Anand Mahindra on why 90% of all startups fail
MONEYCONTROL NEWS OCTOBER 04, 2022
Mahindra Group chief Anand Mahindra.
In a country where more than 90% of all startups fail within the first five years, many had no chance of surviving at all in the first place, says industrialist Anand Mahindra, whose Mahindra Logistics is acquiring the troubled logistics tech unicorn Rivigo. Poor risk management and one-off circumstances are also to blame for the failure of many startups, Mahindra tweeted this afternoon, adding that despite these troubles, many struggling startups have viable business models and “good tech” on their side.
“Over 90% of all startups fail,” tweeted Anand Mahindra– his claim being backed by a 2017 IBM-sponsored study which stated that as many as 90 percent of Indian startups fail in the first five years.
“Many had no chance of survival in the first place. But many fail because of one-off circumstances or because of poor risk management,” Mahindra, 67, continued, adding: “Yet they had potentially viable models & good tech. That grey zone is a fertile field for large companies to plough.”
There is no denying the sentiments echoed by Mr. Anand Mahindra regarding the high fatality rate of entrepreneurial startups. By far, keeping aside the covid19 pandemic that almost put the world in a state of an uncertain coma, the 21st century has been like no other before. Amidst global financial crises, rapid technological advancements, surging cryptocurrencies, skyrocketing stock prices, quick-fire IPOs, and ICOs, what has been less obvious is that currently there are over 580 million entrepreneurs in the world — among which, over 250 million are women (www.oberlo.com). But what is worth taking a note is that out of such a big universe of entrepreneurs hardly a handful achieve entrepreneurial immortality – lasting business success, to name a few : Jeff Bezos (Amazon), Elon Musk (Tesla), & Mark Zuckerberg (Facebook).
Much has been written about the entrepreneurs and entrepreneurship and their secrets to building wealth or being successful in business. Much focus is given on anecdotal events or actions, or on the business decisions and results when assessing an individual’s journey. Attempts have been made to explore the mindsets of those successful people, to identify their personal drivers that have helped them to succeed and with a better understanding, come to an understanding of what really drives entrepreneurial success.
The global view is that entrepreneurship is one hell of an exciting and rewarding journey, but the naked truth is that more often, the entrepreneurial journey is sugar-coated to look like a less cumbersome and easy road that leads to easy success. However, startup statistics do reveal a rather scary picture of a startup failure rate of more than 90%. I often wondered why some businesses or companies that have been around in the neighbourhood, or perhaps heard about on radio or watched their commercials on television, do not exist anymore? What happened to those seemingly promising startups companies with a lot of lasting success potentials?
For more than 3 decades I have been on this enigmatic quest to find the secrets of entrepreneurial success and in the process studied the lives and times of highly successful industry captains, self-made billionaires and people who are said to have put a dent in the universe by virtue of their enterprising spirit. I have attempted to assess what does being an “entrepreneur” mean to these individuals, before delving deeper into significant shared characteristics. Finally, I have tried to explore at the deepest and most profound level, what fundamentally drives their entrepreneurial behavior and what is the “essence” of everything they do?
Entrepreneurial success is all about developing a value creating enterprise that translates sustainability, entrepreneurial responsibility and social impact to help create a successful business in a highly competitive landscape. The core strategic challenge faced by an entrepreneur is the decision of choice and by their very nature, entrepreneurs have limited resources. The way in which entrepreneurs explore alternate strategy options for commercializing their ideas and exercise their decision of choice has a very big and direct bearing on their success.
Developing a value creating enterprise is a comprehensive thought process that draws upon the entrepreneurial traits of identifying and acting on opportunities, pursuing innovation and creating new value. It is an outcome of the synergy of two entrepreneurial talents; first the ability to spot an opportunity that can help create economic value and second the ability to capture the economic value that comes with the opportunity. When it comes to the ability of spotting an entrepreneurial opportunity, it is the entrepreneurial mindset that makes some people better at noticing new business opportunities, more at ease while taking risks, natural salespeople and adept at cultivating social networks – all traits that drive entrepreneurial success.
From an academic perspective, more than abundant articles have been published on the causes of entrepreneurial failures, the most common being ;
• Lack of vision
• Lack of proper planning
• Not having enough capital
• Failure in marketing
• Pursuing too rapid a growth
• Hiring the wrong people
• Poor business plan
Whereas all the above reasons for entrepreneurial failure do hold good to some extent, my studies of over 3 decades have brought me to conclude the following key and critical drivers of entrepreneurial success;
• Having an understanding of the disposition, tendencies, strengths and weaknesses of their unique entrepreneurial character
• Being able to create a clear and compelling vision of their ultimate business success
• Being able to uncover hidden and underlying challenges that hinder their progress and growth
• Having the ability to renew, re-energize and inspire themselves to take their business to the next level of growth, thereby being able to pre-empt stagnation and decline
• Being able to understand and develop a growth mindset
• Being able to identify their business in a perspective of their individual strengths and passions
• Being able to craft a breakthrough strategic plan for sustainable business growth built around their unique talents
• Having the ability to reinvent their business model to have better stability, security and scalability
Apart from the above, in context of the 21st century business challenges, I find the following to be of very great value when it comes to pursuing entrepreneurial success;
• Having a contemporary and a radical management approach and set of management, business and leadership skills necessary for performance results and delivery of entrepreneurial success
• Developing an entrepreneurial mindset, attitudes, skills and behaviours that are needed for professional and business success including initiative and self-direction, risk-taking, flexibility and adaptability, creativity and innovation, critical thinking and problem solving
• Possessing excellence in conceptualization, development and execution of the roadmap from startup stage to continuous growth stage
• Having the ability to develop and foster a fitting work and business culture that fosters sustainability, innovativeness, growth orientation and a high adrenaline competitive spirit
• Being able to clarify business goals, objectives and inability to develop/acquire skills and resources needed to operate a successful enterprise
• Being able to experience clarity of what business success means and the means to create that success
Business isn’t anybody’s hobby, it’s a life blood. One works really hard and keeps doing good, maybe pretty good, but global statistics on entrepreneurial startup success, although scary and discouraging, are a clear reflection of the state of affairs of entrepreneurial endeavours.
In all realities, at the heart of every entrepreneurial pursuit is creation of economic value. Coming from my corporate experience and over 3 decades of rigorous studies on what drives entrepreneurial success, I find the inability to capture the economic value that comes with an opportunity to be the most critical reason for entrepreneurial failure, and this is mainly due to a lack of a comprehensive understanding at large of what entrepreneurship is all about. Secondly, unlike big corporates who have at their disposal a plethora of enterprise resource planning tools, startups and small business are left to their own devices when it comes planning their enterprise and managing the impact of their decisions on the overall outcomes of their business.
Unlike the domain of management, entrepreneurship lacks a halo around it that attracts profound academic and educational treatment. Like leadership, entrepreneurism is experiential in nature and can be learned only by practice. Just as one can’t learn to swim in a classroom, one can’t learn what entrepreneurship is about unless one has experienced it.
Jammu Navani
Excellence, Leadership & Entrepreneurship Coach,
Management Consultant & Corporate Trainer
Experiential Entrepreneurship 