Guide book: How to resolve office conflicts
Following Page 24
the BIZ KID CLUB
Anniversary Special Issue
The Magazine for Growing Companies Samantha Kochhar MD, The Blossom Kochhar Group
Biz Kid Club
Rahul Seth Joint MD, Sudhir Gensets
Bharat Joshi Director, ACTL
They have the inheritance. But the 2nd Gen also has perceptions to battle and points to prove. Thatâ€™s no cakewalk, as this crop of heirs tells us Page 25 The Goods
Swipe away at these touch desktops The magazine for growing companies
Apps for smart business travel Page 22
Nirupa Shankar VP (Strategy), Brigade Hospitality Services
Hiring Troubles? The problem could be you Page 52 February 2012 | `150 | Volume 03 | Issue 01 A 9.9 Media Publication | inc.com Facebook.com/Inc
Ishaan Suri Director, Interarch
Carrying the Torch Are the heir apparents ready to claim their space?
25 The Inheritors Get to know the 2nd Gen of India Inc.—their challenges, aspirations and fascinating journeys make for great stories. by shreyasi singh and ira swasti
26 Ishaan Suri Interarch Building Products
29 Nirupa Shankar Brigade Hospitality Services
32 Chetan and Rishi Kajaria Kajaria Ceramics
34 Rahul Seth Sudhir Gensets
37 Vikas Kapur Hidesign
39 Dipak Sanghavi Nilon’s
41 Bharat and Hitendra Joshi Associated Container Terminals
42 Ankit Gupta Holostik Group
45 Samantha Kochhar The Blossom Kochhar Group
Kumar R. Parakala KPMG Samish Dalal SP Jain Institute of Management & Research Mitali Bose Hay Group
52 Why Is It So Hard to Find Good People?
The problem might be you. Are you making any of these all-toocommon mistakes when hiring?
photograph by Subhojit Paul
by april joyner
on the cover
From left: Rahul Seth, Samantha Kochhar, Bharat Joshi, Nirupa Shankar and Ishaan Suri. Photograph by Subhojit Paul in Delhi. Cover design by Anil T. This edition of Inc. magazine is published under license from Mansueto Ventures LLC, New York, New York. Editorial items appearing on pages 21, 52-60 were all originally published in the United States edition of Inc. mwagazine and are the copyright property of Mansueto Ventures, LLC, which reserves all rights. Copyright © 2009 and 2010 Mansueto Ventures, LLC. The following are trademarks of Mansueto Ventures, LLC: Inc., Inc. 500.
48 How I Did It Patu Keswani
The founder of Lemon Tree Hotels has created a low-cost airline equivalent of the hospitality business. as told to shreyasi singh
february 2012 | INC. | 1
04 Letter from the US 05 Editor’s Letter
06 Behind the Scenes
Companies that make Kingdom of Dreams fit for kings
Salaries: Up, up and rising The Ticker How smart mechanics means good business Offshoring for you Ladies, meet e-commerce
The strings of the guitar inspire Varun Jain both in life and at work
16 Guest Column
By Pradeep Chopra Don’t just outsource your social media. It’s not tech maintenance
2 | INC. | febrUARY 2012
A school bag-in-a-tablet: e40 makes learning fun
21 The Goods
Touch-friendly desktop computers Pack your phones with these smart travel apps Tech Trends, by John Brandon: Virtual assistants for smartphones Things Heena Akkhtar Can’t Live Without
Guidebook, No. 1
How to resolve office conflicts. Following Page 24.
68 I Wish I Knew Then A. Mahesh Reddy, founder, AMR Constructions, believes in learning. His clients have taught him everything he knows
Strategy 59 Technology What’s behind Google’s big push at small businesses 60 marketing The power of video testimonials 62 elevator pitch Can MyCity4Kids get investors to play along with their expansion dreams—of going to 10 Indian cities from its current base in Delhi? 64 The way i work He may love to switch off from work post-8pm but serial entrepreneur Manish Sharma has finally struck a work-life balance with Printo. as told to rohini banerjee
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Letter from the US
MANAGING DIRECTOR: Dr Pramath Raj Sinha Printer & Publisher: Anuradha Das Mathur
Happy 2! Every month or so, two new Inc. magazines land on my desk. One of them is more than familiar; it’s the one I edit.
The other is very much like mine but at the same time different. I look at the cover and wonder, who is Sameer Jain of Net Solutions, who’s smiling at me and wearing distinctly non-Western clothes? What’s his story? Leafing through the magazine, I stop at Behind the Scenes, a favorite photo spread among my colleagues, and I see not a scene of an American theater, as we’ve published, but one of a Comedy Store in Mumbai. It’s an interesting experience, reading Inc. India—discombobulating, informative, and thrilling. Over the past two years, I’ve been privileged to learn about many fascinating entrepreneurs who are creating and running innovative and important companies in a nation geographically far from the U.S. Inc. India has also been a source of story concepts for me. Recently, I read about the Sagars, a husband-and-wife architect team, and thought: That’s a good idea; I should really do a story like it. (Why did I never think about publishing a story about architects?!?) Mostly, though, Inc. India makes me realize that entrepreneurs the world over are more like one another than not. They share similar dreams and aspirations, problems and joys. Starting a company is a leap of faith for the most creative business minds; running one is the province of those who are willing to work hard, year after year, to bring new ventures to life. The clothes may be different, the laws and customs dissimilar, but the creative impulse and the ability to execute the dream are exactly the same. On a personal note, I want to thank the two editors I’ve gotten to know these past two years. Pooja Kothari, the first editor of Inc. India, left the magazine to become an entrepreneur herself. We haven’t stopped our correspondence or friendship, however, and my last missive from her described a woman in the happy throes of building a company. Shreyasi Singh took over from Pooja last year. It didn’t take us long to establish a transcontinental relationship as rich and friendly as the one I shared with Pooja. Shreyasi has been doing a wonderful job; watching her put her smart stamp on Inc. India has been terrifically exciting and gratifying for me and for my cohorts here in New York City. So congratulations to everyone involved with Inc. India as you enter Year Three of publication. Your friends and admirers in the States wish you joy and continued success.
Jane Berentson Editor, Inc.
4 | INC. | FEBRUARY 2012
Editorial managing Editor: shreyasi singh assistant features editor: rohini banerjee feature writer: ira swasti Copy Desk Managing Editor: Sangita Thakur Varma DEsign Sr Creative Director: Jayan K Narayanan Art Director: Anil VK Associate Art Director: PC Anoop Visualisers: Prasanth TR, Anil T & Shokeen Saifi Sr Designers: Sristi Maurya, NV Baiju & Chander Dange Designers: Suneesh K, Shigil N, Charu Dwivedi Raj Verma, Prince Antony, Binu MP & Peterson Chief Photographer: Subhojit Paul Photographer: Jiten Gandhi community team product manager: mahesh ravi assistant product manager: Rajat gupta associate: deepika sharma Sales & Marketing senior vice president: krishna kumar (+91 98102 06034) business development Manager: arjun sawhney (+91 95822 20507) assistant regional manager (south & WEST) rajesh kandari (+91 98111 40424) Production & Logistics Sr General manager (Operations) Shivshankar M Hiremath Manager Operations: Rakesh upadhyay Asst. Manager - Logistics: Vijay Menon Executive Logistics: Nilesh Shiravadekar Production Executive: Vilas Mhatre Logistics MP Singh, Mohd. Ansari OFFICE ADDRESS nine dot nine mediaworx Pvt Ltd A-262, Defence Colony, New Delhi–110 024 For any queries, please contact us at firstname.lastname@example.org Published, Printed and Owned by Nine Dot Nine Mediaworx Private Limited. Published and printed on their behalf by Anuradha Das Mathur. Published at A-262, Defence Colony, New Delhi–110 024 printed at Tara Art Printers Pvt ltd. A-46-47, Sector-5, NOIDA (U.P.) 201301 Editor: Anuradha Das Mathur
Of the past, and the future It’s easy to see why young people respond so well to Philippe Cousteau Jr. He’s the perfect 21st century role model—he speaks passionately of hope and individual can-do, runs an environmental not-forprofit, and travels to the most fascinating places on earth. A couple of weeks ago in Hong Kong, I met him briefly and heard him speak at the Make a Difference (MaD) Awards, an annual forum to recognise young social change agents from across Asia. More than his adventures (in 2011, he spent a week in the Arctic Circle for his Going Green programme on CNN International) or his interesting ventures, it was his take on family legacy that intrigued me the most. Cousteau founded EarthEcho International—to inspire and empower youth to protect our water bodies—with his sister Alexandra in honour of their father Philippe Cousteau Sr, the son of the legendary ocean Things I Learnt explorer Jacques Yves Cousteau. In This Issue Popularly known as “Captain While running a Cousteau”, Jacques pioneered business or doing a job, marine conservation and one develops a by-product underwater diving. His son, of core competencies. These can be spun into Philippe Sr, was actively involved other businesses. Point in these expeditions. Together, they taken, Patu Keswani studied the seas like nobody had Be aware of your done before. They are definitely a people biases—who we tough act to follow. hire is as much a Does the third-generation of judgment on us as it is on those who make the cut Cousteaus, both in their 30s,
constantly battle with performance pressure? Or is environmental protection a solemn family pledge they are proud to be custodians of? Similar questions are raised in our cover story this time—on second generation entrepreneurs from a cross-section of India’s mid-size enterprises. In India, family succession is hard to miss—both in our politics and the business world. According to KPMG, 70 per cent of India’s top 250 private companies are family-run. But it’s a segment we’ve rarely covered. Gritty and ground-up entrepreneurship somehow excites us more. This cover story has made me question that. Silver spoons or not, these inheritors have their unique set of daunting challenges too. Failure—of not being able to take their family companies forward, or not utilising their opportunities enough—scares them as much. We sometimes think about these issues too at Inc. India. We’ve inherited a name and product that is iconic. As we build it into a brand here, we want not just to meet expectations but to exceed them. Now that we have turned two, that is both a sobering thought, and a constant motivation. Your best wishes and the great feedback over these two years have encouraged us to stay the course. Thank you for that.
Shreyasi Singh email@example.com
february 2012 | INC. | 5
BEHIND THE SCENES
Companies at the Heart of Everyday Life
Décor From the outside, it looks like a palace fit for kings. Step inside and it’s as if the whole of India is on display. The creative minds behind Kingdom of Dreams’ exquisite interiors and exteriors belong to Blue Lotus Productions, a Mumbaibased art and design firm which took almost two years to complete the project. Founded in 2006 by Omung and Vanita Kumar, their creative team of 19 people has brought to life several movies such as Sanjay Leela Bhansali’s Saawariya and Black, mega live events, and television shows like Comedy Circus and Nach Baliye, with their spectacular sets.
Dancers Nautanki Mahal—the Kingdom of Dreams’ venue for Bollywood style musicals and theatre is incomplete without its dance performances. KoD sources dancers for all its shows, whether it’s for their anniversary special or New Year celebrations, from Dance Café. Started by professional dancer Kanika Sharma in 2008, this Gurgaon-based dance studio teaches a range of dance forms such as Latin meringue, Salsa and contemporary Bollywood. Dance Café’s instructors—10 of them—can also help you learn to play the drums, piano or guitar.
6 | INC. | februARY 2012
Kingdom of Dreams, Gurgaon
03.01.12 8:30 PM
Architecture This 6.2-acre live entertainment destination boasts of unique structures with equally remarkable names—a Nautanki Mahal, a Culture Gully, a Showshaa Theatre and the IIFA Buzz Café. The dream of a royal Indian experience was turned into reality by Mumbai-based architectural firm Naren Kuwadekar & Associates. For three decades now, Naren Kuwadekar has been designing commercial, residential and educational institutions including the Taj Lands End Hotel, Mumbai; MIT Gurukul, Pune; and Lokhandwala Township, also in Mumbai.
Promotions Guests don’t have to worry about driving to Kingdom of Dreams as they can be picked up and dropped for free by HOHO buses. Running across four routes in the capital, these buses have been provided by Blue Ocean Media, a media marketing firm started in 2009. Founded by Rajiv Saxena, Rajeev Mehta and Ajay Arora, the company advertises KoD on the exteriors of these buses and showcases clips of their famous musical Zangoora on LCDs in the buses. Apart from KoD, Blue Ocean does outdoor advertising for more than 30 clients including Dell India, Tata Motors and Skoda at fuel stations, bus shelters and on auto rickshaws.
PHOTOGRAPH COURTESY KINGDOM OF DREAMS
reported by ira swasti
News, Ideas & Trends in Brief
Study says most Indian employees work late
A Sane Rise? Salaries continue to go up but for good reasons Despite business confidence dipping in
India, there’s one thing that continues its upward swing—employee salaries. Global management consulting firm, Hay Group, forecast a double digit salary increase in 2012 for companies that assured a robust near-term outlook. In its recently released annual compensation and benefits report, Hay Group suggested salaries could increase by almost 12 per cent, across industries, management bands and locations in India. The study—conducted on more than 300 organisations and 3,20,000 employees across sectors like consumer durables, construction, FMCG, technology and retail—also interestingly found that while companies are cautious of the economic outlook, they are largely optimistic of long-term performance. That is truer for illustration by Shigil N
Indian companies—which have shown better stability and stronger values during recessions—than for foreign entities. In fact, increments have been promising not only at junior or middle level but also at senior management level where 11-12 per cent growth in salaries is expected. Encouragingly, functions like engineering, sales, marketing and support functions like finance and human resources are picking up in recruitment. Yet, employers shouldn’t get alarmed by the salary hike forecast. This report indicates several positives behind this. The pay rise, says Sridhar Ganesan, managing consultant, Hay Group India, defined a balancing trend where employees whilst holding on to their jobs are being covered for inflation and employers are also being creative in managing retention. Ganesan added that it, continued on the next page
Over half of Indian employees work well over eight hours a day, and over 40 per cent regularly take work home, finds a latest global survey by Regus, a leading provider of flexible workplaces. Conducted on 12,000 business people in 85 countries, the study found that nearly half of Indian employees (45%) work between nine to 11 hours every day compared to 38 per cent of global workers. There’s more for company owners and employees to mull over. The report finds 44 per cent of Indian workers also take work home more than three times a week. Workers in smaller companies in India (12%) were three times more likely to work 11 hour days than largecompany employees (4%). Madhusudan Thakur, Regus’ regional vice-president for South Asia, strikes a note of caution. “There is a clear blurring of the line between work and home. Sustained economic growth in the last few years and substantial outsourcing work have contributed to longer working hours.” The long-term effects of this could be damaging both to workers’ health and to overall productivity, he added. “They can become disaffected, depressed and even physically ill.” Take note, employers. february 2012 | INC. | 9
in fact, pointed to a definite maturing of organisations in India with a stronger compensation philosophy in place. Clear short-term and long-term targets with cautious hiring, and a compensation strategy designed around pay-for-performance is characteristic of many companies interviewed. “In the last five years, Indian employment market has witnessed a range of behaviours with employers on a hiring spree and also in rightsizing mode. The market is now stabilising and maturing to the next level of employer and employee relationships,” he added. Basically, in the post-recovery period from the initial economic slowdown, organisations have become more realistic and cautious in merit increments, the study found. They are shifting towards variable pay which is directly linked to individual and organisation performance. Seventy nine per cent of the organisations participating paid some form of bonus in the last 12 months. Ganesh said, “There is a constant reinforcement of pay for performance. Bonus figures have been showing an increasing trend year on year.” In fact, variable pay is being used as a prime tool not only at a senior management but also at junior management level. Bonus percentage ranges between 8-44 per cent of base salary at junior management, 11-63 per cent of base salary at middle management and 15-75 per cent of base salary at the senior management level. Plus, companies must involve themselves in intelligent market benchmarking. More and more, salaries will be a combined balance between a sector and gen10 | INC. | febrUARY 2012
eral industry trends. Outlier compensations—mainly, to poach talent away—is unlikely to be a tool that companies use. Yet employers can’t afford just to perfect the compensation puzzle. Along with ensuring only performance is celebrated, employers also have to work at an overall workplace atmosphere that leads to greater employee effectiveness. Hay Group’s report found that the focus on employee benefits, engagement and enablement is significantly higher than ever before in India. Of course, salary multipliers are critical but employers have realised that compensation is just one part of the engagement strategy—which is becoming more holistic now, and takes into account organisational values, cultural imperatives and talent management ideas. “Employees have also realised that a salarybased mercenary attitude does not help them personally. Learning becomes ad hoc and static,” Ganesan believes. To control attrition, companies are building risk mitigation plans like job rotation, multi-tasking, high potential progression paths to enable so that employees can benefit from diverse opportunities in the same ganesh company. For both small and large organisations, these elements will drive talent management practices of the future. Ganesan said companies stand to benefit hugely from this focus as it leads to more agile, accountable organisations. —Inc. India
Their name may carry a hint of blue but Azure Power, one of India’s leading solar energy developers, loves the power of yellow—this month wadhwa the firm commissioned its third solar plant, this time in Rajasthan, in two years...while Inderpreet S. Wadhwa’s Azure shines, Biochem Pharmaceutical Industries saw the green of money when global pharma giant Zydus Cadila acquired 100 per cent stake in it. The move is expected to strengthen Zydus’s foothold in the Indian market and push Biochem to greater heights...Zydus is not the only one, private equity investors—ICICI Venture, Sequoia Capital and Oman Insurance money, money everywhere have infused `50 crore into Chennai-based Star Health Insurance. The firm is planning to raise around `170 crore by the end of 2012... Another private equity firm, Clearwater Capital Partners, has made an open offer to increase its stake in the hospitality chain, Kamat Hotels India...Now to some buzz from Bengaluru, K. Ganesh and Meena Ganesh, who sold their education services firm TutorVista to Pearson Group last year for `577 crore, are now working to co-promote a range of e-commerce start ups in books, jewellery, travel and an online grocery store. —Inc. India
photograph by Radhakrishna
“A Sane Rise?” continued...
Full Throttle Venu Donepudi and Vijay Gummadi are powering CarZ, a one-stop service station for your car.
we can deliver at a cheaper cost than authorised service centres. Is there a similar company or brand anywhere else that you want to benchmark CarZ to?
Profit Garage A multi-brand car service vrooms to business Over the last few years, India’s automobile market has undergone unprecedented transformation with a multitude of new brands and models. With this change, gone are those days when any street mechanic could yank up the bonnet, and tinkle with it. Or so believe auto enthusiasts Venu Donepudi and Vijay Gummadi. In 2009, the duo founded CarZ, an independent multi-brand car service network, where cars produced by most major manufacturers can be serviced under one roof. Currently operating four service centres in Hyderabad, CarZ has turbo-charged ambitions. Its founders believe their model of offering professional, affordable and friendly service to car owners, will help them accelerate. Here, they lay out their growth track. —Inc. India
photo Courtesy subject
What is the market size of this opportunity? And, how did the two of you find your way to it?
