The problem juices Prahalad -- and it shows. Even as he focuses on strengthening Praja, he speaks regularly on the digital divide. He helped persuade Carly Fiorina, CEO of Hewlett-Packard, to launch what HP calls its World e-Inclusion initiative. But that's the gauzy future. Right now, Praja faces an environment that's downright poisonous for startups and a capital market that is essentially dead. Many potential customers are slow to commit to buying anything, let alone a new platform that requires a whole new way of thinking.

In late February, Prahalad and Jain refocused the company on marketing its core technology, relying on system integrators to build specific applications. It also laid off more than a third of its staff. "I would be lying if I said that I was emotionally and mentally prepared for this," Prahalad says.

There was a learning experience here too -- but not the kind that Prahalad had hoped to have. "Especially in troubled times, leaders must behave like emotional and intellectual anchors," he says. "You must steady the organization and have a passionate belief that what you are doing is important. I never realized how critical that was in times of turbulence."

What is so fascinating about Prahalad is that amid the gloomy tidings, he seems more energized than ever. Praja may be fighting for survival, but Prahalad has yearned for a test like this: "Leadership is about what you do when the going gets tough.

"It is the bamboo that bends in heavy winds that has another day to live," he continues, reciting an old Indian saying. "The trees that don't bend get uprooted."

Jennifer Reingold (jreingold@fastcompany.com), a Fast Company senior writer, is based in New York. Contact C.K. Prahalad by email (ck@praja.com).

Sidebar: What the Teacher Has Learned

C.K. Prahalad has spent most of his life thinking about how companies run. He has consulted to the likes of AT&T, Philips Electronics, and Sony. Now he's in the hot seat as chairman of Praja Inc. Here's what he has learned so far.

When the going is roughest, leadership matters. In times of trouble, Prahalad says, "leaders must behave like emotional and intellectual anchors. There are no external cues now. The critical issue is about faith, passion, and, most importantly, authenticity -- so that people know you are not pretending. People can see a sham."

Successful managers embrace discomfort. "If you do precisely what you're supposed to do," Prahalad says, "and you're boxed in, then you're going to do that very well." But if pressed to do things that aren't in your normal job description, he says, the challenge can push you to a new level of achievement.

Great leaders stay on message. For Prahalad, nothing is more important than reminding people what the company stands for. "I spend a lot of time talking about what we're doing in terms of strategy," he says. "You have to give the same message over and over again."

It's not one person. It's not the team. It's both. A painting of a pack of wolves in Prahalad's office symbolizes the combination of leadership and teamwork that pervades successful organizations. "With wolves, solidarity is first," says Prahalad. "But when they hunt, they change roles. The implicit hierarchy depends on who does what." In an organization, he adds, "one unique person makes a difference, but you need teamwork to make it happen."

Think? Act? Balance the two. Says Prahalad: "In a company like ours, if we want to do something, we can just call a meeting. But in a small company, you have to exercise caution and build your own personal dampers so that you don't act on everything. Sometimes not acting may be smart. But if I get the feeling that everybody's becoming so thoughtful that nobody's doing anything, I want to go and light some fires somewhere."