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Journey from a startup to an enterprise

    It all starts one fine day, when a brilliant idea flashes, that you think may be socially relevant or monetizable or both. And you think over it and suddenly, what was once a simple idea has been converted into a viable business! Yes, you have just got the ‘start up’ fever.  The bug has bitten. And just like any other fever, temperatures are going to rise, bad symptoms are going to appear, but at the end of the day, almost everyone survives a fever.  But can you?  

      Before you go further in this read, more out of convenience, I am using he to denote both he and she, and using product more generically to denote products or services or any solutions that is being offered. 

     The general working habits of an entrepreneur are to be totally driven, committed to succeed and very assertive – he is not afraid to take risks, is very focused on goals and results, learns from his mistakes quickly and adapts to newer environment well; works well with people and other employees; and is able to juggle a lot of things at the same time.   When an entrepreneur sees an opportunity, he immediately pounces upon it and successfully drives it to create something of social or financial value.   Some characteristics that are typically associated for any successful entrepreneur are- persistence, resilience, good motivational power, great communication skills and a very high regard for ethics.  For an entrepreneur it is important to realize that three things are non-comprisable – ethics, morals and legality of doing business.

    Creativity, Innovation and risk taking are their DNA.  They all want to make it big.  I am terming enterprise as a company that earns money and is fairly large in size and offers a lot in value to their customers, and I hereby want to describe to the best of my experience how to turn a startup to an enterprise in years to come.

   In a broader sense, an entrepreneur starts off as one of these three types or organization:

  • Non Profit – typically a non-governmental organization that wants to deliver to some social cause like – educating farmers to take on organic farming, setting up schools for under-privileged kids, etc.   They are usually funded by some grants and managed by one or two highly socially motivated individuals.  Such individuals could be highly successful folks who have left known enterprises to be driven by their own inner passion to make their community better – they may get some paltry salary to meet most of their living expenses.
  • Social (for Profit) – typically the undercurrent theme is the same as a non-profit but there is a little commercial side to things here, hence this type of an organization is also called a hybrid as it has both a social value and a financial value.  A good example here would be a construction company who wants to recycle wastes and make buildings; installing water stations in remote villages that supplies potable water at low cost, a government library etc.   They do work for the benefit of the people but they also have to work for small profits as they have to employ quite a few people, invest in some infrastructure and are continuously looking to grow.   Any school or hospital, given that they are partly guided by the principle to serve the society has to operate in this mode, but do they?
  • Commercial (for Profit) – Examples are banks, phone or automobile companies to name a few.   These companies may in turn give back to the community through their corporate social responsibility programs.  This is what the default type is for most entrepreneurs- to build a successful organization that they can sustain for years or sell out strategically for bigger money.  They all want to make money and plenty of it.

     There are a few things a founder of a startup needs to understand and do business accordingly:

  • What type of company do they need to form and register?
  • What are the financial parameters involved in running the company?
  • How do they start the team and how do they grow as they find more footholds in the market?
  • What is their short term and long term plan for their business and how do they market and sell their solutions?
  • Who are the competitors now, both direct and indirect, and how to gather intelligence about them so that they can do better?

Here are more in-depth details about the factors –

  1. Type of company – this can change as business grows or declines, but normally they start off as a proprietorship or a partnership company and go on to be a private company.  One must be clear about the legal liabilities, financial reporting and tax obligations against each of these to ensure they are operating at the right type at any given time.  I am not talking about the legal registration of the company but rather introducing the options that the founders can have while they start the company.
    1. Sole Proprietorship – this is owned and managed by one individual (founder) who assumes all the risks and takes all the profits. 
      1. One person company (OPC) – one can create a single person legal entity and allows the lone entrepreneur to run the business with limited liability protection.
    1. Partnership – this is owned by two or more individual who share the risks and receive the profits in their proportion of partnership, and they have a formal partnership deed between them
      1. Limited Liability Partnership Company (LLP) – a form of business where the liability is limited to the partners and one partner is not responsible or liable for the other person’s negligence.   The partners become shareholders of their company and they have the right to manage the company directly.
    1. Private limited corporation – this functions as a separate legal entity and gets registered according to the local laws of establishments and is owned (and usually operated) by two or more individuals (called stockholders).  The risks here are limited with accordance to their financial investment and the company is monitored by a set of independent directors to whom the stockholders have to report.
    1. Franchising – totally an orthogonal type of company, where by paying a franchisee fee the individual(s) gets the rights to use the parent company’s name and sell their products and services, and is always responsible to maintain the same quality standards of the parent company.  An example here is how the global fast food joints like Subway and McDonalds expand their footprint across geographies.   Growth here depends on the volume of transactions that happens, and scalability is related to what the parent organization does.

    I am not mentioning the other type (which is any public limited company) here as this article is about startups and generally, public limited company means that you have done an initial public offering with a lot of investors and this usually happens about 8-10 years after successfully starting the company and so are pretty close to becoming an enterprise.

  1. Finance –   It is all about funding needed at every stage and therefore is critical to understand the cash flow and to maintain a precise record of transactions to show revenue and profits.  While I am no financial expert, I would like to introduce some commonly used jargons used in the daily life of entrepreneurs and what they mean in layman’s terms, without any deep accounting interpretations.

Terminologies:  

  • Investment capital – The initial amount put into the business by the founders either through their personal savings or through an obtained loan. Usually one must have their first 6-9 months of operating cost covered by this investment capital.
    • Sales is simply the money one makes selling their solution. 
    • Revenue:  At the very start, sales and revenue would mean the same, but as days go by, any investment returns and royalties of your IP -to name two- gets added to sales to denote revenue.  
    • Profit (or Loss) is the money one has left (or lost) after taking care of all the expenses of running the business.    The word earning is also used to mean profit.
    • Gross profit – this is essentially difference between the revenues and the cost of goods sold.
    • Operating cost:  this would include the real estate and office space rental expenses, employees’ salaries, all utility bills etc. – this would always be there, irrespective of whether you are making money or not.
    • Working capital:   This is cash that is needed for every company to cover their operations cost.  Efficiently managing the working capital in terms of faster receivable conversions to cash and lower inventory translates to better health of the company.  A business needs to have this liquidity to continue its operations.
    • Operating profit (or Earnings before Interest and tax – EBIT):   This is the profit from business operations before the deduction of taxes and interests.  This is got after deducting the operating expense from the gross profit.  Operating profit is the best measure for running a company and it is best to keep both the labor costs and the manufacturing costs down.
    • If you do have profit (also called pre-tax profit), you need to take care of the government by paying their dues in terms of taxes. 
    • Also if you have to grow the business, you need to reinvest in your business in terms of more employees or equipment from your profit. 
    • One needs to pay the interest part if the company has been financed by debt
    • After all this, the money left is yours as post-tax profit, also known as Net profit.
  • Cash flow:  Every entrepreneur has to understand the difference between revenue, profit (before and after tax) and Cash flow.  The most important is definitely cash flow which is the one that pays your bills and salary. Simply put – it is the money coming in and going out.   If you cannot manage your cash flow, success is almost unobtainable.

First the startup has to realize profit and then later find means to maximize the profits.  Profits can be made through outstanding receivables but is realized only if it gets converted to cash that one can use. One can convert all the profits realized into growth through investing in the company through better equipment and adding marketing muscles, and still have no money left.   Profits are also used to pay debts (interest on loans etc.).   Profits stuck as receivables or on immobile assets do not help cash flow.

  • Funding patterns:
    • Bootstrapping – basically from one’s personal savings
    • Crowdsourcing – raising money from a few people
      • Seed – This is got formally from some professional angel investors in the early stage of your startup, usually smaller amounts compared to what a VC can provide.
    • Equity financing – means you get money in exchange for part of your company.
      • Venture Capitalist (VC) and Private Equity (PE) come with a formal series of funding your company in exchange for stocks (of your company), which essentially means the founder’s ownership gets diluted at every step.  They usually come in the picture at a later stage when you have built some credibility.
    • Debt financing – one can borrow cash which needs to be paid back, irrespective of whether the startup is turning a profit or not.
      • This is done through bank business loans, credit lines, and even through VC debt
    • Grants – usually given for any social development causes and are rare to find.
  • Various team structure as growth happens – with most of my experience being in IT companies, the numbers and timelines listed below at every phase are just ball park estimates and they do vary from industry to industry, and on the technology maturity. 
  • Hi Octane phase:
    • Team structure:  Absolutely flat, everyone multitasking and all of them are high on energy to prove something valuable.
    • Total Employees in company: 1-10 employees, essentially the founders and a few friends.  “Men on a Critical Mission” being the work culture.  Engagement model between the employees is just informal and everyone rolling up their sleeves and contributing, all in an ad-hoc manner.
    • Approximate time period :  First 6 to 9 months of the startup
    • Customers :  May not have one, but still searching for one or two
    • Typical Funding:  Mostly boot-strapping through the founders.  No money is coming in and only outflow is happening and hence critical to keep operation cost very low.
    • Maturity of product or service:   Basically an idea that is given a form in terms of a novel minimal viable product which gets showcased as a demo or a pilot.

      Confidentiality about the innovative solution is maintained by all the team members and nothing is documented during the process- they all know what final solution they all want.   There would be some good feedback and ‘hazy’ acceptance (or not) in the market, which gets incorporated into the solution being offered to make it more robust.  

  • “Survival or Death” phase: 
    • Team structure:  Still flat, everyone is still multitasking but is also clearly responsible for some part of the solution.
    • Total Employees in company: 5 to 20 employees, adding some dedicated test function, few more developers and your first sales and marketing person.  Engagement model between the employees is transforming to be more semi-formal as they are held accountable for part of the overall solution.  While hiring new employees, it is important to get folks who are entrepreneurial, have an appetite for innovation and are ambitious in their quest to solve problems; if the growth happens, this is the core team that would be leading and managing the company down the road including managing the entire execution of deliveries for future products.   Small ‘undefined’ teams of two or three are developing parts of the solution and the founders are slowly getting the hang of leading and managing teams and products together.
    • Approximate time period :  6 to 24 months of the startup
    • Customers:  Definitely have one, maybe two, and engaging with them closely and more regularly. The team needs to deliver a good product to them.
    • Typical Funding:  Again no money may be coming in and hence, there is a need to crowdsource from friends and family to survive.
    • Maturity of product or service:   First sellable product or solution is ready in accordance to the essential features that the market needs. You already know what the bull’s eye is and you are focusing on the same.  Exiting this stage may throw a few surprises – having validated your idea as a product, now the rubber hits the road to check for the actual potential of your solution in the market.

     Since some acceptance is happening, it is important to lock down one or two customers and work with them to make your product happen with proper non-disclosure agreements signed legally. As the team just grew a little, with everyone wearing an entrepreneur hat, they would tend to pull in different directions and hence, it is critical for the founder(s) to give them the focus to achieve their common goal.  