Both of us have had stints across the US, Europe and Middle East while working in the robotics research division for GM and Chrysler. When we moved back to India, we realised that while the increased disposable income in the hands of middle class families led to an increased sale of cars in India, the car servicing industry was still fragmented and unorganised. It seemed to be the right place for us to unleash our entrepreneurial spirit. The numbers speak for themselves. Sales of new cars have been steadily increasing with unit sales in excess of 2.5
million vehicles per year; currently 18 million passenger cars are already on the roads. Only a third of the vehicles go back to the dealer after the warranty period so the opportunity is clearly huge. Targeting this market provides us a sizeable business opportunity. Though there is a large unorganised market for servicing, the more complicated cars of today cannot be dealt with by these small shops. The newer cars need specialised handling with state-ofthe-art equipment to service them. Unorganised mechanics and local garages lack the expertise and know-how to service these vehicles. They also don’t have access to genuine after-market parts. Training, parts, and equipment are needed, which
We would like to benchmark ourselves with Midas and Maaco. Midas is based out of the US, and is spread across the world with nearly 3,000 centres mostly in Europe and North America. Their electrical and mechanical expertise is something we want to bring to India. In terms of collision repair and auto paint jobs, we benchmark ourselves to Maaco which is based out of the US with nearly 500 body shop locations across the continent. CarZ is essentially a brainchild of a combination of the best of what Midas and Maaco offer. What has CarZ’s start-up journey been like so far?
The ride so far has been extremely encouraging. We reached operational breakeven in the second month itself. This validated our model and has given us the necessary impetus to keep forging ahead, bringing more value to the customer. In the last 22 months since we began, we have serviced over 34,000 active customers. We plan to expand to 300 outlets across India by 2016. We recently closed a Series A funding of $5 million from IndoUS Venture Partners. By the middle of this year, we aim at expanding to 36 outlets across south India. We have a blended franchise-company owned outlet model. Seventy per cent of our outlets will be franchised. There’s enough interest coming in. In fact, we’ll probably be going in for a second round of funding by the end of this year itself. These targets might seem ambitious but we’re confident they can be achieved. february 2012 | INC. | 11
Deconstructing Offshoring Two insiders bust myths about India’s IT industry In the United States, offshoring has assumed political proportions. In India, it powered a huge IT ramp-up, and gave birth to many of our modern business hubs. Yet, Gaurav Rastogi and Basab Pradhan, both part of the senior management team at Infosys, say the industry isn’t really understood. In their book, Offshore: How India Got Back on the Global Business Map, they explain the workings of the offshore service model, and the lessons it holds. — Inc. India What was the trigger for writing this book?
The offshore services industry of India came out of nowhere in the 90s and in the short span of 20 years, it has established itself as a major $60-billion global industry. It is quite an amazing story. How many industries can claim to have had this kind of an impact in such a short time? And yet, for something that now appears familiar, this industry is quite enigmatic to outsiders, who only get fragmentary views, and never the full picture. As insiders, we had perspective that readers would find interesting. What myths or popular misconceptions have you busted in the book?
The industry took shape before the economic liberalisation of India. The “global delivery model” for services was born in this industry back then. Entrepreneurs who went through the challenges of those years haven’t received enough attention. Today, there’s perhaps too much pessimism about the future of the industry—concerns that the wage differential will go away or that companies aren’t innovating enough to sustain themselves. These are myths that needed to be busted. Every part of this industry is steeped in jargon. The investor community knows about the levers of profitability. People working inside the industry know the fundas of the global delivery model. The word “offshore” itself has different connotations for different industries (say, for finance and oil drilling). Each community has its own language, which to those outside, may appear as jargon. We explain things from first principles, so the reader doesn’t feel left out. How has the book been received in light of the ongoing global debate on offshoring?
Folks who have read the book are happy that we haven’t avoided controversial topics. For instance, a chapter in the book “Is Offshore Good for the World?” deals with the economic impact of offshore on western markets, which may be controversial. But our job as writers is to say it like it is, based on facts and economics. We’ve shown that offshore is just another form of global trading in goods and services. BPO offices are just another avenue of global trade. Because trade in services seems to impact higher-end jobs, it causes more public angst. Offshore services companies need to address this angst if they are to continue growing. 12 | INC. | febrUARY 2012
E-commerce creates female entrepreneurs The internet has emerged as an equaliser, providing a catalyst for entrepreneurship amongst women in India. Site analytics on Alibaba.com recently showed that the site’s female-membership base saw a healthy growth of 71 per cent year on year. Indian women entrepreneurs, registered on Alibaba.com—the global leader in e-commerce for small businesses—represent a diverse set of industries from hair and beauty to machinery and food processing. Alibaba.com believes this demonstrates how e-commerce has the potential to provide Indian businesswomen a flexible, accessible and cost-effective platform to overcome traditional male-dominated boundaries, and explore business prospects beyond conventional channels. “With the growing use of e-commerce, women entrepreneurs can access information at the click of a button. It’s that easy,” says Sandeep Deshpande, the country manager for Alibaba.com (India). With more than 72 million members around the world, female entrepreneurs form a significant proportion of Alibaba. com’s registered user base. The strength of women entrepreneurs, especially in developed economies, is more than 25 per cent of the respective user base. Similarly, South East Asian nations such as Malaysia (27%) and Vietnam (20%) also have a sizeable representation of members on Alibaba.
14 | INC. | febrUARY 2012
Life Outside the Office
“I'd do anything to be part of the original Guns and Roses line-up.”
Varun Jain was studying for his Master's at University of Warwick when he banged into a Swedish death metal fan and an arpeggiated chords lover. The co-founder of En Route Media, a Mumbai-based manufacturer of LCD screens for taxis, says the two guitarists opened up his “limited” sense of music. Hooked, he learnt to play the instrument despite aching fingers. In 2004, the three friends got together to form a rockband called Elysium—which means heavenly in Greek. The band didn’t last long, but Jain’s love flourished. Today, his acoustic guitar hangs proudly in his office, and he strums it whenever he can. Over the weekends, he brings the house down with his electric guitar. These days he's strumming Wish You Were Here by Pink Floyd, a classic which was also the inspiration behind his company. “We wanted to build a place where people could do what they loved, and not just work for the sake of it. The song asks you to do that.” There’s nothing better than listening to live music, he adds. He has attended more than 30 concerts so far and cherishes his collection of ticket stubs from them. Magical concerts n David Gilmour at Royal Albert Hall, London n Pearl Jam at Shepherd’s Bush, London n Alice in Chains at the Scala, London Set the stage on fire for: A charity concert to raise funds for the Pakistan floods in 2006 n A charity concert to raise funds for the University Chapel n
His God, and rockstar David Gilmour, Pink Floyd. “His live concert was the most inspiring guitar performance I’ve ever seen—a 60-year-old man playing flawlessly for three hours. There’s so much emotion in his music. Whenever I listen to it, I want to pick up my guitar and start replicating it.”
photograph by Jiten Gandhi
reported by Ira Swasti
GUEST COLUMN BY PRADEEP CHOPRA
To outsource or not?
Social media isn’t technology. You can’t just outsource it and expect magic. A lot of it is best done in-house
The benefits of social media and why you need to do it are no longer relevant
questions. What matters is how you do it. When companies get started on this, one of the questions I’m most frequently asked is whether social media should be outsourced, or done in-house? There is no one right answer, of course. Instead, understanding the pros and cons of both choices will lead to the best one for you. Over the last two years, we’ve had the opportunity to interact with more than 1,500 marketers from 250-plus organisations thanks to our social media workshops. This has been an extremely representative audience—ranging from a one-man company to a mega brand with more than 1,50,000 employees. Through our interactions with them, we’ve learnt that the choice between inhouse and outsource is a function of two aspects—the kind of social engagement your company needs, and the company’s understanding of social media. As a thumb rule of sorts (mine), social media strategy, customer
16 | INC. | febrUARY 2012
engagement and responses to conversations for a brand are ideally done in-house. Social media isn’t a jazzy, new-age initiative. Social media marketing strategy needs to be aligned with organisation’s overall marketing strategy. An external agency or a consultant can productively contribute in this process but key marketing people within the organisation should own the strategy. For example, a global technology company we worked with last year got its formula just right. After attending one of our workshops, they brought us on as consultants. While we helped them refine their social media strategy, their marketing team was the custodian. illustration by shigil n
Fundamentally speaking, the ultimate objective of using social media is to build relationships with customers. To do justice to the opportunity, people who understand the nerve of the customer are the best ones to drive conversations with them, even on social media. Your key marketers need to be involved. Also, because customer engagement is a function of both the content (Facebook wall posts, Twitter tweets), and the ability to initiate conversations, the person responsible for driving this engagement must understand the context. Most organisations tend to treat social media as a technology-oriented function, asking their SEO (Search Engine Optimisation) teams to take ownership. But, what a good social media initiative needs is a joint leadership of their marketing and customer relationship management teams. Managing your company’s reputation in the online world involves multiple aspects: monitoring, analysing and responding to the activity on various Social Media channels. While monitoring and analysing conversations for a brand can be completely outsourced, responding to conversations especially the sensitive ones must be managed in-house. It’s very difficult for an external entity to respond on your behalf and still maintain your brand voice. Still there are aspects of social media that you can give out, such as developing the applications, media buying and content creation. These are special skills that are difficult to build in-house. For example, when it comes to marketing on Facebook, developing applications is becoming very important. Successful Facebook applications need wellconceived concepts and creatives to be developed and promoted. While your company must take an active part in the concept stage, the rest can be owned by a specialised social media agency. Content creation for social media can be specialised. It means using a variety of mediums—videos, pictures, presentations, blog posts and tweets. Videos certainly should be professionally produced to make an impact. Time and again, I see that companies underestimate the effort it takes to build scalable content. They should be urged to remember—social media is free but social media marketing isn’t.
For large publishers, integrating social media channels such as Facebook, Twitter, and LinkedIn into their websites can be another opportunity for driving engagement. This is an even more technology-oriented task and can be outsourced to an external agency. Also, there are a number of avenues such as Facebook and LinkedIn advertising where social media can be categorised as a paid medium. Look at e-commerce companies. They are leveraging Facebook not just for fan acquisition but also for driving potential customers onto their websites. Internet companies constitute around 20 per cent of our workshop participants and we’ve seen a significant increase in their Facebook advertising budgets in the last six
Most of all, creating a social media strategy comes from understanding the medium. If the organisation doesn’t have clarity on that, it makes sense to engage with a specialised agency, preferably one that has served clients in the same industry. The same agency should be given the responsibility for executing the strategy. Social media is an immediate, constantly iterative process. Companies get flustered with their agencies because they seem to think the strategy is not consistent. You need to be prepared that strategies are likely to change. The key to getting that right is finding the right agency—quite a challenge in itself. Keep in mind the skill you most need when you go scouting for an agency. The understanding of social media channels relevant
A company’s understanding of social media most determines whether it should outsource or not. months. Some of them are spending as much as `2 lakh a day on it. For a leading FMCG brand, while they had their internal team to take care of content and conversations on Facebook, as an agency we helped them acquire around a million fans. A company’s understanding of social media most determines whether they should outsource this skill or not. Many companies who embark on a social media initiative still don’t have an answer to “why social media”? It seems like an obvious question to have asked before starting out but honestly a large number of these initiatives are still driven by ad-hoc impulses—pressure from a competitor, or orders from a boss who doesn’t want to be left behind. If the benefits of social media are not clearly established internally, commitment from top management to allocate the right resources and appropriate budget will be limited. Moreover, without clear objectives, the company won’t have the right metrics to measure campaign performance.
to your business is vital. Say, if you are looking at leveraging video marketing, expertise in creating and promoting videos becomes critical. Similarly, if an application on Facebook is important for your strategy, the agency should have a strong in-house expertise or partnership with an apps company. Also, an agency’s experience in serving similar brands will be an advantage. For example, if you are a financial institution, an agency that has served brands in the financial services vertical will be sensitive to the dynamics of your industry. Even then, go for agencies which seem to have a well laid-out process for their campaigns. Remember— this isn’t maintenance outsourcing. Make sure you enter into “partnerships” with your agencies. Don’t use them just as vendors. Pradeep Chopra is the CEO of Digital Vidya (http://www.digitalvidya.com/) India’s premier social media training company. He can be reached at firstname.lastname@example.org and actively shares his views on LinkedIn and Twitter. february 2012 | INC. | 17
Companies on the Cutting Edge
“Children have a tremendous capacity to learn on their own. They just need a chance.” —Ram Gollamudi, co-founder & CEO, Edutor Technologies
18 | INC. | febrUARY 2012
Edutor Advantage e40
Learning made fun
Imagine if your child’s many dozen text books could be collated into one lightweight, handheld device. Edutor Technologies, a Hyderabad-based start-up, has done just that. Its Edutor Advantage e40 is a home-learning gadget that comes preloaded with CBSE and ICSE school curricula for classes III-IX. The 4.3-inch touchscreen device engages the eyes, ears and touch to make school lessons simpler and more fun. Smartly, there’s no internet or Bluetooth connectivity, ensuring students aren’t distracted as they go through the wide range of lessons on multiples formats, like an audio visual on how to calculate the area of a triangle. To keep in sync with CBSE’s continuous comprehensive evaluation, the Advantage e40 also has a range of practice tests for selfassessment. “Much of the innovation in India’s education system has been around teaching aids. The emergence of touch-screen technology presents an opportunity to revolutionise learning materials,” says Ram Gollamudi, co-founder of Edutor Technologies. Already 3,000 units of the device have been sold in Bengaluru and Hyderabad. The company now wants to target the rural market. Specifications Length: 14.9 cm Height: 8.2 cm Weight: 169 g (without battery) Battery charge: upto six hours Price: `5,980
comes loaded in a power chip that is inserted into the device. As Edutor keeps publishing more content, an updated power chip can be ordered to upgrade content. Additional content Content is king can also be The device has lessons in mathematics, science, downloaded from Edutor’s app library social studies and for free. English. All content
Photograph by S. Radhakrishna
reported by ira Swasti
Your Business Toolbox
The Right Touch A new generation of computers built for taps and swipes
Before You Buy
Touchscreen all-inone desktops tend to be pricier than standard PCs. The machines are well suited for designers, multimedia producers, and frequent collaborators.
When all-in-one touchscreen desktops debuted a couple of years ago, they were criticised for being sluggish and not responding well to gestures. These second-generation machines, all of which run on the Windows 7 operating system, come with faster processors and more responsive screens. We tested four of them to see how they stack up. —John Brandon
photo by photos.com ; Courtesy company (4)
Sony VAIO L Series
Our top pick, the Vaio registered every touch, swipe, and tap during our test. It took just six seconds to swipe through a 15-page PDF. We downloaded a 350 MB file in 23 seconds, comparable to the other machines here. Videos looked colourful on the bright 24-inch screen, and music sounded rich. The computer, which has a 1.3-megapixel webcam, comes with a few touchenabled apps, including a media player. cost: $1,230 for a system with an Intel Core i5 2.4 GHz processor, 4 GB of RAM, and a 1 TB hard drive
Dell Inspiron One 2320
A close runner-up, this computer’s 23-inch touchscreen, which tilts back as much as 35 degrees, was the most responsive of the bunch. During our test, we swiped through a 15-page PDF in six seconds. Videos and photos looked vibrant on the screen, and music sounded clear, though the bass was lacking. The computer comes with several touch-enabled apps, including one for operating its 1-megapixel webcam. cost: $1,250 for a system with an Intel Core i5 2.5 GHz processor, 8 GB of RAM, and a 2 TB hard drive
HP TouchSmart Elite 7320
It took about 10 seconds to swipe through a 15-page PDF on the TouchSmart’s highly responsive 21.5-inch screen, which tilts back up to 30 degrees. On the downside, photos and videos looked washed out, and songs sounded a bit distorted. The TouchSmart comes with a variety of touchfriendly apps, including one for operating its 2-megapixel webcam. Unlike the other desktops here, it does not have HDMI ports for peripherals. cost: $949 for a system with an Intel Core i5 2.5 GHz processor, 4 GB of RAM, and a 500 GB hard drive
Samsung Series 7
This desktop, which has a 1.3-megapixel webcam, can lie flat for playing games, sketching, or collaborating. Another nifty feature: you can drag icons for Windows programs into the Touch Launcher and open them with the press of a finger. It took nine seconds to swipe through a 15-page PDF on the 23-inch screen, which also responded well to taps but did not always register flicks. Sound and image quality were just so-so. cost: $1,199 for an Intel Core i5 2.7 GHz processor, 8 GB of RAM, and a 1 TB hard drive february 2012 | INC. | 2 1
Products + Services
Travel Smart Mobile apps that ease your travel worries It’s tough to keep up with a hyper travel schedule—one that takes you across three cities in as many days. Check out these travel apps for your smartphones. They will ensure your productivity soars when you are on the move. They’ll make sure you stay on top of last-minute travel plans that sometimes leave you stranded without a hotel room in a new city. —Ira Swasti Kayak
This free mobile app lets you compare prices on different travel websites to find the best deals for hotel bookings, car rentals, flight charges as well as travel deals to your choice of destination. Once booked, you can manage all these details through their itinerary management tools.
Packing can’t get easier than this. This app comes pre-loaded with travel-specific checklist items that you can choose from to create customised packing lists. That includes tasks such as “get a haircut”, “setup an e-mail auto responder” or “e-mail a copy of your itinerary to your family” before you go on the trip.
Not Just Me-Too
2 2 | INC. | febrUARY 2012
With this app on your mobile, you don’t need a data card to connect your laptop to the internet. It searches and finds free WiFi spots in hotels, restaurants and airports, and alerts you when it finds one. You can then get connected to the web with a click. HotelPal
For trips planned at the last minute, hotel bookings become quite a task. This app comes to the rescue as it lets you find and book the hotel that suits you best. You can check out hotel photos, amenities, charges as well as live availability of rooms before you find the one you want.
