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The critical role of culture in building great start-ups by Pankaj Raina

Posted on 18 February, 2021


“Even if a company has the best employees, a negative culture can influence worker morale, increase employee turnover, and decrease organisational productivity,” writes Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock.

 

Click here to read the full article on “The Hindu Business Line”

 

Below is an excerpt from the post that first appeared on The Hindu Business Line on 18 February 2021:

 

“Culture eats strategy for breakfast,” said Peter Drucker. This is a timeless lesson in building great organisations. One of the key growth drivers for India’s economic prosperity is start-ups. In the early phases of a start-up, all that matters is the team and its execution capability. However, not all start-ups survive, but some resilient and determined ones become great companies.

An important criterion driving this journey to greatness is “culture”. Start-ups must find a way of creating a flexible, innovative culture and encourage individuals to take ownership. It is not easy to build the right culture, as different members ascribe to it different meanings. However, a simpler way to define it is — what a start-up and its constituents believe? How they operate and live? It is not about building fancy office spaces or colourful walls, but rather about people, how they respond to challenges, how they work together as a team, and what they believe is good or bad for the start-up’s success in the long run.

Research has proved that culture also affects the bottomline. Even if a company has the best employees, a negative culture can influence worker morale, increase employee turnover, and decrease organisational productivity. For many first-time founders and entrepreneurs, defining and creating an optimal culture is an afterthought. They are busy sorting out licences, registrations, and figuring out revenue models, targets, and margins to survive. As founders, it is crucial to realise the building blocks of culture that can foster prosperity and innovation.

 

Visualising culture

Competitive advantage, unique value proposition, differentiation are words synonymous with start-ups raising PE-VC money. Moving beyond the tangibles, many intangibles make a company unique. The frequently documented ones are brands, service, quality, recall, etc. But the essential ingredient to building a competitive advantage is the culture.

It all starts with the employees (knowledge, skill, resources) and how they engage and respond to various situations. The right culture can help identify the right people and build a resilient organisation. More often than not, people are the organisation’s most significant differentiator. The pandemic has already reinforced the need to build resilient business models, and human resilience is an essential ingredient of these resilient start-ups.


Build an agile system

Covid-19 has already proven the need to be amenable and adaptable to change. Start-ups are deemed to be more “agile”. Founders can set the right expectations and behaviour from the start with a smaller team while being nimble enough to adjust and adapt quickly to business demands.

Change agility gives a clear competitive advantage to organisations and makes companies more resilient. Teams can build resilience and agility by clearly defining the need for change, its impact, controllable and uncontrollable factors, visualising what successful change would look like, identifying steps to work towards that change, and defining the top priorities.

 

Flexibility, an important virtue

As changes are inevitable in a volatile and dynamic business environment, organisations need to ensure their workforce possesses a “mindset” that allows them to view change positively and take actions that facilitate effective change.

 

Click here to read the full article on “The Hindu Business Line”

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Zephyr Management is a global emerging markets investment manager, specializing in the creation and management of highly focused private equity funds

Since its inception in 1994, Zephyr has sponsored and/or managed 26 investment funds in both public and private securities markets representing approximately $1.2 billion in combined commitments and assets under management

Emerging Markets Focus

The firm has initiated several private equity funds investing in several African countries, South Korea, Mexico, India, and Sri Lanka since its founding. Zephyr's funds serve medium size enterprises that are often ignored by larger private equity players. Zephyr funds provide growth capital to established companies with proven business models and sustainable competitive advantages.

Investment activities are currently focused on India, Sri Lanka and Africa.

Zephyr Peacock India

Zephyr Peacock India provides equity financing for fast growing, small to medium sized companies led by strong entrepreneurs and management teams.

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Emerald Sri Lanka Fund

Emerald Fund provides equity financing for fast growing, small to medium sized (SME) Sri Lankan companies led by strong entrepreneurs & management teams.

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Zephyr Acorn provides equity

Zephyr Acorn provides equity financing and business support to innovative early-stage companies in East Africa.

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Active Portfolio Support

The firm's special expertise lies in bringing global best practices to medium-sized growing companies by assisting them in conceptualizing sustainable business strategy, management development, compensation, ESG, expansion outside of their home country, capital structure and positioning for stock exchange listing or trade sale.