Going from myths to maths of business

Mukesh Chaturvedi

After the recent attacks on World Trade Centre Towers, it is not only the US economy that is badly hit, but the world economy at large has been affected. Indian tourism, including hospitality industry, for example, has taken a bad hit. While airlines and hotels are experiencing a 40- 50 per cent shortfall in business even as the season begins, the worst affected are small and medium enterprises in this sector. Laments a New Delhi-based travel and tour operator,
“Earlier, it was the Nepal tragedy; and now, it is the US incident. Two major set backs within a year are more than sufficient to finish any (small/medium) business of my kind. Well, I think it’s all a matter of luck.”

That’s the first myth conditioning the orientation of small and medium enterprises : Luck is supreme. But, then, the Japanese predicted the 1970s’ global oil crisis over ten years in advance using ‘scenario modelling’ and started working on fuel efficient engines and small cars far ahead of any other nation. The second myth influencing the mindset of small & medium entrepreneurs is that “it is the first venture which makes or breaks”. They need to understand the dynamics of small and medium enterprises a little more clearly. Actually, 80 per cent of successful businesses would take two to five attempts.

The third most significant myth is the assumption that “all you need is money to be successful”. In fact, money is only the starting point. The real requirement is optimal utilisation of all those resources that money can buy.

Some other myths confounding small and medium enterprises are their beliefs like “successful industrialists are born”, “one needs to be an inventor”, and “one needs to be high-tech”. No doubt, one needs to be optimistic, have a sense of determination, and be energetic; but, perhaps, more important are clarity of purpose and task, and extraordinary perseverance and work. One needs to be more of an innovator and a builder of organisation rather than just an inventor.

Today, we are talking about genome or biogenetic engineering. Yesterday, we were talking about information technology or telecommunication. Day before yesterday, we were talking about plastic. Technology is an ever-changing phenomenon. But, there are some industries that will always be there, like food, real-estate and housing. Therefore, to be successful, one doesn’t necessary need to be ‘high-tech’. Finally, a very big myth that has paralysed the young generation’s initiative is the misconception that “only the best engineering students make good entrepreneurs”. The example of Bill Gates alone would be enough here to clear this doubt.

I suppose, these myths are a more serious threat to the future of small and medium enterprises rather than competition. According to me, the answer to their dilemmas lies in professionalisation of management - more result-oriented and cost-efficient working. How can professionalisation be achieved? The first and the foremost is Vision.

Davinder Kumar Jain started with little more than his vision that demand for writing instruments would grow along with literacy. From helping run his father’s small in Delhi in the early 1960s, Mr Jain’s Luxor Writing Instruments today is the market leader in the Indian writing instrument industry with a turnover of Rs 150 crore and a product portfolio that includes Parker, Papermate and Pilot.

Business Concept Definition is the next important requirement for professionalisation of management. What is the purpose of the venture? What do you want to accomplish with the business? Name? Fame? Money? Or, contribution to industry and commerce?

The third critical requirement is Product-Market Study: Product research - Is the product feasible/realistic? Market research - Who will buy? Where are they? How many - a niche? What competition exists?

Astute financial planning, or correct financial projections is another must for an effective professionalisation of small and medium enterprises.

The fifth major requirement is perfect matching of human resource needs and skills. The small and medium enterprises, today, don’t need just ‘nine to fivers’. They will work only for wages. What is needed is a manpower that is keen to pursue innovation and growth; people with a sense of risk, profit and loss - corporate entrepreneurship or intrapreneurship.

And, finally, Positioning. How do you want your business to be perceived? Corporate slogans like “ We Also Make Steel” and “Where You Come First” make this point abundantly clear.

(Dr Mukesh Chaturvedi is professor, Marketing and Business Communications, Management Development Institute, Gurgaon)