Friday, May 11, 2012

Small and Medium Enterprise Paradoxes - Scale, Scope and Growth apart

Of late, I am beginning to at least experience a love with enquiry I nursed long ago, and had to forego. That was when I first studied linkages between Entrepreneurial Orientation and Learning styles. It is of some lament that in a world gone global, my understanding is largely from one nation - India. It is also my joy, that being here in India, I have seasoned professionals with whom I can bounce such reflections. I write this short piece as a token of my appreciation for those who’ve helped my understanding.
1.     Venture creation is often a leap of individual faith and investor confidence at times. Beyond the proof of concept and business model success, CEOs and their top teams have less influence over their organisations than they believe they do. An institutional effect in the ecology of the business sector is more at play. Small and medium industry may mistake their size for comfort in autonomy, when they may be skating on the thin ice of a disappearing glacier. Such is the role of the business environment as well.
2.     Scale trumps scope in the near-term for some firms. Scale is trumped when volume loses differentiation. Like the current state of the Indian IT services industry, where low cost begat scale, and now differentiated value eludes the customer. The CEO cannot determine such ecological balance of his or her own accord. The paradox of entrepreneurship is about traversing from social misfit to innovator to community champion. It is a paradox of identity shifts across stages in the institution’s life cycle.
3.     CEOs and their teams can orchestrate firm performance, provided they share a mind-set around what results they want from a shared vision. CEOs need to abandon their ‘leader’ image and mould with the wisdom in the group for which collaboration produces value that none in the group could produce alone. Leaders with individual power often dread giving up for the insecurity of processes for leadership in organisational systems. Such tipping points are moments of deep dialogue or shallow disconnects for the entrepreneur and his/her team.
4.     A Renter or Trader mind-set in governance afflicts early design of organisations in risk-averse firms. Structures and communication protocols that serve such designs will not be able to generate passion for intellectual property or pioneering innovation. A change in such mind-set is about leadership courage and vulnerability, both. The Renter can become a Statesman, provided he or she embraces the technocracy of pioneers in the team. The paradox is of staying on a accreting value chain without having to invest incremental time in acquiring the unnatural identity of pioneering innovation.
5.     Markets are not decided by hard figures of funnel size and feasibility studies as much as by buyer or sponsor intent and motivation in the zone most proximate to value creation. Qualifying for purchase intent is market intelligence as opposed to post-facto wisdom in lessons learnt in pitching for business.
Facilitating such moments are a challenge and joy. The challenge comes from lack of precedent in the relationship. The joy comes from the opportunity to raise questions that delightfully make for progress. The progress in small enterprise is not a function of ‘leader’ development alone. It is about fuelling the aspirations of a team in alignment with shared purpose for which the firm is created. Do small firms retain size specific autonomy? Do they rise to overcome issues of size with a maturing team that enables even more people to experience development of markets, customers and the ecosystem?
This is not a matter of policy paralysis in itself. It is the mitigation of risk in an environment where perceptions shift faster than providers can retain customer attention.


  1. Consider the history and engines of growth of the Software industry in USA. Take the case of the ‘Spreadsheet’

     An idea generator (Alpha firm – say VisiCalc) developed the concept to the stage of a successful prototype.
     The Alpha firm then tested the market and then a firm at the next stage (Beta firm with a different capital and ownership structure and culture – say Mitch Kapor’s Lotus) grew the market to a middle level.
     The beta firm then with or without the help of the venture capital partner hawked the beta tested product to a tertiary firm (a Theta firm - say a Microsoft) that scaled the market to national and international levels

    The personality of the leader and the style of leadership and the culture of teamwork at each of the three stages are different.

    In the US the Alphas have stayed on as serial entrepreneurs at the Alpha stage going from one seed to another. The Betas have stayed on as mid-level product refiners and market developers not falling back as Alphas or attempting to be grow into a Theta

     I’d call the alpha stage the Brahma or Father stage and
     the Beta stage the Siva or Son stage and
     the Theta stage the Vishnu or Holy Ghost stage; the stage at which the original idea or creation permeates the universe

    Seldom can an idea grow to be all three at the same time. Any attempt to do so is like trying to play God and is a prescription for failure.

  2. Thanks Kuruvilla

    Very pertinent comments that imply what an unchanging Identity can do to Alphas, Betas and Thetas. In relative contrast, am taken by Disney's evolution. From movies, to theme parks and merchandising...So also, consider Capital One - one form of identity to another - often taking one momentary advantage to another as in a series. For a while it appeared that the telecom industry in India were on that path, seizing one advantage after another. Watch what each firm's response will be to the pressures of the policy decisions the TRAI will take.

    Identity is a strong source of firm behavior that leadership need to practice as contact sport of a dynamic business environment. Like Disney...The Avengers are already way ahead of Harry Potter in revenues, and who knows what forms of products this will generate.

    I thank you for such intent reading and lively contribution to the theme in the blog. The leadership in a firm need to respond to what trade-offs will perpetuate the firm. Longitudinal analysis of firms like Stora-Enso (world's oldest joint-stock company) and Shell and IBM and TVS and Sons and the Tatas are all great sources of learning. Similarly, firms that die in an ecology are also likely to provide learning, like Dyanora, and Solidaire and ECIL in India, or LML, Lambretta and Allwyn Pushpak for example...Similarly, less consumer focused OEM suppliers may have a lot of learning for us..Would Vespa in India source from Japanese auto-components manufactured in India or encourage vintage investments in Dell-Orto of Italy?

  3. Thanks Joseph, Nice Article.

    I agree with you CEOs need to abandon their ‘leader’ image :-)