Change Tracks

The Ministry of Science and Technology announced it will be investing $749,500 over the next few years…Under a new program, Promoting and Accelerating Young and Aspiring Innovators and Startups (PRAYAS), the Ministry will be providing grants of up to $149,900 to each startup to encourage innovators.* However, free flow of funds alone does not ensure success. Indian startups and SMEs have to bring about radical improvement in costs, quality, service, and other critical avenues to stay ahead of the curve.

- Hardik Harsora

Times have not been better for Indian startups and MSMEs. Volatile policies in foreign lands, government initiatives to propel growth, and an ambitious young generation spell good times ahead for these sectors. Reduction in corporate tax and soon-to-be implemented GST will add to the optimism. India is also poised to become a $5 trillion economy by 2025, for which the backbone is the MSME sector. MSMEs and startups are touted to spur jobs, entrepreneurship, innovation, and disposable income.

However, the picture is not all rosy. Over 40% startups have failed since 2014, according to startup tracker Xeler8. The average age of these ventures is just over eleven months. Kishore Biyani stated that 90% startups he has seen have no meaning. Kris Gopalakrishnan observed that around 70% startups will fail and 20% will remain as small enterprises—far from promising numbers for a country which boasts the highest youth demographic in the world.

So, where are startups and MSMEs going wrong? We can attribute their failure to many factors. However, the Pareto Principle can be applied here too. Almost 80% failures occur due to 20% reasons.

The gravest error is business modeling, or the lack of it. Businesses try adopting ideas from the West without understanding what their customers want. Or they fall hook, line, and sinker for motivational speakers who dish out mountains of wisdom, but skip out on steps to implement those. This absence of a business model also causes startups to burn cash fast. Eventually, funds dry up sooner than anticipated, resulting in failure, according to Rishabh Lawania, founder of Xeler8.

What can be done to develop effective business models? How can startups and MSMEs grow larger by design, with owners guiding them skillfully like Captain Spock?

the propel excellence method

This method for fundamental rethinking addresses the most important components of a business: