Do right by customers, focus on governance, never cross the red line: Lessons for entrepreneurs and new-age managers

Entrepreneurs must always do what’s right for the customer, no matter what the compulsions are, and this is a value Nithin Kamath—Founder of online stock trading firm Zerodha—says he tries to live by.

Kamath, who bagged the CK Prahalad Next Practice Entrepreneur Award for 2023, said all efforts at Zerodha are geared towards helping the customer make money in the markets.  

“Helping customers trade quickly, at a low cost, is not enough. It is important to make customers make money in the markets,” he said, during a fireside chat, on the sidelines of the CK Prahalad Next Practice Oration event held in Chennai.

Kamath referred to the ‘Nudge’ feature on Zerodha’s platform that’s designed to help customers do the right thing and make fewer money mistakes, such as buying penny stocks.

Nudge is a real-time alert on Zerodha’s trading platform that warns users of the risks associated with a particular trade before execution.

“Nudge never asks you to trade,” he stressed.

Kamath also spoke about the other attributes that have helped his startup reach a customer base of 12 million in its 13-year journey—keeping the product offering simple, not overselling, setting expectations right, keeping the team size small, and its ability to retain employees.

Are all these ‘next practices’—a visionary idea put forth by business and management thinker CK Prahalad?

It may seem so at hindsight, but these are pratices that have evolved over time, helping Zerodha scale up as a business, said Kamath, promising to get back and learn more about Prahalad’s ideas and postulates.

An eminent jury comprising Professor M S Krishnan (Accenture professor of computer information system at Ross Business School, University of Michigan), Narayan Ramachandran (Ex-Head of Morgan Stanley, India), MR Rangaswamy (Founder, Indiaspora and Sand Hill Group), D Sundaram (Lead Independent Director, Infosys) and Lakshmi Narayan (Ex CEO and Vice Chairman, Cognizant) chose Kamath in recognition of his achievements in building Zerodha as a platform committed to doing right by the customer, resonating with the next practices teaching of Prahalad.

Insights for entrepreneurs

The award ceremony was preceded by the Next Practice Oration organised by CK Prahalad Foundation, the CSR arm of TVS Capital Funds, in honour of Professor Prahalad—one of the most beloved teachers at the University of Michigan, well known for his theory on the fortune at the bottom of the pyramid.

At the oration, Professor Gautam Ahuja, one of Prahalad’s colleagues and an authority on strategy and organisation science, drew insights from Prahalad’s ideas, which entrepreneurs and modern-day managers could benefit from.

Professor Ahuja—Eleanora and George Landew Professor of Management at the SC Jonson Graduate School of Management at Cornell University—advised entrepreneurs to be clear about who their customers are and whom they are serving. He also urged them to make effective use of all the resources around them, especially women.

“Bringing women into the team is not a CSR initiative. It is not a favour. Women are excellent managers,” he said.

Ahuja also emphasised the importance of governance in startups. “Entrepreneurship is great. But many startups seem to have serious governance problems. We have seen unicorns crashing… Governance is just a fancy word for honesty,” said the professor, adding that entrepreneurs must constantly ask themselves if they are doing the right thing.

No matter what the short-term benefits are, one mustn’t cross certain red lines, he reiterated. “Find your red lines and live within them. Private equity business should be clear of these lines.”

In his introductory address, Gopal Srinivasan, Chairman and Managing Director, TVS Capital Funds, said it is a privilege to work with next-gen entrepreneurs to help them build better businesses.

“We (TVS Capital) are on our way to our fourth fund. A private capital platform is something India so much needs.”

He also stressed the need for entrepreneurs to look beyond best practices and be empowered with future-focused next practices.

“There are individual pockets of excellence. But they all fit into the frame of next practices,” he said.