     As you wind down this phase, you may be shocked to find that quite a few competitors are offering similar solutions. Your solution may be better or faster or cheaper, or your solution has a unique flavor that is liked by many – in all scenarios, it is better to go back to the drawing board and make the suitable corrective actions speedily.  If you survive, you are growing.  If you are nearing death, it is time to start new ventures based on lessons learnt or do something else that one is more passionate about.  Probably one can take the next step to growth if there are a couple of angel investors and VCs knocking at your door – it is time for to strengthen one’s financial acumen.

  • Sprouting (First growth) phase
    • Team structure:  One level hierarchy established and although not a true matrix organization, getting a specialized project manager would help to drive execution formally through a process.  The founders feel they are not in total control, delegation of responsibility has happened and they start operating more strategically leaving the tactical execution to their managers.
    • Total Employees in company: 20 to 50 or 60 employees, with clear functional responsibilities assigned to team leads or managers.  Time to make the engagement model between employees more formal and a people office to manage talent is now in place (maybe two members – one HR and one recruiter).  Start developing policies for the company and the values that you want to establish to highlight your cultural fabric of working. Also a dedicated sales and marketing team is in place to acquire more customers.
    • Approximate time period:  2 to 4 years since establishing the startup.
    • Customers:  Handful of them to whom one starts delivering to or customizing their solution.  Need to add lot more features to the product to make it more valuable, and maybe add parallel products similar to your original one, but targeting  different industries or offers variations in features from light to heavy. 
    • Typical Funding:  More crowdsourcing and funding from good angel investors, or may be a business loan to do some debt funding as a second choice.  If angel investors are in, some dilution of equity may happen. Now is the time to contract out the financial part to a specialized expert to work for company and its well-being.  Cash will start flowing in as the product is being sold now and it is time to get into proper financial planning – budgeting and forecasting etc. At the same time, the operation costs has also increased in terms of more salary and more marketing costs,  and hence one needs to ensure cash flow is good and some reinvestment is happening.
    • Maturity of product or service:   Variations of the product are being sold, across industries. Lots of word-of-mouth feedback on the products going on in the market and newer avenues are opening up. 

       This is the real execution phase – it has to be ensured that all the solutions for various customers are delivered on time and with high quality.  Good publicity around the product is happening due to various offerings at different price points for the customers.   If operating in the services space, start expanding on the disciplines that one can offer solutions for and add different industries to the customer list.   One would see an organization emerging here with some clear span and accountability.  As long as the ‘novelty and utility’ factor of the offerings are not wearing out, one would be ahead of the completion with your own USP (Unique Selling Proposition).       

  • Irons in the fire (More Opportunities) phase – honestly, the previous phase and this phase may be seen as one phase as they have a thin line separating them.  But this phase is distinctively a steep exponential growth phase where there would be struggle to meet commitments.  The offerings are rocking in the market, the goods manufactured are growing in volume and are respected for high quality leading to customers increasing business in the offered services lines.  This is the best phase of growth where delivery skills matter the most – as long as one executes, they would be dancing to their bank.
    • Team structure:  Still at one level hierarchy but with a working model that bears distinct resemblance to a matrix organization with handful of project managers and accounts teams.  The first formal organizational chart with vertical and horizontals is in place.
    • Total Employees in company: About 100 to 200 employees, with managers having technical product leads to address each and every product or service line.  Since 75% of the team is new, it is important that they get integrated into the company properly and they feel welcome and motivated.
    • Approximate time period:  3 to 5 years since establishing the startup.
    • Customers:  About 10 to 15 customers now from various industries and of different sizes, asking for more and more.  
    • Typical Funding:  Now is the time Venture capitalists and Private equity folks come in with their first series of funding, trying to get as much of equity from you as possible.  If one can, it is better to always go through some debt financing through loans as a first option so that one can still preserve the equity and ownership properly.   This is the time when lots of money is flowing in, and the first taste of profits is being relished.
    • Maturity of product or service:   Variations of the product are being sold, across industries.  Many forces are pulling the company in various directions to deliver on their commitments and it is imperative that good customer relationship gets maintained in this process. 

     You are a mini-enterprise now. So far, all the growth has been organic or may be acquisitions of smaller entrepreneurial teams to close some gaps or add some value in the offerings to strengthen the complete portfolio.   At every phase, the customer base is expanding.  Your exit plan is to build it to a proper enterprise over time or get bought off by a bigger organization.

  • Gorilla phase – I term it in this way because on land, Gorillas are not that agile as the other apes, and this is true for your organization but they do have tremendous strength and power.  Also Gorillas are very intelligent, can do complex tasks and can communicate with people.  The Entrepreneurial founder is now sitting far away from the real action and there is a hierarchy below him to work his plan.  Agility in execution may be lost or definitely get slower and hence it is critical the customers gets managed properly in this phase by the founders directly as there could be fallouts due to bad execution and improper communication.
    • Team structure:  Two levels of hierarchy with a Project Management office and a proper People Office in place.   Recruiting is a challenge here as you need to have more people executing the planned work across many customers.  An international office may also need to be created.
    • Total Employees in company: About 200 to 1000 employees, with senior managers and managers responsible for most of the execution. Again here you would have 75% or more of your organization new and hence it is important they get nurtured, trained, feel important and motivated within the organization.
    • Approximate time period :  5 to 8 years since establishing the startup
    • Customers:  Lots of customers, big and small, across various industries and various geographies.
    • Typical Funding:  The best case scenario is to fund the expansion through the cash flows and profits, or through more business loans.  Or one may need the help of few more angel investors and VCs/PEs to expand at the cost of equity.   The advantage with going the VC or PE route is they have an established network and can find synergies between many investments they may have and also have extensive network to sell your solutions better.
    • Maturity of product or service:   Many different products are being sold, across industries and many different services lines are making money.

      At this stage, you are close to an enterprise and likely that you are taking your company public to ease any money pressures on the expansion plans.  One must start thinking beyond their industry and comfort zone and may go after an additional industry or start some neat inorganic acquisition to expand the baseline.  The company is now considered to be the top 5 players in the field they are are in and since loads of money is coming in, careful financial decisions needs to be taken to address all the objectives.

  • Reinvestment Phase – I call it so plainly because you are towards the tail end of the bell curve of your industry and hence not able to grow anymore.  Classic example is when the PC market died, all the computer manufacturers moved to laptops and then as the laptops are in the stage of less growth phase now, now we see the same manufacturers in the field of tablets and smart phones – Lenovo and ACER are  typical case studies here.   Since the technology shifts so fast now, the timeline that one can become history is shrinking as well and hence one need to act smarter to expand with new technologies while still making money in the older one.  It is time to revisit the whole startup phase again, but now with a newer technology and newer areas of investment.   But there is no guarantee for success.  Say for example Intel and Microsoft who are leaders in the computing have not been able to get a foot hold in the smartphone market yet, yet they still rule the roast in the enterprise and server market.
  1. A one year and a three year Plan, revised annually – I see this being missed by most of the entrepreneurs.  It is all stored up in their head and unless this is clearly articulated and understood by everyone in the team, engagement of employees does not happen.  It is good to have a documented plan that gets revised regularly as to where one wants to see the company heading, who are the target customers and where do they see their products fit in the big scheme of things.
    1. SWOT analysis – assess one’s strengths and weaknesses and capture one’s opportunities and threats.  The reason I suggest this being done annually as an exercise is that most of the time, your strengths quadrant would be increasing as you start to innovate and learn new things and in this process, old weakness become your strength.  You would now have new weaknesses though. Also, some the threats you would have captured earlier would not seem to be so, and newer and modified ones do come into the picture. Likewise, you would suddenly see an ocean of opportunities as you start tweaking and building your solution to address adjacent areas as well.
    1. Business plan – Although a marketing and financial plan will be part of an overall business plan, one needs to do a careful analysis of the environment regarding the technology being used, the political and economic environment  in the target market and how it may influence your product or service; and understand all legal requirements pertaining to your service or product. This detailed analysis of the business environment has to be done even before one start’s’ working on the demo or pilot.  It is best to articulate who the potential customers would be, what markets to target and what would be the likely demand of your product or service.   There are lots of free templates available online to write a good business plan. 

     A proper business plan is a golden document that gets revised every year, and gives a strong baseline to all the team members so as to have them all on the same page, ensuring everyone understands and is clear about their startup objective.  This plan must also indicate key risks to their business, when they may get triggered and how to mitigate them if they occur.

  • Marketing plan – This is the part where one needs to clearly articulate their target market segments and how the new innovative products or service would be positioned and  have a selling strategy around the product along with a proper pricing strategy.  Get some intelligence about the competition, have a good promotional and distribution strategy and map out a proper marketing implementation of the product including the marketing budget, sales objectives and how one would be monitoring the translation of the marketing program to sales.
    • Financial plan – This would show the burn rate of the cash reserves to cover your operations for the first few years on a monthly basis.   Estimate a break even analysis when one would realistically see earnings for their products and service, the funding plan for a 3 to 5 year horizon and list all the expenses one would incur during these first few years.  One should revisit this financial plan every quarter for due diligence purposes to understand where one stands and what corrective actions needs to be put in place to continue a successful operations.    One needs to understand the usage of money coming in and the profits being generated so that reinvestment happens prudently.
  • Competitive landscape – there is an old adage that says if you have thought of an idea; someone is already working on it.  The other way to look at it is if there is no competition, there may not be a market at all for that idea. So, before jumping into the arena, it is better to chart out your PIE in the bigger Eco-system and see where you fit in and what exactly you are addressing and if there is a credible market for the same. Once the idea gets firmed up, look at close competitors to understand what they are up to and try to incorporate something better than what they are doing in one’s solution. Remember, this world is all about the bigger fish eating the smaller fish.

      If your business in not scalable, it may end up being a one man show throughout.  For some businesses, this is fine. Scalability is not to be confused with growth, as the former is about the architecture of your product and the latter is about how efficient your sales force is.  The former is about business models and the latter is about size.  Growth happens usually at an additional operational cost whereas scalability does not need to be. 

     Self-proprietorship and franchisee companies are usually not scalable as they work on an individual’s offering of his expertise like a consultant, architect, accountant, shop-owner etc.  You can still grow without being scalable but you would soon reach a plateau.  Only if the business is scalable can you grow to be an enterprise someday and this is the SOLE CRITICAL criteria of startups that want to aim big and create more jobs and newer markets.  You can fund your startup through external sources only if you show you can scale your offerings and have a plan for the same.   And the growth has to be seen and realized either in terms of value they add or revenues they generate, or preferably both.