This app covers more than 4,000 airports and 1,400 airlines worldwide to let you know your real-time flight status. It has maps that can be zoomed-in with satellite and weather radar imagery and allows you to find alternate flights in case yours is delayed. GroundLink
You can book cars anywhere in the world with this app. It tells you the details of the route as well as cost including rate, gratuity and tolls. Once the car is booked, the app informs you of its estimated time of arrival.You can also invite your friends to join.
photo by photos.com
Joining the tablet bandwagon is HCL, India’s PC giant. HCL’s new tablet, Me Tab X1, is priced attractively at `10,999. It’s part of a buzzing segment to make tablets that cost less than `20,000—aimed at capturing a market that cannot afford the spiffier iPad. Beyond its price, the Me Tab X1 also comes with other distinct advantages such as compatibility with almost all 3G USB dongles and data cards, customised apps for India with 35 content partners to offer a comprehensive user experience. In fact, the Me Tab X1 offers real value add in terms of the preloaded apps—users can book discounted tickets using the Cleartrip application, buy books and magazines at a discount from the bookstore, and use the preloaded office suite for document editing and management. Most Android tablets do not have dedicated desktop management software of their own, and usually expect the user to sync stuff like contacts, calendar entries and notes using the Google account. HCL gives users the option to do both, thanks to the ME Connect desktop software, which is similar to the desktop suites on Nokia and BlackBerry smartphones.
Products + Services
tech trends john brandon
At Your Service The skinny on virtual assistants I got a lot of work done during a recent road trip, thanks to my new assistant. As I drove, she added some meetings to my calendar, took an e-mail dictation, and found some restaurant options for dinner. She has a great sense of humour. When I jokingly told her I loved her, she responded, “I bet you say that to all of your Apple products.” As you probably guessed, my new assistant is Siri, the voice-command system built into Apple’s iPhone 4S. To see how the feature stacks up against other voice-recognition systems, I compared it with Vlingo, a free app for Android phones, BlackBerrys, and iPhones. Using Siri is a cinch. Hold the iPhone up to your ear, or press and release the Home button. Then speak your command. Siri takes you through step-by-step directions to complete its assigned tasks. Say “Send a text message to Jim,” for example, and it will prompt you to speak the subject line and message, then say “send.” During my tests, Siri took dictation for texts and e-mails accurately most of the time but got tripped up by some unusual words and proper names. You can also use Siri to send reminders to yourself. I asked it to “Remind me to send a message to my editor when I leave work,” and a note popped up on my phone when I left the office. I also used it to add meetings to my phone’s calendar, play music, check stock quotes, and dial-up FaceTime chats. Siri can search for things on Google, Wikipedia, and Yelp, as well. When I asked it to find an Italian restaurant in Minneapolis, it pulled up a number of options from Yelp, along with a Google map. I asked Siri, “Who is the founder of Zynga?” and it produced Google search results for Mark Pincus. The system has a few drawbacks. It can read text messages but not e-mails, and you can’t use it to add or edit phone contacts. Also, instead of speaking directions, it displays a map on your phone. Perhaps the biggest drawback: Siri works with a limited number of third-party apps. That’s where Vlingo excels. I tested the app on the Samsung Galaxy S II, an illustration by Prince Antony
Android smartphone. To get started, I opened the app and hit Speak It. To post a status update on my Facebook page, I said “status update,” and a list of social networks popped up. I chose Facebook, dictated the update, and clicked an icon to post it. To research hotels for an upcoming vacation, I said “trip to Chicago,” and Vlingo opened the Kayak app on my phone. (The destination field was already filled in, but I had to type in the rest of the information.) Another great feature: If you are using a BlackBerry or Android phone, Vlingo can GOogle maps
hen I asked Siri to W find an Italian restaurant in Minneapolis, it pulled up a number of options from Yelp. read incoming texts and e-mails automatically. The app read incoming messages accurately, but the ones I dictated contained more errors than with Siri. Another downside: Vlingo doesn’t send location-based reminders. My verdict? If you’re mostly interested in dictation, Siri is great. If you need a voice-recognition system that works well with other mobile apps, Vlingo is the way to go. But don’t worry, Siri: I still love you.
The latest version of Google Maps for Android (v6.0) smartphones and tablets now gives users the ability to navigate indoors. Google’s Indoor Maps will now display detailed floor plans of any building where they’re available. If you are inside the building, the map will provide your approximate location in the premises—accurate to a few metres. Already, Google has mapped some important stores and public places in the US and Japan, with locations such as Macy’s, Ikea, The Home Depot, and airports in San Fransisco, Tokyo and Chicago. Its latest frontier in digital mapping is touted to be Google’s effort to deepen people’s personal attachment to their Android phones. “When you’re inside an airport or shopping mall, a common way to figure out where you are is to look for a freestanding map directory or ask an employee for help. That directory is brought to the palm of your hands, helping you determine where you are, what floor you’re on, and where to go indoors,” explained Brian McClendon, Google VP of Engineering, Google Earth and Maps, in a recent blog. february 2012 | INC. | 2 3
Things I Cannot Live Without...
Gym Having studied medicine, I understand the benefits of good health.
Apple MacBook Air It helps me manage work and life.
iPad I play Angry Birds on my iPad a lot. And then there’s iTunes for music. founder and COO, TravelPort
Heena Akkhtar iPhone With 3G connectivity on phones, life has become easier.
2 4 | INC. | febrUARY 2012
Here’s a doctor who believes that an Apple a day keeps her troubles away—nope, not the fruit, but Apple Inc. Heena Akkhtar is a woman who dons several hats: she is the founder of TravelPort—a niche travel solutions firm for corporates—a trained homeopath and an avid traveller. But before all that, Heena Akkhtar is your regular supermom who believes that a “guilt-free” balance between family and work is possible. Helping her to strike that balance is her Mac. “I get a lot of work done on it. It helps me manage both my career and family,” she says. The trained doctor also strikes a healthy balance between her body and mind with a strict cardio regimen and a regular dose of books and music, thanks to her iPad and iPod. —Ira Swasti
...and What I Covet
I love travelling. I wish to go to the US and spend around 45 days there, visiting all its fascinating cities.
Everything you need to know to run your business in today’s economy
: : : : : : : : : : : A monthly guide to policies, procedures and practices
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resolve office conflicts Workplace conflicts occur when business heads with differing standpoints are unwilling or unable to find common ground. “It can happen to the best of teams after the honeymoon period of the working relationship,” says Beth Fascitelli, head of Consulting at Meta-Culture, a conflict management consulting company based in Bengaluru. In offices, disagreements should be resolved promptly and wholly to ensure the roots of conflict don’t fester beneath the surface and snowball into something uglier. Lingering discord is harmful—it adversely impacts the image and well-being of the business. Besides, disruptions in harmonious working relationships increase attrition and consequently hiring expenses. Conflicts also reduce productivity—a study, Managers as Negotiators, found that 30 to 42 per cent of a manager’s time is spent in trying to reach consensus. In worst case scenarios, partnerships break down and businesses go bankrupt if the dispute leads to a lawsuit. Face the fact that conflict cannot be wished away. Nor should deep-set differences ever be accepted as unsolvable. “Ignoring conflict is like not paying heed when doctors advise appropriate preventive measures. You could end up needing surgery when some exercise and diet control would have done the trick,” adds Fascitelli. Follow these pointers to set in place a conflict resolution mechanism, well before any hint of discord.—Charu Bahri Vol. 03 No. 01 | inc. guidebook
resolve office conflicts : : : : : : : : : : : : :
Establish Systems Get support: Work to get buy-in for a conflict resolution mechanism from business owners at the outset. They should be willing to participate in the process and honour it even if the situation does not affect them directly. Some top honchos welcome dispute handling procedures that keep them out of the fire-fighting frontline. “In companies, appointing a neutral person as chairman who has voting rights to salvage deadlock situations is the first line of defence in case of conflict between directors, in a business deed,” opines Dipali Sarvaiya Sheth, partner, MDP & Partners. Think ahead: Identifying an appropriate mediator is the first step in setting up a conflict resolution mechanism. “An external mediator is always preferable in the interest of ensuring an impartial resolution,” says Sindhu Ramachandran, founder & principal consultant, DCC Consulting, an organisational development consulting firm. Organisations that can additionally afford an internal mediator benefit from having a person on hand to present the facts fairly, and help the external mediator to reach effective conclusions. “Sometimes, it may not be convenient to identify a mediator at the outset when starting a business. Partners or directors can still provide for a mediation mechanism in case of conflict,” suggests Sheth. Clearly mention the timeframe in which a mediator will be sought and the kind of situation that will be addressed by mediation. Share information: Well informed mediators are the most effective. “At the time of appointment, make available inc. guidebook | Vol. 03 No. 01
details of the roles and work scope of each person holding authority,” advises Ramachandran. This information helps forecast possible areas of conflict and work out alternative structures whereever possible. Provide the mediator an After Action Review report in the eventuality of conflict. Such reports mention what was supposed to happen, what actually happened, and the cause for the discrepancy. But Ramachandran cautions, “Mediators should not rely on
tion is resolved and both sides agree to the solution,” advises Sheth.
Create healthy workplaces
Nurture the environment: Prevention is better than cure, especially where business conflict is concerned. So, Fascitelli suggests thinking things through from the outset. “Preventive measures are like scaffolding holding up a relationship, a foundation to build upon.” These include making conscious decisions to evolve a desired organisational culture, clearly defining leadership roles to avoid confrontation, establishing communication guidelines, introducing systems to align expectations with reality, and writing out the plan. Investing resources in these aspects will go a long way in minimising the risk of trouble arising, and ensuring that it’s managed well, when it does actually arise. For instance, business heads should not be singled out for criticism during meetings. Their lapses are best corrected by initiating group discussions and letting the communication flow to the area of concern and corrective measures. Non-judgemental communication goes a long way in helping avoid conflict.
Business heads should not be singled out for criticism in meetings. reports prepared by superiors who could be biased. They must stay open to new possibilities.” Mediators can also ask probing questions about the parties’ viewpoints to understand them. “After all, sometimes the presenting issue is not the issue at all. Asking questions to unearth parties’ real needs and concerns is vital to coming up with creative solutions,” adds Fascitelli. In case of conflict: Organisations are adversely impacted when conflict breaks out. “Disputing business heads try to influence employees to take sides. They may also try to blame the other side for causing or escalating a conflict,” says Ramachandran. This can create an unpleasant and stressful work environment. Let it be known that business will continue as planned in case of an eventuality. “Status quo must be maintained until the situa-
Focus on organisational culture: Conflicts occur because of the human fight or flight response. People are wired to become offensive or defensive under stress or when threatened. Accepting that disagreements will happen is a healthy start towards setting in place systems to deal with them.
“Focus on creating a culture wherein people feel safe to actually address conflict; if they don’t feel safe, they’ll inevitably deal with the conflict in negative ways like venting their feelings with colleagues at the water cooler,” suggests Fascitelli. Employees should be encouraged to speak up and deal with the matter. For this, she suggests making sure that the immediate consequences are never punitive as that deters individuals from seeking relief. The idea is to enable opposing parties to work through their differences at their own level before escalating matters.
Communication and trust may breakdown between conflicting parties
when they assume inflexible positions. Consequently, it becomes hard for them to re-establish healthy communication even after the conflict resolution. Bruised egos may lead them to avoid each other. Ideally, the process brings out each side’s contribution to the dispute. “It takes two to tango,” observes Ramachandran, “but sometimes one party can come off looking worse. Such disgruntled employees should be counselled to deal with the frustration that sets in.” Human resource consultant Sunitha Ravi points out that it is important to help conflicting individuals make a complete recovery from a conflict. Employees can be helped to overcome negativity by taking up a hobby, attend-
ing motivational workshops and participating in CSR initiatives. Since conflict is a drain on emotional and physical health, they can also be encouraged to undergo relaxing yoga sessions or learn meditation. Sometimes, HR managers qualified in behaviour and development are briefed about the case and asked to step in after the mediators are done. “Managers follow up the progress and morale of employees after the conflict resolution process. They work closely with both parties to ensure calm prevails,” she adds. In a world where it doesn’t take much for conflict to erupt, establishing a conflict resolution mechanism makes sound business sense, to minimise losses from discord.
resolve office conflicts : : : : : : : : : : : : :
Conflict Resolution Best Practices Beth Fascitelli, head of consulting at Meta-Culture, a conflict management consultancy, shares tips to address workplace disputes successfully. Practice inquiry: Finding out facts is vital to resolve an issue. It is
dangerous to try and resolve a conflict situation without sufficient understanding. So, inquire to know the truth. Master the art of listening: Let people vent out their feelings before
asking them to hear your side and collaborate on a solution. Listening plays a central role in conflict resolution—it is a trust-building measure. Learn to acknowledge: Genuine acknowledgment is about reflecting your
understanding of what someone has said and how they feel even if you don’t agree with him. He feels relieved about having been understood and that frees him to move on to problem solving. Meet parties separately: Understand the situation from both perspectives
by meeting each party separately. Build trust and perhaps even coach them to engage with each other. Make it clear that you are impartial and will not favour either one. Once the parties are together, your job is to help them arrive at a mutually agreeable resolution.
Mediation versus Litigation “Mediation (by a trained third party mediator) can help come up with win-win solutions as opposed to the win-lose scenarios that take place in court. In the event mediation fails, institutional arbitration is always preferable over litigation,” affirms Dipali Sarvaiya Sheth, Partner, MDP & Partners. Institutional arbitration resolves issues faster and more effectively. It is also possible to provide for arbitration by a sole arbitrator jointly appointed by the parties to save cost, failing which the sole arbitrator may be appointed by institution. In the absence of pre-agreed dispute resolution mechanism by mediation and arbitration, conflicting individuals have no choice but to take recourse in litigation. “Mediation sessions are hard to organise and can spell disaster when the people involved are unwilling to see other’s point of views,” she adds.
Read more about conflict
resolution, http://www.ohrd. wisc.edu/onlinetraining/ resolution/index.asp Understand conflict resolution, http://www.
Source free training material, http://www.crnhq.org/
inc. guidebook | Vol. 03 No. 01
Family businesses are still a bulk of all enterprises in India. The second generation may be born into privilege. But with that reality comes a constant burden of expectations, and the need to become bigger and better—faster. Here are some fascinating case studies of this journey.
The number 2, coming second or turning two—this issue we are literally seeing double everywhere. Inc. India completes two years with this issue. Even as we continue to grow, we thought it would be interesting to see how those who also inherit flourishing ventures face up to the responsibilities of legacy.
february 2012 | INC. | 2 5
Interarch Building Products
“You have to be thick skinned” Ishaan Suri is the next-in-line at Interarch, a `500 crore pre-engineered steel company. He confesses his “two fathers”—Gautam Suri and Arvind Nanda, the company’s co-founders have demanding expectations. Here, he talks about the challenge of standing on his own. AS TOLD TO Shreyasi Singh photograph BY Subhojit Paul
“I never walked into the company and became the director. That’s typical of family businesses in India. We’re against this. In fact, I am on the board now. Other than on the company website, I don’t use that designation on my card or anywhere else. In the system we’ve set up, respect in the company comes by doing and not by being. The last seven years, since I joined Interarch, have been challenging, even frustrating at times. I’ve never been stopped from doing anything but sometimes that plays out badly. My father and Mr Nanda told me the world was open for me, and I could decide what I wanted to do. People think that second-generation entrepreneurs are blessed to have such leverage. But this isn’t really always such a happy-go-lucky situation. It’s very easy to stray when you don’t have boundaries. You have to discipline yourself. The amount I have had to learn in these years is equal to 15-20 years of functional experience. In a job, people only have a set of expectations from you. You are given some responsibilities, told how to fulfil them, and you can focus on doing that. You can’t do that here. The learning curve is very steep. 2 6 | INC. | febrUARY 2012
Age: 30 Qualification: Bachelor’s in Business and Economics, London School of Economics; Debut Year: 2005
The first generation should plan out the new generation’s early career in the company. If you don’t have a plan, the second generation just comes in the office to sit, and doesn’t know where he’s going or what he’s doing. february 2012 | INC. | 2 7
Yet people in the organisation have respect for you only if you can demonstrate to them that you are capable. I was lucky to be thrown into the fire when we got the Delhi airport project. After we won that contract, GMR wanted a company representative at the site 24x7. It was a massive project. We had 25-30 sub-contractors, and more than 7,000 labourers working with us for 20 months. I was there full time—from seven in the morning to late at night. Basically, I lived in a container for one and a half years. It was like running a plant actually—we had more than 150 staff members there. That was great for me, it exposed me to so much since I was at the front-end, the one taking the kicks. Over those two years, the way our employees viewed me begun to change. I was probably the youngest project head at that particular site. Initially, the GMR and L&T guys laughed—they probably thought I was too young to be any good. But today if I walk into their offices, they know I managed to deliver that project. I learnt from them and they learnt from us. I was there taking the pressure—many times I had my back up but I was leading. That experience, the pressure, the energy, was super intense. Beyond changing perceptions of those around me, I realised for myself that I could take on so much. My entire outlook for business has changed since.
Interarch Building Products began operations in 1984, and pioneered the high-end metal interior products market in India. Today, Interarch, which was jointly founded by friends Arvind Nanda and Gautam Suri, is a leading turnkey pre-engineered steel construction solution provider with integrated facilities for design, manufacturing, logistics, supply and project execution. Interarch has been instrumental in executing some of the most complicated steel building projects in the country. The `500-crore company today has to its credit landmark projects such as Delhi’s T3 airport terminal structure and Tata Motors’ green field auto plants. The company has also built the largest multi-level steel office complex for the headquarters of Reliance Industries in Navi Mumbai.
2 8 | INC. | febrUARY 2012
In fact, that’s something I think second-generation entrepreneurs should try to do. When a big change or a big project is happening around you, don’t throw somebody else into it, jump in yourself. It’s your chance to do something new in an environment that is not preset or benchmarked. You can build from scratch. It’s very difficult to change something that is not broken, but you have no limits when you build something that doesn’t exist. The airport project was an unprecedented assignment for Interarch. But it’s not like I got appreciation letters or bonuses—in your own company, one has to be extremely thick-skinned. No one’s going to applaud you. Also, I have not one but two bosses, and two fathers. My father and Mr Nanda are very professional, and our families have been friends for a long time. But it is a partnership. That makes the dynamics interesting. There are times when I feel that this is my company, and at other times I feel less so. But that is great. It keeps me in line. In fact, it provides me a great balance—of being both a professional and an owner. Although my father and Mr Nanda give me a lot of freedom, they’re both tough taskmasters. If I falter anywhere, I’ll get a blunt one-line e-mail from one of them. That really stings. My eventual goal is not that I must be sitting in the high chair. I see my role right now to be what my designation is—head of corporate marketing and business processes. Yes, when my involvement is required in something else as a promoter, I give it my share of attention. But I prefer to first be accountable for what I am supposed to do. That’s my actual job. I may be a shareholder but I get a salary. That’s very important. Ajai Chowdhary, chairman of HCL Infosystems, told me once that he might be the chairman but he’s the functional head of marketing in his company. I’ve learnt that from him. It’s not about being a CEO. In fact, 10 years down the line, I may just be the head of marketing. You don’t have to be the boss just because you own the company. My ultimate aim isn’t to run the company, it’s to be a good promoter.
