As humans, we tend to blame everything on luck and time. When we succeed, we feel we were lucky and the timing was just right. Similarly, when we fail, we think it was bad luck or bad timing. Let’s take a deep dive into the role of luck and timing in entrepreneurial success and failure. Ashok Soota and S.R. Gopalan hit the nail on the head in their book ‘Entrepreneurship Simplified – from Idea to IPO.’
To me, the title of the book ‘Entrepreneurship Simplified’ is somewhat of an oxymoron, as entrepreneurship is rarely simple. But the book does an admirable job in simplifying all the basics a newbie entrepreneur must be aware of before taking the plunge and also during his or her journey.
I believe the authors don’t need an introduction but let me do the formalities. Soota, an avid gardener, is the founding chairman of Happiest Minds Technologies and was the founding chairman of Mindtree. He led Wipro’s IT business for 15 years and was once considered the closest aide of Azim Premji. Gopalan, who sadly left us last year, was the founder of Dawn Consulting and Bizworth India, which provides advisory services covering finance, regulation, taxation, and strategic aspects of business.
A STITCH IN TIME
Timing is everything in your venture. Sometimes, an idea is too early to enter the market when it doesn’t have the need for the product/service or it just could be that the supporting technology infrastructure is not ready. For example, most current vital internet-based businesses would not have been successful without the availability of inexpensive broadband and mobile technologies. The authors cite examples of companies like Fab Mall, India Plaza, and Rediff shopping which failed because of low internet penetration in India at that time.
Several other ventures fail because they enter the market too late. When a sector is seen as ‘hot’, everyone rushes in to grab a slice of the opportunity. Even VCs tend to succumb to the herd mentality. But this leads to overcrowding of the opportunity which results to many failures. This happened to the non-banking financial services industry in the late 1980s and early 1990s, the authors wrote.
WHICH IS BETTER: TOO EARLY OR TOO LATE?
According to the authors, out of the twin dangers of being too early or too late, the former is the bigger hazard. If there’s no obvious need in the market, the startup can’t easily generate or create that demand. Here the market will need a large player with deep pockets. If you are a late entrant, you still have a chance of gaining a share of the market by exploiting the weaknesses of existing players and creating differentiating strategies.
Timing is also critical when you raise funds and later when you do your IPO. Strangely enough, your business can be effective even when the markets are slow or in recession. Some of the world’s top companies including Microsoft and Cisco were born during recessionary conditions. Part of the reason for their success is that if you could succeed in tough times, you will prosper further when the good times arrive.
The authors are not advocating that you wait for recessionary times to launch. “The optimum approach is to catch the groundswell of booming demand and be cautious of your spends,” the authors wrote. As Ashok says, “Use the good times to prepare for the bad as the down cycle will inevitably follow.”
Similarly, timing is critical in your decision of scaling up or implementing a pivoting strategy if the need arises. Too early and you may be abandoning your idea before giving it a fair chance. Too late and you may have literally run out of time and cash. Timing is also crucial during acquisitions and they need to be done only at the right time.
THE FOUNDER’S LUCK
Most successful entrepreneurs and VCs agree that luck has played a very important role in their success. Soota recalls the luck factor from his Mindtree days, when the money for the second round of funding was credited to his bank account one week before 9/11. Imagine the situation if it was delayed by one week! Mindtree would have probably joined the dust heap of failed entrepreneurs.
So, if good luck does contribute partially to success, does bad luck contribute to failure? The authors believe this is not the case. It is the job of the entrepreneur to be prepared for one of the several possible negative events and have contingency plans ready for implementation. So, what is commonly called bad luck, the authors label it as not calibrating your assumptions and the inability to see change coming.
The authors conclude with the view that an entrepreneur’s efforts should be to improve the probability of success and reduce the probability of failure. An ongoing factor for success is to get your timing right, all the way from idea selection, market entry, scale-up timing, pivoting strategy, acquisitions, etc. While many people attribute their success to luck, in reality, they significantly contribute to making their own luck by being at the right place and grabbing the right opportunities.
Above all, apart from financial success, entrepreneurship should be a journey filled with joy and a sense of purpose. It is not worth destroying your personal lives in the process of trying to build a successful business.
Editor’s note: This article is based on the last chapter of the book ‘Entrepreneurship Simplified’. The book contains a wealth of ideas spread across different chapters like Idea Generation and Validation, Funding, Winning with VCs, Mission, Building your Organisation, Business Strategy, Marketing Strategy, Wealth Creation and Sharing, and IPO. I strongly recommend it to all entrepreneurs both newbies and the seasoned ones.