     The latest trend I see with young folks is that to develop a mobile app in the latest operating system and sell it in an IOS and Android store – this is great and if the users like it, you are reaping in some good money.  But this does not mean you can scale this app or monetize these apps otherwise.  Having a mobile app developed does not mean you can run a business with it.   

     As an entrepreneur, you can offer a newer solution in an older technology, offer an older solution in a newer technology, create a newer technology by being the first to offer something in it, can make an older solution in an older technology faster or cheaper or better , offer a known solution of one industry to another industry where it is novel, manufacture products with high quality and better cost and cater to variety of industries, or offer your professional services to customers who want to engage and partner with you to develop products or solutions for them.  Yes, the opportunities are vast.   But an entrepreneur also will find it difficult to realize that he may not have the control of the organization as it expands and hence critical to have the best seed team as his first recruits  that he can count on who would deliver what he wants every time with high quality.

     And closing remarks, in most instances, I have never seen the startup selling the same product or service they started off with, but their learning experience on the way with the feedback loops involved at every stage would see them offering something that could be totally different from what they had planned.  This is the irony of startups.  What you start off planning is not usually what you end up doing and being known for.

       Although it may look like I have simplified the journey of an entrepreneur through this write up, I’m just trying to put some formal process around how things evolve.  Every journey is different and difficult but not very far from what has been documented here. I always see an abundance of energy and enthusiasm of an entrepreneur and his confidence rubs on other team members to make the startup work.  Success is not always measured by whether the startup made money or not, but also by the experience  and self-learning they go through which helps them in future and in other walks of life, beyond their career.  And the pleasure of working for themselves is the best thing of an entrepreneur. The author is a business and technology consultant associated with Business Intellects, Bengaluru who has been privileged to assist a few startups at various phases of their journey.  His passion is to help small and medium enterprises be more successful or turn around their business, and also does some value based leadership workshops and corporate training.

Diversity brings Stability and Innovativeness

    We have seen a lot of leaders challenging the notion of a diverse workplace due to some inbuilt perceptions. Recruitment gets put on hold for months together for a role that is classified as ‘diversity friendly’.   How often do we see colleagues squirming about ‘certain entities’ when it comes to recruitment?   Lots of HR folks complain that managers are finding it difficult to lead a diverse workforce and it gets worse if the teams are in different locations.  Far often than you wish you hear that there is a gender bias when it comes to compensation.

    Gear up, folks.   We live in a global workplace now and it is inevitable and unavoidable to have a diverse environment to work in, and it is imperative to adopt and welcome the diversity for one to be successful.  Managing diversity is a top KPI for every person now.  Everyone wants to do a stint abroad outside their home country to look good on their profile. 

   According to Wikipedia, diversity is used to describe “entities with members who have identifiable differences in their cultural backgrounds or lifestyles”.   University of Oregon mentions that “diversity encompasses acceptance and respect.  It means understanding that each individual is unique and recognition and exploration of these individual differences is key to nurture a safe and positive environment.  It is about understanding each other and moving beyond simple tolerance to embracing and celebrating the rich dimensions of diversity contained within each individual”.

     Given globalization and the breakdown of international borders in conducting business, every organization EXPECTS that there will be ‘broad based INCLUSION’ based on gender, race, color, religion and religious beliefs, national origin, ethnicity, age, marital status, sexual orientation, disability, social-economic status, gender identity, ancestry, ideologies or even veteran status, whether or not there are local laws supporting the same or legal acts specifying the same.   It is a consorted leadership effort in almost all successful organizations to have all forms of inclusive growth in their structural DNA, thus gaining confidence amongst its employees and stakeholders.   Every good organization strives to ensure that it is a SAFE environment for all employees to co-exist peacefully without fear of being ‘victimized’.   If such ‘hostile’ behavior against a group or an individual does exist, be it direct or psychological,  and is found to be deliberate, with the intention to ‘harm’ or ‘hate’, then such acts must be IMMEDIATELY dealt with to uphold the organizational value and integrity.  Learning to tolerate, accept and work with different types of people leads to a healthy workplace.  Remember all five fingers are of different shapes and sizes and the same applies to people.

     Treat everyone as an individual who is valuable to you and valued by the organization, instead of having a ‘blanket umbrella that is based on misplaced perceptions of certain entities’.  Compensate the employees proportional to the skills and values they bring to the organization.

    In a recent finding by MasterCard (“Connectors Project”), it was revealed that Indians face a greater bias on account of their gender, ethnicity and religion when it comes to getting a job or securing a loan.   A related study by Schick and Steckel (Dept. of Economics, Ohio State University) finds that tall workers do earn better than their shorter colleagues.  All these discrepancies are due to ‘perceptions’ that we form based on personal experience or observation.    By addressing this ‘push for diversity’, it is important to close this perception gap.

     This topic is mainly confined to organizations where success is measured by higher revenues, better products, being a leader in their field and happy employees. On the other hand, Government has to address diversity in a mandated way to uplift the portion of their population that is not ‘privileged by some criteria’.

     In India, there is ‘Unity in Diversity’.  India is one big family living harmoniously as one entity although there are many different religions and languages that comprise it.  India is a surprisingly stable country given its democratic nature of government, diversity, religious and cultural differences and the myriad of issues that inundate the news streams day in and out.   Moving from one state to another is difficult even for locals as the language differs.  Moving from one town to another town in the same state does not make life easier- the dialects are different. But a cohesive fabric, Indians have survived with all these differences for centuries now.  India even gave the world a woman Prime Minister in Indira Gandhi in 1966 whereas England had their first in 1979, Australia theirs in 2010 and US or Japan till now has not got a women President or Prime Minister. 

     Given my experience living in Canada for a few years, as a well-accepted immigrant of a beautiful country, it was hard for me to fathom the fight over two languages (English and French).  The cultural fabric is to engross in every Indian that despite the differences around, they chose to co-exist peacefully and been tolerant over the years – this is something I really feel every other country has to learn from India.   Differences exist but are carefully managed.

     At a high level, let us take the case of two countries, both developed and both an envy for other countries – one that thrives on foreign immigrants (heterogeneous teams)  that enables an innovative mindset, USA, and the other that is relatively more homogenous in population but revered for the quality of its products, Japan.   I would say the same thing about Bengaluru where more than 70% of the population is immigrants from other states, and hence the entrepreneurial culture is more distinct here, just like the best of the world comes out of USA.  I am not implying by any means here that being homogenous does not lead to innovation and being diverse does not produce good quality, but more a generic appreciation of what these countries are more known for.  Diversity definitely is America’s strength and all the major corporations like Intel, Microsoft, Google, Cisco, Oracle etc. have indeed a mix group of employees and were able to manage them well. 

    So, it is just not about diversity but also about proper diversity management that is instrumental for any successful organizations.   Having a diverse workforce brings in different set of values and views, based on where they come from, how they were raised, religious beliefs, personal and professional experience, family background and so forth, and it is imperative that a good manager to be able to hear all pertinent views and be able to make the best use of them to enable a productive environment.   Conflicts are healthy as long as they are managed well, and conflicts have to be constructively solved by having all the players on the table and combined reasoning taken forward keeping in mind the best for the organization.   After hearing all the views, it is great to arrive at a balanced decision and I am sure without these various perspectives, the options one may think of is limited. Non-obvious options that come out from diverse views are worth considering kindling creativity within the whole team, thus being able to translate to a competitive advantage.  Management must ensure that awareness is created to encourage these differences and to highlight the fact that we all get richer by these varied experiences.  As an example, if four people stand in four directions away from an asymmetrical building and are asked to describe it, they would come out with different descriptions of the same building depending on where they are standing – they would easily miss out what they cannot see. This is what I mean by ‘bringing in perspectives through diversity’.  Lots of management papers have been written highlighting that diversity does bring competitive edge to organizations – there is stability created in the organization due to a heterogeneous team.

    Although stability by itself does not lead to progress, proper management of a stable organization can prove wonders in productivity and innovation.  Pooling in a lot of ideas and funneling them properly does give every organization a rich set of options to ponder and invest.  Homogeneity must not be confused with monotonicity.  With segments like manufacturing which is very process intensive, it is better to be good at what you do and of course, you can do better than what you did through innovation in process.. But still at a higher level, manufacturing does look like a monotonous routine (I personally disagree though) –timesheets and prescribed output is sacrosanct.  Eating the same type of food every day does get boring after a while, does it not?     

   A few examples to show how diversity benefits:

  • For those addicted to cricket like me, the case of Indian Premier League’s success can be attributed to the fact that there are foreign players within each team and for youngsters who want to come to Indian cricket, this is a great chance to mingle with a few best in the world and gain from their experience.
  • Take the case of NBA, it got better over the years thanks to an influx of great players from Nigeria, France, Australia and even China.   People come to support them and they have managed to provide rich entertainment value.  The coach (“diversity manager”) decides whom to play or not, depending on who is in form and who can make a difference… he makes a call if Yao Ming plays for 2 mins or 40 mins for the good of his team.
  • Even farmers in India do ‘crop rotation’ in their fields, almost 3 to 4 times a year.  Depending on the season, and the best crop to plant and harvest, they make their decision. 
  • Andy Grove (Intel), Sergey Brin (Google),  Marcus Goldman (Goldman Sachs), Pierre Omidyar(eBay), Maxwell Kohl (Kohls) and  Jerry Yang(Yahoo!) are all few examples how USA adopts its sons properly by giving them the freedom and opportunity, and who in turn give it back to the society in terms of generating lots of jobs.

    It all shows that it does pay more to be GLOBAL than to be local, given the way business is run nowadays.   As a diversity manager, it would pay to bet on your top horse but you must definitely allow all your horses to run and compete equally to ensure there is a level playing field.  There can be positive surprises from unexpected quarters periodically.  Equal opportunity, which is the recruitment motto behind any US organization, is a much better choice than reservations and quota systems as this provides an unbiased platform for everyone to be hired in.

   Hiring the best out there is definitely more important than being diverse (for diversity sake) but the management has to consciously address diversity as part of their recruitment process.  Not recruiting some group due to generic perception problem is wrong – treat everyone as individuals first and then it is the management’s responsibility to address each individual’s integration into a diverse group.  Saying ‘(s)he does not fit in the group’ does not bode well for any management – this essentially means they have not done enough.   By not managing diversity properly, there is a direct cost escalation to the organizations that has been well documented by management researchers. 

     Being just diverse just for diversity sake is also a bad option – that means valuable time to recruit and to execute is lost.  Setting a diversity quota to meet annually is a bad move – only government can have ‘reservations’ to address some economic inclusions of certain segments of society.  Mandating certain things at the grass roots level by the government in providing compulsory education to all their citizens is definitely an ace above having reservation of jobs for certain segments of population. 

