SMEs must constantly re-invent themselves to survive: Dinesh Awasthi

On June 9,2014, interview of Dr. Dinesh Awasthi, Director at EDI appeared in Business Standard.

Ever since its inception in 1983, the Entrepreneurship Development Institute of India (EDI) has not only spawned new start-ups, many of which have gone on to become sustainable small and medium enterprises (SMEs), but also served as a think tank in helping the government develop SMEs, says Dinesh Awasthi, Director, EDI, in an interview with Vinay Umarji. Edited excerpts:

Dr Dinesh Aswathy

What factors have helped encourage entrepreneurship in India in recent years?

Let’s go back to 1991 when liberalisation changed the rules of the game. It became much easier to set up a business. Before 1991, the economy was supply-driven; after 1991 it became demand-driven. Suddenly, the consumer became king. Earlier, SMEs had a limited role to play while quality and technology were casualties. There was a restriction on quantity of production.

However, post-liberalisation and by the late 1990s, young people saw opportunities in setting up their own enterprises. This was also the time for advent of technology and knowledge-based economy. So even without much capital base, you could become a businessman and make money legitimately.

So while liberalisation was a major factor, the opening up of technology and knowledge-based economy too encouraged setting up new ventures. In fact, most of the businesses were set up by people who were in their thirties.

Today too, at EDI and across India, students have a killer instinct and don’t want to talk small.

Has this led to a problem of plenty in terms of too many start-ups being added to the already large number of SMEs present in India?

I don’t think so. The top slot among SMEs is always vacant. Many SMEs fail too after being set up. But we have to change the mindset and start seeing failure as an opportunity, the way our western world counterparts do.

In fact, one of the statistics suggests that in the first 1000 days of setting up a new business, 40 per cent of start-ups in any country globally shut down. So those who can compete will survive. Gone are the days of best practice, nowadays it is about next practice.

Unless SMEs constantly re-invent themselves, it will be hard for them to survive and there won’t be a problem of plenty.

Are there are enough resources available for SMEs to flourish in India? What is lacking?

Why does one produce? You produce for the market. Resources are never constant for SMEs in India. As far as demand is concerned, India has insatiable demand and people will continue to demand more and more.

The market is bursting with opportunities for SMEs.

What challenges still plague entrepreneurial SMEs in? How can they overcome them?

Most of the SMEs are being run by old hats. Their way of operating is not changing. Our students at EDI complain that their fathers don’t allow innovation in their family businesses.

SMEs are yet to value innovation and yet to learn to invest heavily in technology. You will not be able to capture the global market without quality and innovation.

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