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Shishir Prasad
I write on technology, finance and ocassionally culture

The Education of Vikram Akula

“I am not going to talk about Microfinance,” said the Kurta-clad Akula. You know that an era has come to an end when the man who was once the face of an industry chooses not to talk about it. The ballroom at Taj Land’s end which hosted Sankalp 2012 — arguably India’s biggest social entrepreneurship do — was packed to the rafters. Most of the people inside the room were social entrepreneurs. Entrepreneurs who want to walk the line that belongs to neither Mohandas nor Mammon. And they wanted to hear from the man who tried but could not keep to the line.

“Yes I made mistakes and I want to talk about it so that other social entrepreneurs who are there in room don’t have to repeat it,” said Akula. And when he said that there was a tinge of humility but there was more hurt, regret and entrepreneurial bravado. “Please– if you are a VC I don’t want to hear from you,” said Akula. And he then began talking about what he had learnt from the school of hard knocks.

He spoke about how as a young microfinance officer working for the Andhra Pradesh Government he did not have enough funds to disburse a loan to an old lady and she said to Akula: “Am I not poor too?” Having told this old chestnut, Akula moved on to what he had learnt.

“I used to believe in 3Cs: capital, capacity building and costs,” he said and then suddenly turned around and picked up a book. “It’s all here if you want to read about it.” The book of course was his  A Fistful of Rice. The sunshine of a salesman was still burning bright.

So what had Akula learnt? “I call them the new Cs. The first one is Culture,” he said. SKS expanded too fast and Akula did not have the time to percolate the culture of the early days deeper into the organization. This was perhaps the biggest lesson he left for others in that room on that day.

Sales, Finance, Management team – almost everything can be converted into a process and scaled if the organization throws in enough resources. Culture is process-resistant if not process-proof. Very few organizations have a playbook that details out 16 steps needed to spread the culture. Very often some of the key founders are the ones who carry the culture torch, using it to illuminate important decisions that the people take in that organization. Most organizations adopt a bureaucracy that usually passes off as culture. The standard offsite, townhalls, video messages from the CEO are all rituals that often masquerade as culture. And more often than not the difference between a great entrepreneur and an average one how they can imbue the workplace with company culture. There were more than 50 companies that started exporting software to the US in the early eighties. Just four became large companies. The ones that become large were able to create large leadership ranks that knew what the founders stood for. SKS may still go on and become a great company. The loss of its founder at such an early stage of the company makes it that much more difficult. One only wishes that Akula had learnt this lesson before he took the company public.

“The second C is what I call codes of conduct,” said Akula. Though to Akula it appears like a separate learning it is actually a derivative of culture.  There are companies which look the other way while their sales staff hustle and hoodwink customers. That’s culture and value system for you. Such companies may have a code of conduct and also a value system statement but from trainee upwards everyone knows that successful senior leaders in the company have their own secret code. And usually the secret code is chosen over the formal one. So even if SKS had put in a strict code of conduct but the behavior of the senior management within company told a different story, the code of conduct would have never worked.

The last C that Akula spoke about was control. “When PE investors enter the company, the social interest does get sidelined,” he said. Akula felt that he had given up control too fast. The real control is the psychological control that great founders have and which gives them the moral control of the company. This is very often accompanied by a large shareholding but not always. Also, nobody forced Akula to give up control. He always believed that microfinance could be scaled up fast; could be highly profitable. To achieve that scale and heft he needed outside capital. So for every percentage shareholding he gave away the value of the firm rose rapidly (till the Andhra government clampdown). Had he not given up control, he would have grown much, much more slowly. And would Akula been interested in microfinance then? And if had been, what would he have said to the poor woman for whom he did not have funds.

Without a doubt, Akula has a lot to teach other social entrepreneurs. But has he really learnt his lessons?

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Akula is wrong again. SKS Micro failed because of the following reasons:a. Akula was greedy. b. He was unprofessional. c. He pursued flawed business model. d. There was no real concerns for the poor borrowers. e. He tried to create unreasonable value for share holders and himself at the cost of the poorest of the poor in the country. f. There was no business ethics. g. deviated from declared commitment and goal. - firstchoiceipo.
 
 
Shishir Prasad
I have been a business journalist for 16 years and worked with Business Standard, Businessworld, Economic Times and Forbes India. Most of those years were spent writing on strategy, technology and private equity.
 
 
 
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April 21, 2012 09:59 am by K A PRASANNA
Akula is wrong again. SKS Micro failed because of the following reasons:a. Akula was greedy. b. He was unprofessional. c. He pursued flawed business model. d. There was no real concerns for the poor borrowers. e. He tried to create unreasonable value for share holders and himself at the cost of the ...