     If the organization does have a need to meet some diversity goals, it is better to select and train from within, rather than wait for the ‘right person to walk in’.  When expats usually get sent to other countries to maintain and impart the culture and values of the organizations, it is also imperative to have couple of potential candidates to coach and train to take over their role in couple of years, and it is a recommended practice to have a succession plan that is confidentially maintained but is being tracked from the first day of assignment.  

       To summarize, it is also about not letting your perceptions rule your decisions. It is not about just addressing diversity but also about managing them properly.  Any day meritocracy supersedes diversity.   Quality is needed to get the competitive edge and innovation is the key to attain leadership position.

Thanks to Manoj Vakeel for providing feedback after a detailed review, and to Malayala Manorama publications and University of Oregon websites for some reference data mentioned here. The author is a technology consultant,   and a soft skills and leadership trainer, based out of Bangalore, India.

CUSTOMER RECOLLECT & RECONNECT

An interesting CRM business story

What do these establishments below have in common?  How do they survive and grow?

  • A neighborhood specialty exotic pizza store that uses wheat dough?
  • An exotic flower boutique that provides bouquets for special occasions?
  • A made-to-order shoe manufacturer that does fit-to-walk shoes for you?
  • An organic fresh-from-farm outlet that gives you the most tasty fruits and vegetables?
  • A specialist dry fruit and nut store that sells around-the-world products?
  • A baker renowned for tasty and nutritious bread and biscuits.

       Yes, you are right.  They offer specialized services, not run-of-the-mill sort of solutions.  They may all be family-owned and they may be one of a kind, and most likely, do warrant higher margins than the rest.  They may be pricier than the common pizza or a florist or a normal baker which means they would have lower volume of business (not necessarily though) but definitely a particular type of customer who wants to enjoy the very best. They survive due to the patronage of these customers and their word-of-mouth campaigns.

     But a growth question always bothers the owner of such establishments – how do I grow? Should I grow?  What is the best way? As any consultant would say, the answer is simple – “It depends”.  They definitely take care of all their customers who walk into their door well but going above and beyond this is something that is not in their DNA.   Believe it or not, many of these businesses make anywhere on the upward of a quarter of a million dollar a year.  I will explain to you how and it is simple- let us say on an average 50 unique customers order a specialty pizza and a drink at an average price of $15, which makes the owner get to the annual revenue an upward of quarter of million$.

     My observation on these establishments is that even today, in these connected times, they do not seem to be going after customers, neither new nor old.  Once they have decided to grow, all they need to do is to simple things would make their dreams come true.   Let me tell you a real business story and how we worked with them to help them grow(some of them are already done, some are being done and some planned but I thought I would add this all up in this story)- there was this businessman in New Delhi who sourced the top notch variety of dry fruits, nuts and spices from Turkey, Iran, Afghanistan and other parts of the world etc. whose average daily revenue was $1000 (on an average he had 20-25 customers walk in to the store and buy items worth $40 to $50) – on weekends he made double.  He normally sits at the front desk, had couple of helpers packing stuff for the customers and had one computer for billing.  He had a small storage at the back- his “go-down” which was used to replenish the items in the store.  His customers are from all walks of life – from tie-wearing executives to politicians to seemingly rich business men.  They come to the store, look at the basket and based on their perception of freshness (all of the products are relatively fresh as there is not a stock for more than three weeks and he gets fresh products every fortnight) and their desire, pick up items, get them packed, get billed, pay the money and they are out – all within 10 minutes.

    This dry fruit and nut man Mr. H definitely wanted to take the next step and grow.  Honestly, he is not a typical client I get as I usually work with the manufacturing or information technology business, but I was excited and wanted to give it a shot. So, I verified with him if he can get a bigger store, can he sell online and hence can he work out better logistics and packaging for the same, can he get into a bigger social presence online, etc. and for all my questions he answered in the affirmative confidently. Then I had him do a desired sales projection on a monthly basis for the next two years.  Then I asked him for the increase of input cost he sees as he has to source more materials and operations costs would increase due to additional helpers and packers, and he gave me a reasonable estimate. Then I knew he had it in him and he was serious – he knew all about WHAT is to be done, and I told him I will help with the HOW part and we agreed on a partnership and a financial relationship and we both would work on attaining the same goal.

   There are three things that can be done to improve the way one conducts business, all of them related to one another:

  • Some low hanging change to the way one operates.
  • What can we do socially and online – either in person or through umpteen websites?
  • What extra can we do for our customers – the ‘above and beyond’ rule.  In any selling business, statistics show that more than 70% are repeat customers – why cannot we make their experience levels delightful?

What can be changed in the way one operates his business?

    From the first month on, he had one of his helper welcome each customer at the entrance and get their contact details – their phone #, email address, their social accounts their location of residence in New Delhi and important dates in their family (birthdays and wedding days) – during the wait time, they volunteered this information which was keyed into the system by the end of the day.

   After every week, and every month, he had a summary tally of how much and what each customer bought.

    He also started offering a card membership stating that after an overall purchase of 5 kegs or more, they are entitled for 500g of Golden Raisins.  This made his customers stay a little longer inside the store which helped his store helpers push other items that they do not usually buy.  The system automatically resets after they take this freebie and they are given a new card.  Just like a Starbucks card!

  After a few months, once he was getting good results, he started another shop in another corner of Delhi and had his son take control of this one.  His son was also made responsible for all the online sales.

What did he do online or socially?

   First he got into Pinterest so that he can start using PINS for his business and he also got lots of ideas from this social site from other store owners globally.  Although Pinterest is not that prevalent in India, it gave him some exposure to other similar businesses and seeds ideas into his operations and offering.

  Next he started testing the online market – he outsourced to develop a website for his store and also selling his goods in one leading e-tailer in India.  After about three months, he added one more leading e-tailer.  In both these e-tailing option, he captured the customer’s data to the level he could so that he can start sending advertisements to them during festival days.  Now he has perfected his packaging in a more cost effective manner based on the initial feedbacks he got. After some initial hiccups in review, the customers started giving him good feedback.  His only complaint was the credit time to get the money from the e-tailers is a bit longer, and his return rate either due to bad packing or some customer not liking the product was about 8%.   Slowly he moved some of his e-tailing customers to his website as well.

  He had a business page setup in Facebook and then he started adding the social accounts of the customers that were given to him.  Every fortnight, he would suggest some recipe to be made out of dry fruits and nuts and spices, and also would send out an advertisement for his local customers of Delhi region.

Customer Delight:

 This is the best part.  He had info about most of his customers who visit his shop and the anniversaries. Whenever they had one anniversary, an email was sent out to them (as well as a Facebook message) to make their next purchase on which he gave anywhere from 2-4% off. If he is close to one of the two shops, he would deliver it in a basket.  The customer just loved it.   Due to this alone, his original customers just started selling his store everywhere in NCR region.

   For his online customers, he made a database separately and asked for the same information about their anniversaries, social account etc. and although many did not respond as they preferred to shop through recognized retailer, he did manage to get some of them to his online store direct and had similar promotions for them.

    During 4-5 festival days, he prepared an awesome newsletter stating his promotions, even interviewed the less known chefs of local restaurants that were famous in the Delhi and had their favorite recipes published (this was easily recognized by his Delhi customers as they identified with the restaurateur), health benefits data of his produces and a small write-up of the origin of his dry fruits and nuts.

   Let me tell you, a year into this journey, he stood by his personal and financial commitments with me and he does send a sumptuous sweet box and a nut and dry fruit box on two festival days of the year – our New Year and Diwali.  We did some more than what has been published here, and it takes the passion and diligence of the business owner to be sold on the suggested idea to make this happen.   His intent must be clear combined with his passion and desire to grow, and then a small nudge by a consultant like me can help him achieve it.   For me it was a great experience and first of its kind as usually I work only with the IT and manufacturing folks.

   Due to him, a few of his business friends have started talking to me about their business.  Just like practicing Yoga or going to a much needed training program, both of which can be accomplished as home through self-study, it takes a mentor or a consultant to guide you through the process and partner with for success.

    So, RECOLLECT your customers for repeat buy and RECONNECT with them as much as possible, in a sensible non-intrusive way, so that there is a win-win both for your business as well as the end customers. Research has proved it takes 5 to 7 times more to acquire new customers (mostly advertising and marketing) than to retain repeat customers, existing customers spend 67% more than the new customers and 50 to 70% of the sales occur due to repeat customers.  There is a Pareto figure that states that 20% of the customers provide 80% of the revenue, and 8% of the customers account for 40% of the revenue.  Doing the math well, why should one have to spend 7 times to get a sales volume of < 30% if there is a high probability of a sale to an existing customer?  You definitely need new customers for revenue growth and higher market segment share and this must be a key focus area as well. This is something I always preach the specialty segment that your uniqueness does sets you apart from the crowd but you need to have the momentum going your way to enable more business to happen by trying out small things in a periodic way with little investment.

The author is a co-founder of Business Intellects and operates out of Bengaluru, India and is a business and technology consultant and a corporate trainer. Their motto is “We Make Success Happen”.

Core Values of a company

Great companies have certain set of fundamental core values that usually dictates their DNA and Way of Working (WoW).  Usually these values get set over time and are usually set for a long horizon, and maybe there is one value that gets changed every once in a while as they go through some change, either internally through some acquisitions or mergers or through external environmental variables like a globalization of the company or when they have to adhere to a changed corporate law or something.  In any case, having a set of Core values for a company is essential for a competitive advantage and also to showcase their identity to the world.   Some of the common values that you usually see in many organizations are diversity, integrity, safety, excellence, fairness and of late, community which talks about a greener planet and corporate social responsibility.  So, how do these values get set? When people talk about culture of the company, what does it actually mean?

   A process in which this gets defined is usually from an attitude that reveals itself as some consistent behavior pattern which morphs itself to a set of values which with some commitment gets to be the culture of the company.

    A good way to start is when the organization is transforming itself from a startup phase to some growth phase.  The founders and the top management would certainly have some opinions that they have cultivated over time in their professional and personal front and this may be a starting point as to how the organization gets weaved. These opinions are just bucketized as ‘attitude‘ which reveals itself as a behavior from the person.  I want to emphasize that the connotation of attitude here is everything positive that spreads within the organization and this gives the head start of what is to come for the organization as they grow. 

    Once these behaviours, which are things that you and I do on an everyday basis, gets to be more consistent and seems to reveal a pattern within the organization, these can be the core values that your organizations can start off with.  Values are the interesting qualities that are important to the organization that all stakeholders breathe day-in day-out.

     Many a times, just because the organizations needs to have a set of values , it gets published from the top and they are set to be followed as a general guideline across the organization. This is totally wrong, you have known companies like Enron and Lehman Brothers for all the wrong reasons, and I am sure they would have had some credible set of values published within which obviously nobody followed.  The point to emphasize here is these set of values has to be constantly re-iterated within the organizations and they have to be something everyone can live by, in both their professional and personal lives. 

