Entrepreneurship Fundamentals

Professor Ikhlaq Sidhu, founding director of UC Berkeley’s Center for

Entrepreneurship & Technology and an authority on the process of innovation and technology management, visited our campus recently. In this exclusive interview, he shares his insights on entrepreneurship in India and abroad, why enterpreneurship should be taught in companies and a lot more. ,

TSA: Do you believe entrepreneurship can be taught, or is it something one is born with?

Prof. Ikhlaq Sidhu: I think the truth is somewhere in between, in the sense that everyone can be more entrepreneurial than they are. Entrepreneurship is essentially a style of thinking and from that point of view it can definitely be taught. You could also ask, ”Can engineering be taught?” In a way, yes it can. But engineering is taught to people who have an ability to learn engineering. For example, you’ve been selected (in IIT) because you showed an aptitude for certain subjects believed to be relevant to engineering. If someone has great aptitude to begin with, he is likely to achieve more with what is taught to him. In that respect entrepreneurship is no different from any subject.

TSA: Do you think there is a way of judging a person’s aptitude for entrepreneurship?

IS: I think it is possible to notice people who seem very entrepreneurial. There are always people who don’t seem to give up easily; people who look for other ways if they are not satisfied with their work.

I like to think that the process can start with one conversation or by an observation made by a single person. Entrepreneurship is a very bottom-up process. It doesn’t start from a research report. Entrepreneurship starts from understanding people’s needs and finding solutions for them. In a way it is an extremely applied form of engineering: More applied than somebody giving you a problem to solve because it is so unconstrained.So there are certainly some skills which would mark out people as entrepreneurial. I don’t think there is a standardized test for it, though –
What standardized test would Bill Gates pass that other people wouldn’t ? But I think if you had spent some time with Bill Gates before he started Microsoft you would have guessed he was entrepreneurial.

TSA: So in entrepreneurship you work with a person and identify his skills. Don’t you think it is different from engineering in that way?

IS: Yes. In engineering you are given a problem on paper with all the specifications you need, and you produce an output. Engineering is narrow in that way, unlike the real world which is so much less structured. Once you enter a job you find that it is no longer like school: No one is giving you an assignment to complete.

TSA: You mentioned that it would be useful for companies if people were more entrepreneurial, not just at the top levels but also lower down. Do you think it would be beneficial if companies taught their employees courses in
entrepreneurship?

IS: I think it would. Entrepreneurship as a subject is usually not taught by companies, but I think it should be. A lot of companies, however, teach entrepreneurship but replace the word with something else, like intrapreneurship , or technology management, or basic business skills.I believe that there is a certain amount of inefficiency in companies inIndia which comes from people not being entrepreneurial, and from an overstructure in the company that is not scalable. Let me explain. Maybe the CEO of a company is very entrepreneurial, as you would expect. He probably makes a lot sensible decisions every day. But go down two steps — say the manager of an engineering group with a clever idea. He does not talk to the CEO all the time. In a way he is almost working on his own. Every decision he makes is a business decision even though he don’t realise it. The more that such people can understand the perspective of the
leader, the more likely it is that the company will move forward.

TSA: What is the difference that you perceive between student start-ups in India and in the USA, such as at UC Berkeley?

IS: At one level, there is no difference. Students from both Berkeley and IIT are smart have all kinds of different ideas and try all kinds of new things.Just like in IIT, not every student who passes out of Berkeley starts a company.

The difference though is in the number of students who believe they will start a company. In IIT it is probably a small fraction. In Berkeley and in a lot of leading US schools it is a very large fraction: One of three. In IIT I would guess that fraction would be somewhere in the range of one out of fifty. In the US, even though maybe only 5 per cent of those one out of three go on to start their own company, at least you start with a pool of one out of three students . On the other hand if you start with a pool one out of fifty, you end up with far fewer start-ups. The second difference is in the environment. In the Silicon Valley, for example, start-ups are all around you. Your neighbours work for one, your
parents probably did too, your father’s friend just started one… there is nothing mysterious about entrepreneurship. Therefore the amount of mentorship available is much greater.

If you are a student in India and you intend to start a company in future, the problem is whom to go to. If your parents didn’t start a company, how will they advise you? What will they tell you? They will probably tell you what they know: You should get a job. And if everyone in your family is exactly the same way, it is going to sound like a consensus.

The other thing that mostly goes unsaid is that there is a lot more money in the American economy , particularly with the venture capitalist community that exists there.

To be fair, though, students in the US too are not immune to this problem. After all, if you were a venture capitalist, who would you give your money too-three students with an idea or an established team of people with three
big businesses behind them?

TSA: You attributed the dearth of aspiring entrepreneurs in India to the lack of mentorship. Once mentorship is available, will the number of students wanting to start their own companies grow exponentially?

IS: Absolutely. And I would use the word ‘role models’ along with the word mentorship. For instance, if all your (IIT’s) role models are Nobel Prize winners, then everyone in IIT is going to aspire to Nobel Prize. On the other hand, if you invite 10 speakers every year, each of whom shares experiences about how to start a company and make it successful, you are going to see an increase in the number of people who want to emulate that success. And the more such people you have in society, the faster this number is going to grow. And I think you can see that beginning to happen in
India.

TSA: What do you think about the prospects for clean technology start-ups, especially student start-ups in India, given the lack of legislations and subsidies that encourage such ventures?

IS: Well, I don’t think you should rely on large amounts of funding or on government regulations for the success of a clean technology start-up. Even in the US, the amount of money you would need to start such a company would
be enormous. In clean tech a lot of money is invested in the beginning on intellectual property and that intellectual property is usually absorbed into an existing business, and only those large existing businesses are
capable of funding the rest of it.

As for subsidies, though they might influence the R&D activity within a company, a business model cannot be built around a subsidy. A subsidy might be in place one year, and gone the next. Businesses have to make sense on
their own, not because of some government regulation.

TSA: Are social enterprises similar in some respects to clean technology start-ups?

IS: No, social enterprises are different. Social enterprises are basically non-profit organizations that make money (laughs). In social entrepreneurship, instead of making a donation you teach a person to make money and keep some of that money for yourself.

The big problem social enterprises face is that they are never sure whether they are businesses or charities. They are confused whether to reinvest their profits or to put it into the social good. If they reinvest all that money, they basically become businesses, while if they put it all into the social good, they risk becoming less competitive.

TSA: Any final word of advice to IIT students?

IS: India needs more people to be entrepreneurial. That is the only type of change that will make the country more efficient at utilizing its resources and ultimately make it more competitive. We need a much greater percentage
of IIT students who decide that at some point in their career they will be able to pick an opportunity and very effectively use it to run their own business.

You never reach all your goals. But if you set them too low, you don’t reach any of them. India needs some more people with big goals.