How India needs to consciously create an intensive environment for start ups to expand and usher in the era of Indian MNCs

It is hard to believe now, but when I graduated in the '80s, the most sought-after jobs were in the public sector, of course a distant second to the charms of USA. Freshly minted engineers would take a shot at the recruitment tests held by BHEL, BEL, ISRO, BARC' and once they got in, would retire from there. These jobs paid well, came with good perks and phenomenal security. The 70s and 80s were also the time when India was attempting indigenization on a large scale and these companies were at the forefront. In 1981, when Maruti set up a plant to build a modern car, it was an exciting place to be in. CDOT in 1984 with its allure of designing and building a new switch was still a very cool place to work. The marriage market, the ultimate barometer of job status, also confirmed this by giving a premium for bridegrooms from this cadre. Government and bank jobs, which were the post-independence favorites, had given way to a new order - the hotshot PSUs.


The opening of the economy and the emergence of the IT sector in the 90s overturned this cozy world and completely took over the dreams and aspirations of the next generation. And here the order of magnitude of growth, both in number of jobs and in the earning capacity, has been substantial. In just a matter of ten to fifteen years, we have employers like IBM, Wipro, Infosys, Accenture, and Genpact recruiting in thousands every year. The average compensation for a fresh engineer has gone up from Rs 24,000 pa in 1990 to Rs 3,00,000+ in 2010, a whopping 1150% rise!. Old names like IBM and Coco-Cola, new names like Microsoft, Pepsi, Airtel, Nokia, Honda and Toyota and even newer ones like Google and Facebook have created innumerable options. The job content has grown by leaps and bounds with international competition pushing up output quality levels to global standards. No wonder then that the IT sector and MNCs now provide the ultimate inspirational jobs for the Indian middle class.

One of the side effects has been that most of our talent is going into perfecting large-scale delivery on one hand and copycat execution on the other. A software engineer of the 90s, today, would be managing a 5000+ team of engineers and have responsibility for hundreds of millions of revenue. Or if he were on the business side, he would be launching a global brand in India following, to a great extent, the same strategy that succeeded in the parent country. However, somewhere during the course of this euphoric journey, we have given a short shrift to innovation. Very few new ideas in products or services have originated from the country. China has its Huwawei and Haier. India is still not there except in IT Services. More worrying is the fact that in a world where large category killers like Google and Facebook are getting created in shorter and shorter timeframes, we are still struggling to create brand new world-class companies. Infosys continues to be our showcase company 25 years after its inception! This makes us very dependent on the global economy and any hiccup there results in enormous anxiety and hand wringing here. We are worried about American elections changing outsourcing rates and UK elections changing visa rules. What it means is that we do not have control over our destiny when it comes to creating the right quality jobs at the right time in right numbers. We need to able to do this if we are serious about leveraging our demographic dividend to claim our rightful place in the world order. The only long-term solution is to create enough new businesses in all sectors, which can leverage the domestic demand and then extend their reach to international markets. In short, we need a few thousand more Infosys and Bhartis!

The well paying and comfortable jobs of today, to an extent, have become the golden handcuffs of our generation. The escape velocity (the speed required to break free) today is much higher than say what it was even ten years back when the exodus happened from old economy companies to the new ones. So it is going to take conscious effort from all the stakeholders (the extended family, the investor, the entrepreneur) to build a momentum for creating a significant number of start-ups, which can then go on to produce the new set of Indian MNCs in the next decade.

First and foremost, there has to be an appetite for failures, which today is nearly absent in our society. We need to showcase and celebrate failures as much, if not more, than our successes. Our hiring managers need to socialize the well-known fact that candidates who have seen failures bring more to the table than the ones who have only seen success. This will go a long way in making start-ups cool places to work in for our youngsters.

But the start-ups cannot attract the best and the brightest unless they are willing to pay as well as the bigger companies. The competition for talent is intense and global and there is no way anybody will settle for less than market compensation even if the job is far more exciting. Of course, start-ups cannot compete with the established companies in terms of cash and perks. Therefore our entrepreneurs will need to share more equity/stocks with their employees. The mind-set has to move from wanting to hold 100 per cent to willingness to build a company with a group of likeminded "founders" participating in the upside as well as downside. This would definitely attract a certain type of people. Take for instance Vaidhyanathan who recently quit ICICI to join Future Group's Financial Services. When asked what motivated him to take such a risk, he said: "But to take a stake in a business and add value to it is an experience I've never had". There are many more such seasoned executives waiting in the wings for the right start-up at the verge of scaling that would gave them not only the opportunity to build a new business from scratch but also offer a significant longer term upside through stock options, or profit sharing. This would surely incentivize them to compromise on the cash part. But here is where we get stuck in real life as the entrepreneur feels it is too risky with no absolute performance guarantees. A via media would be to bring such people on-board in "interim CXO's" role. This would help both sides to get over their fears and doubts. What is required is a change in our collective mind-sets; new employee engagement models replacing traditional full time employment offers.

Our corporate also needs to step in and do their bit to encourage start-ups. In the developed world, the start-ups get their first Beta customers from their backyard. It creates a win-win situation as the larger companies get a peak into cutting- edge technology and better supplier/vendor options while the smaller company gets its big break in the home ground. In India, the situation is distorted, as we always prefer "foreign companies" to domestic ones. I have heard of cases where Indian companies adopted anglicized names, offshore addresses and hired "white" sales folks to become more acceptable to Indian decision makers.

The Government needs to learn from countries like Israel and contribute its bit by reducing taxes and building incubation facilities. Our Govt. today is going the other way - it gives special status to large firms populating SEZs.

The next decade needs the pint sized, no name start-ups with abundant ambition and guts to dream big to become the new normal in our job market. This is the only way we can get the pendulum to swing towards innovation and entrepreneurship - the foundation for an economy which can stand and run on its own two feet.