To Be or Not To Be: Rising Through Disruption

In Samuel Beckett's seminal absurdist play Waiting for Godot, two men wait for the titular character "Godot" to arrive – but he never does. For startups and entrepreneurs today, a government induced reprieve or stimulus for the disruptions caused by Covid-19 is akin to waiting for the proverbial Godot. Given that, it's incumbent that the current scenario acts as a call to action for founders/entrepreneurs. Entrepreneurs must rethink the traditional fundamentals of how to run a business. Similarly, investors must rework their established playbooks for evaluating a potential investment opportunity.

Prominent risk analyst and celebrated author Nassim Nicholas Taleb divides modern world systems into three broad categories, the fragile, the robust and the antifragile. As per his analysis, fragile systems succumb to disruptions and uncertainty, whereas robust systems tend to survive and withstand disruptions. It is here that Taleb propagates a third system i.e. antifragility, which benefits from such shocks and uncertainty. According to Taleb, antifragile systems are beyond robustness and actually get better with disorder - they gain where others lose. He likens them to Hydra, the water-serpent from Greek mythology, which regenerated with two heads when one was cut off.

Now, more than ever, is the age of the antifragile.

The Covid-19 induced lockdown in India started on March 24. Over the course of the 2 months since then, we’ve seen startups in India pivot, adapt and try every trick in the book to survive. The bigger ones, like Swiggy and Zomato, have adapted their established business models in order to be the first movers in a disrupted market. Both of them have seamlessly expanded their offerings in order to capture the demand for the delivery of essential commodities. Swiggy has also released a feature called “genie” which offers their underworked delivery agents to pick up and drop items – similar to Dunzo. A great move considering people couldn’t move out of their houses. Both Swiggy and Zomato are also piloting alcohol delivery in various parts of the country– an extremely lucrative space to capture that has come up solely due to the pandemic (though they're facing issues already). The online-to-offline space has grown substantially due to the crisis, and everyone is scurrying to capture a piece of the pie. Reliance has launched JioMart as well, albeit without the kirana stores that were supposed to be essential to their model.

However, these pivots and adaptations are a result of a shove rather than being calculated or pre-emptive moves. It brings to mind the “Boiling Frog Syndrome.” In the 19th century, various physiologists and scientists conducted an experiment involving a frog.  They found that when a frog was placed in boiling water, it would immediately react and jump out. Whereas, when a frog was placed in warm water that became gradually hotter over time the frog would not react and slowly boil to death. The hypothesis was that due to the fact that the change in temperature is gradual, the frog did not realize it’s boiling to death. In the same way, most startups have ignored all the smaller, “warm” signs and have never tried moving towards an antifragile system. They’ve only adapted when placed directly in the hot water because they were forced to adapt.

Furthermore, this process of adjustment has exposed systems which weren’t ready for such adaptations. This is evident by how often the food and grocery delivery applications being reconfigured either crashed or lagged during the process.If any of the companies in a given space had an antifragile system, they could have made significant headway and left the rest of their competitors more than a few steps behind, securing crucial competitive advantages. Unfortunately, none of the companies were positioned to move rapidly and efficiently towards a new offering. In these hotly contested markets, any such consolidation would have been a significant long-term win. One cannot help but feel that a golden opportunity has been missed by most players.

Nonetheless, it is easier said than done. Building an antifragile system involves understanding that new age businesses cannot pigeonhole themselves within the metrics of revenue and profitability. They must acknowledge the complexity and randomness surrounding their market and environment, and build value systems with a long-term outlook. This involves building systems which facilitate an increasingly collaborative way of problem solving and research. Here, promoting more democratic decentralised internal mechanisms would go a long way in pre-empting risks and deciding on future actions. Entrepreneurs must also rethink their hiring strategies to ensure that they are able to attract a diverse pool of individuals who can adapt to a constantly changing environment. Adaptability, diversity and innovation should be at the forefront while they map out their hiring playbooks.

From the perspective of investors, they must look beyond the traditional metrics of product-market fit, differentiation, the top or bottom line and momentum, while they evaluate potential investments. They must actively pursue antifragile founders who embrace risk rather than being risk averse. This can be gauged through questions around innovation and risks posed to founders during early stage interactions. The intention should be to understand how cognisant the founder and the top management are of uncertainty and disruptions in the space within which they operate. It can also be evaluated by understanding how decision making takes place within the entity. From the perspective of the founder, establishing that you have an antifragile system in place can also help in leveraging the same and building it into the valuation for your business. A truly forward-looking investor should not be averse to such a scenario.

While it is difficult to be prepared for such a crisis, it pays to be antifragile regardless. In 1999, the founder of Intel, Andrew Grove wrote a book called “Only the Paranoid Survive.” In the book he talks about how companies can react to “Strategic Inflection Points”, which are occasions where companies are forced to adapt or risk being left behind. These points can be set off by factors, such as, competition, new technologies, change in regulations or even pandemics, much like the current situation. Grove argues that in such situations, the usual rules of business no longer apply. However, if managed correctly, these points can be an opportunity to capture the space, and as opposed to giving in, companies can emerge stronger than ever.

One cannot deny that disruption and uncertainty are here to stay. Startups and businesses that ride these waves as passive fait accomplis will falter and be replaced by entities that embrace these changes. Hence, companies must actively move towards adapting and growing through these strategic inflection points by building antifragile systems. After all, as American educator Randy Pausch stated in his last lecture, “we cannot change the cards we are dealt, just how we play the hand.”