An evening with R Satya Narayanan
About Mr Satya Narayanan
On Friday, Sep 17, we had a very insightful session by Mr R Satya Narayanan, Chairman of CL Educate, a listed Edtech company. He has been a founder of well-known ventures in education like Career Launcher and Indus World Schools. Today, he is a much sought-after advisor in the field of education and entrepreneurship.
Mr Satya Narayanan drafted the new education policy for the Delhi government in 2014. He is a mentor/investor in various startups. He is a published poet in Urdu and currently translating the Sanskrit works of Kalidasa into Urdu. He is also on the Board of Rekhta, an organization devoted to promoting Urdu. A graduate of St Stephens and an MBA from IIM Bangalore, Mr. Satya Narayanan played competitive cricket up to university level.
About India and the education landscape
As a youth, Mr Satya Narayanan could make out that entrepreneurship was not really encouraged in India. The brightest people wanted to join a bank, the IAS or some other government job. Mr Satya Narayanan did not quite agree with this view. He could notice that rickshawallahs, panwallahs, dentists, etc were all entrepreneurs who could never be sure how much they would earn the next day. But he was too young and did not have the necessary experience to air his views openly. Today, 25 years later, India is called a country of a million entrepreneurs.
One person, more than anyone else, can take the credit for transforming India from a poor country into one with the third largest GDP in the world. That is the Indian mother who has made sure that her children receive the best possible education even in poor families and get into top institutions like the IITs. It is no surprise that 9 out of the top 100 CEOs in the US today are Indians. The pace of education has picked up so much that education and services make up almost a third of the country’s GDP.
A once in 350 years event
About 350 years back, India and China accounted for about 74% of the global GDP. Asian countries went into a decline subsequently. But in recent decades they have made a good recovery. Today Asia accounts for 51% of global GDP. Asian countries may be different from each other, but they share the common values of hard work, honesty, hard work and emphasis on education. Mr Satya Narayanan mentioned that we should all try to capitalize on the opportunities created by this once in a 35o years event.
How he became an entrepreneur
When Mr Satya Narayanan launched Career Launcher, random thoughts were crossing his mind. He had joined Ranbaxy after his MBA. His salary was more than what his father was earning after 30 years of service. But he asked himself why he was selling medicines and what he would really achieve. At best after 20 years, he might become the CEO of the company, just like the then CEO, D.S.Brar. why not try to become the founder and chairman of a company right away? He wanted to be in education but did not want to do a PhD or publish research papers. Based on his aspirations and his own love for teaching, Mr Satya Narayanan set up his venture Career Launcher to provide coaching for entrance examinations in 1995.
On the education sector in India
The education sector has seen a big boom in recent years. The Delhi government had been spending 6% of its GDP on education. On Mr Satya Narayanan’s recommendation, the number increased to 24%. Many states are not only spending more money but also more transparently on education. That is a good trend because over a 30-year time horizon, there is no investment which provides greater ROI than education. We are currently in a good space as far as education is concerned. The current spending is about $ 10 billion. Private players are playing an important role as they account for 45% of the sector against 15% in USA and China.
The impact of the pandemic
When the pandemic broke out, people began to work from home, and everything moved online. One group of companies accepted the reality, decided to get on with life and converted an adverse situation into an opportunity. These people are in a good place now. The second group of “wise” people went into denial. They thought the pandemic would go away quickly. Today, they are in trouble. Mr Satya Narayanan emphasized that to be an entrepreneur, one has to be hungry and foolish. Going forward, he feels that only one format will survive after the pandemic: blended learning.
Other points
Mr Satya Narayanan’s message was that no company can arrogate wisdom to itself. How much ever successful a company might be, new companies with better ideas and business models are bound to emerge. IBM did not create what Microsoft did. Google did not create what Facebook did. And Facebook could not produce what WhatsApp did. Companies should remain grounded, feet firmly planted on the ground and never be dismissive of youngsters and startups.
The concept of payback does not make sense in entrepreneurship. One should talk about pay forward. It is like nurturing a child. We do not invest in a child for the returns it will fetch us! Entrepreneurship should not be equated with economic returns.
Q&A section
The section was moderated by R Prasad and Sudhakar Rao.
On becoming an entrepreneur
As a 24-year-old who had joined Ranbaxy, selling pharma products just did not appeal to him. As mentioned earlier, Mr Satya Narayanan realized that the best that could happen to him was to become the CEO some 20 years down the line. He did not find it inspiring enough. Why not be rebellious and head his own business right away?
Mr Satya Narayanan had not moved forward in cricket. He was interested in education but not in doing a PhD. Such random thoughts came together and pushed him into entrepreneurship.
But Mr Satya Narayanan cautioned that while it is ok to be rebellious, it is also important to have purpose and skills to succeed. We have to keep asking ourselves: What is it we can do better than others?
On success and failure in entrepreneurship
Looking back, Mr Satya Narayanan feels that 70% of the decisions he made were mistakes. If that had been 30%, he would surely have become a Bill Gates! Entrepreneurship is about a series of initiatives. When something goes wrong, we can either label it a failure or a learning opportunity that can lead to success down the line.