    Values must not be confused with (technical) competencies the organization has and hope to acquire which is literally your market place advantage.  Do not try to fit in values and have the organization stick by it as this would be a disaster waiting to happen. The best way to do this if to have a value workshop every couple of years from a good subset of your best employees and have them evolve the values to mean what one lives by at that point.  Or one can take a survey across the corporation.  It is reasonable to change a value here and there every 3-4 years to ensure you are consistent with the behavior seen but definitely not a good idea to change all the values every few years as this destroys the complete DNA of the company.  Whenever there is an acquisition or a merger or a change event, it is good to have a relook at the values to get consistency across the larger corporation.

    Good companies have Values inscribed in your badge behind your photo ID so that you can always refer to them to reinforce your behavior.  Values are the long term identity of the organization, and as I said, one must be able to take it home and live by the same set of values in one’s personal life as well. During the orientation of new employees and during their integration, it is critical that one emphasizes these values over and over again so that it gets instilled in every employee.  This would lead to a general commitment to behave in a particular desired way.   Commitment is sort of a guarantee to do something in a desired way and this is great for an organization. 

     Once you have the commitment, a good company can actually map it back to the performance appraisal process which must consist of two parts: the What and How, with equal weightage.  The ‘What’ defines the results orientation of an employee and maps against the performance objectives achieved. The ‘How’ should translate back to the Values of the company to be consistent with the behavior that one wants to see within the organization.  For Example, if an individual achieves excellent results and exceeds all his objectives, but at the cost of disrupting the team when ‘team work’ is one of the values of the organization, his performance assessment must need improvement and not be graded as successful.

   Now we have identified a process where an attitude showcases behavior which sets a value that gets the commitment from all. If you are this stage, I would say we have a culture identified for an organization which is just a set of attitudes and beliefs or way of working that is acceptable within it.   Yes, I said Attitudes, which means which can be a cycle in itself. Your attitudes initially would have originated from the set of values you grew up with, the cultures or geography you were brought up in, and of course, the best of practices you have seen around which you have slowly adopted as something that you want to identify yourself with. 

    One point that I want to make before I wrap up, for which I have got some mixed reaction, is ‘customer’ can never be stated as a value.  I have seen customer as a value in almost all companies now, be it customer delight or customer satisfaction or anything, but I would say NO organization can be in business if they do not have any customers. This would rather be more a metric to be measured.  I would rather state a value that would be an expectation of a customer like excellence and integrity, which may be harder to measure but something that reveals as a behavior.  A value has to be applicable for both internal (employees, management) and external (customers, vendors) stakeholders.

Are Shopping Malls dead in India, thanks to Mobile and Internet Technology?

Digital sales are slowly replacing physical sales.  Multi brand multinationals will not have it easy in India as this may be too late for these brick-and-mortar giants to enter the market.  Without an online strategy in place, their entry would not be very attractive for the youth who seem to be the regular shoppers now.  The internet shopping in India is here to stay and would only improve from here and if not the way to go, would be a strong alternative for the normal shopping in stores. 

   We already know that Metro has its limitation due to ‘political’ pressures in competing with the local small time shops.  IKEA is announcing its entry with some ‘forced’ restrictions and will not give the look and feel of IKEA elsewhere. .  Walmart has been waiting and waiting for a long time, initially by setting up an alliance with Bharti who already have the local Easyday shops.  Now with problems at the top with the CEO resigning and everything, something does not seem to be well at the top and hence with Wal-Mart itself in India. 

    Personally the frequency of visiting Metro has diminished to once or twice a year from once a month couple of years ago for me and my friends– the reasons being the distance travelled as they are situated in either North or South of our city, more instinctive buys that results in large bills, not much of variety in the store as they seem to carry only the hot moving items, not much price differences now between even an Easyday or a MK Retail and too much crowd. All these factors disappear when we buy online as we buy only what we want, gets delivered at home and price is better.

    The question now is: Is India having the Walmarts, the Ikeas and the Carrefours too late? Do these huge all-in-one brick-and-mortar retail megastores make sense in this day and age? Where do we have the real estate to establish these huge megastores in an area where people have easy access to? Is this going to be a dumping ground for cheap quality Chinese goods into our market? Most importantly, are they going be better in quality at the same time cheaper in price than what exists today?  This is key for them to flourish and maintain the same global standards that they are known for and they have to source locally as well.  They definitely would give a run for the money for stores like Big Bazaar, More Super stores, Star Bazaar and Reliance Mart which is definitely needed as what we get from these stores is not worth the time and money spent there and I sincerely hope we are in for better service which is totally not in the charter for our Indian counterparts.

    With the boom in internet shopping, is it really worth an investment for these stores and is it really worth our time as customers to venture into one of them, but for the fun and excitement of seeing a huge megastore where you get everything and get getting trapped in getting produces that we do not need just because it is cheaper than outside. With technology, should not the world become smaller as it always has been – remember when airlines were introduced, over time, global travel has shrunk in time.

    Our shopping brains are thinking different now and would evolve to getting the next hot fad, at the best price, delivered at our home after an in-house trail – why travel the distance in this maddening traffic and with escalating petrol prices?  

    There is a great way to get the right products and this would be through the VAS route if the phone operators can come up right applications based on context, location and social means.  The mobile ads are already catching up now in India and it is time to focus them to an actual sale.  Yes, depending on the place we are, through GPS, we can be attracted to the right place to get what we want, which is based on a match with a shopping list application that we have stored in our mobile and that informs us that the ‘time is now to buy it’.  This would be Nirvana.  This way we address only our NEEDs and not our WANTs.

M-commerce growth and trends in India (as opposed to how many have internet connections and total population):

  • Population of India in 2013:  1.239 Billion (Ref 1)
  • Mobile internet growth surpassed  more highly monetized desktop Internet usage in May 2012 (Ref 2)
  • There were 904 million subscribers in October 2012 according to TRAI out of which only 78.7 million were Mobile Internet users (accessed internet on mobile at least once a month) and projected to be 87 million by Dec 2012 and this is expected to double by March 2015 to 164 million. (Ref 3)
  • In India, e-tailing has the potential to grow more than hundred-fold in the next nine years to reach a value of $ 76 billion by 2021 from $0.6 billion in 2012. The growing broadband users along with mobile Internet users will drive this e-tailing story. (Ref 4)

   With the slashing of the 3G data prices by almost all leading service providers like Airtel, Idea and Tata Docomo, and the decrease in roaming charges suggested by TRAI,  this trend is very healthy and we hope to see lots more data flowing on the mobile internet.

   It is important for any E- shopping site to have the following – secure way to transact, trust of quick delivery and quality guarantee, ease of returns, and a good touch and feel.  The last of these, touch and feel factor, is the one that would attract anyone to a site and make them comfortable to shop inside due to that site being attractive, being relevant to what one needs, being easy to use, has a good graphical interface and has a ‘virtual trail room’.  The security part has to be enhanced and must be foolproof and every step must be taken by the e-tailer not to sell our information to anyone (in India especially this has to be implemented stringently – how else can you explain the umpteen garbage messages that flood your mobile with offers?). The quality must be equated to ‘what you see is what you get’ with no aberration whatsoever and no replacement without your knowledge, and also return policy has to be free, fair and easy. Every step must be made to return the stuff to the courier itself if this is not suitable after a quick home trail, and this means the delivery must be more specialized to include return delivery too.  Right now, most of us go for Cash on Delivery (CoD) and if the charges are extra for the CoD, more than half of the e-shoppers drop the idea of shopping.  E-tailer enjoys as they get the cash or credit before or as they sell the product, which is the best business model to be in, as this was what made Dell popular – they deliver the computer only after you make the order and sign your credit.

Some of the top E-tailers online in India:

    There are three types of online shopping sites – Focused, generic and marketplace type.  Although there is a thin line between the last two in terms of their offerings, it is better to classify them different.

  • Focused (Niche):  A customer usually logs into this site for a particular product (for ex. wines from Four seasons), or a particular brand (for ex. Reebok or Bodyshop) or a particular segment (Zovi for clothing, BeStylish for footwear, etc.).  Many retailers who have a brick-and-mortar store have an online presence and if you one who buys only from the same store or brand, this may be the site you would go to.  This type of site with the particular segment concentration can easily expand into other areas in due course and become a generic store (like Flipkart did beyond books).
  • Generic Online Mall:  Somebody who carries more than one segment even a mega store where one can shop for most of the items you would find in a departmental store, such as Flipkart, Infibeam, Myntra.
  • Marketplace (Bazaar type):  This is more like a hosting site for different vendors to put their products in and can be sort of compared to any travel site like MakeMytrip from where one can buy any airline tickets and accommodations- both work on some commission basis, such as shopping on Rediff, Tradus or Craftsvilla.   Here the seller is verified by the ratings given by the online store and these ratings give the end customers the confidence to buy stuff from them – it is important that customers give the feedback for very purchase made.

Here is a list of some popular websites today in India for shopping online: (disclaimer – these not necessarily an exhaustive list)

  • Myntra (www.myntra.com) – identified as a clothing and footwear website and carries only brand name apparels and shoes and accessories.
  • Flipkart (www.flipkart.com) – started off as an online bookstore and Indians started using it as a Noun for any online purchase of any kind, sort of an Amazon equivalent for India.  Right now they called themselves an Online mega store and offer electronics, appliances, clothing, footwear and watches to name a few. But when you say Flipkart, the shoppers associates them only for books/e-books and then for mobiles, laptops and toys. They did try to do an Apple store replica by selling mp3 digital downloads through their Flyte store which they closed down couple of weeks ago. 
  • Landmark (www.landmarkonthenet.com) –  they are into books, mobiles, cameras and toys and this is one shop that started off in the late 80s as a brick store and have managed to get into online as well which gives them an advantage in terms of  30+ years of retail experience. They are presently owned by Tata group.
  • Infibeam (www.infibeam.com) – I would say they are Flipkart competitors and give the other companies a fight for their money in their pricing.
  • Snapdeal (www.snapdeal.com) –   Again competitors to Flipkart and Infibeam.  But may a times, they do not honor their commitment and got for refund which is pretty good. I am assuming they are not able to handle their vendors well.  This is a back side route that Ebay is taking in India indirectly as I see it and they are also major funding partners for Snapdeal.
  • Homeshop18 (www.homeshop18.com) – A generic mall type like the above three, but has an added advantage in having a shopping channel on TV.
  • Jabong (www.jabong.com) – they are again into fashion, furniture and footwear.
  • India times (shopping.indiatimes.com) – a Times of India Group Initiative that carries a wide variety of things online.
  • Rediff (shopping.rediff.com) – more a marketplace concept where lots of small businesses offer their products for sale to customers. This is one site that asks for shipping charges for each and every item which can add up eventually.
  • Zovi (www.zovi.com) – a clothing and accessories only store with their own brand names and slowly adding more varieties of clothing and accessories.
  • Tradus (www.tradus.com) – a marketplace store that sells a lot of products with some good deals on a daily basis.  One of the worst customer support site based on my own experience, where they have not even bothered to reply to my umpteen emails for a defective carpet they sent me.
  • Amazon (www.amazon.in) – Debuted in Indian market just this month. Their Junglee concept has not taken off the ground and slowly evolving into a comparison site. Amazon itself may be too late to enter the Indian market, but since they are loaded with cash, they would be ready to buy some established players and consolidate their position – I can never write them off.
  • Yepme (www.yepme.com) – more positioned as a competitor to Myntra offering clothing and footwear.
  • BeStylish (www.bestylish.com) – a footwear and accessories specialized store.
  • Big Basket (www.bigbasket.com) – grocery and household goods store doing same day delivery.
  • OfficeYes (www.officeyes.com) – an office supplies company that sort of focusses only on SMEs.
  • Bookmyshow (www.bookmyshow.com) – an online place to book any of your movies, events, sports or theatre tickets.
  • Fourseasons from UB (www.fourseasonsvineyards.com) – sells wines from Four Seasons online.
  • Watch shop (www.watchshop.in) – sells branded watches at challenging prices.
  • Craftsvilla (www.craftsvilla.com) – a bazaar type store that sells crafts and furniture from artisans from around India.

