For MSMEs, Growth Is Stability
As I look at the situation, several things strike me. In this article, I will talk about only one of them. It is a fallacy of sequential thought process of survival, stability and growth. It is a fallacy hiding in plain sight! writes Samir Sathe of Wadhwani Foundation.
MSMEs have been subjected to the host of advisements from a battery of ‘rescuers’, including consultants, advisors, mentors, coaches, experts, lenders, investors, employees, academia, friends, acquaintances, families, parents, spiritual leaders, and in fact even strangers on the social media, for all its worth! Argumentative Indians, as Amartya Sen puts it, have no dearth of wisdom when it comes to giving it to someone else.
The result. From confusion to more confusion and loads of it, and in a few cases, from confusion to clarity, albeit least of it.
As I look at the situation, several things strike me. In this article, I will talk about only one of them. It is a fallacy of sequential thought process of survival, stability and growth. It is a fallacy hiding in plain sight!
Consider the last 100 years.
We all know that the average life span of an enterprise has come down from over 60 years to <10 years in the last 70 years of corporate history. We know that 95% of the start-ups fail within the first five years of their birth. We know that the death rate of the SMEs is highest when it comes to the fourth generation, where the decline has begun from the third generation. Most of the MSMEs are in second and third generation accompanying their previous generations and few with the founders. Also consider the external environment now, which is dark for most of the MSMEs out there with one-fourth to one-fifth of them facing extinction with either delusional perception of the ‘pent-up’ demand situation which, some experts believe, will shoot up or debilitating despondent outlook on demand which in several cases, may further dampen the confidence of the entrepreneurs. This condition, coupled with a fractured financial situation, can even make the idea of entrepreneurship, a bad one for young aspiring ones.
How will the next 2 years look?
I expect that the next two years will look unstable, to say the least and decisively conclusive in sealing the destiny of many MSMEs. Consolidation with accompanying death rates will exceed birth rates. Consequently, there is a reasonable chance that MSMEs in the system in say 2023 will be perhaps wiser, pragmatic, cautious and even desperate. Imagine the pain of lost years, lost opportunity and lost profits. Entrepreneurs, by design, are somewhat convinced that their idea should prevail. The same trait and dogged determination that makes them an entrepreneur is also responsible for the failed attempts. While the spirit of entrepreneurship encourages learning from failures, the system would have the resources wasted anyway, for every failed enterprise.
Growth is Stability
Growth is Stability, Wadhwani Foundation
“Life is like riding a bicycle. To keep your balance, you must keep moving.” Celebrated scientist Einstein once said. And therein lies the answer of whether MSMEs should think of stability before growth.
As Christ Woodford in his synopsis of the science of bicycles puts it (see www.explainthatstuff.com/bicycles.html), riding a bicycle is one of the most brilliant examples of physics in action. It converts the power used by the body of the cyclist to kinetic energy that propels the cycle to move ahead. The kinetic energy navigates through the air resistance and rolling resistance depending on the ascent of the ground on which the rider cycles.
MSME entrepreneurs will do better to ponder over the brilliant and the most visible act of riding a bicycle. Should they want to be stable and balanced, they must apply the force equally for the cycle to be straight. Given the rider almost never cycles in a frictionless environment, the force must be applied to move forward, lest the cycle would topple and fall down with the rider needing to stop or unable to start at all.
MSMEs are feeling the resistance of the demand slowdown, which is making them blind-sighted to know where they are heading towards, the drag of the tailwinds of constrained cash situation, pulling them backwards and not forward. They also are in a state of poor fitness, poorly fit gear to ride a bicycle, and fundamentally unsure of the technical robustness of the cycle itself. They are also unaware whether they have the stamina to exert power on to the cycle pedals to move forward.
At this point, the cyclist has two choices. The first is that he/ she could decide to deride the bicycle and stop. MSME entrepreneur could stop and halt the business because the conditions aren’t right, in which case the journey stops, the enterprise dies.
The second choice is to ride to a point where someone else could ride the same bicycle or someone gives another bicycle if the cycle needs to be replaced. In either case, either the rider or the bicycle changes, but the journey should continue. The show must go on.
The nuance is that the rider must take a reflective moment as a leader, a pause than a full stop to continue riding ahead. The growth pivots are not different. They indeed are the pauses of reflection in these troubled times to decide which way the rider must ride the same or different bicycle or whether the rider him/herself must be changed.
In real life, MSME entrepreneurs assume that they are the only ones who will continue to ride the bicycle of their business, that the same bicycle must continue or that they cannot continue the journey until there is no wind, or resistance or that the ground is smooth, frictionless and has no ascent or that the journey must have clear visibility of the final destination from the start to the end!. Look at these assumptions and none of it is true!
My simple advice to MSME entrepreneurs: Think of a bicycle. If you want to be stable, reflect on the situation, take pause, slow down and then move forward, keep riding, think of growth and surely get rid of any of the aforesaid, false assumptions.
Samir Sathe is Executive Vice President, Wadhwani Advantage at Wadhwani Foundation