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In an earlier piece (published in these columns on January 13, 2014), I had suggested that large corporations in India could benefit from a more strategic engagement with smaller, entrepreneurial businesses.
While that is all nice and fashionable to propose, one has to acknowledge that the execution of this strategy has its share of challenges.
In particular, it would be useful to think in terms of areas or sectors where the possibility for such engagement might exist. It is equally important to give some shape to the idea of such strategic engagement.
Benefits of engagement The benefits of such engagement are significant enough that it would pay to give some thought to implementing such an idea.
As the economy grows in size, diverse business opportunities emerge in new segments of almost every sector. Start-ups are quick to spot and pursue these opportunities. By engaging with these start-ups, large companies can effectively address market opportunities more efficiently.
Niche segments For example, financial service firms may benefit from engaging with start-ups that address the specialised needs of certain niche customer segments.
Media and entertainment firms could enter new and less obvious genres of entertainment, IT services firms could tap into product and technology licensing opportunities in adjacent spaces, system integrators into solution design firms, pharma companies into clinical service providers or even companies that specialise in development of new chemical entities.
The list could go on. Such ideas are not unheard of in the Indian context.
How can large corporates make such engagement a part of their strategic design?
In an article that appeared in 1980 and is as relevant today for Indian corporates, Edward Roberts identified a continuum of styles of engagement between large and entrepreneurial businesses.
This ranges from a loose engagement as a passive provider of capital, all the way to starting up the entrepreneurial venture as an internal venture.
Joint venture approach Of these, he advocates the “new style joint venture approach” as particularly interesting because “the small companies provide entrepreneurial enthusiasm, vigour, flexibility and advanced technology; the large ones capital, and perhaps more important worldwide, channels of marketing, distribution and service.”
Several successful joint ventures between large companies and entrepreneurial ventures across the years exemplify how this “synthesis” created “significant competitive advantages.”
Roberts’ comments are especially relevant to the current state of entrepreneurship in India.
The financial success of entrepreneurs who started up in the past decade or two and the social esteem that they enjoy seem to have caught the imagination of professionals across industries and of all ages.
Thus one frequently hears of professionals across many industries and functional areas wanting to start-up, based on the market opportunities they perceive in solving problems in supply chain, manufacturing or service delivery and so on.
At the same time, leaving aside a few sectors like on-line commerce, enterprise in many of the more traditional businesses need what strategy literature would term as complementary assets.
Examples of such assets are distribution chains, service networks, product evangelists and so on.
Many early-stage enterprises languish or fail due to lack of access or inability to create complementary assets from scratch. These factors could either lead to a higher level of failure among entrepreneurial ventures in many sectors, or worse, discourage many of those who are considering entrepreneurship from taking the plunge. Partnership between large corporations and entrepreneurial firms would thus not be simply mutually beneficial business alliance.
Thus Roberts’ idea of the new style joint venture would lead to a socially desirable broad basing of entrepreneurial activity as well.
(The author is on the faculty of Indian Institute of Management - Bangalore and Chairperson, NS Raghavan Centre for Entrepreneurial Learning. Views expressed
are his own.)
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