“Street smarts usually trump academic brilliance”
Manoj Khatri spoke to Philip Anderson about aspects of successful Entrepreneurship, unique challenges and opportunities for Indian entrepreneurs and the advantages of an intraprenuerial culture.

Philip Anderson is the INSEAD Alumni Fund Professor of Entrepreneurship at INSEAD, in Singapore. He is also director of the 3i VentureLab and director of the International Centre for Entrepreneurship, which includes the Caesarea Rothschild Entrepreneurship Centre in Israel. His undergraduate degree in Agricultural Economics is from the University of California at Davis, and he received his Ph.D. in Management of Organizations from Columbia University.

How would you define entrepreneurship in the modern business context? What are the different aspects of entrepreneurship?
That’s an interesting question because different people have different answers. For example, is the self-employed owner of a one-man repair shop an entrepreneur? Is the founder of a venture-capital backed start-up whose stake has been diluted to 5 per cent an entrepreneur? If you identify entrepreneurship as owner-management, only the former is, but economic policy is oriented toward creating more of the latter kind of enterprise.

For us at INSEAD, entrepreneurs build companies that are specifically crafted to exploit a particular opportunity. This gives them an advantage over older companies that were designed in response to challenges of the past and must change to adapt to today’s requirements. Entrepreneurs can build new companies. They can also rejuvenate existing companies via buyouts and turnarounds. They can also build new companies inside existing companies, which we would call corporate entrepreneurship.

There are two key aspects to entrepreneurship. The first is forming or reforming a company. The second is that entrepreneurs behave like owners, not like people who are maximizing some other shareholders’ value. They may or may not have ownership stakes that are actually significant, but their interests are completely aligned with those of the owners. They behave like principals, not agents.

What are the key forces that govern the success of entrepreneurial ventures? What makes a successful entrepreneur? Can entrepreneurship skills be learned or are they always innate?
The single most important factor is quality of management. Most ventures do not end up doing what their business plans envisioned. High-quality managers adjust to unforeseen situations; because they build the company as they go along and behave like owners, they win by being more nimble and adaptive. The next most important factor is that successful ventures attack real problems or needs that people are willing to pay them to address. Far too many entrepreneurs create value propositions that customers find “nice to have” but not “must do.” After quality of management, the best predictor of success is whether a venture is attacking a problem that is causing pain for an attractive group of customers they can reach without burning too much cash.

The will to spot opportunities and take risks in order to realize them is part of a person’s overall makeup, which is partly innate and partly a product of his upbringing. The best way to learn how to be an entrepreneur is to work at the side of a successful one. The problem is that entrepreneurs are understandably reluctant to hire those who cannot help them immediately. Therefore our role in business schools is not to teach people how to be entrepreneurs. It is to impart skills and insights that allow our graduates to hit the ground running and make an immediate contribution to an entrepreneurial venture. That allows our students to learn from a veteran entrepreneur those lessons that can only be conveyed by working together.

Can you bring out the significance of the role of entrepreneurs in the developing nation like India? What lessons can we learn from the entrepreneurs of the developed world?
It is difficult for a company in a developing country to do exactly what a rival in a developed country does, because it is not a level playing field. Foreign companies have access to capital, technology, human resources, and infrastructure that often give them an advantage. Of course, Indian firms can compete on cost, but such strategies will keep Indian wage levels at subsistence levels and run the risk of foreigners pitting India against China to see who will work for the least pay. Therefore, the best way for Indian companies to create value is by seizing opportunities that foreigners have not spotted or cannot use to their advantage. Often, existing companies are not optimally configured to exploit such opportunities. Even great companies like Tata or Biocon can’t be in every business and can’t pursue every economic possibility. India needs entrepreneurs who can build companies that either do something foreigners are not doing, or that do the same thing in different ways.

There are many lessons India can learn from entrepreneurs in other countries, and it is fortunate that so many great entrepreneurs are of Indian descent and passionately desire to give back to their mother country. One of the most important is that savvy, toughness, and high energy usually count for more than sheer intellect. The most highly educated person who does well on tests often does not make the best entrepreneur. Indians are used to the idea that you need to be a top student from a top university to make it into the most prestigious companies or the civil service; the rules are different for entrepreneurs. Street smarts usually trump academic brilliance.

Another important lesson is that risk-taking and opportunism can go along with frugality. Really good entrepreneurs squeeze as much as possible out of limited amounts of cash. They leverage the money of others, and never invent the wheel when a good, cheap one is available in the marketplace. By keeping the rate at which they burn cash low, entrepreneurs can try a lot of ideas, most of which do not work, without losing because they ran out of money before they hit upon a workable value proposition.

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