Prof Parimal Merchant
A now world-famous industrialist of Indian origin used to be the son of a steel trader in a small town. In the late seventies his father sent him to Indonesia to recover some money from a client. The client had given some land in lieu of money, and the son had the responsibility of selling off the land at a good price and bringing the money home. Now when the young man landed up in Indonesia, he came to know that steel was being bought up at high rates by the Japanese, much higher than the rate was in India. So he sent his father a message - instead of selling off the land, we will set up a steel mill here.
This story serves as a perfect illustration of my three-point proposition for today. The first of these is:
1. To survive in business is difficult
To continue with the story, the mill was duly set up, and for ten years the young man and his wife stayed there in Indonesia, raising their small son and establishing their business. Money was scarce in those initial years. They had one car which used to drop the child to school, and then ferry the father to the factory. The same car was used do all kinds of odd jobs for the mill during the day, and then bring them back home in the evening.
He was finding it difficult to bring the son up in a foreign environment, especially considering the precarious financial situation they were in. Then they had a daughter, their difficulties were now doubled, but somehow, they managed. After ten years of struggling to get the steel business off the ground, he realised one thing - If we can learn how to raise two kids instead of one, we can also manage two factories. But establishing one factory had taken up ten years, there was no way he was going to spend another ten years setting up the second one.
2. To grow is easier than to survive
He was an ambitious man, he did not want to end up with only a handful of factories in his lifetime. No, the way forward was acquiring factories instead of setting them up himself. But there was no money for acquiring another factory at the time, so he came up with an ingenious solution - he took up the management of a German-owned factory in the far-away Caribbean with the proviso that he would be allowed to buy it in five years time.
3. To grow faster is easier than to grow slowly
From these humble beginnings, he has today acquired a unsurpassed reputation for acquiring and turning around sick steel mills, and is known as the Steel King of the world. His company has mills in 13 countries.
Now just imagine, if he had simply sold the land in Indonesia and come back home, none of this would have come to pass. Or if had just stuck to the one factory, he would not have built up the empire. If he had not hit upon his strategy of taking over sick mills, his firm would not have become the largest steel producer in the world.
Now that we have seen a real-life representation of my three-point proposition at work, let us go deeper into why I say that to survive is difficult, to grow is easier than to survive, and to grow faster is easier than to grow slowly.
Family Business is at a Crossroads
There are two contrasting perspectives in the contemporary family business scenario. There are the businesses that are going through a challenging time, finding it difficult to stay afloat, and then there are those who are soaring high, growing by leaps and bounds.
What sets them apart? There is an explosion of opportunities for the family businesses in India today. So what makes some unable to meet the challenge, while others grab the opportunities with both hands?
The major factor that sets the two apart are that one group is unable to keep up with the changing times, while the other relishes the change, and embraces it.
Move faster or be Left Behind
Let me illustrate how different the world is today. In cricket, the public's taste has changed from the slow, languid pace of a five-day test match to the slam-bang variety of T20 cricket. There were times when batsmen took 32 balls to get off the mark, nowadays centuries are scored off less! There was a time when we had to stand in queses for everything, from paying bills to applying for admission or jobs, now everything happens at the click of a button or the touch of a screen, from the comfort of your own home. But for people who have still not learnt how to use the internet or operate a smartphone, it is difficult to cope. The internet and mobile telephony have transformed the means and the speed at which the world communicates, and also the way the world does business.
Elevate or Eliminate: The Choice is Yours
If things are changing fast these days, they will change even faster in the near future. Change will bring with it some negatives too, both for businesses and for families. It may break families apart, or it may bring them closer together. It may eliminate some family businesses altogether, and it may elevate others to undreamed-of heights. But one thing is for sure - people and businesses who are stuck in the past, who are resistant to change, will find themselves growing increasingly irrelevant.
For family businesses, the choice is clear -
1. Either wait and do nothing as the world changes around you, or
2. Change yourself and adapt to the times.
Just like with the steel baron, where at one time the norm was to invest your own money to expand the business slowly and steadily, today the mantra is of explosive growth. We have to take the reins in our hands, dig in our heels, and gallop, not canter towards our goal. But with total control, comes total liability. You could take the lead, or you can stumble and fall. The way forward in front of family businesses is littered with hurdles. Receivables are taking longer, margins are under pressure, competition is ruthless, material is supplied at lower than raw material prices... we are experiencing what a vicious cycle means, as crisis leads to crisis, and every day a new challenge presents itself. The faster pace of life has also made a difference in our lifestyle, with much greater avenues for entertainment, leisure, and other distractions. It is harder to focus on work now than it was in the old days.
The Secret to Explosive Growth
But still, some family businesses have taken to the times like a fish takes to water. They have learnt the new rules of competition and adapted themselves in no time at all, they have grasped that the whole world is a market, they have seen the opportunities multiplying manifold and have not let them go by. Now, these are the ones who are experiencing what I call a virtuous cycle. A jump in business, which leads to a further jump, and which in turn leads to a quantum jump. This quantum jump is of the kind that sees a business grow from a local one-man operation to a thriving enterprise with a global footprint, in only a few years time.
This kind of growth is not a mirage, it is a real possibility for thousands of family run businesses in India today. They have the advantage of families working together, of quick decision making possible only in family businesses, and the huge pool of talent-for-hire that is available in the country.
Thus, family businesses at both ends of the spectrum have challenges they must face - one, just to be able to survive, and the other, to be able to manage phenomenal growth. But in today's scenario, just surviving, and managing to keep your head above water, hoping that a big tide will not come and wash you away, is simply not possible.
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