Indian Harvard grads turning biz plans into success stories

Back in 2005, Ashwin Damera, a student at Harvard Business School (HBS), had a bright idea. What India’s booming e-commerce industry lacked, he believed, was a comprehensive travel portal. His idea won him second place in the classroom business plan contest; the winner of which was a proposed plus size lingerie company. He doesn’t think that one came through, but a year later Travelguru did, thanks partly to generous cheques from three unexpected investors - Damera’s own classmates.

Meet Ankur Daga, one of Damera’s angel investors, and himself an entrepreneur. Fresh out of HBS he founded Angara, an online jewellery company that emerged from watching friends struggle with purchasing jewellery. Despite his family background in jewellery, Daga wasn’t expected to follow suit. “The question was always ‘You’re highly educated, shouldn’t you be working for a private equity or a consulting firm’ ?” he says. But Daga doesn’t feel deprived. “I’ve done the McKinsey stint; I wanted to start something on my own, and the earlier the better.”

Daga and Damera aren’t the only ones to go against the grain. More and more Indian graduates from HBS are rocking the boat by ditching traditionally espoused careers on wall street or in consulting for entrepreneurship , ending up with cross-border businesses and bifurcated lives. They include people like Naveen Tewari (Class of 05), a McKinsey consultant who returned to India to start mKhoj, a mobile advertising network . “When I went in to HBS all I wanted to be was a partner in McKinsey . That disappeared in exactly three months,” he says.

According to William Sahlman, Senior Associate Dean at HBS who teaches a second year course on Entrepreneurial Finance, after 10-15 years, almost 50% of graduates are involved in entrepreneurial settings. India has seen its share of successful HBS entrepreneurs from Ashish Dhawan of ChrysCapital to Avnish Bajaj and Suvir Sujan of Bazee (later gobbled by eBay). Lately, though, they are jumping into the water and getting their feet wet earlier, sometimes , while still in school.

Kapil Vishwanathan’s was a case of campus entrepreneurship. He floated Pre-Media Global, a Chennai-based leading vendor providing content services to the US publishing industry , while still at HBS, along with his sister Kami, also an HBS alum. He’s wanted to become entrepreneur as long as he can remember. “It had to be a cross-border enterprise . It was just a question of when,” he says. He even tried to support other young business leaders pursue their entrepreneurial dreams by starting the Entrepreneurship Club at HBS. “Of course, the investing and banking clubs were larger,” he jokes.

Entrepreneurship has never been more in vogue than now. Paresh Vaish, a partner with Boston Consulting group and HBS Class of ‘86, says, “The top quartile of the class got jobs in investment banking and the rest aimed for corporate jobs.” Since his time, the number of electives in entrepreneurship has gone from three to 20, and number of dedicated faculty from five to 32, the largest faculty contingent focused on entrepreneurship at any business school in the world. “In the 70s, 80s and even the 90s, HBS was all about propelling you the quickest to make partner in McKinsey or Goldman Sachs. It’s no longer the case,” says Sumeet Narang, batch of 06, who rejected an offer from Goldman to start Samara Capital, an India-focused private equity firm.

For Narang, this was his second management degree; he’s also an alumnus of IIM Lucknow. His second stab at it was largely driven by the fact that HBS offers one of the most “international and diverse candidature among business schools” . With a history in private equity and investment banking in his six-year career with Citibank, Narang says the tug to turn entrepreneur was always there, but HBS intensified it.

Like Narang’s , many of these startups were based on business plan entries in the second year business plan contest. Georgia-born , Gujarat-raised Abhi Shah, founder of Clutch — voted top Legal Process Outsourcing (LPO) company from among 80 LPOs worldwide — says he and a classmate came up with 38 different business ideas during Think Week, a concept they borrowed from Bill Gates.

A part of the plan generating process was to have them be thrown out the window. Anshul Arora (MBA 04) followed neither of the two plans he submitted for the contest. Instead, with an “atypical” career at McKinsey with exposure in developmental work, Arora pursued his dream of a business with a “clear social mandate and a commercial motive” . The result was Edvance Learning, an inventive education model that spots gaps in the education and training landscape, and designs products to fill the lacuna.

For Arora the choice was between Harvard and Stanford which, he says, also has a great entrepreneurial flavour to it, along with physical proximity to Silicon Valley, the birthplace of aggressive entrepreneurship. A key Harvard advantage, he says, lay in its international leaning. “HBS with its general management perspective naturally has a strength in entrepreneurship vis-à-vis business schools like Wharton or Stanford that have strengths in finance and strategy ,” says Ashish Singh, MD Bain Consulting and HBS alum.

