What kind of a leader are you? The Page 30
Matchmaker Who Has Made Millions M. Janakiraman, founder, BharatMatrimony
HOW TO BE A GREAT BOSS
HOW TO BE A Page 60
The Magazine for Growing Companies
GREAT BOSS JIM COLLINS on the secrets of extraordinary leaders PAGE 24
The magazine for growing companies
The Great Grassroots Why rural India is the new business frontier Page 34
July 2012 | `150 | Volume 03 | Issue 06 A 9.9 Media Publication | inc.com facebook.com/inc
Umesh Sachdev aims to reach two million villagers with his voice-based mobile solutions
Ajay Chaturvedi wants to hire 10,000 women for his rural BPO firm HarVa by 2015
Ploughing Profits SV Agri’s Hemant Gaur aims to build his potato supply chain business into a `500-crore company.
34 The Rural Way 24 Be Great Now
Jim Collins, author of four books on what makes companies excel, talks with Inc. about creativity, discipline, audacity, and the other things that spur greatness. interview by bo burlingham
30 13 Ways of Looking at a Leader
Narcissistic or charismatic? Authentic or tribal? We identify 13 classic types of leaders. Which one are you? by leigh buchanan
India’s villages are spawning smart ideas and big ambitions into flourishing companies. This change—of looking at the village economy as a business hotspot—is being led by a breed of entrepreneurs who could be sitting in swank corporate offices but know that rural India offers opportunities and challenges not easily found elsewhere.
by amrita roy, jen swanson and shreyasi singh
48 How I Did It Subhasish Chakraborty
Helping people dream, and making those dreams come true has played a key role in building DTDC Courier & Cargo. Little wonder that the company has almost as many franchisees as employees. as told to ira swasti
52 The World as an R&D Lab
photograph by jiten gandhi
Increasingly, innovation is coming from the developing world. And smart entrepreneurs in the developed world are jumping on it.
This edition of Inc. magazine is published under license from Mansueto Ventures LLC, New York, New York. Editorial items appearing on pages 11-13, 19-22, 24-32, 52-57 were all originally published in the United States edition of Inc. magazine 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.
on the cover
Ajay Chaturvedi, founder, HarVa, and Umesh Sachdev, founder, Uniphore, photographed by Subhojit Paul in Delhi. Photograph of Jim Collins by Justin Stephens. Cover design by Anil VK. Photo imaging by Peterson.
july 2012 | INC. | 1
05 Editor’s Letter
06 Behind the Scenes Anish Kapoor, Subodh Gupta, Manjit Bawa—firms that keep their masterpieces alive at the Kiran Nadar Museum of Art.
Viewpoints: Taming technology Angel Investing: The emerging asset class in India The Ticker The Inc. Data Bank A Skimmer’s Guide to What Chinese Want: Culture, Communism & the Modern Chinese Consumer Research Corner: New findings about the children of entrepreneurs
13 Get Real
By Jason Fried Plenty of customers are dying to upgrade; plenty of others have no interest in that. A lesson learnt the hard way.
2 | INC. | july 2012
Sandeep Mall’s wild chases with his Canon kit.
16 The Scuba Sutras
By Guhesh Ramanathan Why sometimes enjoying the moment, and not always counting results makes you a good CEO.
19 The Goods
Portable business projectors A primer on second-gen ultrabooks Mobile monitors for presentations Multi-touch tables Tech Trends, by John Brandon: launching slideshows from your phone Best digital signature apps
Guidebook, No. 6
How to develop a killer app to amp up your business. Find the guidebook following Page 22.
Strategy 55 Sales Door-to-door selling is a great way to practice sales pitches for your business 56 Technology Why learning coding skills can help you manage your tech team better. 58 elevator pitch Secret Wardrobe rents designer wear online. Will you fashion out a `1-crore cheque for it? 60 the way i work M. Janakiraman, founder & CEO, BharatMatrimony, believes his company is helping build a better India—because happy marriages lead to good citizens.
64 I Wish I Knew Then...
Serial entrepreneur Murali Bukkapatnam shares the lessons learnt over his 13-year entrepreneurial journey.