Age: 29 Qualifications: Bachelor’s of economics, University of Virginia; Master’s in hotel management, Cornell University Debut Year: 2009
Brigade Hospitality Services
“You always have to be on your toes” Joining her family’s `600-crore real estate business was never a given. Happily for everybody, Nirupa Shankar’s ambitions and those of the Brigade Group slowly began to align perfectly. AS TOLD TO Shreyasi Singh photograph BY Subhojit Paul Growing up, working in the family business was not always on my mind. There was never any pressure to do so. I was honestly just exploring things for myself. I studied Economics at the University of Virginia. Every summer, I’d come back to India and do different internships, be it in advertising, research or a hotel internship at The Leela Palace Hotel, Bangalore. I ended up taking a consulting job with Ernst & Young in the US after my graduation though—those are the kind of companies that come for jobs on campus. But I knew it wasn’t something I wanted to do for the rest of my life. So I started taking evening classes in hotel opera-
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Set the right example by working hard and displaying a positive work ethic. Also, treat people with respect. It’s a privilege to have a great platform to start with. Second-generation entrepreneurs must use that wisely.
tions at New York University. I absolutely loved it—it just clicked with me. So I applied to Cornell University’s Hotel Management School, where I did my Master’s and had the incredible opportunity to intern at Four Seasons, Singapore. Brigade Group had already started the first Mercure hotel in India (eventually rebranded as the Grand Mercure). In 2009, when I finished my hotel management degree, I got a couple of job offers. But was taking up a job the best use of my time? That’s when my parents told me to think straight. They said the opportunity to be in the hotel business was right here, at home with our company. So I decided to go where I could learn the most in the least amount of time. At
that point, Brigade Group had eight to 10 hotels planned for the future. I also knew that deep inside my parents wanted me to come back and help support the business. While I am the younger of the two sisters, my elder sister is married and currently living in the US. I also started seeing the benefits of being in India.Also, I wanted to be part of the ramp-up phase in our hospitality business. There’s no point in coming in after all the hard work has been done. Monitoring is not where the fun is. It is only when you build a project from scratch and add tremendous value to bare land, that you can feel a sense of achievement. I’m glad I joined when I did. Initially, I was a little apprehensive about moving back home. I had been living abroad
Company Profile | brigade group
Brigade Group was established in 1986 by M.R. Jaishankar with property development as its main focus. Today, Brigade, headquartered in Bengaluru, is one of South India’s leading property developers. The `600-crore company has a uniquely diverse multidomain portfolio that covers property development, property management services, hospitality and education.
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on my own for eight years since I was 18. But surprisingly, the transition was pretty easy. I was inducted into Brigade Hospitality Services in 2009. This company primarily managed the hospitality related assets of the parent company. Our hospitality portfolio consisted of lifestyle clubs, convention centres and serviced apartments—essentially, they complemented many of the residential and commercial projects of the group company. For instance, for all our large residential enclaves (over 700-800 apartments), residents expect a really nice gym, spa, dining area, badminton court, squash, a swimming pool other sporting facilities. The hospitality team would ensure that these facilities and services were properly and professionally managed and delivered to the customer. But nothing was handed to me on a silver platter in the last two years. When I came in, there was no major announcement. It was like any other new joinee coming in—a template mail was sent out with my qualifications, what I’d be working on and who I
would report to. I had to consciously make myself known within the organisation—in the beginning, people hesitated in calling me for meetings. I’d go up to any team member myself if there was something I wanted to participate in, and ask that I be involved. That’s sort of how you make your way. I spent the first three months as a management trainee. I worked with our ground and front line staff to understand what they were doing and what challenges they were facing. I also wanted all our staff to be comfortable with me. Making the effort with people really helped. People spoke to me very freely because they knew I had the best interests of the company. I didn’t have a hidden agenda. I didn’t need to move ahead at anybody’s cost .
Honestly, I think the hospitality team is happy that they have somebody from the promoter family working with them. In the first 10 years of the company, my father knew every employee and every customer. Today, after the tremendous growth in the past 15 years, the hospitality team only meets him once a month for a review session. Now, because I’m here, I think they do feel more connected with the bigger picture. Of course, the expectations are there. You have to be very sharp. People will not hesitate to appreciate or dismiss you. My father’s shoes are extremely large ones to fill. But with the support of my family and my sister who will eventually join the business, the new leader-
Expert view Kumar R. Parakala
Partner and COO, Advisory KPMG
Taking India Inc. forward India is dominated by family businesses. Happily, the new crop is taking their parents’ companies to a bold new future.
ship transition will happen over time, maybe even five to 10 years. We have an organisational goal of `10,000 crore by 2020 and I am here to ensure that this happens. I’m confident I can take the business to the next level. I have a lot to offer. I still need to learn so much from my father—his grit, determination, his eye for business. But, I’m not him. I bring different things to the table. In any case, the company isn’t what it used to be. What you require in the first 25 years isn’t what you need in the next 25. I am learning a lot today and gaining tremendous experience and exposure. Of course I want to see this company grow, and to support my father’s vision, but at the same time, this is also a great platform for me. That’s important too.
India has become the global hub for entrepreneurship. More than 100 companies start every year despite the fact that many don’t survive. Yet one can’t deny the penchant for risk taking here especially in the distinct marwari class where people take great pride in doing business. In fact, the Indian industry is dominated by second generation family businesses. Seventy per cent of the top 250 private Indian companies are family run, and soon most of them will be run by second or third-generation entrepreneurs. This new crop is taking their family businesses towards a bold new future, and are blessed with some distinct advantages to enable them to do so. According to a study by the government of India, 96 per cent of second-generation entrepreneurs stem from a strong family support system. These families are accustomed to the risks that entrepreneurs need to undertake, and that combined with an established reputation and financial support enables them to forge ahead. Second-generation entrepreneurs have another benefit— they have an ingrained value system of careful spending and hard work as a result of the first generation’s struggles to erect a business. Often, the second generation has grown up with these struggles. They value this and continue to build on it. Right now, the opportunities for India’s family businesses are galore. Before 1991, Indian business success was a function of ambition, licences, government contacts, and an understanding of the bureaucratic system. After liberalisation, family businesses which then dominated Indian markets faced competition from multinationals that had superior technology, financial strength and deeper managerial resources. The old, family-managed businesses which formed the backbone of the economy needed to evolve and become more institutional if they were to extend their life cycle. Family businesses had to face a different world from the one that existed when they were set up. The second generation has been critical here with a new style of working—typically a more open work culture, a flatter, less bureaucratic leadership style—aimed at diversifying the portfolio of the company. Being adept at technology, this new generation has driven their companies to enter new Continued on Page 47 february 2012 | INC. | 3 1
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Chetan and Rishi Kajaria Kajaria Ceramics
“We speak the same language”
The brothers believe their fresh ideas, and their father’s experience is just the shine Kajaria Ceramics, their `1,000-crore company, needs. AS TOLD TO ira swasti Chetan Kajaria (CK): I was always certain I wanted to join the family business. After completing my engineering in 1996, I did a one year stint with the company in the exports department and learnt the basics. Then I went to the US for my MBA and came back in 1999 to head the ceramic tiles division of our family business. Rishi Kajaria (RK): Instead of putting my effort into starting something else, I thought I might as well come back to the family business and make it grow. I joined Kajaria in 2000 after finishing my degree from the University of Boston. I trained for a couple of years in the company. In 2003, I started a new division for vitrified tiles, separate from ceramic tiles that Chetan was heading. CK: Because we head two separate divisions in the company, our roles are well defined. There aren’t any differences between us. For common areas such as human resources, finance and accountancy, our father, Rishi and I have fortnightly meetings where we discuss what is going on in our respective areas and set goals for the future. RK: A lot of issues concerning both the verticals come up on a daily basis but we sort them out in meetings and once we leave the room, we speak the same language. It’s never you are right or I am right. Both of us would put our point forward and then let logic reach a definite conclusion. CK: There’s no question of seniority between us either. My being four years elder to him does not matter because we joined the company roughly around the same time. Experience-wise, we’re almost at par. RK: I think when the younger generation joins the company; a lot of new ideas come in. Fortunately, our father has always been receptive. There was no defined HR head when we came in. After putting in place an HR team, we’ve introduced ESOPs, and also better tools to judge performance.
photograph courtesy company
growth areas and effect swifter organisational changes. Many are also using their financial strength and risk taking ability to start high-risk, high-return businesses in technology. Even when not directly involved with their own businesses, second generation entrepreneurs are helping new businesses emerge. In fact, many are part of angel investing funds that seed and allow first-generation entrepreneurs to establish their start-ups. Many second-generation leaders are also learning to decentralise effectively—a challenge their forefathers did not face. They are investing in HR—bringing more clarity in processes for employees and starting their own leadership training programmes to attract the best and brightest talent. But this transition also forces them to deal with a fundamental concern—the continuity of their businesses once they let go of the reins. Professionalising throws up different office dynamics, and the lack of an entrepreneurial culture can have an adverse impact. Contrary to popular notions, those who end up leading their family businesses into the next generation, don’t necessarily have an easy run. Many heirs apparent are daunted by the challenges, in fact. While they have a secure foothold in terms of the resources they need, many face insecurities in taking over. The endless comparisons that arise from carrying the family name forward and the pressure of carrying the legacy can be difficult. There is also the succession challenge, especially when more than one secondgeneration family member is involved. This leads to uncertainty. Research shows that many family-run businesses tend to become a pale shadow of their former glory by the time the third generation takes over—only 4 per cent of firstgeneration businesses will make it to their third generation—mainly because they become weaker each time the business is split because of more than one heir. Family differences and sibling rivalry, something almost every major Indian business house has faced, often drives away investor confidence. Yet the joint family structure—the spawning ground for entrepreneurs— continues to evolve and compete effectively in the global market. Even as secondgeneration entrepreneurs step into the rather big shoes of their parents, they have the luxury of years of experience and learning. India has both confidence in them, and offers them enough opportunities to expand their horizons.
Let your father guide you. Nobody in the company will share the experience he has.
Age: 37 Qualifications: Bachelor’s in petrochemical engineering, Pune University; MBA, Boston College Designation: Joint MD Debut Year: 1999
Age: 33 Qualifications: Bachelor’s in finance and marketing, Boston University Designation: Joint MD Debut Year: 2000
Work really hard, and be patient. Things won’t be defined for you from the day you start. february 2012 | INC. | 3 3
CK: Till recently, we were known only as manufacturers of tiles. About a year and a half back, we tied up with Vitra, the fifth-largest company in the world for sanitary ware and fittings. We’ve also become more aggressive. RK: As the younger generation, aggression is our key strength. But the experience of having spent decades in the industry can only come from our father. That is invaluable. For example, when I began the new division of vitrified tiles, all the systems that were already running in the other division were replicated. I had the benefit of experience. I find it surprising when I hear people say they can’t work with their fathers. Why can’t they? It’s possible to have an open dialogue with your father, learn from him without having to argue with him all the time. CK: Our father doesn’t impose things on us. Every issue is robustly debated. He’s very modern and there is no generation gap between us. He’s also good at giving us credit. When he sees our recent numbers, he is very proud. In the mid 2000s, we were a `150-crore company. Today, we do an annual business of around `1,000-crore.
ajaria Ceramics was founded by Ashok Kajaria K in 1988 with a production capacity of one million sq mt of tiles. Since then, it has laid out a richlypatterned business journey. Today, it is one of the largest wall and floor tiles manufacturers in India with a production capacity of 30.60 million sq mt, and more than 400 options of ceramic, vitrified and glazed vitrified tiles. In 2011, the company clocked a turnover of `1,000 crore, and has laid out a growth plan to double that within the next three years.
RK: Joining a family business doesn’t mean you just rest on past success. People may think things have been easy for us. But we had to prove ourselves when we joined the company. It’s only when employees and clients see you working long hours that they realise you are as serious about the business as your father was. Plus, we’re in a very competitive industry. You have to keep innovating to make sure you’re ahead of the competition. As long as we manage to take the company forward, I don’t care about being a second-generation entrepreneur. CK: Each generation faces its own challenges. Both have it equally tough. In the ceramics industry, the technology used by every player is the same. What differentiates you is how you market your product, and how strong your dealer network is. While dad has done a tremendous job of building a strong network of over 6,000 dealers, we have the equally tough task of maintaining and strengthening it. Also, we have to build the brand. That didn’t need to be such a focus earlier.
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Don’t try to fight what you have been born with. You can get annoyed with people judging you or accept it. Eventually, you have to start earning your lottery, and proving you’re worth it.
Generation Rahul seth
Age: 34 Qualifications: Bachelor’s of Commerce, Delhi University; MBA, University of Cardiff, UK Designation: Joint MD Debut Year: 1999
“A lottery doesn’t last forever” Rahul Seth takes us through the early days of joining Sudhir Gensets, his father’s `1,200-crore company. What worked for him was his age. He was so young that nobody felt threatened by him. AS TOLD TO Shreyasi Singh photograph BY Subhojit Paul
I started coming to our office when I was doing my bachelor’s, essentially to kill time after college and because my father told me he’d double my pocket money if I did. When I began, I was given the worst chair in office, next to a pillar with very little room to sit. I was thin and young so I managed! I was asked to check bank statements and transporters’ bills—it was very clerical. My father thought that if I could actually sit on a chair and do that for half a day, it showed that I had patience. It didn’t take me long to tune into business. I liked what I saw. The work I was given wouldn’t take me long to finish so I began interacting a lot with my colleagues. That’s where I learnt the maximum. I got hooked on to marketing and began going to meetings with the sales guys. Meeting customers was a real pleasure. There, I felt our business was really differentiated from others. We dealt with a large universe—industry clients, real estate, infrastructure and individual customers who needed gensets for their residences. We didn’t have a marketing process then. So I set up a marketing tracking enquiry system. It was very simple and handwritten. But it worked. In fact, when
I went to the UK to study for my MBA, people actually missed my presence. My father was surprised when people would tell him that. He’d ask them how a 20-year-old could make so much of a difference. It wasn’t me; the lack of focus on maintaining a proper tracking system led to business slippage. It’s only after I came back with my MBA degree that I was given both responsibility and accountability. I took over the marketing role, and tried to create a process-driven system rather than one driven by individuals. Sudhir Gensets was around `170 crore then with some 300 employees. My father had an extremely talented and loyal group. But business was done in a more individualistic way. I could make changes because people responded well to me. I had overcome the resistance of being born with a silver spoon when I worked there between 17 and 20. Because I was so young when I first began coming to office, nobody was threatened by me. In fact, many people wanted me to be there because I acted as the bridge between them and my father. I don’t try to fight what I’ve been born with. Employees, clients and people around you might see you in a february 2012 | INC. | 3 5
certain way because of what you’ve inherited. You can get annoyed with it, or just accept it. When you have a lottery, you can only be thankful for it. But a lottery doesn’t last forever. Eventually, you have to start earning it, and prove you’re worth it. One of my uncles told me that he’d seen several businesses where the father earned all the money, and the son destroyed it so by the time the grandchildren grew up, they could only talk of their dadaji’s achievements. He told me to make sure my children should be able to see what we’ve created. I’m happy I’ve been able to contribute continuously. When I joined, we had a very family-oriented work culture. I cherish that too, and want to carry it further. But I differed from my father on some things. Say, when somebody wanted to resign, he’d always want to stop them. He would get hurt and take it personally. I tell him that I understand that he doesn’t wish his people to leave. But beyond a point, negotiating is
Company Profile | sudhir gensets
A leading manufacturer of diesel gensets and sub-stations, Sudhir Gensets was founded in 1973 by Sudhir Seth. Today, the Gurgaon-based company is ubiquitous. It has powered major sites and utilities like Delhi’s Metro stations, the Commonwealth Games Stadium and the All India Institute of Medical Sciences among others. It’s also grown to a turnover of more than `1,200 crore.
weakness. It’s important to make an honest attempt to retain employees. Yet, you have to also learn to let go. I’d rather focus on creating an environment where people love working for us. My father has come around to that as well. But I didn’t win his confidence overnight. It was in 2006-07 that I first think he was really proud of me. We grew by almost 50 per cent that year, and expanded our business from gensets to electrical contracts. We won our bid for the metro project which was worth `200 crore. Plus, the same year we set up a new plant, for which I was responsible. We had put up that plant in
Expert view Prof. Samish Dalal
Centre for Family Managed Business, SP Jain Institute of Management & Research
A transition done to the T A mithai shop owner’s journey has many key lessons for passing on the baton.
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record nine months. All this happened simultaneously and I was involved in all of these developments. In fact, my designation changed right after that when I was promoted to the role of joint MD. My father is my benchmark. He has a lot of hunger and aggression. He’s always talking about taking things to new heights. I’m more of an executioner. I want to perfect something first before moving on to the next plan. I have to confess I find it difficult matching his pace. We did business of `1,200 crore last year. His plan is for us to be a `2,500-crore organisation in the next three years.
This Christmas I found myself at an unlikely pastry store— the Namaste Nasta Centre, a traditional Indian snacks and sweets store. My interest was piqued and I struck a conversation with the elderly gentleman at the counter. He turned out to be the owner, Ram Dayal. I grabbed the opportunity to talk business, and what followed was a practical case study in succession planning. Ram Dayal’s story begins in Mumbai in 1962 when he was a helper cook in a sweetmeat shop. In 1967, he decided to open his own place with his meagre savings and help from two friends. Thus, Namaste Nasta Centre was born. Money remained a problem. Because he didn’t have enough cash to pay for a cook, he cooked himself. His wife handled the cash counter, while the friends-cum-partners helped procure raw material and manage logistics. By 1975, Ram Dayal had tasted double success—Namaste Nasta Centre had become Mumbai’s hot spot and he had become a father. Things were going smoothly till the summer of 1989, when his business partners proposed to close the business. To keep them invested, Ram Dayal offered to part with the half of his one-third share, but with no success. Around that time there was a stroke of luck when one of his regular customers, a bank loan officer, asked Ram Dayal to seek bank finance. His financial worries ended, but management worries such as purchasing, packaging and logistics continued. Ram Dayal needed help so he pushed his daughter (the eldest child), a college student then, to join the shop parttime. His daughter’s “necessity-driven” debut was a major breakthrough. She came in with fresh ideas for packaging,
cleanliness and flavours, and also introduced “tasting before buying”. She changed the shop layout and gave all customer-facing employees uniforms and gloves. The shop’s name board got a paint job. Soon, the initiatives were well-rewarded. By 1994, Ram Dayal’s shop was a buzzing centre. And, his daughter proposed that they start a new one. I asked if his daughter—who wasn’t to be seen in this shop—managed the other outlet? Ram Dayal said his daughter was since married, and lives in the US. But his son looked after his shop. Because the father-daughter team would discuss shop affairs at home, they slowly won a convert—the younger child son. Ram Dayal says that they always kept conversation positive even when things were going awry. When the shop’s kitchen caught fire and employees got hurt, he remembers discussing the merits of shop and employee insurance. Today, Ram Dayal owns four shops and exports dry snacks to more than 30 countries. His pace has slowed down but his son has succeeded him, and has the same zeal that he once did, Ram Dayal says. For me, Ram Dayal’s transitions hold several key lessons: n If the first generation wants to pass
on the business to the next, they should focus on the positives of the business (like the fire story ) in front of them. Other than motivating youngsters, it helps the narrator identify the brighter side.
n If a family business wants to involve
the next generation, they should ideally be groomed from early on. This has twin advantages—the new generation imbibes the colours and texture of the business. Second, nothing matches actual shop-floor experience. People might pick holes with this argument—that children should be inspired to study. Yes but if children are involved early on, the eventual induction is smoother.
n It’s important that the older genera-
tion allows the entrepreneurial ambitions of the younger set, especially if they prove themselves. Ram Dayal’s daughter did prove herself. So, when she came up with a proposal and her father was smart enough to back her judgment.
