NRN Mantra for Entrepreneurs : Create a democracy of ideas, democracy of well meaning people. Value system means the ability to incur a huge cost for your beliefs. You have to accept scalability otherwise you will be unfair to your investors.

Mr. N R Narayana Murthy, co-founder of Infosys shared his thoughts on challenges facing entrepreneurs and companies at the Times Literature Festival in Bangalore recently. Edited Excerpts:

When an entrepreneur retires he hands over the baton to people who haven’t started the company, do you believe values also change when this happens?

What you need are excellent managers who have a good value system. Value system is absolutely necessary at all points of time. People who are well connected to the market, people who can pick up the phone and call a CEO of a $20 billion company – as long as those things are met it’s not a problem.

As organizations grow, they build lots of checks and balances; there are several powerful individuals who will create a democracy of ideas. As Amartya Sen once said in a democracy you will never have a famine because there is always an opposition and that opposition will ensure that there is no disaster. When we create a democracy of ideas, democracy of well meaning people, you would automatically have created lots of checks and balances. Therefore I don’t see an issue at all in passing the baton to other kinds of managers.

Do you think it’s alright to follow not very ethical practices in order to survive in the initial 2 years?

There is no proper time to build a reputation; you have to build a good reputation from day one. There is never a good time for you to become good, it’s always a good time, that’s how you build reputation. You build reputation by doing something difficult. Value system means the ability to incur a huge cost for your beliefs. If you don’t incur any cost then there is no value system. You should be able to pay a certain price for your conviction. It doesn’t happen when you reach a certain age, certain level of prosperity. By demonstrating your adherence to values right from day one, you will become stronger and stronger to do bigger and bigger things.

On corruption in India

In our case we rarely get into a situation where we have to give bribes because hardly 2% of our business is from India.

Having said that I must say that corruption demands are from a very small percentage of people that we interact with. By and large majority of people want to improve the country, they work hard and are decent. In any population, there will always be a small percentage of such people, only problem is when there are 99 good people and one person puts a spoke, then it causes problems.

Don’t you think you should get into the system of governance and cleanse it?

I think this country has a lot of young leaders, they are full of enthusiasm and therefore as you grow older it is better when one takes a back seat, one provides advice when asked, that’s my view. I think there are a lot of people much smarter than I am, they are more daring, and they have better ideas and are much more confident than we were.

Why is it that Indian IT industry is looking to the West, is it because the Indian market is not capable enough or large?

There are several reasons, first of all we have made huge costs on employees who want an average of 10% salary hike, in a good year they want 15-20%, therefore our costs are very high. The market in India is small and the majority of the market in India is with the government. The government, for various reasons, takes longer time to take various decisions; it is difficult to implement a project.

By and large most projects that most Indian companies have been able to do for the government have been losses. When our objective is to create maximum number of jobs for youngsters and when such job creations will lead to opportunities in secondary and tertiary cities, I believe this is enough value addition. Because no sector of our economy has created as many jobs as fast as software services companies have created in the history of this country.  If you look at the top 5 employers in this country, the software services companies will be up there in the list. I think that’s a pretty good contribution to the country. We have raised the image, confidence; we have raised the confidence of youngsters to become entrepreneurs.

The Prime Minister of India has launched the digital India project; we believe the government will come up with a methodology whereby it is a win-win for both the government and the software companies. I think the opportunity in India will pick up and as and when we are able to provide salaries and absorb the overheads and reasonable profit from Indian business, I have no doubt Indian businesses will grow much faster.

Small entrepreneurs grapple with scale issues all the time, what’s your suggestion to them?

If you get into a niche area where you are the leader or you are bringing a fresh idea to the table then you become the leader, you have a differentiated business value. Then it’s easy for you to scale up. My suggestion is get into niche areas where there are no competitors who can crush you with their might.  

If you want to get to a higher level, there is no short cut to scalability, you have to accept scalability. Even in a product situation scalability is very important because you have to bring new versions, look at new markets, create new channels of distribution; you cannot run away from scalability if you want to be a long term entrepreneur. You have to accept scalability otherwise you will be unfair to your investors.