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CONTRIBUTORS Jen Swanson Jen Swanson first became interested in business and entrepreneurship in 2006, when she worked for our parent magazine, Inc., in New York. But it was her first trip to India in 2009, as part of a twomonth travel writing assignment that left her hopelessly attracted to the growth and energy of the subcontinent. Happily, she has since found a way to marry these two passions; by living in India’s version of the Big Apple, where she writes for Inc. India and other publications as a freelance journalist based in Mumbai.
Amrita Roy Growing up, Amrita Roy aspired to be many things—a fighter pilot, a doctor and a wildlife photographer. Then she fell in love with the written word. Today, she goes into raptures over a particular turn of phrase, can spend a lifetime defending the Oxford comma and sing paeans to the long dash. For the past decade, she has worked with India’s top national dailies like The Telegraph, Hindustan Times, Mail Today and Mint, as an editor and writer. She is also a voracious reader, a passionate foodie and a curious traveller.
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Meenakshi Kumar Meenakshi Kumar is an independent journalist who has spent more than a decade in the action-packed newsrooms of leading English newspapers. Even after so many years, nothing is more satisfying to her than chasing a good human-interest story and seeing it printed. She has written on subjects as varied as women, environment, books, travel, culture, health and entrepreneurship. When not writing for a living, she is busy bringing up her two hyper-active daughters. In between, she squeezes out time to pursue her love for reading and music. Neha Gupta Neha Gupta worked as a wealth manager with HDFC Bank, and with the monetary policy department of RBI in the early part of her career. These assignments often left her craving for more. In 2005, she joined her family business, setting up a hospitality venture in Delhi. She chanced upon her calling when she was asked to put together an industry publication. She was surprised by how much she enjoyed writing and the editorial process, and is determined to put that realisation to good use now.
Resolutely “for-choice” During a parliamentary discussion in May, Union Health Minister Ghulam Nabi Azad mooted a proposal to make a year-long stint in rural India mandatory for MBBS graduates. That we are nowhere close to meeting the goals we set out for the National Rural Health Mission isn’t a secret. So, over the past few years, the Centre has tried incentives—including reservations in post-grad medical courses and additional marks—to attract young medicos to villages. As the minister regretfully admitted, there has been virtually zero response to the scheme. Ironically, a debate on this topic and another of Health Ministry proposals—to make doctors headed to the US sign a bond promising they will be back—was in full force on the TV in my study when I sat down to write this editor’s note. As always is, the entrepreneurs we profile in Inc. India, and certainly the ones in the special story we’ve attempted on rural businesses in this issue, trumped the pessimism. The company builders in The Great Grassroots on Page 34 didn’t need to be coerced to go to the villages. Rather, they’ve cannily identified big business opportunities for products and services targeted at the rural markets. That they are helping plug development gaps—as they build Things I Learnt flourishing companies in agriculIn This Issue tural technology, rural BPOs, lowSome clients aren’t cost hospitals, safe water and VAS worth the attention they solutions—is the multiple win-win demand. You should know that all good businesses must seek. which clients to fire, so you can serve the good The macro drivers for rural ones better. businesses to grow are abundantly It’s important to be clear. There is an urgent need to systematic about drilling bolster our food economy and fix down leadership. Point our farms. Plus, the penetration of taken, Jim Collins.
the mobile phone and mass media has made the market more accessible. In fact, according to data compiled by Grant Thornton India, agriculture and related business segment attracted 14 M&As and 8 PE deals amounting to $586.56 million and $19.12 million respectively in the year 2011. More than anything else though, the entrepreneurial talent behind these ventures demonstrates that our villages are finally beginning to get the attention they deserve. There is Dr Sabahat Azim, a former IAS officer of the Tripura cadre, who quit the government to found Glocal Hospitals, a chain of rural hospitals. Or, Vijay Bhaskar Reddy of Vinfinet Technologies, who studied in IIT Madras, and worked with Cisco and Intel, but is now driven by developing affordable farm technologies. Even just a decade ago, we couldn’t have hoped for such dynamism in the villages. Interestingly, even our expert columnists—Mark Kahn, Kartik Srivatsa and Vikas Nath—reflect the same passion and pedigree. Amid the carpet bombing of gloom and doom stories, they provide a ray of much needed hope. Also, don’t miss out on the Jim Collins interview from our US edition on Page 24. The celebrated author has a great deal of good advice for CEOs, including why founders must figure out their BHAGs (Big Hairy Audacious Goals).