Age: 33 Qualifications: BA, Stanford University; Juris Doctor, Berkeley School of Law, University of California Designation: Director, Institutional and International Sales Debut Year: 2008
Vikas kapur | Hidesign
“My father was nervous too” Joining Hidesign was never a dream. But working in his father’s company has been a wonderful homecoming. AS TOLD TO Shreyasi Singh photograph BY S. Radhakrishna Being part of Hidesign was never planned. I never dreamt of doing this for sure. The company and the children were never discussed in the same context—except when my father would say that none of his children were interested in the business. I studied for my Bachelor’s
in Stanford University, and was interested in government, international relations (like father, like son) and law. My interests started changing when I was in law school—there was a surprising amount of business in law school. Especially, if you chose to work for a february 2012 | INC. | 3 7
law firm. Increasingly, I found myself drifting towards the business of a law firm. I did try to keep a regular job for a bit after the law firm stint, but found it to be tedious and boring. Also, I was in the US for too long and longed to return to India. At that time, it wasn’t about Hidesign at all. My home coming was about figuring out what I wanted to do. I thought of many options. Around the same time, Louis Vuitton (which picked up a minority stake in Hidesign in April 2007) offered me an internship in France, where the company headquarters is. By then, I was slowly thinking of Hidesign as an option. The Louis Vuitton
our personal relationship wasn’t impacted. But he could see that I wanted to return and that I wasn’t very happy in the US. I’m sure that having me around was tough for him too—initially. Hidesign is his first child—he didn’t how I would ease into it, how much he should let go and how we could structure it. He was so deeply involved with every little detail—every tiny piece bit of the business. He didn’t want me to come in and start making decisions without any experience. Yet, it didn’t take him long to become confident of my understanding of the business. I appreciate that he was so quick
The first generation should be very comfortable with bringing in a new generation. More than ability, they should trust the judgement of the second generation. That is very important.
offer helped convince my wife, who was a lot more skeptical about us moving to India. It was a big change, especially because we had just become parents as well. It gave her the confidence that Hidesign wasn’t a fly-by-night firm. It was an interesting company with a positive future. Throughout this period of decisionmaking, my father never pushed me. In fact, he never, ever, does that. It’s probably why this has worked out—I am a part of Hidesign because I want to be. Actually, when I was joining the firm, he was quite nervous. He didn’t know how the personal dynamics would be affected because of this move. He wanted to make sure that 3 8 | INC. | febrUARY 2012
Founded in 1978 by Dilip Kapur, Hidesign began as a two-man workshop in Puducherry. Over the last three decades, it has established a strong brand with its leather goods—handbags, belts, briefcases and wallets. Today, Hidesign has 68 exclusive stores in India, retails at premium international outlets like John Lewis, Selfridges and Robinsons in the UK, South East Asia and Australia, and clocks an annual turnover of more than `110 crore.
to trust me. The way I work probably played a part here. Because I’m so cautious myself, I only take decisions when I’m very confident. I think he’s seen that. And it’s not that I was fresh out of college with no prior experience. I had worked in the US and I think my stints helped me to grow. When I joined, I was put in charge of the international markets and our institutional sales division. That really helped— that a defined role was created for me. Dad kept out of it: which was important for me. Otherwise, I wouldn’t have learnt. For example, the greatest amount of resistance I faced when I came in was from some of our international buyers. Because we hadn’t been paying so much attention there, buyers were getting whatever they wanted from our production teams. When I came in, I pushed back a little and there was some conflict. At first the teams were a little skeptical. I’m sure they thought—this young guy has come in and is trying to change how things work. Now our relationship with our buyers has stabilised. That benefits both of us in the long-term. I didn’t have any struggles with employee buy-in though. People were very warm. As a second-generation entrepreneur though, at the back of your mind, you’re constantly asking—do people really respect you or are they just forced to show that they do because of your father? There is always this chip on your shoulder, this fear that you have to prove that you are capable. Because I do more now, I’ve become the second line-of-command. I think our employees are happy with that. They appreciate the fact that when they can’t reach my father, they can reach me. I try and rise to all the decision-making that comes my way. I don’t shy away from it. My father and I work very independently, and he’s confident I’ll take reasonable decisions. Also, I’ve been an employee somewhere else, and that’s been very helpful. I know that valuable employees are those who will try and figure things out on their own—they wouldn’t dip into somebody else’s management time to help them take a decision. Plus, as a secondgeneration entrepreneur, another benefit is that there’s a certain degree of objectivity that you bring to the table.
photograph courtesy company
I’ve tempered my father a little. I’ve forced him to look deeply into finance, administration etc. He and I are different. He’s more of an entrepreneur and a creator. I’m not sure if I’m one at heart. In fact, when there’s a discussion on how to take things ahead, he wishes to grow and grow some more. I push to consolidate. At the end of the day, the differences help our relationship and the company. We appreciate the
fact that the other brings a fresh perspective. Hidesign is really growing thanks to the battle of wits. Maintaining product quality and store experience is a challenge. These three years have been great. I do enjoy the job. More importantly, I enjoy my relationship with my father more. I now have a definite goal—to run the company someday. I see no reason why that shouldn’t be the goal. I also have
three siblings—my elder brother isn’t interested. But, I wouldn’t be surprised if my two younger siblings join the company. I think that the dynamic will be much more interesting if they do. It’s not a father-son relationship where the son recognises his father’s years of experience. But the way Hidesign is growing, all extra hands—especially if they are family—will be more than welcome.
Dipak Sanghavi Nilon’s
“I take more risks than my father did” The main ingredient for a firm’s success—get the right people at the helm of affairs. As told to Ira Swasti
Gutter Credit here
Age: 32 Qualifications: Bachelor’s in Polymer Engineering, MIT Pune; MBA, Jalgaon University; Management Education Programme, IIM Ahmedabad DDebut Year: 2002
I took over the family business when I was all of 24 years. My father had just passed away. It isn’t that I was forced into it. Even if I hadn’t been born into a business family, I would have done something of my own. It’s great to know that I provide so many people with employment. That means a lot to my family and me. My father was a gutsy risk-taker in his early days. But, by his mid-40s, he gravitated towards spirituality. Nilon’s growth slowed february 2012 | INC. | 3 9
down in those days. The cantly different from the way my father company was put on operated it. I take more risks than my auto-pilot mode, manfather did. We are much more aggresaged almost entirely by sive and have been so since the senior management. 2004. We are also more cusWhen I joined tomer-focused. Earlier, MY TIP Nilon’s in 2002 after we sold products we Don’t enter my father’s demise, I made. Now, we find the business with the realised our senior out what our conthought that you own it. managers were not sumers want and Learn from those around ambitious enough. develop products you. You can turn your My father used to accordingly with strict ambitions into reality say—find people quality control. only if you take people better than you to run Rajheev and I didn’t along. the company. I set about want Nilon’s to remain a to do that. It took me 18 pickle company. We wanted months to find the right perto be known as a processed food son. My professor from IIM Ahmedcompany. So we diversified our product abad introduced me to Rajheev Agarwal. In portfolio to include instant mixes, ginger2004, he joined us as the company’s director garlic pastes and spices. Pickles are still our and CEO. That year proved to be the turning mainstay. But, they constitute only 45 per point for Nilon’s. We were making `10 crore cent of our total business today, compared to till then. Within a year, we had doubled that the 90 per cent before 2004. Also, we retail to `22 crore. Since then, Nilon’s has been from more than four lakh outlets, compared growing at a CAGR of 55 per cent. to just 35,000 in 2004. To ensure that the very Of course, I’ve inherited my business acu- best quality reaches our consumers we men from my father. But a lot of the lessons installed state-of-the-art microbial labs. We also came from Rajheev. When you grow up already had manufacturing plants in Mahain a family-run business, you only have one rashtra and Assam, now we are planning perspective. Many second-generation entrefacilities in south and north India to serve preneurs these days work for four to five years more regionally suitable food products.
Age: 31 Qualifications: Bachelor’s in Business Management, University of Bradford, an advanced course in Supply Chain Management from the Institute of Logistics and Transport, UK Designation: Director
Company Profile | Nilon’s
Founded by Suresh Sanghavi in 1962, Nilon’s has come a long way since its cottage industry days. Today, it is the largest producer and marketer of pickles globally, and one of the fastest-growing processed food companies in India. Its pickles, vermicelli, ginger-garlic pastes, squashes, jams and ketchups, are also exported to countries like France, Japan and Australia. Over the next three years, Nilon’s is targeting to become a `500-crore company. Sanghavi’s son, Dipak, is churning this growth, and confesses he’s more ambitious than his father probably ever was.
in different companies to get different perspectives, before they plunge into their family business. I didn’t get that chance because I joined Nilon’s right after college. Working with Rajheev exposed me to different insights. We make a good team. The way Nilon’s is run today is signifi4 0 | INC. | febrUARY 2012
Today our products travel to Japan, France, the US, South Africa, Dubai, Saudi Arabia, Malaysia, Singapore, Australia and Canada. I’m happy with our recent journey. Honestly, I would have been happier if Nilon’s had been as aggressive about branding and distribution before I entered the scene. When you
join a family business, comparisons between the father and son are bound to happen. In my case, these comparisons are not about business performance, but about whether I’ve retained my father’s values or not. I might have expanded the company, but people want to know whether I treat our employees the way my father did. He was a pious man. I’ve strived to continue to treat our employees with the same dignity. If I ever come to know of people, who think otherwise, I introspect to see if I’m following in my father’s footsteps. If not, I make the conscious effort to better my performance. The most important ingredient for a successful business is to put the right people on top. Once you have that, the rest of the things just fall into place.
When you work with your siblings, it’s best to have clear rules. Be prepared to convince the other with logic, and then support the decision reached.
Age: 29 Qualifications: BSc in Business and Management Studies, IILM Designation: Director
Bharat and Hitendra Joshi | ACTL
“Your successes and failures are more visible” With brotherly camaraderie and their father’s experience, Bharat and Hitendra Joshi are set to grow the family firm.
As told to Ira Swasti photograph BY Subhojit Paul Bharat Joshi (BJ): Our roles are clearly defined. If there’s something that involves both of us, we try to arrive at a consensus. Once that’s done, our final goahead comes from our father. We have grown up together and know each other well so there’s a sense of shared purpose that we bring. Of course, we have our set of disagreements. Every once in a while, Hiten will let me have my say, probably because of my seniority (or as he puts it, because I am old!). february 2012 | INC. | 41
might think that the second generation doesn’t need to struggle, but we do. Challenges are different for every generation. We have a firm foundation but running things efficiently is a challenge. When our father began, the business environment—licences, rules and policies—was harsh. Things are more business-friendly now but there’s a lot of competition from emerging entrepreneurs and logistic giants both in the domestic and international markets. These companies have deep pockets and great management. Thankfully, we have our father’s experiences to learn from. Books can’t match the wisdom that comes from three decades of experience. Our father often tells us—the biggest risks one can take is to set a low benchmark and the greatest threat is that you might achieve it. We work hard to make sure we don’t make that mistake. BJ: We need to demonstrate that we are here because we are good. When you are a member of the promoter family, your successes and failures are much more visible. Though I studied logistics and supply chain, and worked with Maersk, I had to work harder when I joined ACTL. When my father began, he had little capital with him and he didn’t have a guide: Hitendra and I have both. However, we don’t enjoy the complete autonomy he probaCompany Profile | actl bly had as he built this. Associated Container If I had my own business, Terminals Limited (ACTL) was I’d make mistakes, learn and founded by R.R. Joshi in 1997. hopefully, make better deciToday, the company manages inland container depots, freight sions. Right now, I make fewer stations and storage yards, and mistakes but if I have a new built the first private inland idea, it needs to go through an container depot in north India. internal process. I have to sell ACTL also built a rail siding that it internally—to my father and can carry export or import containers to and from gateway the management. Yet, I don’t ports. The company handles close think I can do without busito 75,000 TEUs (twenty feet ness. I’m good at it. I’m as pasequivalent units) per annum, and sionate about it as my other counts big firms like Goodyear, interests—photography, writPaharpur Cooling Towers, Esprit, Gap and WalMart as its clients. ing and doing radio shows.
Usually, the rules are clear—either you convince me or I do. Not that business decisions are made because we agree—it’s because we have a strong professional management team. If we come up with an idea, the team needs to get on board as well —believe in it as strongly as we do. We’ve never felt we have the upper-hand because we are the “scions”. Both of us joined at different stages and our father let us find our space. We went through the same training—essentially to understand all aspects and then to identify areas where we could add maximum value. Eventually, how we found our way to our respective domains within the company was more emergent than prescriptive. In 2004, after working for Maersk for three years, I joined ACTL as director of business development. I’m responsible for growth, investment strategies and new ventures. Hitendra is more involved in the day-to-day operations—handling terminal operations, marketing and being our interface with government, railways and customs. Hitendra Joshi: We work well together. In fact, it’s good that we have each other as we take on the task of expanding the company. People
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“You’re always debating your identity” Ankit Gupta’s mission is to multiply family wealth by diversifying into businesses that personally excite him. AS TOLD TO Shreyasi Singh photograph BY Subhojit Paul Growing up, I knew I was meant to do business and it’s what I thought of all the time. In 2003, after my engineering degree from Visvesvaraya Technological University, I knew it would be easy for me to join the family business and direct people as the “boss”. However, I decided to learn the ropes the hard way. I took up a job as an engineering trainee at the Aditya Birla Group for two years. Luckily, I got into a management role there. The company had just bought over Ultratech Cement. The complete co-ordination of the merger (with respect to IT) became my responsibility. I had the opportu-
Age: 30 Qualifications: Bachelor’s in computer engineering, Visvesvaraya Technological University, India; MBA, UCLA Anderson School of Management, USA Debut Year: 2008
nity to attend a few board meetings with Kumar Mangalam Birla himself. A truly fascinating experience, which further fuelled my interest in business. I have always aspired for a world-class education at a top-tier MBA school like Harvard. My father was also keen that I join his firm, after all I am his eldest son. So just after two years, I applied to management schools in the US. I was happy to get into some of the top 10 universities. During my MBA at UCLA, I began to realise what running a company or doing
operations guy. In the US, I figured what I loved about business: being an investor. So when I came back, I spent all of 2008 researching businesses I wished to create. Of course, I was involved with Holostik, but only to figure out the strategy and align it to execution. I had different ideas for the business, some of which my MY TIP father didn’t quite Don’t just expect your agree with, so we children to join the family agreed to disagree. business. Present it as one When you’re a secof their options. Founderond-generation parents are too involved. entrepreneur, one They want everything to fall is always debating into place the way they one’s own identity. I imagined it. That’s not the have debated what it right way to deal means to inherit, with it. maybe I overdo it a bit. But that’s helped me to figure out what I need to do. There were two ways to deal with my life—one, to say I didn’t care what my father had created. Second, to admit that it was my responsibility to take this on. What does that responsibility mean—creating wealth or just running a company? I see the firm as a way of creating wealth. My challenge is to take what my father has built and see how I can grow it—fast. The past four years have been great. I wanted us to move away from an individual identity to a team one, we have managed to do that. We were called Ukay Group (initials of my dad’s name), now we’re called the Holostik Group. Till recently, the belief was that the HR function was about making sure salaries were paid. That’s changed. Earlier, we worked out of five to six small offices in Noida. I business meant. Other lucrative options and job offers also came up and I was defi- insisted on our corporate building—made sure everybody sat at one office. That nitely tempted. But my exchange proaligned people to a common goal, changed gramme to IIM Ahmedabad along with my father persuasion got me back to India. their outlook. Individuals saw themselves as a stronger entity. I think the biggest He jokes that he got me engaged as an change my brother Shobhit and I have incentive to stay put in the country! brought on is for the management to have Because I’d spent six months with Holosan analytical mindset—of review mechatik before my MBA, I had a fair undernisms and framework to decide future standing of what the company was. avenues of growth and ways to approach it. However, I hadn’t figured out the role Of course, effecting these changes was which suited me best. When I came back, I difficult. But my father has shown himself knew one thing for certain—I was not an february 2012 | INC. | 4 3
Generation Company Profile | holostik group
U.K. Gupta founded Holostik Group in 1978. The interests of the group range from manufacturing of holograms and tax labels, warehousing services, hospitality, real estate development and chemical trading. The group’s flagship organisation, Holostik India, is the market leader in security holograms in India, and the largest manufacturer by volume of the product in the world. The Rs 100 crore plus group has more than 700 employees.
to be very adaptive, despite resisting sometimes. But if he liked something, he’d change it faster than I could imagine. I’ve got used to this now—of selling my ideas to him. It’s natural for parents to continue to think of you as kids. But when they realise that what you said is paying out, they start trusting your instincts. I think the biggest difference in my father’s approach to business and mine is that I am data-driven when it comes to decision-making. In the 80s and 90s, decisions were taken by gut feel rather than data and analysis—also there were little data available to analyse. Presently, data is freely available. If you haven’t done your
homework you are by default starting on a backfoot. The past four years of working with my dad has brought us closer, where we mix his gut and my data-driven analysis and decision-making. And I think it has worked beautifully. We’ve diversified our group into other areas—real estate investments and development, chemical trading and hospitality. Real estate excites me. There’s so much energy in it. Each transaction is different. Though, Holostik India is the largest revenue generator of the group, I’m not involved in it operationally. I see my larger role in the business as managing our portfolio of businesses. Does my not being involved with
expert view Mitali Bose Hay Group
Crafting the Script There is a way to make a company’s change of guard smoother: through dialogues.
