Geographies in Depth

How start-ups will lead India through the Fourth Industrial Revolution

A worker adjusts decorative lights on a model of skyscrapers representing the future of Mumbai city at an enclosure to celebrate 'Ganesh Chaturthi', a festival of the Hindu God Ganesh in Mumbai September 14, 2007. The festival begins on Saturday. REUTERS/Arko Datta (INDIA) - GM1DWDPQLCAA

Securing the success of India's rapidly growing start-up sector is imperative for creating new jobs and skills Image: REUTERS/Arko Datta

Kathy Bloomgarden
Chief Executive Officer, Ruder Finn
This article is part of: India Economic Summit

As the Fourth Industrial Revolution continues at full steam, the entire world must prioritize job creation and the retraining of the current workforce in order to prepare for the digital age. Currently, one in five working individuals says their professional skills are not up-to-date, as robots, machine learning and automation proliferate in the workplace.

The unfortunate truth is that technology is going to replace some jobs – experts suggest as many as 40% of jobs around the world will disappear in the next 15 years. The threat of job displacement is especially large for countries like India, where an enormous percentage of the population is of working age. Indeed, according to census data, the vast majority (more than 63% in 2011) of Indians are between the ages of 15-59. That’s a massive amount of jobs to both fend off what is sure to be an impending unemployment crisis and to create new opportunities to bring young people into the workforce.

Fortunately, there is a powerful weapon that can be deployed to fill the gap: start-ups. Unfortunately, while India has achieved meteoric growth in the start-up sector – with 1,200 start-ups created in 2018 alone – an estimated 90% of Indian start-ups will still fail within their first five years.

How can India improve the lifespan and the power of start-ups so that they can pursue a strong growth trajectory?

The first step is encouraging more collaboration between the private and public sectors, who must work together to:

1. Create an entrepreneurship culture: As John Chambers, former Cisco Executive Chairman and CEO, and current founder and CEO of JC2 Ventures, frequently says: “We need to add another ‘E’ to STEM.” India needs to invest in creating a culture that not only embraces but paves the way for entrepreneurs. Encouraging schools to teach children, teens and university students about entrepreneurship as a career choice would drastically increase not only the number of young adults who choose to launch start-ups but also the diversity of start-up founders to include more women and minorities – and diversity is proven to drive innovation.

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Of course, entrepreneurs must incur a certain amount of risk and a fear of failure is always a spectre in the background. While it may not be possible to dispel this fear overnight, businesses and the government can take steps to reduce obstacles to start-up success. Indian conglomerate Tata Group’s InnoVista programme, for example, awards its employees both for the year’s best innovations as well the year’s best attempts – encouraging teams to take big leaps in the pursuit of innovation. There are other initiatives emboldening people too: just last month, the Indian government agreed to exempt start-ups from the “angel tax”. Now, these businesses can rest, safe in the knowledge that they’ll no longer be taxed if they receive investments deemed to be above their fair market valuation.

2. Build innovation hubs: Countries like the US, France, Israel and China have created settings that allow a large number of start-ups to flourish simultaneously: innovation hubs. Take Station F in France, for example. President Emmanuel Macron himself opened what is considered to be the largest start-up facility in the world just two years ago. Today, the facility houses more than 1,000 start-ups under one roof. Partners, including large multinationals such as Adidas and Microsoft, also offer programming and guidance to help the start-ups get off the ground. Hubs like these may be able to combat the stressful and disillusioning nature of start-up life by providing support and guidance to fledgling companies.

French President Emmanuel Macron delivers a speech as he visits Station F startup campus in Paris
Image: REUTERS

Multinationals can also take a more proactive and leading role. In partnership with Indian incubator T-Hub, social media giant Facebook recently announced the launch of its second annual India Innovation Accelerator Programme, which strives to nurture Indian start-ups in the emerging technology and artificial intelligence space. If accepted into the programme, Indian start-ups will be invited to participate in a diverse menu of technical training exercises and mentorship opportunities intended to help employees create the innovations of tomorrow.

3. Use start-ups to digitize small-to-medium enterprises (SMEs): In recent years, start-ups in India have served as a catalyst for the digitalization of SMEs across the country. In fact, a recent study estimates that Indian SMEs will spend $14-16 billion this year on digital technologies alone – in part because start-up aggregators encourage the companies around them to digitize.

By taking advantage of the resources of their multinational investors (an estimated $34 billion has been raised by foreign entities since 2006), domestic start-ups can, in turn, offer local SMEs a portfolio of productivity, connectivity and digital deliverability solutions that create a nascent space for job growth. Of course, with an estimated 75 million SMEs in India employing more than 180 million people, the prospect of reskilling and retraining may admittedly seem daunting. However, by using the power of start-ups to move the innovation environment forward, business leaders can help expedite the process of digitalization and lay the groundwork for future success

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Boosting India’s already burgeoning start-up environment will help the country address the seemingly inevitable effects of technology on employment. A strong innovation system is fuelled by a dynamic start-up community, which together form a robust source of jobs. The Fourth Industrial Revolution may threaten businesses large and small, but, when your business’ survival hinges on the ability to innovate, it will be those that push new boundaries and encourage others to do the same that succeed in the modern business landscape.

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