Amar Bhide: A New Take on New Businesses

Volume 14, Number 2 Article by Amar Bhide September, 2002

Amar Bhide: A New Take on New Businesses :

In conversation with N Balasubramanian, R T Krishnan, Mathew Manimala, S Raghunath and Douglas Stoddart

In the beginning there was the traditional rags-to-riches myth. The myth now prevalent in the business world is about the business school style startup – the well planned, well financed, well managed startup, where an experienced manager from Microsoft or Intel has a big idea, comes up with a plan, raises millions of dollars from a venture capital fund, recruits a top notch team, puts it all together using the kind of business management techniques taught at business schools, and in fairly short order turns it into a successful business. Amar Bhide, whose book, The Origin and Evolution of New Businesses, has shattered some of the myths and traditional perceptions about entrepreneurs, particularly about their risk taking abilities, was in Bangalore recently, and spoke to IIM faculty about his research and his findings. Most startups, he says, are started with neither a lot of capital nor deep experience, are based on relatively mundane ideas, and improvise and adapt as the businesses grow. Many of the decisions made by entreprenuers tend to use heuristics, and the desirable entrepreneurial traits vary with the kind and the stage of the business. He also talks of his finding that high uncertainty businesses tend to be low risk. This is because ambiguity averse competitors, including large companies, steer clear of unmeasurable and unquantifiable risk, leaving the field open for small operators who have little to lose. By the same token, recessions may be good news for small startups.

Although he has taught entrepreneurship at Harvard Business School and continues to do so at Columbia Business School, Prof Bhide is sceptical of business plan contests, incubators and entrepreneurship courses. It is not possible to learn a skill, he believes, without getting your hands wet. Universities and business schools have two major roles to play: distilling and disseminating knowledge, and nurturing networks among students who have graduated. Going beyond that is a fruitless distraction.

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