As an example of one of his early mistakes, Mr Satya Narayanan mentioned the wrong pricing for his programs. Career Launcher offered two kinds of coaching for the CAT exams. One was a longer version called “Planned”. The second was a crash course for those who had got through CAT and received interview letters. He decided to charge more for the “Planned” version. One of his friends pointed out that it was a mistake. People enrolling for the crash course were more willing to pay a higher fee. What mattered was not the effort that went into coaching but the willingness of the customer to pay!
Sathya mentioned that ultimately what we call a success or failure depends on our mindset. In entrepreneurship, no mistake can kill us unless it is something that makes us lose our credibility (e.g., Satyam). If we keep learning from our mistakes, without losing our credibility, we will be fine.
On what it takes to be a successful entrepreneur
A good CEO must have some hands-on skills. This has become super magnified in an era of technological disruption. The moral right to lead a team comes from having at least one skill. This could be sales, finance, engineering, design, etc.
Teachers need not necessarily become the best entrepreneurs in the education sector just like a good player need not always be a good coach. A teacher has an advantage in dealing with learners, but this is neither necessary nor sufficient to become an entrepreneur.
On identifying venture opportunities
The key questions to ask are whether there are tail winds due to changes in policy, technology, consumer behavior, whether we have the capabilities (people and money) and whether we should buy or build the product.
Opportunities exist in every sub sector of education: tutoring, entrance exam preparation, coding, etc. But the challenges of scaling should not be underestimated. Today, scaling and brand building have become expensive. So going national is not easy.
Rural areas also offer exciting opportunities. Anything that alters the orbit of the youth in rural areas will be valued even more than in urban areas. We must enable the youth to cross a hurdle that alters their life. Each of the smaller towns is a potential goldmine. While the unit price may be small, the number of customers can be large.
On teaching/learning outcomes
Some 200,000 people write the CAT exam. Only about 5000 get admission to the IIMs. So, the failure rate is 98%! A key insight which Mr Satya Narayanan conveyed is that the successful 2% of the students may make up the ad campaigns but it is the remaining 98% who build the business. It is all about how we mentor students and shape their expectations. If we deal with students well, they will say that they could not get through the exam, but they did love the teaching. It is this word of mouth which will help in attracting students in the future.
Prasad added that ICFAI’s objective has been to admit average students and convert them into above average. Mentoring plays an important role here. In contrast, the institutions which admit only the “best’ students, have less scope to add value.
On charlatans in education
Satya admitted that there are unscrupulous players in education as in every other field. Fortunately, they get caught sooner or later.
On the pandemic
The pandemic was an unprecedented situation. In such a situation, there was no option for the leaders but to jump in and do something. Since it was difficult to predict what would happen, Mr Satya Narayan felt it made sense to prepare for the worst. Thus, Career Launcher staff began to work from home seven days before the lockdown was announced. But changing the mindset and going online was by no means easy. People were used to the physical format. The first 100 days were extremely challenging. The leadership team launched Project Unify to bring together the offline and digital formats. Over time, things have worked out well and Mr Satya Narayanan is confident that his company will be in a good position as we come out of the pandemic.
On the Chinese crackdown on tech companies
The Chinese authorities are trying to deal with the demons in their head and trying to address some fundamental issues on how to manage business in their country. In the process, global companies have become weary of investing in China. As they pull their funds out of the country, they will have to find other investment avenues. So, there will be exciting opportunities for India and Indian entrepreneurs.
On whether a bubble is developing in the EdTech space
Overheating and undervaluation are an integral part of the business cycle. While we should be aware of the pitfalls of overheating, we must also welcome the funds that are coming into the sector. Other sectors have attracted heavy investments in the past. So why not education which is important for the long-term prosperity of the country? It is quite possible that thanks to the generous funding, some of the players will attain a global stature like the Indian IT services companies have done. Entrepreneurs must deal with the ups and down with equanimity. Even when the P/E is low, they should strengthen the business and run it well.
On the impact of AI/ML
AI/ML have been tremendously impactful for Mr Satya Narayan’s business. AI is making very accurate predictions about a candidate’s performance in the CAT exam. AI is also freeing up the time of teachers from routine work and enabling them to provide the right advice to students. For example, they can tell a student: Why did you spend so much time on the modern maths section? It is not very important, and you also got all the answers wrong. This kind of ultra-personalization can really help a candidate to do well in the entrance examinations.
On whether entrance exam coaching results in wrong students joining the course
If the institutions of higher education want to set tough question papers, the students also have the right to get the support needed to do well in the exam. We should respect the aspiration of students to do well in the exams and gain admission to the top institutions. In any case if institutions move away from IQ to other forms of testing, coaching institutions will also evolve and adapt to the changes! So it may be difficult to prevent the existence of coaching classes for entrance exam preparation.
On the impact of the NEP
Education policies in the country are being increasingly shaped by people with the right mindset. The NEP is well thought out but it is 800 pages long and difficult to implement. It is also subject to multiple interpretations. The progress with education reforms could be faster. But overall, Satya is not too disappointed. He believes things are moving in the right direction, despite the challenges we face.
A very insightful session by one of India’s most thoughtful entrepreneurs. Excellent moderation by Prasad and Sudhakar.
We thank Dr. Vedpuriswar for bringing out the highlights in the form of this note
