Most companies mutate biz models before they discover their destiny

Manish Sabharwal

When the inventor of Chess presented the game to the king, his pleased Highness vowed to give the inventor whatever he wanted. The inventor asked for one grain of rice on the first square, two on the second, four on the third, etc., i.e. doubling the grains on every subsequent square.

The king felt bad that the inventor asked for such a small reward because after 32 squares (the first half of the chessboard) the inventor only got 100 tons of rice-about one large field. But by the end of the second last row, he was due 500 million tons of rice-more than today’s annual global rice production. By the end of the chessboard, his total rice pile would be higher than Mount Everest. Compounding is the eighth wonder of the world. This story has important lessons for entrepreneurs.

Overnight success

The first question my father-in- law asked me when we sold our earlier venture to a large multinational was, “Why? You have only been at this for six years”.

Coming from somebody who had built a multithousand crore company over 40 plus years, I should have paused. But I had spent my entrepreneurial career watching technology companies like Google, Yahoo, Amazon, and eBay become overnight successes. I’m now older, wiser-and therefore more dangerous-and realize that overnight success takes about ten years. In fact, many interesting companies don’t hit their full stride for many years after ten; Wipro had revenues of Rs7 crore after 30 years, Lupin had Rs 25 crore of revenue after 20 years, and Infosys had Rs 10 crore of revenue after 10 years.

Most companies mutate business models a few times before they discover their destiny (hypothesis testing). Most operational capabilities are cumulative and the only way to build them is to have angry customers who teach you how to fix the problem. It takes years to build a personal and corporate reputation that enables hiring an experienced team that has seen the ‘movie’ before.

Decision-making metabolism comes from a team-with tight roles and responsibilities-that trusts each other. Most importantly, the non-linear tipping point is often reached when companies shift from making what you sell to selling what you make. This institutionalization involves bringing in adult supervision, addressing governance (allocation of decision rights) and longevity.

Stay away from miracles

The British playwright, Somerset Maugham, should have included entrepreneurs when he said, “Only the poet or the saint can water an asphalt pavement in the confident anticipation that lilies will reward his labor”. But pouring more water over a plant does not make it grow faster. Stay away from people who promise miracle steroids or fertilizers.

Building any enduring institution takes time and that is why the true reward lies in the second half of the chessboard. Two billion more times in the second half than the first for the inventor of chess.

The author is the Chairman of TeamLease Services

The article was first published in Entrepreneur India April Issue