Another trump card for the school, according to Tewari, is its famed case study methodology. “The case study method means there is no structure and no formula. Life is like that. You’ll never get a situation that is a replica of what you learn,” he says. Every week, he recalls, the class was introduced to the case of a thriving entrepreneur, ranging from Narayana Murthy (Infosys) to Jeff Taylor (Monster) and Andrew Viterbi (Qualcomm). “I began to realise that I could be just like them and it didn’t involve rocket science,” he says.

That’s a sentiment everyone felt at some point in the course of two years , says Daga: “In a class of 900, at least 200 think seriously about entrepreneurship .” Those that do act upon it have a common starting point — the HBS alumni network — deemed one of the world’s most powerful networks with over 70,000 members. “The best part about graduating from HBS is that you can get a meeting with anyone at anytime. And as an entrepreneur that’s the hardest part,” says Daga. “We have more than a 20% share of the global venture capital business with examples like John Doerr at Kleiner Perkins and Tim Draper at Draper Fisher Jurvetson. That kind of network is hard to replicate ,” says Sahlman.

A significant part of mKhoj’s $7 million Series A investment was landed through the HBS connection. “There is immediately a connection and the first question is, ‘Which section are you from’ ?” says Tewari. In fact, HBS has made such a success out of institutionalising its network that Vishwanathan didn’t require an investment banker when he raised $18 million for PreMedia ; he knew exactly who to call.

For Shah, on the other hand, the HBS advantage wasn’t just about fund-raising . Having built a political advocacy group for the Indian American community with 65,000 members , and a successful summer internship with Jerry Rao at Mphasis, meant his network of influence was fairly extensive and with deep pockets. “For me the choice was going the Bobby Jindal way or coming to India and making an impact as an entrepreneur ,” he jokes. Where the HBS connection did come to play was in his endeavour to recruit the best and the brightest. “It’s the credibility that comes from a school with pedigree,” he says.

Finders and seekers

This year marks the 125th anniversary of the patron economist of innovation. Joseph Schumpeter was born on 8 February 1883 — and his work on innovation and the role of the entrepreneur continues to be a beacon to economists, businessmen, management consultants and venture capitalists. Economist Lawrence Summers has said that the 21st century will be the century of Schumpeter.

It is usually believed that true innovation emerges out of the tinkering of smart people in labs, garages and university dorms. Think of Larry Page, Sergey Brin and Google. But there is also the structured innovation that comes from large companies. Think of the team of engineers at Tata Motors who designed the Nano. We usually tend to underplay the importance of the corporate innovation, especially if it is part of a slow-burn process of incremental advance.

Schumpeter often wrote later in his life that large companies, too, could be hotbeds of innovation. “By the mid-20th century”, writes his biographer Thomas K. McCraw, (Schumpeter) was arguing that innovation “within the shells of existing corporations offers a much more convenient access to the entrepreneurial functions that existed in the world of owner-managed firms”. In other words, it isn’t necessary to start your own firm to satisfy your entrepreneurial urges; you can do it within the innards of a large company.

Innovation has many dimensions. One of the most fascinating research programmes that I have come across in recent years is that of David Galenson, a professor of economics at the University of Chicago. In a series of papers that he has published over the past decade, Galenson has identified two types of innovators — the conceptual innovators and the experimental innovators.

Godard made his greatest films in his 30s and Clint Eastwood in his 60s. What does this tell us about innovation?

Galenson says that the conceptual innovators are the finders. They make bold leaps and challenge the existing way of looking at the world and doing things. This group mostly does its best work at an early age. The experimental innovators are seekers who gradually reach their goal, taking one step at a time. Their best work usually gets done later in life.

Galenson derives his insights by studying artistic achievement. He has recently published two new papers for the National Bureau of Economic Research (NBER) in the US. Take the movies — and two directors born in 1930. Jean-Luc Godard changed the grammar of cinema when he was in his 30s, but declined later. Clint Eastwood did not pick up the director’s megaphone till he was past the age of 40; and his best directorial work has come in his 60s. Godard directed Breathless when he was 30 while Eastwood made Letters From Iwo Jima at the age of 76. Galenson says that Godard was a conceptual innovator while Eastwood is an experimental innovator.