Shreyasi Singh firstname.lastname@example.org JUly 2012 | INC. | 5
BEHIND THE SCENES
Companies at the Heart of Everyday Life
Frames A painting is incomplete without its frame. Adding to the aesthetics of these art works are frames manufactured by Ahuja Framers. The Delhibased firm used ramin wood, which is light-weight, resistant to termites and does not curve in extreme temperatures, to showcase these beautiful creations. The 14-people firm was founded by D. N. Ahuja in the 1950s and is currently run by his son Murti. The team has earlier framed Madhuri Dixit’s painting by M.F. Hussain as well as a rare oil painting of Gandhi gifted to ex-US president Bill Clinton, among other masterpieces by Anjolie Ela Menon and Subodh Gupta.
Lighting Lighting gallery paintings is an art in itself, given the myriad sizes, shapes and textures of the art works. Providing special lighting to enhance the appearance of paintings covered in glass frames or those made on oil canvases is Vis à Vis Lighting. It is the lighting division of Vis a Vis India, an art and design curator, founded in 1997 by Hardeep and Amit Gupta. The 56-people firm provided IR and UV ray filters to prevent damage to the art pieces by light, along with sculptural lenses to elongate the light’s circular beam for longer frames. They have lit 37 establishments across India including Delhi’s famous Lalit Kala Academy, Hugo Boss showrooms in the country and the Mumbai International Airport.
6 | INC. | JULY 2012
Kiran Nadar Museum of Art, Saket, Delhi
07.06.2012 4:30 P.M.
Location The museum that exhibits modern and contemporary art forms from India and the subcontinent is housed across 18,000 sq ft in the DLF South Court Mall, Delhi. Art curator and director of the museum Roobina Karode chose to showcase art collections in a mall to engage the average shopper, not just art connoisseurs to drop in. The DLF South Court Mall houses almost 175 retail units, and is promoted by the giant DLF Group which was founded in 1946 by Raghvendra Singh. The `10,000-crore real estate group is currently headed by his son-in-law Kushal Pal Singh and has 266 million sq ftÂ either developed or under development.
PHOTOGRAPH BY Subhojit Paul
reported by Ira Swasti
News. Ideas. People.
Be The Boss
“Technology was built to help us work smarter so we have time for things we cherish the most. Tame your inbox and stop treating it like a Twitter stream.” Sahil Parikh, founder of Mumbaibased tech firm Synage Software, recently shared his tips on how to control e-mails, on his well-read blog sahilparikh.com. Parikh recommends checking e-mails only a few times in a day, and that too when you can respond with an action. “I either delete an e-mail, reply or move it to a follow-up label.” Otherwise, checking your account every 30 seconds, and re-reading mails to reply later can completely drain you out. “If something is important, I know I will get an SMS or a call.” He’s put these insights into great business use—his company pioneered DeskAway, a home-grown SaaS product in 2007 to combat e-mail invasion. DeskAway allows project conversations to happen at one place, sparing cc chains and e-mail pile-ups in the inbox.