As for the incubation of which city leads in establishing such online store, Bangalore has taken a lead here by seeding the Myntras, Flipkarts, Zovi, BigBasket etc. whereas Infibeam comes from Ahmedabad.  They usually have warehouses in few cities from where they ship items to the customers or deal with the manufacturers directly to get the product for the customer.

 What Indians are buying and how?

Travel constitutes nearly 3/4th of all the commercial transactions that happen online for B2C.  The days where we used to get our travel arrangements made by Thomas Cook and other local travel shops are getting numbered. Now one can buy bus tickets on redbus.in or ticketgoose.in, train tickets directly from irctc.com or yatra.com, and air tickets either through consolidators like makemytrip.com, cleartrip.com, goibibo.com or yatra.com, or directly for any of the domestic and international airlines, directly online. These consolidators are a better way to look at the options available and they pretty much give the same price as the airlines themselves. Also they are great to choose the best time of departure/arrivals, airline, lowest layovers, price, etc. If we can get the forex part online somehow as well and have it delivered at home, which is already there with most of the banks as long as you have a relationship with them, then we are all set to travel abroad just by sitting before a computer or a smartphone. Travel insurance can be taken online and procedures to get visa is listed for each embassy as well.  Based on the word of mouth, one can book for holiday packages and do what your friend or family recommended and once you have this covered, we can book them online as well.  And with a site like TripAdvisor, one can land up in the hotel of your choice based on real reviews from real people and in the price range one can afford.  So, pretty much the entire travel plans but for the actual travel can be done online.

While we grew up with ‘analog’ cameras with 24 or a 36 roll film from either Fiji, Konica or Kodak, we were so fascinated in taking photo prints of our travels or special occasions, in either matte or glossy, in either 3.5 x 5 or 4 x 6 and have them inserted into photo albums for sharing with friends and family. Whereas now except for printing passport or visa photos or wedding albums, nobody knows or interested to know such a place like a photo studio exist and we are all busy sharing the digital copies of our photos online or through social networking sites to let others know about your travelogues instantly.

Footwear:  The online stores that enable any footwear purchase are Yepme, BeStylish and Myntra.  The footwear names like RedTape, Relaxo, and even the sports shoes companies like Reebok have online presence to buy their products, either by phone or through online directly.  The problem with buying shoes online is the fitment – simply put, across the sites, the nomenclature for UK vs. Euro vs. US sizes differ.  So, if one is happy with a particular brand and knows the size and shape they are comfortable with, then this is easy to shop online for the best deal.  Otherwise, the old school of trying it in a physical store would be the best.

Perfumes and Cosmetics:  This would be an interesting online experience – although you can buy them online, you do not know how they actually smell.  Looks like IBM and some other companies are working on a technology that allows our nose to sense smell and be able to buy online.  We have always grown up by knowing that once we sniff two or three strong aromas, the nose does not get the rest right after that – this is why when it comes to perfumes as well, tried and tested works – the couple of names or flavors you and yours have accepted well is the best thing to shop.  It is recommended that duty free shops are the best places to buy perfumes and not even online.

Clothing and Designer Brands:  The non-travel, non-business e-commerce is pretty much in this area and almost every player competes here although Myntra for brand names and Zovi for its own products are well known.  I feel that Myntra today is a trend-setter in the way they are retaining the customer and playing the price factor by sending individual emails now and then.  And also since they sell quality products from brands around the world, customers do not even wink before they buy.  Also their delivery has been impeccable – always right and on time.

    Flipkart is also into clothing now although they started off as a book vendor and it is difficult to change the mindset of old customer as they associate Flipkart mostly to books and electronics.  The opposite effect would also be true if Myntra starts selling books, I would be reluctant to go them at the cost of Flipkart. Hence the ‘niche’ segmentation applies for e-tailer in terms of what ‘mind space’ each e-tailer occupies. 

    Government enterprises, like that of Jharkhand (www.buyjharcraft.com), some established silk sari stores like Rasi, Nalli, etc. as well as clothing megastore like Shoppers Shop  have made it easy for customers to buy their goods online.

Wines:  We have FourSeasons from UB and Kinvah Wines from Nandi Valley who already have an online store and they can deliver your favorite bottles home.  Some vineyards have detailed description of their products online like Grover Vineyards and Sula but not selling online yet – it would not be too long for them to do as well. Being from Bangalore, there are lots of wineries around the Nandi Hill and nearby areas which make good wine and may be easier for local population to get access to them as well directly from the manufacturer.   Since sale of alcohol is also controlled by state regulation, it is difficult to get a country-wide audience for the same as some states like Gujarat prohibit the sale of alcohol.

Chocolates:  Every local city have their own places to buy their favorite home-made chocolates  and in Bangalore, we have couple of places that I know of (surely more) – Chocolate Philosophy who takes phone deliveries and Rage chocolatier who have an online store.  Just like flowers bouquet (there are lots of florists online), the Chocolates are great gifts to be sent to your family and friends for their special occasions.

Toys: Flipkart and Landmark have a good selection but there are specialty online toy stores like Redbell that would make any purchase more fun for kids.  I wish Hamleys comes online soon, but the need of the hour is an online store which would make school life more interesting by making a range of educational toys available to purchase by the click(s).

Books (and eBooks):  The choices are many – Flipkart, Infibeam and Homeshop18 and Landmark to name a few. It is always easier to buy a book online as the same book does not differ from one shop to the other and the store that have it available and offers it at the best price wins the customer.   The old book houses like Strand and Gangaram are feeling the heat now unfortunately and stores like Sapna somehow are surviving with a good student loyalty base.  There is one retailer that is worth a mention – Landmark – they seem to have a good physical and online presence and managed to time the market right by evolving with the market condition. Strand has not been able to although they do have an online presence.  Take the case of CrossWord which is closing stores– they are not able to maintain their margins with their high cost stores.  Pretty simple, why should ANYONE buy a book at an expensive store if they get DELIVERED at a much lower price at home? 

Office stationaries and equipments:  For those SMEs, we have the likes of OfficeYes.com and PrintVenue.com that takes care of most of the customized needs.  For generic needs, Flipkart and others do have a wide range.

Spectacle and sun glasses:  Lenskart and GK Opticals seem to be marching ahead here.  Although just a small thing to do, and this is a great first step in ‘virtual trial rooms’, it is great to be able to try out different frames with your own face photo uploaded.  Then all you need to do a few selections, and the retailer comes to your doorstep with those frames, you can try them at home and select the one you need and pay for it.  Once you are done with the frame, you can have the retailer take the prescription for fitting the right glasses. 

    Like printers, where the printer is offered at a bottom price and the manufacturers make money from the cartridges, in prescription non-designer spectacles, the frames gets subsidized a little and money is made from the glasses.  It is important here to note that designer frames can be brought online for a much cheaper price as do non-prescription name brand sunglasses.  It is equally important to ensure that you go to the right place for the prescription glasses as even a small annoyance in the power can give you headaches literally. The good thing is you can get good frames to fit your needs independent of the place you get the glasses and get prescription glasses from an online store that has a physical presence too like GK opticals so that if there is any issue, you can go and rectify it immediately.

Jewelry and watches:  Again, I feel that this is an area that needs to grow and get more publicized as the market can be huge.  Some may ask what is great about watches, especially the classic analog ones.  For them, I ask have you seen how many Titan showrooms are there.  Watch is something, although it shows the same time in every hand, is a segment that can go from Rs 2000 to Rs 10 lakhs and beyond as well, depending on your affordability and fancy.  

     Many of the leading reliable pearl shops of Hyderabad like Mangatrai and Krishna, and jewelry shops like GRT and Krishniah Chetty have an online presence where they proudly display their catalog.     It still amounts to the fact that one can gloss over some the catalog items and need to visit the store to make the transaction.  But slowly there is a move from the stores that once your selection is done online, they bring the 4-5 jewels of similar kind home and then you can make a purchase sitting in the comfort of your own home.

Grocery:  I am sure within walking distance from wherever one lives, you would have a grocery store like Foodworld, More or a Reliance Fresh, or even a Hopcom that allows you to pick the right vegetables and fruits.  But for the lentils and the rice, that one gets for a month or so, either a discounted local store or the likes of BigBasket and ZopNow is a great asset – you do not need to carry these stuff home as they get delivered at the time of your choice and usually in a good condition (you can return if the condition is not acceptable) and on the same day.  Pretty soon one would have intelligent pantries and fridges at your home that informs what is needed regularly, connects it directly to an online store of your choice where you have the credit and it automatically gets delivered to you. The apartments we live in are getting smaller in size, thanks to the affordability (or lack thereof) we all have, and hence buying non-perishable products and storing it for more than a month does not make sense – in fact, more you buy in excess, more they decay.

Electronics and appliances:  Flipkart, Infibeam, Homeshop18, Snapdeal and Tradus to name a few are places you can compare and buy the right appliance, mobiles and laptops you need.  All seem to be working fine and have their own best prices for selected items and it is good for the customer to shop around between 3-4 sites before you get it delivered.   Specialty mobile retail stores like Sangeetha, The Mobile Store and Univercell all have a good online presence from where you can pick up your favorite phones.

Sporting goods:   Decathalon is a Europe based sporting goods provider that has established a niche market, both online and in physical store format.   More local online stores would be nice to have in this segment with a lower price point.