Cinema is just one arena where Galenson has picked his insights. The same patterns of innovation can be seen in other arts such as architecture, poetry, painting and novel writing. So Pablo Picasso was a conceptual innovator. Paul Cezanne was an experimental innovator. Among poets, T.S. Eliot was in the first category while Robert Frost was in the second. Among novelists, Ernest Hemmingway produced his best work at an early age while William Faulkner gave us his classics later in his life. “The elegant and sophisticated poetry of Cummings, Eliot, Pound, and Wilbur grew primarily out of imagination and study of literary history, and was formulated conceptually, while Bishop, Frost, Lowell, Moore, Stevens, and Williams produced poetry rooted in real speech and experience, drawing on the observed reality of their daily lives to innovate experimentally,” wrote Galenson in a 2003 article.

Galenson’s insights can be adapted to the world of business and innovation. Some businessmen strike like lightning at a young age. Others gradually come into their own later in their life. It is fair to say that Bill Gates was at his best in the early years of Microsoft. Sam Walton changed the retailing industry only much after he had moved into middle age. His innovations took place at a glacial pace, and were not the result of one inspired idea but gradual learning born out of experience. Steve Jobs seems to have magically transcended the divide.

Other economists too have tried to understand the interplay between drastic and incremental innovation. One group, for instance, believes that upstream firms usually produce drastic innovations while downstream firms tend to use these drastic innovations to produce their own incremental innovation.

Coming back to Galenson’s two categories of innovators, perhaps the distinction between the seekers and finders extends to national innovation systems as well. Would it be correct to say that the US is a nation of seekers while Japan is a nation of finders? And what about India? And Indian industry? Are we more finders or seekers? I invite readers to write in with their answers to these questions.

17 mistakes startups make -- the 100-word version

In 1999 John Osher started Dr. John's SpinBrush to sell a $5 electric toothbrush. In 2001, he sold the company to Procter & Gamble for $475 million. Here are his "17 mistakes start-ups make" in 100 words.

• Failing to spend enough time researching the business idea to see if it's viable.
• Miscalculating market size. Entrepreneurs say, 'The market size is 50 million people. If I only sell to 2 percent, I'd be selling a million.' But most products sell less than 1 percent.
• Making a commitment on sales projections that were wrong. Created costs that require those projections to be met. Run out of money.
• Overprojecting sales prospects.
• Making cost projections that are too low.
• Hiring too many people and spending too much.
• Lacking a contingency plans.
• Bringing in unnecessary partners.
• Hiring for convenience rather than skill requirements.
• Spending half their time doing something that represents 5 percent of their business.
• Accepting that it's "not possible" too easily.
• Focusing too much on volume and company size rather than profit.
• Looking for somebody to tell you you're right.
• Lacking simplicity.
• Lacking clarity of your long-term aim and business purpose.
• Going after too many targets at once.
• Lacking an exit strategy.

Eugene Kleiner Laws

• Make sure the dog wants to eat the dog food. No matter how ground-breaking a new technology, how large a potential market, make certain customers actually want it.
• Build one business at a time. Most business plans are overly ambitious. Concentrate on being successful in one endeavor first.
• Risk up front, out early.
• The time to take the tarts is when they're being passed.
• The problem with most companies is they don't know what business they're in.
• Even turkeys can fly in a high wind. In times of strong economies, even bad companies can look good.
• It's easier to get a piece of an existing market than to create a new one.
• It's difficult to see the picture when you're inside the frame.
• After learning some of the tricks of the trade, some people think they know the trade. This reflected some of Eugene's own humility; he recognized that many venture capitalists thought they were experts when they had just a bit of knowledge.
• Venture capitalists will stop at nothing to copy success.
• Invest in people, not just products.
• There is a time when panic is the appropriate response

The Long Nose of Innovation

innovation is not about invention. An idea may well start with an invention, but the bulk of the work and creativity is in that idea's augmentation and refinement. The newer the idea, the coarser the granularity of most analysis, and the more likely people are to say, "oh, that's just like X" or "that's been done before," without any appreciation for how much work and innovation is involved in taking an idea from concept to wide practice.

................

Rewarding the Art of Refinement

The heart of the innovation process has to do with prospecting, mining, refining, and goldsmithing. Knowing how and where to look and recognizing gold when you find it is just the start. The path from staking a claim to piling up gold bars is a long and arduous one. It is one few are equipped to follow, especially if they actually believe they have struck it rich when the claim is staked. Yet the true value is not realized until after the skilled goldsmith has crafted those bars into something worth much more than its weight in gold. In the meantime, our collective glorification of and fascination with so-called invention—coupled with a lack of focus on the processes of prospecting, mining, refining, and adding value to ideas—says to me that the message is simply not having an effect on how we approach things in our academies, governments, or businesses.