Photograph by Jiten Gandhi
juLY 2012 | INC. | 9
New Wings Why angel investing is an emerging asset class India’s rapid economic growth over the last
decade has catapulted many hitherto middleincome group individuals into the ultra-high net worth individuals (HNI) bracket. CRISIL Research defines Ultra-High Net-worth Households (HNHs) as those having a minimum average net worth of `25 crore. As per Kotak Wealth and CRISIL Research, the total net worth of Indian Ultra HNHs is expected to grow from an estimated `45 trillion (across 62,000 ultra HNHs) in 2010-11, to `235 trillion (across 2,19,000 ultra HNHs) by 2015-16. Till early to mid-2000s, barring a few islands of excellence, Indian entrepreneurship was too young to be taken seriously as an angel investing asset class. However, with rapid economic growth accompanied by factors such as rising domestic consumption, high disposable incomes, demographic dividend and increasing integration with the global economy, Indian entrepreneurship seems to be reaching an inflexion point. Given these factors, Indian HNIs must now seriously consider angel investments as an asset class. Angel Investing 101:
Angel investing includes individuals or groups of individuals that invest their own money in seed stage ventures. The type of investments can be diverse, ranging from a fresh entrepreneur who only has a plan on paper to a newly incorporated company with a beta product or even a relatively mature business. The Silicon Valley ecosystem, considered the global benchmark for entrepreneurship, has been fueled by the likes of Ron Conway (invested in Google, Paypal, Ask Jeeves), Marc Andreessen (invested in Twitter, Scribd, Digg) and Paul Graham (invested in Scribd, Reddit, Loopt). These angels have backed fresh, young entrepreneurs, often armed with only disruptive ideas and paper business plans. Given extremely high risk levels, these entrepreneurs would have been 10 | INC. | juLY 2012
unable to attract other formal forms of capital such as commercial debt and institutional equity. Also, in addition to filling a vital seed stage financing gap, angel investors also provide business guidance, high-quality networks and experience sharing, all of which significantly improve the odds of a small business scaling up.
Ahmedabad and Blume Ventures among others. Going forward, this segment is expected to exhibit vibrant growth. There are no official numbers on the total size of angel investments in India, given that the industry is still largely informal. However, to give perspective, IAN alone closed 10 deals amounting to about $7 million in 2011.
Overview of Angel Investing in India:
Taking the First Step:
The Indian angel investing landscape can be broadly classified into three segments. The first segment includes an emerging breed of accomplished technology professionals including the likes of Rajan Anandan (MD, Google India), Deep Kalra (CEO, MakeMyTrip), Vishal Gondal (CEO, Indiagames) and Sharad Sharma (ex-R&D Chief, Yahoo India). The second segment is organised angel networks—the dominant two being the Indian Angel Network (IAN) and Mumbai Angels. IAN has grown from 12 members in 2006 to about 140 as of January 2011, and has invested in 23 companies. Similarly, Mumbai Angels has grown from 20 members in 2006 to about 100 in January 2011 and has 20 announced deals. Other upcoming angel networks include Chennai Angels and Hyderabad Angels. The third segment is institutional seed investors, and includes entities such as The Morpheus, Centre for Innovation, Incubation and Entrepreneurship (CIIE) at IIM
As a first time angel investor looking to test the waters, it’s advisable to join one of the local angel networks in your geography. This network helps in accessing deal flow and diversifying risk via syndication. Also, interacting with other experienced members helps hone one’s individual investing skills. It’s recommended that the first few investments be made in sectors that you understand deeply and where you can add immediate value through prior experiences. If you don’t want to actively monitor and manage your investments, it’s a good idea to invest in institutional seed funds as a Limited Partner (LP). Finally, it’s important to understand that angel investing is an extremely high riskhigh return asset class. Therefore, allocations to this asset class must be done judiciously. Soumitra Sharma is part of the Investments Team at IDG Ventures India, and can be reached at soumitra_sharma@idgvcindia. Illustration by shigil n
inc. data bank
Crunching the numbers Productivity
The amount of time the average employee spends in meetings each week:
How banning meetings one day a week would affect employee productivity, according to managers: Female Entrepreneurs
Increase in the number of women-owned companies from 1997 to 2011:
Portion of U.S. businesses owned by women:
46% it would
4% it would
46% it would stay
4% not sure
Share of U.S. workers employed by womenowned companies:
Intuit; Sphere Trending; Inforum
Portion of workers who arrive late to work at least once a month: 27%
Share who are late at least once a week:
Harris Interactive; CareerBuilder; Microsoft; Socialcast
Average amount of office space per employee in 1985:
sq. feet *Projected
Average number of friends per Facebook user:
Portion of consumers who use social media to communicate with businesses:
