It’s been nearly 20 years since I joined the group which is now nestled under workdayAM International. Together with my team, I’ve weathered plenty of ups and downs. We’ve faced auctioning of assets, survived plant shutdowns and endured being cash-strapped only to emerge stronger.
In today’s time when some of the best startups with great ideas are facing challenges of survival or scaling up, few things can be learnt from ‘traditional’ businesses. There is no doubt that the future belongs to businesses that continuously disrupt the status-quo through innovation. However, innovation and adapting oneself to the fast-changing business scenario can also be learnt from ‘age-old’ businesses that have actually been there all through.
Earlier this month, Southern Petrochemical Industries Corporation (SPIC), our flagship company, completed 50 years. So, how did we traverse an obstacle-laden path to come this far, especially the last decade when the company’s survival seemed difficult and I was appointed as the Chairman in 2011? If I were to ponder, there are lessons we learnt the hard way. Lessons that may seem unique to traditional businesses but have stood the test of time and can be applied to today’s startups as well.
Fiscal discipline always comes to my mind first. Skewed financial management stems from the imprudent use of funds affecting the balance of revenues, expenses and borrowings. We were on the verge of losing SPIC due to financial strain before my captaincy. I can safely say, we crossed a critical phase in our business lifecycle – that of transition and transformation - owing to tight fiscal adherence. In the long run, strict budgetary control proved essential in improving and sustaining financial performance and reducing vulnerabilities. After all, a profitable business can never be substituted by equity-funded cash losses.
Rapid growth is great. But you can get into trouble if you grow too fast. The propensity to increase revenues with unlimited cash-burn can leave you with a deepening problem: being forced to seek more capital - diluting your stake and ultimately facing a fund crunch. It is easy to get lured into large, risky deals to boost growth. The lesson here is that entrepreneurs need to consider the sustainability of risky growth strategies cautiously and be prudent in taking risks.
A strategic skill for entrepreneurs is to understand what constitutes genuine assets, invest and use them to their competitive advantage. Sometimes, the most valuable assets of an organization don’t show up on the balance sheet. They could be your intellectual assets, a robust supply chain, market intelligence, strong relationships with customers, regulators, and suppliers and reputation. Identifying and investing in genuine assets will go a long way in creating a sustainable competitive advantage and growth. At AM International, I have always believed that a customer focussed professional team driving the efficiency of business on an everyday basis is the key to success.
We’ve seen large investments in innovative startups, elevating valuations and making headlines. Once funds are squeezed, as it inevitably happens, startups eventually suffer. The problem stems from unrealistic valuations. It is one of the most common mistakes founders make. It can affect what you see as the right capital structure of your business. Unbiased advice is essential in getting a sober and genuine valuation of your business. Else, it may result in the founder losing focus and continuously trying to up the valuations through creative means, another sure shot way to risk or lose your enterprise.
Yes, entrepreneurship is difficult and needs long hours. But don't sacrifice family, social life and fun both for yourself and your team. Ultimately, it will lead to burnout. Plan time off and give yourself breaks. Involve yourself in interests outside work and spend quality time with family and friends. It will not only alleviate the stress that can drag you down but also energize you to keep going. Moreover, a fresh mind will help you make better decisions or arrive at realizations that you wouldn't have otherwise. Spending days and nights at your desk doesn’t always help you with a solution. With a daily walk in the park or a break in the mountains, the solitude and peace may help you come up with your next big idea!,
Today, entrepreneurs dream of creating the next disruptive thing. As per the 2019 Global Startup Ecosystem Report, the global startup economy is worth nearly USD 3 trillion, that's larger than the GDP of the UK. These startups aren't just contributing to economic growth; they’re solving real problems, fulfilling unmet needs and improving people’s lives. Despite their best intentions, it is estimated that 90% of startups fail.
It’s clear that the usual startup approach of going full steam ahead doesn’t work for every business. Entrepreneurs can take some cues from traditional, unglamorous businesses and chart their way forward with more confidence and conviction. Lastly, businesses like ours can learn from young startups how to remain nimble and address market inefficiencies on a large scale using data and technology.