Home décor and furniture (includes Crafts):  UrbanLadder, FabFurnish and Cauvery – a Government of Karnataka enterprise (www.cauveryhandicrafts.net)  are three such sites that offer furniture and other craft items for customers to choose from.   Then there is a market place called Craftsvilla that offers products from across India from various artisans which looks unique.

Lingerie and inner wear:  This type of clothing does need some privacy to shop and what better place to shop from home either directly from the manufacturers like Lapeches or from clothing stores like Rediff and Myntra.

Entertainment tickets:  BookmyShow and TicketPro are good means to get tickets online for any event, theater or sports, and all the Cinemas like Fame, PVR, and Fun etc. have means to book your tickets online for any show within the next 2-3 days and choose your seats too.

Personalized gifts:  Zoomin, PrintVenue and other stores do cater to this population and this is a great idea for giving away corporate and personal gifts.

   I have not mentioned some trivial items like movies and music that are readily available either in media form or digitally online from various sources. Pharmacy and health care products are sensitive for online purchases, especially the prescribed ones and hence may not be a good option to do online.  That leaves Cafes, Restaurants and fast food and finger food joints and ice cream shops which cannot be experienced other than one being physically present there to enjoy.

   Something like HomeDepot that takes care of home needs (bathroom fittings, electrical fittings, lights, and construction related items) needs to happen in India so that our dependence on increasing labor in these areas can be taken care of personally with a how-to-do-guide – a nascent field for online growth.  And Education and related items would be a hot topic as Indians spend close to 30% of their salary for education of their children – this is another segment I foresee lots of changes happening and pretty soon only tablet will replace the umpteen books the poor students carry today.

    Think about the future malls as just warehouses or small fronting shops with just trial rooms and selected merchandise where you can also do online purchases of their own goods.   Every shop can even have an ATM-type front end which shows their catalog and one can just touch and shop then and there. The other shops I see in a mall of the future would be sporting places like bowling lanes, and lots of eateries.

     The biggest advantage is you can shop 24 x 7 and after you come back from office.  It can be done from your home in a relaxed manner without any stress and the entire family can participate in the purchase decision without travelling together.  The other advantages being comparison of the same product from various vendors and also better prices.

  With Mobile internet and Internet of Things (everything on the net) becoming popular, it is high time for late adopters to start getting into the net bandwagon now.  Selling directly online in India can get the wrath of the distributors and the non-brand stores as it eats up on their heavy margin.  But customer is king and this mindset change will happen through couple of totally consolidated online stores who have no baggage of the past to maintain. This would change the way we see and do things and hopefully the margins would be passed directly to customers as discounts directly from the seller and this is the day we would all wait for.

This article was compiled and written in 2013

Ref:

  1. EconomyWatch.com’s Econ Stats database – June 2013.
  2. Kleiner Perkins Caufield & Byers have released a report on Internet trends around the globe for 2012 & 2013)
  3. IMRB i-Cube 2012, All India estimates, October 2012
  4. Study by Technopak, from TechGig.com

Are Aggregators just living the moment?

    It is the Uber and Ola that have come to influence us getting a cab nowadays. Or a Grofers to put the nearby grocery store together and offer you delivery at some minimal discount. Or a Zomato or Foodpanda who have their collection of restaurants that you can order from.  Or a Redbus to help us choose from various operators for travelling by bus.   Even some e-tailers are just marketplaces!

    Who are these folks?  Do they have any assets at all?  These are the new breed in business circle called “Aggregators”.  Putting it simply, they put everything in one umbrella for the customer to search and order but they do not own any of the assets, be it the cab or the restaurant or the grocery store. In old times, not very long ago, we called them “Brokers” who operates on a commission or the Middleman to facilitates trade – unfortunately  however you call them, they do operate on commissions and being in their nascent stages of business, they throw away the venture capitalist’s money in terms of discount to acquire more customers like you and me.   And overall this is similar to the ‘bazaar’ concept where many traders are lined up to offer their goods to customers like us.  At this point, they are not held responsible for the quality products being offered by them, be it a rude driver, or a bad bag of rice or food poisoning. So add ‘no responsibility’ as well. What a way to do business  – no assets, not answerable for quality(in a way), no products of their own except an app, no engineering development in them except for some web developers (which they can outsource) and purely only a marketing organization.

    This is all great for the customers now(personally, I am smiling) , but in the long run, once they get into some sort of monopolistic mode, they do have the power to increase price and take us for a ride (literally, yeah, with Ola and Uber).  Possibly.  But my own feeling is they cannot.  Gone are those days that any company can last that long and not morph quickly through acquisitions or other growth areas, because the technology is growing so fast they either have to adapt or perish.  Some other new guy with a newer business model would eat their lunch shortly… stay tuned.

     Who is monitoring the driver if he had not got his required sleep of 8 hours – what happens if a tired driver is at fault? Who is monitoring the time it takes to deliver food for you or its quality?  Who is tracking the part if the nearby grocer is getting rid of old stock (but not expired yet)?  The Answer is No One.  You can say “reviews”, but we all know how the reviews are done.  If you happen to pay the ‘premium service’ to these aggregators, your reviews is always above 4 out of 5.  If not, you are finished. It is somewhat like media – they chase after TRP and not deliver the news without bias.

       They say an Ola cab driver makes about a grand a day in India.  He would be making the same amount even if he had not opted for Ola but he has joined Ola which would keep him busier. 

     Why cannot the Uber and Ola have a stricter licensing law for the drivers – give them a stringent test both on the road and on road rules, and only if they exceed the standards, they are allowed to continue.  Pay their insurance premiums for comprehensive and third party liability to ensure protection of the customers. And check the condition of the car every six months and ensure they go through proper maintenance process.  These are some of the value adds these aggregators have to do to differentiate from others – they do not seem to want to do this.  So, sustaining this business model is going to be hard especially if you are living on venture capitalist money and not making any profits for years together.  And the differentiation between like companies is none – there is no USP that they can boast – if someone adds a new feature, immediately the next guy follows with something better.  The same situation exists even for e-commerce players here.  Certainly all these companies would not be Buffet’s babies!   But keep these coming, as we are ready for the RIDE as long as it lasts, LITERALLY.

The Author is a business and strategy consultant and a corporate trainer based out of Bengaluru, India.

First thing for Autonomous vehicles : Proper annotation

As the Driverless or autonomous vehicle buzz is going around, with almost all car manufacturers trying something on their own to create enough news around their activities in all the car shows, we obviously see more Driver Assistance coming up in driving, parking, etc.  A fully autonomous car plying on your roads, and believe me, this would be restricted only to a few countries where good driving habits exists and huge penalty is incurred for any traffic infractions, would follow a series of fundamental steps (there would be more than three but for our discussion I am limiting it to three) to make this happen over the next few years:

(i)                 Put a camera or multiple cameras on a car (called host car or the EGO vehicle) and drive around the entire town and outskirts mapping all possible videos and images

(ii)               Annotating or tagging or marking those images to give the objects seen in those images some consistent meaning (video would have lots of frames and each frame would have lots of images which includes objects outside of the host car) which becomes the data for future processing – this is a manually intensive task, and

(iii)              A distributed computing environment working on these large datasets to get trained (this is there the Artificial Intelligence – AI kicks in) and scores of models developed for various situations for the cars to interpret and make decisions on the fly by recognizing such objects and patterns.

On a granular level, any tagging would have to be done minimally (if not more) in three different groups:

(i)                 Static – just the road signs, road lane boundaries and foot path boundaries, everything out there that is limited to the road and parking spaces.

(ii)               Dynamic (moving) – over the static, other than the host car, it must be able to identify others vehicles, pedestrians and even animals (in certain countries where they freely roam on the road), and

(iii)              Semantic or Contextual (immobile) – like the objects that are part of a scenery like hills, sky etc.

    Having said this, all these activities are very time consuming and although there exist automatic annotation tools, its accuracy levels are so low that all the OEMs prefer to do manual annotations of all the images by themselves. Consider this against what Google can provide in terms of the 3D building view, its GPS coordinates that shows the road conditions across various seasons, its mapping facility and all the optimized algorithms associated with it, and we are slowly conforming to an entire picture set that every car would have that would be constantly changing every day. For Ex., some road gets dug up for some wiring or plumbing, then this has to be instantly disabled across all the autonomous cars plying so that there are no driving errors associated with this. Also depending on the road conditions, the lanes can change or be accommodative to changes which has to be instantly delivered into the brains on autonomous cars. Weather conditions, accidents, light conditions and intended blocks have all to be captured in real time, and hence this data has to be refreshed frequently every hour.

     I am sure with all this complexity, Google is sitting pretty to address this problem once for all, and be there to constantly give us the updates and sell it as an irresistible package that every car manufacturer will be able to consume down the road (pun intended intentionally). When it comes to autonomous cars, it is all about navigating (mapping) and positioning (absolute and relative to others) and both needs to be absolutely precise at any given point in time.   If the label is wrong, then there are serious consequences to the same (fatalities can happen if the trained car missed a cyclist in the frame!).

     Training these data to proper information that the car has to act on involves zero tolerance to errors as safety is the critical need here and so this machine learning using neural networks would have to be done rigorously and tested across various parameters and conditions before any logical usage of it in real time.  The output of the computing would be as good as the inputs one gives into the system.   In fact, it is also imperative that one may need to redo roads to accommodate autonomous driving, and this would include lots of capital expenditure by countries and human labor to do this.    The entire transportation system would become more intelligent and automated.

    All these data being captured by video, even in these times of fast internet, get hog the bandwidth and hence they would require co-location of servers to store and compute. Pretty soon, once autonomous cars are in place, it would not be too far before Traffic Robots take over a policeman manning the streets.

  Having talked about the annotation tool software, when it comes to licenses, there are two major criteria for choosing them: Duration and usage or users. First for the duration of the license, the software vendors would either have it temporary for a given period (say 6 months or a year) which needs to be renewed in full every period after it expires, or perpetual where the license is of indefinite period, usually all updates are free for the first one or two years and after which one needs to pay a fraction of the entire license cost every year. Second is how the usage of these software can happen which means either it is node locked to a client machine or floating in a server world which is nowadays usually in the cloud from where a license key is fetched. So, it is the case that a temporary license may work out more expensive than a perpetual for a longer period of use, and a floating license is usually more expensive than a node locked one. Usually annotation projects encompass many annotators using the tool, over more than 2 years as the amount of video feed is in the orders of TB every week. So, it would make sense to go and negotiate the best rate for a floating perpetual license from the vendor.

  All these are distant dreams that may not see the light at the end of my day. But still the research and the work resulting of autonomous cars would get applied into many other functions around you which would make life easier, I suppose. 

