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V G Siddhartha's story 'will be a good case study and not a deterrent to those who want to be entrepreneurs. I don’t think it will scare young entrepreneurs. I think these cases will make them sensible. They will understand that they have to be very careful about certain things, otherwise, they will have to pay a heavy price.'
What might have driven VG Siddhartha, the founder of Café Coffee Day, to end his life?
Was it the pressure from those from whom he had borrowed money?
Was he really a failed entrepreneur, like he wrote in his letter to the employees of CCD?
Prof Kavil Ramachandran, below, executive director, Thomas Schmidheiny Centre for Family Enterprise, Indian School of Business (ISB), discusses these questions in an interview to Rediff.com's Shobha Warrier.
"The problem is, when you start growing, you get the feeling that you can do everything because of your entrepreneurial aspiration," the former professor at IIM-Ahmedabad says.
Do you look at the tragic story of VG Siddhartha as an entrepreneurial failure, like it had happened to one of your old students, a gold medallist from IIM, Ahmedabad, RSubramanian of Subhiksha? While Siddhartha ended his life, Subramanian is in prison…
I won’t say it is an entrepreneurial failure because it will be an overloaded statement. It is the failure of an individual entrepreneur who recognised the need to transform himself as the game was played out.
Ramalinga Raju of Sathyam also had a similar end. Whether it is Subhiksha or Cafe Coffee Day or Sathyam, one of the major things I notice is, they become over-confident about themselves as time passed.
It is like, you start with a mission but as the organisation grows, your own confidence in your own ability, indispensability and identity get changed.
I feel it is a reflection of your failure to change yourself to the requirements of the situation.
If I have to take the example of Subhiksha, Subramanian had a great run as a student and then as an entrepreneur; he had identified a niche market of growing opportunity. But when you grow, you have to realise that there are limitations to individual capacities and capabilities.
Subramanian had a great strategy but implementing that kind of a strategy requires you to have a team, bandwidth, and the ability to let go and work with others. It means you need the ability to accept organisational leadership and not individual leadership.
Do you think they become overambitious after a certain period?
Yes, and also they became overconfident in their own capabilities. This maybe created by the forces around by creating an impression that you can do everything. More than that, you feel that you can do everything.
If you take the case of Siddhartha and Subramanian, both of them centralised powers, they were the ultimate in decision-making. As far as I understand, they identified themselves with the organisation.
The problem is, when you start growing, you get the feeling that you can do everything because of your entrepreneurial aspiration.
Both Siddhartha and Subramanian diversified into many fields, other than the core idea in which they succeeded. Could that also be a reason for their failure?
It is not that. It is the inability to let go. What they should have done was, they should have realised that they could not do everything. They should have realised that they were only good at something and that too at a particular scale of operation.
If you take the case of Chandrasekhar of TCS, he chose to be a facilitator or a conductor of an orchestra after a certain period.
The ability to let go is one of the major differences you find between these two and some of the other successful entrepreneurs. One of the great examples is Azim Premji. Though Premji controls 70-75% of the company, he didn’t say that he was going to do everything. He chose to be a facilitator.
There are several others too, like Dr Reddy of Reddy Labs. Dr Anji Reddy started it but soon he realised that he was not a great manager; he was more of a scientist. So, he brought in his son and son-in-law, and they in turn brought new professionals which transformed the whole organisation.
Ability to let go is one aspect of a successful entrepreneur. That depends on your trust in other people.
Then, another thing is, when there are many confidential aspects in your dealings, both political and non-political -- I don’t want to use the word shady but questionable transactions -- they feel they cannot discuss these things with others. That is because you know that this is not accepted as high-quality governance activities. When you do such activities, you have to do it yourself.
My observation is that when you are aware that your transactions are not transparent, but at the same time, you are ambitious and want to pursue those things, it becomes centralised.
Because of the deadly combination of your growth ambition, over-confidence and nefarious type of activities, you get into a trap.
In Siddhartha’s case, his debt kept mounting…
It means if your investments are not leading to profitable returns, naturally the debt will go up. Your debt going up means you are not utilising your funds properly. It also means you are taking many risky assignments.
Was debt management the problem?
No. If you are borrowing, you should be confident of repaying. But if your risk propensity is very high, you have to be aware of it. When you are ready to borrow money and play the game but when the chances of your success are very limited, you are playing a risky game.
You borrow money from somebody and decide to play the game. But your over confidence in yourself, drive to grow faster, and willingness to cut corners, will add to the complexity of the game you are playing.
The end result is, you are not only ambitious but you are not ready to let go and your activities are not straightforward. Then the success run will not continue forever.
Is it not like gambling?
It is. When you lose one round, you will think you will win the next round and you will go on playing. You go on playing because you want to be a winner and you want to grow.
Because it is not straight-forward, you may not be discussing this with anyone.
Even if you are taking chances with borrowing, if you have a good board of directors, they may alert you. But when you are over-confident and think you know the best, you bet high without any backup.
Siddhartha wrote in his letter, ‘I could not take any more pressure from the investors, lenders and IT officials’….
It means pressure was coming from multiple angles. It also means he was losing control but failure made him leverage much more on the thought that he would be a greater winner next time. This way, you get into a vicious cycle, a vicious cycle without a support mechanism.
Support mechanism means?
Advisors, mentors, a good friend or a family member. But you don’t use the support mechanism because you don’t believe in them or you can’t disclose any of your dealings with them, or you are afraid to disclose to anybody as you don’t want the perception of you going wrong.
In the case of Siddhartha, he was considered as an icon. He was not only the coffee king, a very successful, informal, easy to interact kind of guy. If he had disclosed that he had a lot of liabilities because of his stupidity, his image would have got tarnished overnight. So, the feeling of insecurity overpowers other things.
Don’t you think he must have felt extremely desperate to write that he was a failed entrepreneur?
I don’t think Siddhartha has failed as an entrepreneur. Yes, he has failed as a sensible individual who happened to be an entrepreneur. It can happen with anyone if you don’t do the right things.
As an entrepreneur, Siddhartha became very successful. Where he failed was, he leveraged on them beyond what was successful. He became overambitious and did not consult anybody. And he was ready to compromise on governance principles.
Do you think Siddhartha’s story will be a deterrent to young entrepreneurs?
I think it will be a good case study and not a deterrent to those who want to be entrepreneurs. I don’t think it will scare young entrepreneurs. I think these cases will make them sensible. They will understand that they have to be very careful about certain things, otherwise, they will have to pay a heavy price.
As a professor, what will you tell your students to learn from Siddhartha’s story?
You need to have ambition, you need to have growth aspiration but you have to keep in mind two or three things.
First is, don’t bite more than you can chew. Don’t chew what you cannot digest. Be sensible about that.
Second point is, keep your foot on ground, be realistic in terms of implementation, in terms of raising funds and funds utilisation.
Third point is, have a set of advisors whom you can rely on. Don’t think you can find answers for everything or your answers are the best answers. Keep your ego under control.
Fourth point is, don’t compromise on governance principles. If you don’t do that, at some point or other, you are likely to fail.