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Holostik on a day-to-day disappoint my father? Maybe, but I am what I am. My younger brother is now actively working with Holostik India. Maybe he will be the one to run that show or someone else will. But that’s not my choice or my father’s—it is Shobhit’s decision to make. I think of every business as an investment. Holostik India is also an investment for me. That’s the huge difference between the first and second generation. My businesses and I are different entities. My father’s generation never had the option of exiting. It was always supposed to be a khandani business. I don’t see things like that. For example, I am very open to selling the businesses or assets I have created. I am a father now, but I’m not creating anything for my child “to take over”. My plans are simple—whatever I’m doing, I’m doing it for myself. I’ll make sure I’ll leave a lot for my child. But will he run the company I create? That’s a decision that only he can make.
Generational transitions are landmark events in an organisation’s life-cycle. Yet, both the founding first generation and its following one often find it difficult to get the process right. Such phases—where the two generations jostle for identity—can be messy. The change of guard, if not scripted perfectly, can have damaging ramifications for protagonists and their larger audience (family, clients and employees). In business, an entrepreneur’s role is a combination of personal aspirations, company vision, and in family businesses, the legacy they choose to uphold in terms of values and beliefs. These factors interplay to create disruptive tensions that drive actions. Often, they lead to different outcomes. For example, while working on an organisational design engagement with a mid to large manufacturing conglomerate, our firm was involved in an invariably-long debate on top-level governance structure. I have always found that such discussions often lead to debate because it involves deliberating the role of the entrepreneur and the first-level of professional management. Towards the latter part of our discussion, the firm’s chairman invited his son to join in. The son had been working in the conglomerate for three years, but was primarily responsible for incubating and running businesses in the services space. The son had interesting ideas. He said he was clear that he did not want to get involved in the day-today running of the businesses he was responsible for. His role, he said, was to build the business and the team, and provide oversight where required. He rounded-off by saying that he knew what he wanted from his life. And he didn’t Continued on Page 47
Age: 37 Qualifications: Masters in hair designing and make up, Pivot Point International, Chicago Debut Year: 2002
The Blossom Kochhar Group
“For me, my mother is my brand” One could handle first-generation choices as excess baggage or as a legacy—Samantha Kochhar went for the second option. As told to ira swasti photograph BY Subhojit Paul
I was a young girl when my mother started the company. I grew up in her salons and back stage in fashion shows. When you grow up around glamour, it’s what you want to do. For me, it’s been a way of life. I have looked after the company’s training business since 2002. But when my father passed away in July 2011, I took over as the MD of the group. My mother is still the chairperson. I feel an immense sense of responsibility now. I’m aware it’s not about us as a family. There’s a larger picture to take care of. My father’s last words to me were, “You’re responsible for more than 1,000 people because they get their salaries from this firm. It’s your choice to decide what to do next—either help them jump february 2012 | INC. | 4 5
to the next level or sell-off everything.” That leap into the big unknown is scary, especially because things are very comfortable right now. Our base is secure. We have plans to add new categories to our product line and give them a new look this year. To do that, we need to tighten our business processes. That’s been my focus ever since I’ve taken on the role of the MD. We have over 1,300 employees. When you manage these many people, transparency in business processes may not come through at each level. But I want to work on that. Yes, people love to compare us. But my mother and I have a good laugh about it. We are two different individuals. I am a lot like my dad. My mother is a creative person and I am systems and process-oriented, as was my dad. Their marriage was great, and the differences work very well for the two of us now. For me, my mother is my brand. She started the company with `5,000. I’ve seen the hard work my parents put in it. I absolutely believe it’s much tougher for the first generation. They build things up from scratch. As inheritors, the second generation needs to ensure that they take the business several notches higher. Yes, we have to work with the choices the first generation makes: people and processes they invest in. There are two ways to deal with the choices: one can consider them as baggages or modify them smartly to take the company forward. What can be better than working with your family? It’s the safest work environment. You only have to put up with your mom, father or brother— you’ve been doing that in any case! It’s not that I’ve just been Blossom Kochhar’s daughter. I have my own professional standing as a make-up and hair
Do an early succession planning for the next generation. They should be mentored well and initiated when the first generation is still in control so that they can work together to create and re-energise the brand.
artiste. I’ve worked with the biggest beauty companies— L’Oreal, Wella and Schwarzkopf. People told me I should’ve started my own brand, Samantha Kochhar. But I am not interested. Yes, there was a phase in 2011 when I decided to partner with somebody else. Soon I realised it was a mistake. Some people had approached me to partner in a gym-cum-coffee shopcum-salon. I realised it was better to concentrate on something that you have, rather than set up another.
THE Blossom Kochhar group
Blossom Kochhar has been a beautician for nearly three decades. She’s built that skill into a viable company—coming up with a brand of aromatherapy-based cosmetic products, a creative arts and design school for make-up and hairstyle training, and a chain of over 100 beauty salons pan-India. Her daughter, Samantha Kochhar is now leading their company, and wants to take the company to a turnover of `400 crore.
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Legacy is a valuable thing. I can see my son growing up with what I’m creating every day. It’s the way I grew up, seeing my parents make the Blossom Kochhar brand. It’s probably why my first love is teaching. I have already trained around 700 make-up artistes. When you teach, you groom the next generation. Again, I need to thank my mother for instilling this passion in me. Six years ago, after having completed big projects and movies such as Monsoon Wedding and The Namesake, my mother asked me to concentrate on our training business. I was very upset. I felt it was unfair that I should teach everything I’ve spent so many years learning on the job. To me, it seemed like I was creating my own competition. She said something that’s stuck with me since. “There’s a time when you put down your brush and teach someone else to pick it up.” It’s kind of like what she is doing with me.
Generation Continued from Page 44 want to postpone those priorities. Good teams, he added, should run day-today operations. To make sure this happened, he had painstakingly ensured there was no proverbial “Chinese Wall” between the business he managed and the ones under his father’s direct management control. Of course, he had an advantage that other second generation leaders might not—because he was handling new businesses, his organisational set-up didn’t have a “legacy” or involvement of the previous generation. To a large extent this insulated employees of both the existing manufacturing company and the new services company from changes in management style and philosophy. Employees of the services company were able to create their own roadmap—with practices, values, policies, norms and cultural anchors more aligned to the nature of business and targeted talent pool. Similarly, I remember being impressed by the clarity of vision of a newly-designated joint director of a `1,000-crore plus infrastructure company. The second-generation leader in question had moved back from Europe after finishing his management studies and was working in a multinational services firm for two years. At that point he was prepared to take on a more active role and put his vision into action after working with his father for an year. It wasn’t that he was the sole heir. His younger brother, too, was involved in the business, while his father was active as well. However, he stood his stead and I was struck by his confidence and clarity within the first few meetings itself. He was clear about his role–he wished to “run” a certain “kind of company” and therefore had positioned himself in an “operational” role. His vision for the company was different from its reality at that time and at a variance to how the industry viewed itself. But he was undeterred. He demonstrated fortitude and foresight as he successfully transformed his firm—both in business terms and in reputation. In his case, the message from the first generation (his father) was clear. The patriarch communicated publicly that his sons were in charge. Of course, there was the usual skepticism from sections of the old guard and the oft-seen attempts by the former inner coterie to undermine the new generation’s authority. However, the elder son’s clarity helped in building the organisation to support both his vision and aspiration. Contrast this to another Indian entrepreneur we’ve worked with. He runs a large manufacturing firm and has struggled to work out his management style—to get
Owners of family businesses should remember that the transition becomes smoother when both generations acknowledge the fact that the guard is changing—and so are the roles.
involved in the business only when there is growth or investment opportunity mainly to balance the stronglyembedded legacy of a very hands-on management mantra his father followed. His father had built the business from scratch. He was respected for his knowledge of every operational element. The son ideally wanted to play the classic investor-promoter role and not the hands-on, chieftain role that his father had. Because he and his father had worked together for over nine years, he tried to inculcate his father’s style. This resulted in him oscillating between two very different styles of management. As a result, his team received confusing, often conflicting, signals on what was expected. In a few years, his firm went through instability, lack of cohesiveness and ineffective decision-making. The cascading impact was severe on teams that the son managed. When two generations overlap for an extended period—like in this case—the inability to break away from tradition to create a unique management footprint may arise. I have noticed that the first generation plays a crucial role in determining how the second generation and employees experience the transition. Their message sets the stage for the change. Their willingness (or lack of it) creates space for the next generation. Another client we had the opportunity to work with had a messy transition because of the way the first generation handled the process. The company’s chairman had clearly stated to his management team (including his confidants, family veterans and professionals) that his son would take over in the next few years. Yet, he qualified this by adding that his son had a long way to go to earn his stripes. During the course of the transition, in meetings, the chairman constantly second-guessed his son’s decisions. Soon, the message became clear–the son could only claim rights to the chairman’s seat when he had the blessing of the entire management team. The son had already spent two years in the business, had many ideas about re-inventing and growing the business and was raring to go. But the transition was extended and marked by moments of frustrations—for both generations. It turned out to be an uncomfortable experience for the
entire management team. Employees remained unsure of which directions of thought to follow, for there existed two parallel organisations—one that worked on principles of the father and the other of the son. For employees, it was difficult to exist in these differing ecosystems with conflicting rules of engagement. Several one of them got disillusioned and left. Just like the first generation needs to show their willingness to delegate, the new generation, too, needs to visibly display that they’re ready to sit in the hot seat. We have encountered visible reluctance from the second generation in certain instances. Once a client of ours—a chairman of a financial services firm— announced that his son was to become the joint managing director. He entrusted the son with the task of taking on an ailing vertical—with a clear mandate to drive growth and change. In our interactions with the newly-appointed heir, we saw a certain reticence in taking on that role. In management meetings, the son always deferred to his father and verbalised the need to “preserve the core”. While the business screamed to break away from the past, he continued to play by old rules. He’d often say himself that it would take him four to five years to be ready. His stubborn reluctance kept him from really coming to the party and calling the shots, despite the chairman (his father) actively calling on him to do so. Clearly, his was a self-fulfilling prophecy. It was only five years after staying on the fringes that he realised the only way to sustain his legacy was to actually step into the enormous shoes of his father, and take on the centre stage. In short, owners of family businesses should remember that the transition becomes smoother when both generations acknowledge the fact that the guard is changing—and so are the roles. There should be a clear dialogue between generations on roles and time-lines. There should be clarity on the journey that they will have to make. Also, taking along their core management teams, family councils and keeping employees tuned into the transition are important steps that need to be taken right. february 2012 | INC. | 47
Well Positioned Patu Keswani wants to slow down even as he races ahead with new businesses. Itâ€™s a contradiction he seems to enjoy.
HOW I DID IT
Patu Keswani Room to Roam
An unlikely entrepreneur, Patu Keswani combined engineerlike ratios to build a perfect hotel in Gurgaon in 2004. Today, his Lemon Tree Hotels is a pan-India hospitality group—India’s fourth largest, Keswani claims—with 2,000 rooms across 13 cities. Lemon Tree Hotels have a strong brand—of being both affordable and efficient, much like a low-cost airline. In two years, Keswani wants his venture to be the largest hotel company in India with 4,000 rooms and `700 in turnover. He’s also building other companies in affordable housing and vocational training—competencies, he says, he’s developed while building Lemon Tree. as told to Shreyasi Singh photograph by Subhojit Paul
My father was in the railways, and my mother was an army doctor. Growing up, it never crossed my mind that I’d be working for myself. Being an entrepreneur is very life cycle, environment-linked. Like in a lot of business families, some people know right from the beginning that they don’t want to work for anybody else. It wasn’t like that for me. I did my Bachelor’s in electrical engineering from IIT Delhi in 1981
and followed that up with a management degree from IIM Calcutta. I started my career with Tata Administrative Services. I spent 15 years with the Tata Group. My last designation in the Tata Group was as the senior VP and COO of the Taj Group of Hotels. There were 21 hotels in my group. I wanted to improve their performance, so I made a lot of ratios. Basically, I wanted to make a services business, like a manufacturing process, by identifying the key levers to success. I asked all hotels to send me their ratios. For each ratio, I picked up the best and hypothesised that it’s possible to build a hotel that will make 50 per cent profit.
The weave of life started to come together. After Taj Hotels, I
joined AT Kearney, an American consulting firm. They paid me a february 2012 | INC. | 49
how i did it
lot of money for that time—over a crore each year plus bonuses. I thought I’d work for three years, make a million dollars (in the flush of youth, I thought I’d get a lot of bonuses) and do whatever I wanted after that. With them too, I worked with hotel clients and saw how the valuation game worked. If I put in a buck, made half of that in profit, I knew I could get a valuation three times my investment. This was still the late 1990s. We were used to 10 per cent returns on capital—the Reserve Bank of India rate. Going out on my own began to make smart business sense. My decision to be an entrepreneur was taken in five minutes. I’d managed to save around `2.5 to 3 crore. This freed me from the tyranny of material needs and liberated me from having to work for anybody
crore from them. But I ensured that I was still the main shareholder. Basically, I wanted to make a hotel which would be the low-cost carrier equivalent of the hospitality industry like an Indigo. There are three things you expect in an airline—safety, cleanliness and on-time performance. These are basic parameters. But, if the market is not performing to these expectations, and you can offer these services, that becomes your differentiator. Like Indigo did. We did that with Lemon Tree. The Gurgaon hotel, which opened in May 2004, did very well. Some HNIs who knew me well, came and put in money and I created a new company. We opened a second hotel in Gurgaon exactly a year later. We were forced to develop many core
competencies to build the hotels. In the
“My decision to be an entrepreneur was taken in five minutes. My parents cribbed like mad to everyone else but me when they heard it.” else. I could say no to a job. My parents cribbed like mad to everyone else but me when they heard I was taking the step. Being a businessman in those days had a connotation of being corrupt. At that time, my ambition was deter-
mined by the money I had. Then, the point of building Lemon Tree was not Lemon Tree. It was to build one hotel with the “perfect ratios” that I’d worked out at Taj. When I found the plot of land in Gurgaon where I would build the first hotel, I didn’t get a loan. I’d grown a ponytail by then, and bankers thought I was some kind of a junkie. I needed more money, so friends pitched in. I raised some `6 to 7
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US, which is the most mature market, developing hotels is relatively easy. The tough part is getting customers and getting your brand to stand out. In India, there are fewer hotels mainly because of the structural issues related to the real estate sector. While in the US, it’s the brand that matters; in India, it’s the hotel that is important. To run hotels here, you have to own the assets. Also, hotels in India are built according to individual specifications. You can’t have a coherent brand if you work with different products and vastly different-looking hotels. My perspective was to have a certain standardised product that offers standardised services—what the brand stands for. So,
we started building our own hotels. Construction became a core competence. And, we became an end-to-end player—owning and developing hotels, managing hotel services and having a brand. Plus, when we started, we got people who
couldn’t find jobs in the Taj, ITC or an Oberoi. We had to become competent at training. It was another core area that we developed. I have a low threshold for routine. When Lemon Tree grew to two, three then four hotels, I started to get bored with it. When it started expanding, I had to ask myself—did I want to get on to this roller coaster? But I was being driven by people who had invested in the company, and wanted to see it grow.
In July 2006, things got exciting when Warburg Pincus invested `280 crore in the
company. We took Lemon Tree to an allIndia scale. We also launched another brand, Red Fox Hotels, a new chain of limited service budget or economy hotels, in mid-2006. While room tariffs in Lemon Tree were in the `3,000 to 5,000 per night category, in Red Fox, we targeted `800 to 2,000 per room per night. Things have moved very fast for us. In
less than 10 years, Lemon Tree has gone through four distinct phases. In the beginning, we were one brand, two hotels, 100 rooms, 100 people and `10 crore in turnover. Two years later, we had 300 rooms across five cities, a turnover of `30 crore, but still one brand. Two years later, we were 10 hotels, `100 crore turnover, two brands, and 1,000 people across eight cities. Today, we’re the fourth-largest hotel company in India with more than 2,000 rooms and an equal number of people across two brands in 13 cities. Two years from now, we’ll be close to the largest hotel company in India with 4,000 rooms and `700 crore in turnover. The best years for me were the first three years—the journey was incredible. Now, we have the problems of a large company. Today, the challenges are political and
how i did it
“Education excites me more than real estate. I want to educate 10 million people.”
chain and see if I could disaggregrate them into individual businesses. People ask me why real estate. Well, we
have the competence to build in time, in cost and in quality to the specifications we laid out. That’s not easily found in the real estate business. Education excites me even more than real estate. There are 600 million Indians under the age of 30. Most companies only chase the 30 million or so for jobs, the ones who can speak English. If I can help play a role in educating and making employable a few million of the 570 million we don’t look at, that’s something worth doing. I want to educate 10 million people. I don’t know how long it will take. But it’s a target I’ve set for myself, a promise I made to my dad.
Unspoken Rewards Patu Keswani receives the Helen Keller awards for employing 110 deaf and dumb people in Lemon Tree.
cultural. It’s not the stuff that I find exciting. They are similar to the challenges I faced as a senior employee at Taj Hotels or at AT Kearney 10 years ago. People are our challenge. We have no other problems. The business model works, I can extend it. The brand doesn’t need too much peopleinvestment. It’s the management of hotels which we need to scale-up. That is heavily dependent on people. How do I get my core 1,000 people, who have stayed with me over the past four years, to actualise their potential? They have an attitude and a passion now. But, they still lack experience. If you work with Oberoi or Taj, you become general manager of a 200-room hotel after 15 years. A typical general manager with me is 30 years old, has worked for maximum five years and manages an equally complex operation. They still need a lot of soft-skills training and maturity. Earlier, my philosophy was to promote internally. But now at the scale at which we’re growing, we need to get
external talent. For the next two years, my role will be to develop talent and manage the culture. My milestone for Lemon Tree is to be the
largest hotel chain in Asia, in terms of owned-rooms. I think we can get there. We’ve also been committed to hiring differently-abled people in our workforce. Five per cent of our employees, roughly around 110 employees, are hearing and speech impaired. I want to raise that number to 10 per cent by 2013. In fact, winning the Shell Helen Keller Award in 2010, and the realisation that we could impact people’s lives felt great.
