Entrepreneurship Management

MANAGING EARLY GROWTH

Prof Bharat Nadkarni

Managing early growth

Growth cycle of a New Venture

• Start-up

• Early growth

• Rapid growth

• Maturity

• Negative Entropy – Resist/ Delay Decline

Managing early growth

Expand the venture through

• Expansion – horizontal/ vertical• Diversification- related / unrelated• Joint venture• Acquisitions• Mergers• Leveraged buyouts• Franchising• Business process reengineering• Global ancillarisation

Peter.F.Drucker’s tips for growth-oriented enterprises

• The need for market focus• Financial foresight• Building a management team• Where can I contribute?• The need for outside advice

• Managing organizations during Growth and Decline

• A Model of Organizational Growth – as developed by Larry Greiner in early 1970s.

Phases of PLC1. Growth through creativity : Crisis of Leadership2. Growth through Direction : Crisis of Autonomy3. Growth through Delegation : Crisis of Control4. Growth through Co-ordination : Crisis of Red Tape5. Growth through Collaboration : Crisis of Stagnation6. Growth through Globalisation : Crisis ?

Business CommunicationSurvival Rate for Globalised Corporates

Age in Years

Percentage Perish Percentage surviving

5 62 38

10 79 21

15 86 14

20 90 10

25 93 7

50 98 2

75 99 1

100 99.50 0.50

• Organizational Decline

• The changing environment

• Is managing Decline the reverse of managing growth?

• Potential problems when organizations decline: Explaining cutbacks in the middle managementDysfunctional Consequences of organizational decline

Dysfunctional consequences of organizational decline• Centralization : DM passed upwards, less participation,

control is emphasised• No long term planning• Innovation curtailed• Scapegoating : Blamegame• Resistance to new alternatives• Turnover• Low morale, Conflicts• Loss of slack ; uncommitted resources are used to cover

operating expenses• Fragmented pluralism ; special interest groups organize

and become more vocal • Loss of credibility, Nonprioritized cuts.

• Managers caught in the middle • Reducing organizational size / delayering for avoiding

takeovers

What is the Solution?

• Meet the challenge upfront• Increase communication• Increase participation for redefining strategy and goals• Look innovative ways to deal with the problem.

Elements in Turnaround Management

• Change in top management• Initial credibility building actions.• Neutralizing external pressures.• Initial control• Identifying quick payoff activities.• Quick cost reductions• Revenue generation.• Asset Liquidation for generating cash• Mobilization of the organization• Better internal co-ordination.

Khandwalla’s ten elements of a successful turnaround strategy.

SICKNESS IN VENTURE

RBI definition: principal or interest has remained overdue for two

consecutive quarters in a financial year and there is an erosion in the net worth due to the accumulated

cash losses to the extent of 50% or more

Impact – unemployment, non-payment of dues, blockage of

finance, non-utilization of assets

Causes of sickness-• Personal

– Lack of integrated knowledge/ training– Incompatible personalities– Health– Shift in attitude– Succession

• Management– Form of ownership– Wrong choice of product/location– Team building– Planning– Management information systems– Inability to manage growth

• HR issues– Faulty recruitment– Wage structure– Industrial Relations – Low productivity

• Operational issues– Technology obsolescence– Quality up gradation

– Production Management• Plant location & layout• Quality• Capacity utilization• Inventory• Maintenance• Environment• Waste management

• Financial– Capital structure– Capacity to bring capital– Poor resources management– Costing/pricing policy– Over-dependence on concessions & subsidies– Diversion of capital– Over-trading– Unfavorable gearing– Lack of tax planning

• Marketing– Over-dependence on a single customer– Marketing myopia– Sales &distribution set-up– Market feedback/ research– Marketing strategies

• Government– Changing policies – Scale of economy– Controls– Fiscal policies– Role as facilitator

• Act of God– Accidents and injuries– Catastrophes and disasters

B I F RBoard for Industrial and Financial

Reconstruction

Prevention is better than cure

All great companies have some kind of success

formula. It could emanate from a unique set of

strategic frames, resources, processes,relationships or

values. But when the formula hardens,companies lose a

vital ingredient for continued success

The Success Trap

Is your company at risk? Symptoms of Active Inertia

• Strategic frames become binders“We are a growth company”“We know our competitors well”“We are number one”

• Resources harden into millstones“Our brand means the product”“We have it all”“Our technology is a fortress”

• Processes lapse into routines“We have a ‘bible’ for critical processes”“We hire and promote people like us”“We make our decisions by consensus”

• Relationships become shackles“We know our place in the value chain”“We do the important tasks in-house”

• Values ossify dogmas“We are a family, not a company”“We have a campus, not a headquarter”“Our competitors are our enemies”

THANK YOU!!

Entrepreneurship Management

Business Process Reengineering (BPR)

Definition by M Hammer.BPR is defined as the critical analysis or fundamental rethinking and radical redesign of existing business processes to achieve breakthrough or dramatic improvements in performance measures such as cost, quality, service and speed. BPR has often been confused with the quality movement. Quality specialists tend to focus on incremental change and gradual improvement of processes, while proponents of reengineering seek radical redesign and drastic improvement of processes.

Entrepreneurship Management

It is based on four key words:1. Fundamental

Why do we do what we do? And Why do we do it the way we do?Why the old rules and assumptions exist?

2. RadicalDisregard all existing structures and procedures, and inventing completely new ways of accomplishing work.

3. DramaticNot about making marginal improvements.

4. Processesa. Dysfunctional b. Importance c. Feasibility