right customers. To fulfil this, companies had to further address two concerns; setting up a strong distribution network, and tackling information asymmetry (understanding customer preferences in each region, time zones, information availability and more). This gave way to warehouses, information systems and eventually, Internet.
The Internet phenomena
Internet became the second greatest disruption in business. Suddenly, information from world over was available on a platform, free to be accessed by anyone at anytime from anywhere. What did this mean for manufacturers? It broke the systems of centralised production and supply chain process and gave them (especially small businesses) direct access to customers, wherein they could setup virtual businesses, eliminate middlemen and secure higher profits while selling products to customers at cheaper rates. In other words, combined with reduction of cost due to cloud technology and general advances in technology, the rise of Internet led to the creation of a truly global marketplace.
Take the case of the global oil and gas industry. Today, the industry is valued at US $2.5 trillion, and globally, we consume 93 million barrels of oil every day. Now, Tesla Motors is disrupting the automobile industry world over by creating a shift from petrol and diesel run cars to solar and battery-powered cars. In short, it is disrupting the oil and gas industry by providing alternate fuel and energy sources. Let’s take another example. All of us are familiar with 3D printing. One can print a house, a human organ, an automobile, knee caps or something as small as drugs or chocolates. How is all this impacting the manufacturing industry? It’s creating self-sustained communities which don’t depend on the global marketplace.
The disruptive capital
Today, disruption is taking place at a pace never seen before and it is only going to accelerate further. The examples stated above show that what appears to be a promising today will become obsolete thanks to the rapid innovation taking place world over. As companies are formed and innovation lies at its core, we come to the next natural question; why are investors putting money into businesses which may or may not generate revenues? Because, there is surplus capital globally (which arises from surplus savings), and capital gravitates to an industry which gives the greatest value (which happens to be innovation, today) at that given point of time.
And amidst all this disruption, India is the best place to be in. Just as IT solved the world’s problem, startups are solving India’s problem. Let’s get into some statistics. Today, India has about 18,000 startups with US $75 billion in embedded value and 300,000 employees working in startups. This year alone, US $500 million has been invested as seed capital, and the ecosystem is currently valued at US $2.23 trillion, which is expected to grow to US $10 trillion by 2035.
What should startups do capitalize on this growth?
Once startups have build a wonderful business, they have two choices; one, to sell their business and make money, or build a sustainable business. If they choose the latter, they need to strategise on multiple aspects of the business.
One, focus immensely on taking care of the customer. Today, customers are fickle but customer delight is very important. Companies must ensure that they address concerns immediately and create an efficient customer success team.
Second, they need keep their teams motivated. It is important for companies to align people’s aspirations with the company’s goals to build a sustainable business.
Third, as they scale up their venture, they need to plan. At every stage of scaling, the degree of challenge may vary and companies must be prepared to face them. Fourth, they should respect capital. Companies should never blow up cash and instead save for the future. Lastly, they should get better people; people who want to change the world and create a revolution. To aid this, companies need to build an open and transparent culture where ideas flow freely and recognition is based only on merit.
In other words, be paranoid, because the best people worry about their business every single day.
Take immense care of the customer
Keep the team motivated, have a plan to scale up the venture and have a career plan for your people
Build an open and transparent culture where ideas flow freely and recognition is based only on merit