India's GenNext entrepreneurs eye freedom from legacy

Indian family businesses are passing through an interesting phase. The rapid, and often turbulent changes, that are sweeping the economy and society have impacted them too. As the size of families shrink and the number of next generation members fall, there is greater recognition of the expectations from young family members who have shown higher levels of assertiveness. Although a cry for more freedom is evident, the next generation members of business families do not seem to follow a uniform pattern anymore. Galvanising the enthusiasm and energies of this generation is a must for them to embark on the path of accomplishment.

The landscape
The Indian economy has been witnessing steady high growth for the past several years with occasional speed breakers blocking the surge. Driven by the derivatives of the Internet of Things and related technologies, every link on the value chain is metamorphosing across industries, some fast and some less fast. Opportunity is knocking at the doors of every conceivable industry across any market segment. It goes beyond smartphones and shopping, and covers essentials and living priorities. The changing structure of industries within and across has pushed services to the forefront in a very significant way.

The next generation was born to witness these changes, without the legacy of a crawling past—that was reluctant to visualise and accept changes—to haunt them. They are exposed to the entrepreneurial outcomes of globalisation where new products and services are constantly emerging with shorter and shorter life cycles. They are excited to be active partners of this game.

Advantages and challenges
The younger generation enjoys major benefits of being a part of these changes from birth. Technology comes naturally to them, whether it is writing, learning or thinking. Their horizon seamlessly cuts across geographical borders, and they are better informed of the trajectories of change.

Their history of not witnessing the ‘Hindu rate of growth’ has made them optimistic and naturally much more entrepreneurial. They think big, although they are not always aware of the challenges, and the implications of implementing their strategies. The country needs such big thinkers to sustain the pace of momentum set in motion already.

Family businesses are uniquely blessed with a basket of resources, both tangible and intangible. These include deep business wisdom, rich social network, benevolent grooming and abundant funds. Normally, members of the young generation tap into this basket automatically and voluntarily out of family traditions and stewardship values. Encouragement of entrepreneurship offered in Indian business families is an added advantage, particularly in nuclear families that wish to grow big quickly.

However, we should not be oblivious to the realities of the challenges that accompany such advantages. Among them is the natural overconfidence (bordering on arrogance) in their knowledge and capabilities that some of the young members demonstrate. They seem to believe that their family membership and the surname they carry are more valuable than the insight and business expertise that come through hard work and experience. They don’t remember that speed often kills. They also forget that costly experimentation cannot always be camouflaged. This is particularly so if the next generation ventures into an entirely new line of business, that too in an emerging area. The challenge is compounded if the family member has not adequately experienced the value of money.

Many roads to ‘freedom’
Global level research on family businesses in recent times has shown that most next generation members do not wish to join their existing family business. Most often they like to be entrepreneurs on their own terms, at least with respect to the degree of freedom in operations and decision-making. The bottom line for them seems to be ‘freedom’ in the choice of career, and life in general. This is true in India too. Since opportunities come up in every conceivable way, they have a lot to choose from. Interestingly, there are certain patterns emerging in this resolve to declare or seek ‘freedom’.

A) Occupy the awaiting kingdom and throne: In several instances, there is only one child to succeed the existing leader. This is particularly true for nuclear families, many of which had earlier been part of traditional joint families. The next generation is poised to take off from where the senior generation has left, like a smooth baton change in a relay race. For instance, Krishna, son of BVR Mohan Reddy of Infotech Enterprises, was well groomed through high quality education and experience over a number of years to lead the company. Similarly, Sharvil Patel was inducted into Zydus Cadila by his father Pankaj Patel as the next-in-command after his doctoral studies in related areas from Johns Hopkins University in the US. Such smooth induction happens when the incumbent has carefully prepared himself to move on completely. Infotech was rechristened as Cyient Limited by Krishna soon after he took over as part of his drive to rebrand and strengthen the company, and the next generation has proven to be worthy of taking over the mantle. In such cases, the next generation feels and enjoys the freedom and responsibility at the same time.

B) Fiefdom preferred while waiting for the throne: Affluent young members of business families may not always have the throne vacant. They have to wait for their turn even if they are all single children who will eventually inherit the kingdom. This happens either when the incumbent is still very active and/or has no plans of moving out.

Besides, seniors feel relaxed with the opportunity of overview they can provide. It is an entirely different matter whether the next generation likes it or has to constantly negotiate to protect the freedom they are entitled to.

Sanjiv Goenka’s son Shashwat started with growing the Spencer’s retail business on his return to India after studies, away from the direct supervision of his father. Similarly, Punit Lalbhai, son of Sanjay Lalbhai, got into a new venture that had limited core links with their established businesses.

In rare cases, the younger generation—such as Ananya Birla, daughter of Kumar Mangalam Birla, and Roshni Nadar, daughter of HCL’s Shiv Nadar—has started ventures that are in the social space. It is, however, hard to assume a gender dimension to such decisions. Again, there is an underlying push for establishing one’s identity away from the strong and large shadow of their parent.

C) Traditional ministers: Highly diversified family business empires controlled by large families have shown yet another model. Here, again, the next generation has underlined its preference for freedom and hard work over comfort under strong controls. The next generation of the four- or five-generation-old Godrej conglomerate has carved out its own niche under the comfortable group umbrella. These niches are at an ‘arm’s length’, which gives them a certain degree of freedom without close operating supervision from their seniors. At the same time, children of the Rs 40,000 crore-TVS family have shown a tendency to take the elevator route to top management positions in existing businesses.

These patterns are also strongly influenced by family and business circumstances. For instance, in families with poor interpersonal relationships the urge to become independent may be high, but the journey may not be smooth. Besides, health and financial conditions of the businesses, the level of passion demonstrated, family culture and style of leadership all determine how the pendulum swings.

A smooth journey
A unique characteristic of a family business is continuity. Members strongly believe in sustaining continuity of family values of stewardship and entrepreneurship. They recognise that every business has its own phases of ups and downs in their long-term lifecycle. In other words, in a world where nothing is permanent except change, good business families embrace entrepreneurship and independent thinking of their young members. They believe that the business is future-looking and the next generation should have an active role in shaping its destiny.

Continuity requires vision and competitive strategy for the business. Business families should take stock of the richness of their resource basket and the relevance of the mix of its elements. Let us remember that most elements of such resource baskets will work wonders on well-governed business families. They demonstrate a hunger for growth through the involvement of several family members in different capacities. Individualism and collectivism form a fine balance in such families through a process of mutual consultation. Transition and transformation are smooth in several well-known family businesses because of the clarity and commitment members demonstrate to the cause of stewardship.

Strategy is always context specific. Next generation members should recognise the richness of the family basket without losing humility. Entrepreneurship and speed are required for success, as long as stewardship is practised as a value. Ownership is not only an opportunity but a responsibility, often in more ways than one.

Professor Kavil Ramachandran is executive director, Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business