Elephants can learn to dance by emulating what cheetahs do well
Large corporations can learn from startups and create an ownership mindset to gain advantages
Indian wealth has grown enormously over the past decade. Look at our stock-market indicators. On Wednesday, the S&P BSE Sensex closed above the 75,000 mark, a new peak and triple the level it was around the time the Narendra Modi government took charge 10 years ago. A day earlier, the BSE touched ₹400 trillion in market capitalization, the sum of what all listed shares are worth. The impressive part is that participation has broadened vastly too. India boasts of over 150 million demat accounts, up from just 20 million or so a decade ago. Most new investors joined the equity bandwagon after the pandemic’s outbreak in 2020. Investors taking the indirect route have also burgeoned. Monthly investment plans run by mutual funds now funnel as much as ₹19,000 crore into Indian equities each month. In 2014, this figure was only around ₹2,000 crore. Assessments by fund houses, the market regulator and research firms suggest rising equity enthusiasm even in small towns. The ease of investing assured by a clutch of online apps is part of this story. While no hard data is available to back this, it is a fair guess that middle-class India has finally taken to share ownership in a big way.
Yet, it is also obvious that not everyone in the country is a market participant. Since there exists no reliable data on wealth across socioeconomic levels, we have only indirect estimates of disparity. Bleak data on inequality published by global agencies has been subject to criticism, but still, the gap in asset ownership between India’s well-off and those who lead hardscrabble lives must surely glare out for its enormity. This can be judged from the stock market’s capitalization; while foreigners own a chunk of shares, it mostly reflects the wealth of
Indian equity owners, a class unlikely to exceed the ranks of our rich and middle-class. Most of our population is left out. Whatever the true picture of wealth distribution, it has entered the political arena as an issue ahead of our general elections. Along the campaign trail last week, Congress leader Rahul Gandhi promised a survey of wealth possession in the country—for its redistribution. The actual contours of what the opposition party has in mind are not known, but the rhetoric employed signals a leftward lurch in its orientation, reminiscent of India’s socialist era when riches were frowned upon. Although the market showed no reaction to that proposal (as the party is not expected to win), a drastic policy of expropriation would surely be disruptive for our economy, with capital flight setting the stage for hard times.
A benign way to tackle India’s concentration of capital would be to expand the base of equity holders to include every household. This can be achieved by a new approach to the privatization of public sector units (PSUs). Imagine a direct transfer of selected PSU shares to ‘Jan Dhan’ demat accounts opened for families that do not yet own any equity at all. Have-not beneficiaries would get dividends from enterprises that were publicly owned to begin with, track the market value of their assets and possibly start enlarging their stock portfolios through multilingual online tools. Of course, the digital divide will need to be bridged and much regulatory handholding would be required; as of now, a heavy compliance burden—nominee registration, KYC, etc—threatens to freeze the holdings even of aware investors. Eventually, however, stock grants could give all citizens a literal stake in wealth creation. And the more inclusive India’s growth is, the more sustainable it’ll be. are, respectively, founder and chairman of Marico, and the chair of practices at Boston Consulting Group India.
It is the age of startups in India, with entrepreneurs celebrated as they embody the spirit of New India. Large corporations are the economy’s mainstay, but are perceived to be steady and slow. In the corporate savanna, large corporates are elephants compared to the startup cheetahs. Let’s explore what the former can learn from the trendy.
The dominant mindset in a startup is that of a challenger breaking new ground; experimenting, learning and re-pivoting as needed. Many successful startups pivot to a new model as the market context changes. Globally, the example of how Netflix shifted from a DVD rental service to an online streaming service is well known. In India, Myntra started as a personalized gifting service before moving to lifestyle and fashion e-commerce. These are just two examples. Large organizations, however, have a bias for the status quo. Some companies set up innovation accelerators or labs to drive innovation, but studies show that many of these fail to achieve business impact at scale. The real challenge that large businesses face is to find a balance between risk-taking and care-taking as they grow—and adopt the ‘build, break, learn’ approach.
In today’s fast-moving world, the ability to move with speed and agility is a competitive advantage. Startups have a knack for taking decisions quickly, prioritizing action over deliberation. Large firms struggle with this partly because of the many processes and systems they have. One company we know of conducted an ‘audit’ of all its reports and processes and found that a large portion of reports were not being used at all and many processes were too complex. The solution was to eliminate unused reports and radically simplify processes to speed up decision making. The authors found that a systematic and dispassionate review of processes and structure is a good starting point to attain speed and a mindset for action.
Obsessive customer focus: In startups, leaders have first-hand insights into market realities. They are out in the field, interacting with prospective customers, getting a feel of competition. The customer’s voice is a key input for decisions. In large organizations, leaders have a reduced and sanitized (largely) market exposure. Despite their best intentions, even the ‘market visits’ of leaders only provide a rose-tinted view, with everything staged for the big boss’s visit. Of course, large companies are aware of this and try to set it right. Recently, a leading telecom firm announced that all its executives would spend one day visiting customers and understanding their pain points. This boots-on-the-ground approach is important, but even more crucial is the synthesis of what the customer voice requires the company to do differently, and to make it a part of the company DNA and not yet another process.
Organization-first approach: In the early stage of a startup, the founder knows everything about the company and takes all decisions. As it gets larger and some functions get established, the founder remains the focal point who resolves every conflict—implicitly or explicitly making trade-offs that decisions may involve—optimizing for the overall organizational objective. In large organizations, it is impossible for one person to decide everything, and hence structures get created. Unfortunately, most structures have implicit (if not explicit) incentives for people to optimize for the silo and not the whole. Creating autonomous mini businesses within a larger entity can mimic aspects of startup culture, granting both independence and accountability to different parts of a large company. One must be thoughtful in creating these structures, so that they truly solve business problems and are fit for purpose, and not force-fit business-unit structures where they don’t make sense.
In a startup, everyone knows everyone (and even families). There is camaraderie, a sense of collective purpose and informality, while the size and dynamics of the group promotes a sense of mutual accountability. Large companies should find ways to maintain this small-company feel as it grows. Minibusiness structures, cross functional task forces and office designs all are mechanisms that organizations have tried using to foster this spirit.
Owner’s mindset: In each area above, large companies have tried structural or process interventions to replicate startup magic. In our view, those are helpful, but there’s a common ingredient that is the most important, and that is developing an ownership mindset among all employees. Granting stock options is a good foundation for that. Genuine involvement in crafting the overall agenda, autonomy in driving strategic initiatives, encouraging boundarylessness and a sharp focus on result orientation all go a long way in making employees feel like owners. When big companies embrace startup themes and create an ownership mindset, the elephant really starts to dance.
Let’s not forget that every large corporation was once a startup. In the next piece, we’ll explore what young startups can glean from their more established counterparts, closing the loop of mutual learning.