Infotech or Politics, good leaders take all

I have been talking to a few folks, seniors in the high-tech industry, in both India and USA for the past one month – checking both from my business stand point as what to plan for and what client’s needs, I have to be ready for, and also in a more general way. Here is how I can bucket these people in three slots:

(i) Ready to Lead (from the front):  I have seen many of my friends invent small

devices for COVID, or some application that make life easier for farmers to

sell in these down time, all in the click of a button – they have wilfully

taken this opportunity to lead and try to transform and do their bit to the

society as well. Form our client relationship, I see at least a few customers

not getting bothered (yet) but wants to invest in this downtime and stay ahead

when the economy turns around and new demands are created. They are ready to

engage with us both at the project level and augmenting key resources to push

their projects through without any hiccups. Couple of them asked us to take the

whole project and execute them now. They are ready to move fast now.  Bold Marshals. Salutes.

(ii) Wait and Watch: These are the folks

called “cat on the wall”. They usually say wait till end of June to

get a clearer picture and then come to us. They do have ongoing projects that

they can invest but something is not allowing them to open their purse strings

although they have not got any news one way or the others. They are ready to

move with caution. They are the careful treaders.  And

(iii) Looking lost kind: Nothing has happened to them, but still they have gone into a shell and gone negative in their outlook. No good reasons to back their despair but still sounding dejected and feeling helpless.  For them, they do not see any light at the end of the tunnel anytime soon and when we talk to them, we feel that they are so far from reality and not capitalizing on their strengths to move ahead. They just sulk and are told what has to be done for the gloomy days ahead. This is their attitude. Born losers.

      We have seen these three types in the political circles recently with the handling of the COVID situation, in the US or India or elsewhere, Governors or Chief Ministers, Presidents or Prime Ministers.  They get the people around them and work together in a transparent way forward. The leading from the front folks always win and stay ahead. I am glad and overwhelmed to see their optimism and their realistic change transformation attitude and how they have used opportunities presented to them to their advantage. Amazing. You can see a lot of world and corporate leaders being at the helm only because of this one strength of theirs.

As things stand, depending on how the public relations wave goes against China, led by both USA and Australia, in my humble opinion (and I want to be right ) India has a lot to gain both in the manufacturing and information technology front to come up with innovative products with high quality quickly. 

Vendor management – I

A professional services vendor, in this context, is someone who provides skilled resource for contracting or consulting to bigger organizations as and when the need arises. These vendors need to be registered with the organizations for them to offer their services – with the organization which requires their services, usually it is a vendor management team or a procurement team or even the finance team in the organizations which interacts with them. Tier 1 vendors here may include the likes of Infosys and TCS, Tier 2 vendors may include the likes of L&T Infotech and Tech Mahindra, and then we have specialized vendors who concentrate on niche areas like analytics or hardware or just CRM or ERP solutions to provide their services.

  So, when does an organization usually need the services of any external vendor? Some top possibilities when external vendors come into play are (but not limited to only these)

–     When the scope and duration of the project that they are working on or likely to work on, is low – may be a short-term project for a year or two after which they do not see anything beyond, sometimes called “filler projects”.

–     When they want someone outside their core competency to enable what they do, and do not want to grow in this particular area so that they remain focused on what they deliver best. Example being someone who delivers high quality hardware designs but still needs an IT infrastructure that enables them to store and share data, and hence they may outsource the IT infrastructure. It can also be food or transport vendors who work with the high-tech organizations.

–     When they are unsure about the outcome of what they want to try and have very little visibility or confidence. If they succeed, they may continue the project for a longer term and even add it to their competence, but if it fails, they want to cut their losses short and move on

–     When they have bursts of short term needs to complete some tasks needed for the execution of certain projects, or adding up to it

–     When they have big project, which requires huge number of workforce and they may not be enable to staff them alone with full time folks

    The business models that the organizations deploy with such vendors can range from just resource augmentation, milestone based delivery, and even outsourcing an entire low value projects (like support, which makes them to concentrate on next generation new products) completely to them, and it can be in either at the customer site or even at the vendor’s physical location as long as proper information and data security arrangements are met. Big companies usually ask for an ISO 27001 and an ISO 9001 certification from vendors for them to outsource any work being done at the vendor premises.

  The other areas in which external vendors are looped in would be

–     in the providing food and transportation for the employees of the organization which has been stated above and such vendors would be managed by the administrative and operations team of the organization

–     in the recruitment front where external consultancy agencies are looped-in to help in sourcing rich talents for organizations or in the training front where experts in selected technical domains are used to train employees, both likely to be managed by the HR team of the organization, and

–     in providing manufacturing assistance for the designs that the organizations create, be it an ergonomic chair or a high-end IC.

      There are definitely other areas where vendors are employed and there are other business models being used as well, which is not explicitly stated here but the rule of thumb of evaluating if one needs to use external vendors is based on duration of the need, the scope and the core expertise. Eventually it would be a decision of whether to budget it (for full time employees) long term or to expense it (for external vendors) short term, term being a subjective number here.

   In the next few parts, we will talk about some of the practices common in the vendor management domain and talk about transparency and better ways of working that would evolve with the automation era dawning now.

   We are Business Intellects, a digital age consulting, training, auditing and recruitment firm based out of Bangalore.

Manufacturing – the next big wave for India

Thanks to COVID, now it has suddenly thrown India into the manufacturing arena. Due to the perception that China has not been too forthcoming with the origin and spread of the Corona virus, due to their recent show of strength on Taiwan and Hongkong residents and along Indian borders, and also more importantly, Chinese banks and investors trying to buy huge stakes in corporations of other countries, the world order feels they may be capitalizing on other’s misery. Lots of conspiracy theories abound and not getting too much into them as that is not the intent of this article, it is a welcome sign for India to capitalize its manufacturing prowess and prove itself to be a viable manufacturing alternative now over the next decade or so.

   In 2014, the average cost of manufacturing labour per hour was $. 92 in India and $3.52 in China (Ref: GenimexGroup).  When labour costs make up a significant portion of cost of goods, lower labour costs do indeed lower the per unit cost.   Purchase cost is usually the most important factor when manufacturing overseas, but so is quality, delivery times, and ease of doing business, the three items that India has to improve on and impress the world on their capabilities.

    UN data shows China is the world’s manufacturing powerhouse, followed by the United States and Japan and accounted for 28 percent of the global manufacturing output in 2018. Lower costs of living make China’s low wages manageable for the common manufacturing worker, and their factories are thriving by producing goods for the entire world. China’s gross domestic product per capita is almost five times that of India’s, and its manufacturing sector is ten times bigger. India is the second largest crude steel manufacturer in the world after China but our output is a ninth of what China manufactures.  Even if India gains about 5 to 10% of the entire Chinese manufacturing portfolio, we stand to gain big. It did take China about 3 decades from 1980s to be called a Juggernaut in Global manufacturing.

   India has shown the world they can manufacture high quality automobiles (Hyundai exports certain models from Chennai), can make good leather and textile products that are export worthy, and of course, we have in built expertise in creating the best in class satellites, rockets, fighter jets and heavy armaments, We Indians can also be regarded as the best intellectual designers and developers as evident by the fact that we as a community shine in all other countries where we live.

   Now it is a question of self-belief and some quick government actions to turn the tide in our favours. Given the exodus of the migrant population to their natives due to COVID fears in Tier 1 cities, now is the time to use that population on less expensive towns and cities to start building factories and employ them at large, and this would also manage the explosion of the cities beyond its bounds that we are witnessing for the past two decades or so.     Putting a manufacturing base in and around a major city would increase the labour cost and bleed the already broken infrastructure in the cities, and hence it is obvious to choose lesser known towns near good ports and good access to rail network to develop them as smart manufacturing hubs.

 But let us not carried away as well – yes, we need Made in India to attain self-sufficiency in many aspects, but let us not miss the global bandwagon either – we should recognize and act to what the global needs are as well. Made in India should be rather Made By India and it has to be first Made For India before we go globally.  We need to build capabilities first, be it in terms of training and skilling, where the Skill Development councils (SDCs) can help. But we also need to go a little deeper in changing some of the higher secondary education into a vocational stream as well consciously to make the labour market more skilful. Winds of change are blowing for the past few years with more and more seats in engineering colleges get vacant as there are lots of alternatives for students to choose from. IT companies like HCL and Google do not even need a college degree for their talents anymore. Once we build such capabilities, and once we start manufacturing credibly, slowly poverty and homelessness decreases thus creating wealth and better hygiene across all classes of people. When wealth starts spreading, better infrastructure gets built, goods and people gets transported better, spending increases and the economic divide gets to improve.

   If you look at America after the industrial revolution, and Germany and Japan after the World Wars, it was manufacturing that got them to the top of the world last century– automotive being the biggest facilitator for this success across these three countries, and quick and easy transportation became their strong forte. The expertise mainly involves electrical, mechanical and electro-mechanical domains that made them world leaders in what they do. When you have an economy based on manufacturing, you would have credible assets unlike any software companies. You can even turn around perception of lower quality (the Hyundai Pony introduced in the USA was considered a lemon) when you start being a manufacturing country like South Korea did in the 1970s by giving exceptional products over time across the automotive and consumables products, be it the Hyundai or the Samsung now.

  Quality can never be an afterthought, it has to be built-in and this has to happen from Day 1 – as India starts its manufacturing, this has to be infused into the working culture. Japan had a Deming to make them Quality kings after WWII. Also speed of execution is key – getting something quick to the market is the best way to climb up and show case manufacturing leadership. Given that we have enough automotive expertise now, this is the best place to start – build WORLD CLASS cars and trucks, driver or driverless, petrol or electric and showcase to the industry that each component that goes into them can be built with high quality in India for the WORLD. This must slowly lead to building good planes, ships and trains and work in the infrastructure to link cities to towns to villages.

    Solar initiatives and battery technologies for all segments is something that India can showcase as a key strength and lead the world as well. Then comes the electronics segment where we have been laggards – it is time to establish some good Indian brands in the consumer product segment, be it smartphones or electronics and electrical appliances than can compete with the best of the world – yes, we can start being the manufacturing hub of established players but it is time we rise up and start building our own unique brands that we can be proud of. We have some good success stories from the TATAs-Voltas, and from Godrej in terms of HVAC and refrigerators that can compete with the best of class, but it is time to go much more.

   In all these, manufacturing usually is the biggest culprit for all environment damages with its pollutions – we should start the blue print with all environmental effects factored in and again not look at it as a post manufacturing fix. Given we have a heavy responsibility here, and with some credible ethical leadership, we can make all these happen within the next decade. Hoping to see the Indian flag waving higher and stronger.  We should be able to cover the entire spectrum, from a simple needle to a huge aeroplane in years to come.

 We are from Business Intellects, a digital enterprise era consulting, training and recruitment firm based out of Bengaluru, India.