The real task ahead for me is to see
through the new businesses that I’m setting up. These are a real estate joint venture to develop affordable housing with Warburg Pincus, and a vocational education business. Over the last couple of years, these businesses have spun-off from the competencies I was forced to develop. I started to look at the value
Ideally, I’m looking at being a very involved angel investor to these businesses. I don’t think I can give them the passion and attention I gave to Lemon Tree 10 years ago. I’m older, the fires have ebbed. But I bring on board more experience, more capital and can leverage our strengths—hopefully, that should compensate for the passion. I’ve reached a stage where I don’t want to be so involved any more. Right now, I’m hands-on. I shouldn’t be, but there it is. I’d be very happy to let go, but I don’t think the organisation is in a place where I can. We want to take the company public in 2013. After that, I’ll just be a chairman-cum-shareholder. Because of the downturn, the past two years have required my close attention. A lot of the things that we had planned, like getting off the ground with our affordable housing project, did not happen. If there’s one lesson that I’ve learnt as an entrepreneur, it is that the business model gets screwed up if you don’t factor in the fundamentals properly. It’s the wrong time to invest in real estate right now. So, we’ll wait. It’s a large investment and we want to do it right. If you do it badly the first time, you’re in disaster management mode from the word go. february 2012 | INC. | 51
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WHY IS IT SO HARD to find GOOD PEOPLE? THE PROBLEM MIGHT BE YOU hiring traps
By April Joyner
Illustrations by Shigil N
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In this job market, you might expect that hiring new employees would be easy. But many entrepreneurs still struggle to find good people. In a recent survey of Inc. 5000 CEOs, hiring edged out even the economy and government regulation as their top concern, with nearly one-quarter of respondents identifying it as the biggest challenge they had faced in the preceding three months. To be sure, not every candidate is a rockstar. But if you keep turning up dud after dud, the problem may not be the applicant pool. In a quest to find the best workers, entrepreneurs sometimes wind up adopting hiring practices that are actually detrimental to their companies. Here are the four most common problems that afflict interviewers.
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Unhealthy attraction Telltale symptom: A combative work environment Cause: A natural gravitation towards like-minded personalities
are closely tied to their businesses, so it’s not surprising that companies often absorb many of their founders’ personality traits. A founderdriven culture can be a good thing. Steve Jobs’s design ethos, for instance, helped mould Apple into a successful business. But when founders fill companies with their clones, it can lead to problems. That’s what happened to Todd Morris. When Morris founded BrickHouse Security, a New York City-based company that sells hidden cameras and other surveillance products online, he was determined to keep the company lean. For the first few months,
Without a deliberate hiring strategy, founders often unconsciously gravitate toward job candidates who share their personality traits.
he worked alone. Over the next two years, he gradually added a handful of employees. Morris picked people who were a lot like himself: driven and independent. But as the company grew, collaboration became increasingly important. Employees started complaining that there was a toxic work environment. It had become
like something out of Lord of the Flies, says Morris. “You couldn’t leave them alone, or they’d be at each other’s throats,” he says. Morris wasn’t sure how this had happened. With complaints mounting, he hired a consulting firm, PI Worldwide, to help fix the culture problem. The firm administered personality tests to the whole company, including Morris. The results were clear: certain employees refused to listen to the ideas of others and were clashing with the rest of the group. And those troublemakers were mostly Morris’s early
hires. For the sake of the company, Morris had to ask those employees to leave. Like Morris, many entrepreneurs fail to consider team dynamics when launching their businesses. The Stanford Project on Emerging Companies, a study of nearly 200 Silicon Valley start-ups from 1994 to 2002, revealed that most CEOs put little thought into their hiring strategies. As the companies grew and evolved, the CEOs discovered
that many employees no longer fit in. “People have the idea that they’ll cross that bridge when they come to it,” says James Baron, who co-directed the study and is now a professor at the Yale School of Management. “They seriously underestimate how costly and difficult that is.” Without a deliberate hiring strategy, founders often unconsciously gravitate towards job candidates who share their personality traits. “Sometimes we use ourselves as a yardstick,” says Linda A. Hill, a professor at Harvard Business School and the coauthor of Being the Boss. But, she says, people tend to overestimate their strengths and downplay their weaknesses. So, by hiring people like themselves, business leaders may inadvertently populate their companies with CEOlevel egos. These days, all job applicants at BrickHouse are required to take personality assessment tests before february 2012 | INC. | 5 5
coming in for an interview. Morris looks for signs that people work well with others, and he is cautious about hiring candidates whose test results indicate big egos. And Morris meets with prospective hires only after they have already received a thumbs-up from a department manager and a couple of potential co-workers. The changes have already had a noticeable effect. Its 55 employees are getting along, and turnover has dropped 10 per cent. And Morris has gained a greater understanding of his own weaknesses. “I had, through narcissism, hired people who were similar to me,” he says. “It created an environment where there was too much conflict and not enough cooperation.” Treatment: n Be strategic about the company culture. Identify the company’s core values and long-term goals. Hire employees who embody and uphold those values. n Involve key managers and employees in the interview process to ensure that new employees will work as well with their bosses as with their peers.
What matters more,
skills or attitude? Entrepreneurs often say that they value intangible qualities above bullet points on a resumé. But in practice, many are hesitant to hire an employee who hasn’t already held an identical job. And sometimes the quest to find the best candidate becomes a hunt for the person with the longest list of credentials. Paul Millman has reasons not to fall into this trap. He is the president of Chroma Technology, a Bellows Falls, Vermont-based manufacturer of
optical filters for scientific equipment. Before Millman cofounded Chroma, in 1991, he held a string of short-lived sales jobs, including one at a company with which he now competes. Millman had no scientific training, but he absorbed a lot selling optical filters, enough to launch a competing business. Millman’s views haven’t exactly been reflected in Chroma’s hiring process, however. Chroma is owned and run by its 98 employees. Four of Chroma’s employees serve on a steering committee, which makes most management decisions. Last fall, when Chroma added some customer service positions, the committee created a job posting requiring applicants to have either a biol-
Perfectionism Telltale symptom: A surprisingly small number of applicants Cause: An overemphasis on credentials
ogy degree or at least five years of experience in the optical filters industry. The committee figured that sort of experience would come in handy, given that the new reps would also be charged with helping customers—mostly biologists—select the right optical filters for their needs. But very few people applied for the job. The positions sat empty for six months. Millman was perplexed by the stringent requirements. “I didn’t have those credentials,” he says. And in the company’s early days, people routinely performed tasks in which they hadn’t been formally trained. One of Millman’s co-founders was even able to develop software for Chroma’s manufacturing equipment, despite never having had a programming job. Plus, says Millman, Chroma already has some scientists on staff. Every company wants the best employees it can afford, but some businesses have unrealistic expectations. “Sometimes companies expect a combination of Superman and Batman,” says Claudio Fernández-Aráoz, the author of Great People Decisions and a partner at the executive recruiting firm Egon Zehnder International. In reality, the best employees are those who buy into the founder’s vision and are willing to do what it takes to achieve it, says Saras Sarasvathy, an associate
“Sometimes companies expect a combination of Superman and Batman.” 5 6 | INC. | febrUARY 2012
professor at the University of Virginia’s Darden School of Business. Those aren’t necessarily the people with the most experience. While studying how successful serial entrepreneurs approach decision making, Sarasvathy found that they placed a greater emphasis on a candidate’s aptitude and commitment than on a candidate’s previous positions. That is wise, because an impressive resumé may give a false impression about a candidate’s potential, says Boris Groysberg, a professor at Harvard Business School and the author of Chasing Stars. In research for his book, he found that star employees from various businesses owed much of their success to their companies’ processes and cultures. When these employees moved to other companies that lacked the same infrastructure, most failed to match their past performances. Ultimately, Chroma did manage to find a new customer service rep with a biology degree. But it also ended up hiring two reps who did not meet the criteria in the job posting, and both of them have worked out just fine.
Gutter Credit here
Treatment: n Decide which qualifications are truly essential and which skills can be learnt on the job. An excessive list of requirements may discourage good people from applying. n Develop an on-boarding programme. Even the most experienced hires need time to adjust to a new environment.
Photograph by name tk
Hiring too slowly can be just as counterproductive as making a snap judgment.
Telltale symptom: Rounds and rounds of interviews that go nowhere Cause: A fear of making mistakes. Typically a reaction to previous bad hires
Any job seeker knows
from experience how much first impressions matter. In fact, they probably matter too much. A single interview, after all, rarely uncovers enough information to determine whether someone would be a good employee or not. To compensate for this shortcoming, many entrepreneurs follow the adage to hire slowly, fire fast. But hiring too slowly can be just as counterproductive as making a snap judgment, especially when entrepreneurs stack additional steps onto the interview process without clear objectives in mind. Gary Jaffe, CEO of The Booksource, a St. Louis-based distributor of schoolbooks with 135 employees, made that mistake last fall when he began
looking for a new sales director. The search ended up taking five months—two months longer than the contract period for the recruiter he enlisted. Each candidate was required to go through two personality assessments and about four hours’ worth of interviews, meeting with each of the company’s three managers. After sitting in on each interview, Jaffe privately questioned the candidates he found promising. His impressions of candidates would often start out positive but deteriorate as the interviews dragged on. “In the first two hours, I would have absolutely hired this person,”
says Jaffe. “By lunch, he was questionable.” There are many reasons entrepreneurs prolong the hiring process. For starters, adding employees at a small company is tricky. “Once you insert a new person into the mix, you change the team’s dynamics completely,” says Lanny Goodman, CEO of Management Technologies, an Albuquerque-based firm that trains entrepreneurs in management techniques. Previous hiring mistakes can also cause entrepreneurs to drag their feet: because they secondguess their opinions, entrepreneurs add extra rounds of interviews and assessments. That was the case for Jaffe. After firing two of the company’s executives, he had begun to doubt his ability to make good hiring decisions. “It’s so frustrating when you get it wrong,” says Jaffe. “It takes so much effort to fit this person, and you say, ‘Why is this not working?’ ” He was determined to get it right this time. One of the most promising applicants for the sales director position was referred by a trusted source. Jaffe’s father, Sandy, who founded The Booksource and had been its CEO, had met the candidate in a business mentoring group. But despite the family recommendation, personality tests, and rounds of interviews, Jaffe was february 2012 | INC. | 5 7
still unsure. So he invited the candidate out to dinner. After an evening of polite small talk and Southwestern cuisine, Jaffe finally made an offer. But even after all that, Jaffe is again trying to fill the position. Less than three weeks after the sales director joined the company, Jaffe fired him. No matter how many times you interview candidates, there’s no way to accurately predict how well they will perform. Entrepreneurs who drag out the hiring process put off the ultimate test of a candidate: time on the job. Plus, as the months pass and pressure mounts to fill critical positions, entrepreneurs sometimes find themselves making the same hasty decisions they sought to avoid in the first place. Treatment: n Set clear objectives for each stage of the interview process. Make sure follow-up interviews aren’t rehashing the same discussions from previous meetings. n Limit the number of people evaluating candidates. It’s wise to seek a second opinion, but involving more than two or three other managers can make it difficult to get a clear assessment. n Trust your instincts. As the hiring process drags on, you are more likely to ignore red flags.
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Telltale symptoms: Frantic hiring searches, overworked employees Cause: Hiring isn’t a priority until it becomes a crisis
At some companies, new
employees are emergency purchases. With limited time and funds, entrepreneurs seek employees only when it’s absolutely necessary for their company’s continued growth. Then they frantically attempt to fill the positions. Recently, that became an issue for Nick Bock. In the early years of his company, Five Nines Technology Group, an IT consulting firm in Lincoln, Nebraska, Bock didn’t have to worry about hiring. He added only a handful of positions a year. And because Five Nines had quickly earned a strong local reputation, the office received a steady stream of resumés from computer engineers, even when there were no jobs to fill.
But lately Bock has struggled. Eighteen months ago, after taking on several new clients, Five Nines had to more than double its head count, from 23 to 47 employees. Bock hadn’t anticipated how difficult it would be to staff up. After quickly tapping out his leads, Bock scrambled to find suitable candidates. Meanwhile, his team of engineers was putting in extra-long days to handle all the new work. One person quit. Bock tried to smooth things over by giving out bonuses. Recruiting is a lot like sales. It involves developing a pipeline and building relationships. Bock realises that now and has made recruiting a priority.
He schedules meetings with promising engineers even when Five Nines doesn’t have any openings. And when there is a vacancy, Bock publicises it on job boards and the company’s Facebook and Twitter pages. He also asks employees to spread the word. Bock personally reviews each job listing, occasionally recommending changes to better attract the attention of skilled candidates. He also tries to scoop up talent at the earliest opportunity. If a candidate seems like a good fit, he will extend a job offer before finishing the round of interviews. Bock’s new approach has already had a big effect on Five Nines. The company now hires at least one employee every six weeks. Still, Bock thinks he could do more to streamline the hiring process. “I would love to always have one or two people queued up and ready to go,” says Bock. “I don’t know if we’ll ever get to that, but if you don’t have something you’re striving for, it’s easy to slack off.” Treatment: n Make recruiting an ongoing process. Maintain a list of prospective hires, even if there are no immediate openings. n Create an employee referral programme. Also tap social networks, professional organisations, industry trade shows, and local universities. n Stay in contact with talented prospects through occasional lunch dates or meetings. April Joyner is a senior reporter at Inc.
Technology Why Google is eyeing small businesses to make it big. this page Marketing How Kim page 60 The Way I Work Serial
Kardashian’s ShoeDazzle turns custtomers into spokespeople
entrepreneur Manish Sharma on founding, and finding his true love—Printo. He isn’t your regular control-freak. Sharma loves delegating everything that involves following rules and processes to a T. His joy comes from making the rules and the know-how instead. page 64
Can MyCity4Kids enlist investors to give it `6 crore ? page 62
strategy Technology Come to Google Google is making a big push at small businesses. Here’s why Google wants your business—very badly.
Of course, so does nearly every other major technology company—and nearly all of them have the small-business outreach efforts to prove it. But the search-engine behemoth is going to near unprecedented lengths in its efforts to secure the business of America’s entrepreneurs. The company is in the midst of its Get Your Business Online tour—a sort of travelling e-commerce circus featuring free workshops, led by Google experts, on creating websites and hands-on coaching in using tools such as Google Analytics, Google Places, and AdWords. But wait, there’s more: in partnership with Intuit, Google is also offering a year of free website hosting and, in some cases, $75 of free AdWords. The events have been held in 24 cities nationwide; so far, more than 20,000 businesses have signed up. One of them is Tall Paul’s Tall Mall, in Montpelier, Vermont. The retailer of furniture and ILLUSTRATION by Prince Antony
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bedding for the over-6-foot-4 set has had a website for more than a decade, but owner Paul Hartmann was concerned that online business wasn’t growing fast enough. So when the Google team rolled in to Burlington in August, Hartmann, along with some 500 others, decided to hear it out. He wound up pocketing $75 worth of AdWords and getting help setting up a couple of search-engine campaigns. He also plans to check out some of Google’s cloud-based business apps. “It was really useful,” Hartmann says of the event. “I got more out of it than I thought I would.” For a $170-billion giant like Google, merchants like Hartmann may seem like small potatoes. But connecting with businesses like his is key to the company’s efforts to stay on top of online advertising, which accounted for $28.2 billion of the company’s $29.3 billion in revenue in 2010. It’s important as consumers increasingly search for things and make purchases using their mobile devices. “Everything is moving to mobile faster than anticipated,” says Ben Schachter, an analyst at Macquarie Group. Getting more small businesses online, he says, is about giving mobile users better search results—Google says 40 per cent of its mobile searches are for local information—and, perhaps more important, building the customer base for new mobile advertising products. Some 63 per cent of small businesses still lack websites, points out Scott Levitan, Google’s director of small-business engagement. “There’s a perception that it’s hard, expensive, and timeconsuming,” Levitan says. “We want to demystify that by making it fast, easy, and free.” Google’s moves have not gone unnoticed by others in the tech world, most notably by Microsoft. After all, as more companies begin to rely on AdWords and Google Analytics for their online marketing, they are also more likely to consider Google’s cloud-software offerings as a platform for running their businesses. Indeed, Google argues that its e-mail, calendar, word-processing, and video-chat applications may be all the tools that many small businesses need. What’s more, those tools are free for companies with 10 people or fewer. (The paid version, Google Apps for Business, costs about $50 per user a year.) Microsoft, of course, has owned the market for business software since people started using computers to run their companies. In a 2010 survey by Forrester Research, all respondents reported using some form of Microsoft Office. But other findings were potentially worrisome for Microsoft: 72 per cent of those surveyed said they were actively looking for, or already using, an alternative to Office. That helps explain Office 365, a cloud-based platform Microsoft launched in June that offers a set of tools similar to those of Google Apps for Business, at a competitive price. Both cost about $5 per user per month. Meantime, Microsoft spokeswoman Tracy O’Dowd says business owners would be wise to think twice before partnering with Google. “Free is never really free,” O’Dowd says. “Google’s business is about scanning your personal data to serve you ads. Small businesses should be leery of any company whose business model is at odds with user privacy and security.” Google spokesperson Rob Shilkin says the Get Your Business Online tour is nothing more than what its name implies—a drive to help business owners better utilise the web. “We have partnered with Intuit to offer websites to help more businesses get online,” says Shilkin. “That makes the web better, which is good for everyone.” —Adam Bluestein 6 0 | INC. | febrUARY 2012
Marketing Ready for their close-up Video testimonials turn customers into spokespeople With reality star Kim Kardashian serving as the company’s co-founder and chief fashion stylist, plus a recent $40 million round of funding led by the powerhouse VC firm Andreessen Horowitz, online shoe-of-the-month club ShoeDazzle has no shortage of big names touting the company. Yet one of ShoeDazzle’s most persuasive spokespeople is an anonymous teenage girl whose online video testimonial posted on the ShoeDazzle website has been viewed more than 37,000 times. In it, she explains how she is “obsessed with shoes” and gushes over the service’s low prices. “The prices are, like, perfect,” she says. If Yelp taught us anything, it is the power that individuals can have in persuading their peers. That power is amplified with video testimonials, where would-be customers can actually see and hear the inside scoop from like-minded individuals. Even in our celebrity-obsessed culture, the best spokesperson for a new business might very well be, literally, the girl next door. Brian Lee and attorney Robert Shapiro (of O.J. Simpson case fame), co-founders of the legal-services website LegalZoom, founded ShoeDazzle in 2008,
along with MJ Eng and Shapiro’s family friend Kim Kardashian. Essentially, the service delivers high-fashion shoes as well as bags and accessories to women monthly, handpicked based on their personal style preferences by a team of Hollywood stylists. Membership is free, as is shipping, and every product costs only $39.95. Kardashian’s name created lots of buzz when the company launched, in March 2009, and by 2010, ShoeDazzle had a million Best Foot Forward ShoeDazzle fans on Facebook. The company’s founders customers show their love for the wanted to build on that momentum but service through video testimonials. recognised that some people might have some trepidation about joining a new kind of monthly service that seemed a lot different than just browsing for shoes online. “We wanted to find another way to have transparency for people—that there is a real service behind it,” says Eng. Rather than hiring celebrity endorsers, the company decided to let real customers explain what they like about ShoeDazzle using short webcam videos. The company had already gained a lot of word-of-mouth buzz through reviews written on its Facebook page and on sites like Yelp. But video provided a twist. “It’s compelling,” Eng says. “Reading a review is one thing, but putting a face to it puts it over the edge.” So late last year, ShoeDazzle contacted VideoGenie, a Menlo Park, California-based start-up. VideoGenie’s software collects 20-second videos from customers, analyses those videos, and distributes the videos to YouTube, blogs, Twitter, Facebook, and the ShoeDazzle website. Although he declines to give details, Eng says the The service can cost $500 to $2,500 a month for basic software testimonials definitely helped boost registrations and sales. that allows customers to record, submit, and share videos to as Visitors to the site watched an average of nine videos per session much as $50,000 a month for high-powered market analytics. for a total of more than three minutes of video. Every day, more After designing a pitch to shoppers and adding some coding than 2,000 videos are viewed on the site. The company also on its website, ShoeDazzle started soliciting videos on Facebook found that people are much more likely to sign up if they have and via e-mails sent to its most loyal customers. Customers seen a video than if they have not. “Real people are talking were asked to record a quick video about what surprised them about the service, using their own words. It’s not marketing most about ShoeDazzle. With VideoGenie’s service, customers speak,” says Eng. simply press Record on the ShoeDazzle site, and the videos are The testimonials also provide the company with a good deal automatically uploaded and e-mailed directly to the company. of practical insight about what appeals most to their customers. After a quick review, customers receive an e-mail confirming Analytics track which videos keep people’s attention longer, that their video has been approved and posted online. which ones lead to more customer conversions, and which In the first month, more than 70,000 videos were viewed videos are the most shared. The technology can also identify online, leading to approximately 1,000 member sign-ups. The influential customers by tracking how many people are driven website had 2.4 million monthly visitors in March following the to the site after watching that person’s video on Facebook. The video promotion, up from 9,56,000 two months prior. Unlike a more powerful voices can then be included in future marketing slick ad campaign, most of the videos are poorly lit and grainy and campaigns for the company. have a fun, next-door-neighbour vibe to them. But the content, One of the top ShoeDazzle testimonials, for instance, has not the resolution, is what makes these videos noteworthy. been viewed more than 48,000 times. In it, an enthusiastic Satisfied customers talk about how they like the price, the woman fawns over a studded blue high-heeled shoe. “What selection, the fast shipping, and even the pink shoeboxes their surprised me most was the quality,” she says. “I love the detail. I shoes come in. (“The packaging is great,” says one happy client. love the pretty pink and cute bag that you sent.” No “They come in a cute little pink box. You can even regift it.”) spokesmodel could have said it better. —Jennifer Alsever
you tube video
“Real people are talking about the service, using their own words. It’s not marketing speak.”
