Innovate or perish

By Srinath Sridharan Why do large conglomerates fail after few decades of existence? Why do successive generational family-business owners struggle to be industry-relevant? Why do startups that come from nowhere with nothing overtake established giants? Why does innovation or growth capital not chase every industrialist, team, or platform? Poverty of ideas! In the business world, it refers to a lack of creativity or innovation. When businesses suffer from this condition, they tend to stagnate, lose market share, and eventually fail. In a world of corporate resources of networks, human, financial, the least attention is generally towards ideas.

Also Read Beating plastic pollution Data Drive: Microfinance gains India can learn agri-policy lessons from China Stick to the knitting Also read: Plugging a loophole This scarcity of innovative thinking hinders their ability to understand and adapt to the changing market dynamics, especially when compared to startups and catering to younger demographics. Moreover, India’s prevalence of family-owned businesses adds another layer of complexity to the corporate ecosystem as it often restricts the encouragement of entrepreneurial initiatives among employees. With so much invested in existing operations, it can be difficult to find the time and resources to think creatively and look for new opportunities.

Ideas are the lifeblood of any business, driving innovation, growth, and adaptability. Indian family businesses must acknowledge that their success is not solely reliant on traditional values and legacy, but on the ability to generate new ideas and embrace change. Without a constant influx of fresh ideas, these businesses risk stagnation and struggle to keep up with the dynamic nature of the marketplace.

Poverty of ideas stands as a formidable obstacle to this progress, eroding the very foundations upon which these enterprises were originally built—on an idea. Family-owned businesses plagued by poverty of ideas struggle to navigate through disruptions—whether it be advancements in technology, shifting consumer behaviours, or changes in regulatory environments. As a result, they become casualties of rapid transformations, unable to sustain their operations in an increasingly dynamic and competitive marketplace.

Looking at the Indian corporate mirror over the past few decades, one would observe many family businesses, including large household names, have simply disappeared, as it happened during the 1991 post-liberalisation, the internet era a decade later, and now with the digital revolution and startups. In all of these, the underlying transformation is the change in demographics, which affected both employment mindset with organisational culture as well as consumption patterns. Very few large Indian family-owned businesses managed this transition well.

Those who survived simply brought the best of talent into managing these entities and separated ownership from business operational leadership. The idea that only promoters have management capabilities has been disproven time and again. In not accepting this, many prove the poverty of ideas theory.

Businesses that stagnate suffer from a lack of new ideas. They become comfortable with the status quo, content to continue with what has worked in the past. They stop looking for new opportunities and fail to adapt to changing market conditions.

They may miss out on new technologies and business models that could disrupt their industry. And ultimately, they may lose their competitive edge and even their relevance. It is thus essential that conglomerates and multi-generational family businesses avoid this poverty of ideas.

This means prioritising innovation and creativity, even if it means disrupting their style of leadership. It means fostering a culture of experimentation and risk-taking, and encouraging employees to share their ideas and think outside the box. Also read: Gaming needs uniform regulation New technologies are being developed and adopted at an astonishing rate, and businesses must keep up or risk being left behind.

But many companies struggle to adapt to these changes. They cling to outdated processes, products, and services, and fail to take advantage of new opportunities. Indian family businesses and conglomerates must confront the poverty of ideas as the greatest disruptor to their success.

But for few, most Indian corporates, with their established brand names and market dominance, have frequently overlooked the potential of startups. Startups are often at the forefront of innovation, leveraging disruptive technologies and agile methodologies to quickly adapt to market demands. The reluctance of established corporates to collaborate or acquire these startups stems from a lack of appreciation for their unique approaches, limited understanding of emerging trends, and a fear of cannibalisation.

Another factor that contributes to the poverty of ideas in Indian businesses is a lack of diversity. When everyone in an organisation thinks alike, it can be challenging to generate new ideas. Innovation often comes from bringing together people with different backgrounds, experiences, and perspectives.

But if a company’s workforce is homogeneous, they may miss out on opportunities for innovation. Research has shown that diverse teams are more likely to come up with creative solutions to complex problems, so it is crucial that companies prioritise diversity and inclusion in their hiring practices. One key lesson is the importance of fostering a culture of innovation.

To combat the poverty of ideas, businesses must encourage creativity and innovation. This can be done by fostering a culture of experimentation and risk-taking. It requires leaders to be open-minded and willing to listen to new ideas from employees at all levels of the organisation.

It also means investing in training and development programs that encourage employees to think outside the box. This can be challenging for large businesses that have established hierarchies and rigid decision-making structures, but it is essential for staying competitive in today’s fast-paced economy. While these family-owned businesses have played a vital role in the country’s economic growth, their rigid traditional approach and hierarchical structures will impede innovation and intrapreneurship within their organisations.

The focus on preserving the legacy and core businesses of the conglomerate, and sometimes to protect only the legacy of the founder, will come at the cost of innovation. Indian corporates, except for a few, have not recognised the value of setting up intrapreneurship—a way to find the idea of their employees, who turn entrepreneurs within the enterprise. One way to cultivate a culture of innovation is to establish an internal idea incubator.

This is a programme that encourages employees to come up with new ideas and provides resources to develop and test them. By creating a space for creativity and experimentation, companies can unlock the potential of their workforce and generate new products, services, and processes. For staying competitive and relevant in today’s fast-paced economy, entities must have an urgent mindset shift, and that has to start from the top.

Are family-owned businesses listening? The writer is Policy researcher and corporate advisor Twitter : @ssmumbai.