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Not Just Kidding Around
Can Vishal Gupta (right) and Prashant Sinha (left) get investors to play along?
6 2 | INC. | febrUARY 2012
Photograph by subhojit paul
Vishal Gupta Prashant Sinha Location
Advertising from brands and listing of local businesses or vendors Funding sought
Elevator Pitch MyCity4Kids helps parents have fun with their kids. Will investors bring `6 crore to the party? The Pitch“Parents are always on the look-out for interesting children-related
queries but have to resort to traditional word-of-mouth or suggestions from local vendors. MyCity4Kids is a platform that connects the local demand of parents with the local supply of children-related services. This is a `15,000crore market which includes schooling (daycare, playschool and school), enhanced learning and sports activities, events and entertainment. Our site enables parents to locate offerings and provides comprehensive listings along with parental reviews. Our revenue is based on preferential listings for local businesses and advertising from brands. Another mode of revenue collection is subscriptions from parents to view our video recommendations. Nearly one lakh customers visit the website per month—30 per cent of these convert to become repeat visitors. To gain more traction, we want to expand our footprint beyond Delhi.” —As told to Inc. India
Funds Sought for
Technology development, and expansion to other cities
Investors Weigh In Tap the market right
Don’t be too niche
The team is addressing a genuine pain point. Large classifieds players like Justdial and Getit cannot provide the curated experience needed in this space. The biggest question is the market size. Scalability is also an issue since curating each market requires local know-how. The company needs to add value to both listings and users (e.g. community features, reviews etc.) to stay ahead of the competition. The current revenue model around listing fees and advertising makes sense. But I’d still need to understand the scalability of this model before making an investment decision.
MyCity4Kids has chosen a great segment as children-related forum sites do not exist in India, and are required. Though it is a great idea, I wonder if there are enough services in different cities that can pay for annual listings. Also, will the numbers add up to substantial revenues for them? If the MyCity4Kids team is able to set up business in the country’s top 10 cities at one go, along with enough listings and user generated content, it would be a great accomplishment. It’s a cycle—advertising as a model works only if there’s enough traffic, and there would be sufficient traffic only if the listings are comprehensive.
The start-up solves a very pertinent problem of finding credible information regarding services for children. There are key areas where the team will have to prove that the business can work—first, can they build significantly more depth and richness in content or listings as compared to Justdial. There are definite scalability issues. The online advertising market in India is very small, and within that market, this company is targeting just children-related services. The company needs to firmly establish how scalable this business is. But, the team seems strong, and is executing their ideas very well.
Sandeep Singhal, angel investor, Mumbai
Arunima Singhdeo, director, Babyoye.com, Mumbai
Mukul Arora, associate, Saif Partners, Delhi february 2012 | INC. | 6 3
The way i work | Manish Sharma, Printo
“Following rules is my Achilles’ Heel. I’m thrilled to delegate.” Manish Sharma describes himself as a serial entrepreneur—at least till he met his business partner and wife Lalana Zaveri. Post-marriage, they drifted for a while, before founding their own venture: Printo, a branded retail chain that provides digital printing services. With Printo, it seems, both also found true love. The `19-crore company with several outlets in Tamil Nadu and Karnataka has won both admirers and customers. Among them are Sequoia Capital and Seedfund who put in $4.2 million in early-stage capital. The man at the helm of affairs at Printo takes us behind the sweat and grit of the building blocks of his business—the ethics, work culture and management style.
As told to rohini banerjee | Photograph by S. Radhakrishna I am a marathon runner, and my morning schedule is dictated by this singular fact. I wake
up early—between 5.30 and 5.45am—for a practice run every morning. On a weekday I run less than 25 kms, but on Sundays we try to cover longer distances. I say “we” because that’s how runners talk. I did coach a group of fellow enthusiasts along with three other guys. Last year, I took a sabbatical from the “we” to concentrate more on the “me”. But I have my fast friends (no pun intended) and we often run together. I practice for an hour-and-a-half daily with a bit of weights, which, honestly, I hate. All that weight training and running leaves me famished by 7.30am, by when I am home and devouring poached or fried eggs, cereal and milk or a sandwich—I am not too strict about breakfast. Ideally, I like to step through the office doors by 7.45am. That doesn’t happen every day. But I am there by 8.15am. My partner in business and in life, Lalana Zaveri, gets to the office 45 minutes later. She is more of a night person and gets up later. She has her breakfast on the fly.
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strategy Mr Nice Guy Manish Sharma believes a company owes more than wages to its employeesâ€”if it cares enough.
I must arrive at the office at least half-an-hour before everyone else, including her. On days when I am late, I am grumpy. I mean, really grumpy. I usually cycle to work and take a shower in office so that I can save time. Biking helps me reach office (almost eight kilometres away) in 25 minutes, while a drive takes anywhere between 25 and 45 minutes. My bike was recently stolen, so now I have to buy a new one. Because I don’t have a long drive, I don’t listen to the radio. At the risk of sounding strange, I do talk to myself and think aloud. When I am home, as a discipline, I don’t respond to e-mails straightaway. Everyone knows that. So if it is really important, I receive an SMS. I believe that sometimes mobiles (I don’t own a BlackBerry) and e-mails are unwanted interruptions. I do answer mails in office right after I have had my coffee. There’s a small area in office that doubles up as kitchen-cum-pantry where I make a strong cup of black coffee before starting my Mac. It’s typically around 8.30am that I am diving into e-mails, catching up on pending work and generally taking stock of the day. Ours is an open office. As a result, employees approach me (or any member of the management team) for discussions at any given time—those interactions often roll into major meetings. Management meetings don't usually start before 9am. I usually have around four, 45-minute-long meetings every day. Once a month, we have a monthly retail kick-off which starts at 8am and runs longer. It’s attended by the entire team. Apart from this, there’s a meeting every three to four days in the week. We meet when there’s something to say, discuss or talk about: otherwise there’s no point in such exercises. However, on most days there are things to talk about with the management team: which comprises the co-founder, CIO and the presidentcum-COO. Our COO joined us this year and the joining was serendipitous. I had been on the look out for the “perfect person” when a member of my running group spoke about a former IIM batchmate who’d returned to his hometown—Bengaluru—after a stint in the States. He said I should meet him. I did. Found that the man in question had a “Bombay bias”. I think I broke it and some days later he agreed to come on board. My running paid off for the company, as well! Coming back to the day, there’s a finance meeting every week that goes on for an hour or so. As a rule, we try to make the company finances available to everyone involved: we have designed processes in such a way that every person has access to store margins. We believe that at a unit level, every store member should know the store numbers and profitability—they should be aware
of which store is not doing well and why not. In the past, I have interviewed people who were not aware of their company or store revenues. I find that strange. A company’s like a team. People should know the scores, who’s playing what and how well, and then decide how he or she can pitch in. My partner and I try to keep a sense of “being in this together”. Therefore, meetings happen in this small room with one large table. We all sit around it, throw ideas around and talk to each other across the table. It’s informal and productive.
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uckily for me, my part in all this—as the CEO—is just to show up. I am pretty good at showing up and wish to continue doing that for a while. Jokes apart, administration and finances are not my strengths. My partner and I recently had this talk about “responsibilities”. I believe my strength lies in innovating, ideating and process designing. Secondly, I do enjoy creating new opportunities—a new store or a product. I am good at fire fighting and in starting processes which are creative for me. It’s also fun trying to find the right person for the right role, and putting together departments. Getting these in place makes it worthwhile for me. But following rules is my Achilles’ heel. Unlike the so-called “typical” entrepreneurship pangs of handing over the reigns, I was thrilled to delegate responsibility and let someone else follow the rules. I don’t believe I make a very good team worker: I believe that entrepreneurs don’t realise that they aren’t good team players at all, though they can put together a killer team. They might believe that they are leading an organisation, but on a dayto-day basis, it’s usually a group of very competent managers who run the affairs. That’s the truth. What I love about my job is the lack of routine: I spend a day every week visiting stores and meeting customers, keeping my ears on the ground. I have a lot of energy for meeting new people. It is a perfect way to keep the feedback coming and to interact with our managers. Our business is spread over a wide area. It’s difficult to keep in touch with every member of the team, all the time. Once a month, I visit stores to either attend an event or just for a chat over chai or coffee. I may not be deeply involved in recruiting all managers and employees, but my partner and I are a part of the training and induction sessions—always. If I am in town, then I make it a point to be part of the training process. I don’t care about the number of people at the session—could be two or 20—the point is to explain the office culture, work ethics and company vision. Till there’s clarity on that, it’s no use working for and with an organisation, is there? We also resort to role-plays during sessions, especially
“I am good at fire fighting, which is a creative process for me.” when we launch a new product, and need to figure out a new strategy. Role-playing or going through case studies remind me of my MBA days. Our office has a distinct atmosphere—it’s the opposite of what I call the hierarchical “cabin culture”. Though we operate pretty much like a traditional manufacturing set-up, at the same time it’s an open office. Traditionally, we have a uniform, right from the CEO to a factory employee, every one wears the same shirt and pants to the office—colours may vary. We all eat lunch in the office’s subsidised canteen. Before we started the canteen, we all ate at roadside Darshinees that dot Bengaluru, especially its industrial areas. I loathed the food and hated paying for it. That got us thinking: how badly our employees were eating. However, that’s where the similarity ends. We believe in the dignity of labour. I believe there is little respect for the workingclass people in my country. Every employee plays an important part in his or her company. So, we try to stress on stuff that offices don't usually talk about, but impacts a worker’s life: diet, hygiene, discipline and ethics—both inside and outside office. We do try to enforce discipline (which makes us traditional, I guess). But, if anybody puts in a comment or query on our website, my partner will get back to him or her within half-an-hour. Any question, comment posted on the website between 8am to 9pm definitely elicits a response from someone—Lalana, the head of city operations, any member of the management team or I. These past four days, while Lalana’s been in training, I have been fielding calls. Because she looks after retail operationally, she’s really focused on feedback. The hands-on approach is possible because I don’t have to travel much for work. I realised that when I went to an alumni meet recently. I was listening to my former classmates talk about their travels, which takes them across the globe, leaving little time to tackle day-to-day issues. I had to point out, if I go beyond 20 miles, I am out of my market. I was only kidding, because now we have a store in Hyderabad too. Fortunately, I am in the thick of things for most part of the year. Work-related travel consists of 10 days, at the most. We are in the retail business: it’s standing on your two feet for better part of the day, or rush, rush, rush. In such a work life, lunches are 20-minute affairs. Interestingly, we barely talk shop during lunches. It’s usually about family, kids, school and cinema.
The period post-lunch is equally hectic. Meetings start from 2.30pm. Our headquarters are known not as the head office but as the main support office—post-lunch we are quickly back to meetings and checking feedback e-mails. My office and work end at 7.45pm. By the time I am on my way back, I am already chatting with a friend, catching up. Work might be on my mind, but I don’t go home and check e-mails. I would rather sleep early and put in an hour’s work before hitting the gym in the morning than work late. Lalana, on the other hand, prefers to take her work home, to bed or bath—wherever she can. We are completely opposite personalities. She’s extremely reactive. To be fair to her, I think as the head of retail, she needs to be reactive and mirror customers’ emotions. She and retail managers are the only sets of people who are allowed to interrupt meetings to receive telephone calls and leave the conference room. Customers come before everything else. Lalana’s work and personal life are completely integrated. When she works, she’s very happy, cracking jokes: as if work’s a picnic. Sometimes it irks me that she keeps so busy. Often she gets irritated when I completely switch off. I don’t recommend that people do business with their spouses. Lalana thinks it’s a great idea. We are such different personalities. At first it was a difficult process adjusting to the work-home routine. Today, we have learnt to come to a consensus. I don’t remember the last time when we quarrelled over home issues, but we fight over work, and often. She comes from a business family, so her approach is distinctly different from mine. I think women business leaders are smarter and their thoughts are sorted. So, it’s me who had to back down a bit and learn to co-operate, rather than her.
ne of the several consensuses that we reached
together was to introduce a five-day week. We will get the system in place by this month-end or the next. So far, we have managed to give all our workers two Saturdays off every month. On most Saturdays, Lalana and I are working. Once in a while, we take off to the hills or go out of the city for a 14-day annual holiday. One of our breaks, we take as individuals. I was wary of the idea: but now I see the wisdom in it. We both love the outdoors. But, I prefer long treks and she prefers shorter ones. For some reason (she calls it sanity) she prefers shorter marathons, while I like the Ultras. Instead of us both compromising, we decided to do our own thing once a year. Apart from the common holidays, watching theatre, meeting friends and reading helps us unwind. I have recently been smitten by historical tomes. As has she. Either I read and then turn in or we cook dinner together and try to have one meal together, before I turn off the lights by 10.30pm. Tomorrow’s another big day. february 2012 | INC. | 67
I wish I knew then...
A. Mahesh Reddy, co-founder, AMR Constructions AMR Constructions was established as a partnership firm in the year 1992, with A. Mahesh Reddy and his brother, A. Girish Reddy. Since then, the company has diversified into several verticals like mining and irrigation, and has grown from a `30-lakh turnover in 1992 to a topline of `1,350 crore. Mahesh Reddy says learning from his clients—mega players like L&T and India Cements—has made all the difference. Our journey with AMR Constructions begun in 1992, when my brother Girish and I started it as a partnership firm. The industrial sector was booming then. Key players came from Vellore, as did we. We decided to set ourselves apart by sticking to a specific sector, and expanding only when we reached a certain level of expertise. We began with sub-contracts for L&T. We learnt a lot from them: how to put systems in place, develop projects and then manage them. Our biggest triumph came in 1995 while consulting for L&T’s Nepal projects. We worked in sub-zero temperatures but we held on. That hard work paid off. After that international project, things began to roll for us. We quickly moved to another milestone in our journey. In 1997, we voyaged into limestone quarrying. We didn’t have any experience here but we plunged in because we knew we could do it. We were ready. Our belief was validated. Soon, we got a contract with India Cements. Usually, cement plants don’t give out contracts for limestone mining—it’s a crucial step in their process. Irregular supply, even for a single day, can lead to interest costs shooting up. Our relationship continues till today. Our key learnings—how
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demand-supply routine, we couldn’t handle the sheer eccentricity of this. We realised we must concentrate on our strength—before everything else. For us, that was infrastructure. More lessons were in store for us. We’d established great relationships with private players. We knew it was time for us to take on the bigger fish—the government. We took contracts for building roads with the Andhra Pradesh government. In 2004, when YS Rajasekhara Reddy became the AP chief minister, there was a surge in irrigation projects. We moved into the vertical. After his untimely demise, projects stalled completely. Fortunately, we had moved quickly In the Right Place Mahesh Reddy has turned his with our projects. Despite the mistakes into life lessons. quick execution, 2009 turned out to be one of our worst years. to be a large, professional company with We’ve been smart since then and have a established processes has come from clients blend of verticals. Some 50 to 70 per cent like India Cements and L&T. of the turnover comes from contract minNot that every leap we made had great ing. The rest comes from construction—we results. Our “next defining step” turned out to do industrial projects for the AP governbe a big mistake, and an even bigger learning. ment, ISRO and Air Force. It’s stuff that we In 2000, we went into iron ore mining. But had seen in our clients while we were that sector turned out to be too volatile. There growing as a company. was too much bureaucracy. At times, there —As told to Rohini Banerjee was no demand, and our equipment would be demobilised. Having worked with professional companies earlier and a steady
Inc. India, February 2012, Vol. 03, Issue 1