Portion of consumers who say they would be less likely to do business with a company that ignores customer complaints on its Facebook page:
88% Sphere Trending; Inforum; the New York Times
Pew Research Center; MerchantCircle; Conversocial
Portion of small-business owners who say government regulation is the biggest problem facing their company: 14% Share who say regulation is important to protect small businesses from unfair competition: 78% American Sustainable Business Council; Main Street Alliance; Small Business Majority
Portion who say they can live with regulation, as long as it is fair and reasonable: 93% Share who say regulations on the books should be enforced: 76% —Compiled by Andrew Shafer
A skimmer’s guide to the latest business books The book: What Chinese Want: Culture, Communism & the Modern Chinese Consumer, by Tom Doctoroff; Palgrave Macmillan. The big idea: Chinese consumers represent a tantalising but complex market. Marketers must resolve the Confucian tension between the population’s ambition and conformism by helping consumers simultaneously stand out and fit in. The backstory: Doctoroff, the CEO of ad agency J. Walter Thompson’s China offices, has lived in Asia almost two decades, working with brands such as De Beers and Lenovo. When in China: Doctoroff sprinkles his marketing advice and observations with suggestions for companies setting up shop. (Promote good workers at least every 18 months. Consult a feng-shui master before relocating. Be prepared to speak at a lot of funerals.) If you read nothing else: Part One, “The Chinese Worldview,” lays out a complicated commercial landscape. It’s a place where consumers require quality only in products that are visible to others, an obsession with stability makes breakthroughs difficult, and marketing is the undernourished younger brother of sales. Rigour rating: 9 (1=Who Moved My Cheese?; 10=Good to Great). What Chinese Want is generous with facts and figures but draws greater strength from the author’s insights and experiences. His description of a visit to the Shanghai Zoo is more revealing of the Chinese consumer than is an exhaustive compilation of demographic data. —Leigh Buchanan juLY 2012 | INC. | 11
Inheriting the Start-Up Gene New findings about children of entrepreneurs research corner
It’s been shown that children of entrepreneurs are more likely to start businesses themselves, but there may be more to the equation. A new study suggests that the influence of an entrepreneurial parent is highly correlated with the age of the children, and that the success or failure of a parent’s business plays a role, too. The Findings
Since 1990, several studies have firmly established that children of entrepreneurs are two to three times more likely to launch a company than are kids of traditional salary earners. But researchers continue to try to understand why. A recent study conducted by professors at two business schools—Edward Mungai, dean of the Strathmore Business School in Nairobi, Kenya, and S. Ramakrishna Velamuri, an associate professor of entrepreneurship at the China Europe International Business School in Shanghai—may shed some light on the subject. The researchers found that kids who were young adults (18 to 21) when their parents ran companies seemed to be most influenced by mom’s or dad’s choice of career path. The research also confirms that parents who fail in a business seem to act as “negative role models,” making their kids significantly less likely to launch a company. But this was mainly true for older kids who had seen a parent’s business crumble. Younger children were not as affected.
12 | INC. | juLY 2012
College-age kids were most influenced by their parents’ businesses and more likely to start their own. Nearly 60 per cent of the entrepreneurs studied had been 18 to 21 years old when their parents ran companies. The Methodology
The researchers plumbed the Panel Study of Income Dynamics, a longitudinal data set run by the University of Michigan that has followed nearly 8,000 representative U.S. families since 1968. First, they identified people who left traditional jobs to become selfemployed. Using the family income data, the researchers determined how the businesses fared in subsequent years. They looked for signs of a start-up gone bad: founders who were later unemployed, left the business after suffering losses, or
reentered the traditional work force at a lower wage. Next, they looked at the kids of these entrepreneurs and determined how old they were when their parents ran companies. Researchers then examined whether the children ultimately became self-employed themselves. (Because detailed data was available about heads of households, who were mostly male, the study looked at only male children. ) The Takeaway
Business failures are trau-
matic, and it’s no surprise that kids who watch their parents go through one might conclude that a more stable job is the way to go. The more important finding relates to age. If 18- to 21-year-olds are the most impressionable when it comes to their parents’ businesses, there’s reason to believe that age group would be highly receptive to entrepreneurial education, say the study’s authors. Mungai and Velamuri propose that universities offer these programmes to undergraduate students of all disciplines. —Daniel McGinn
Illustration by PRAMEESH PURUSHOTHAMAN C
Get Real BY
Jason Fried is co-founder of 37signals, a Chicago-based software company. He does not fear change.
You Can Lead a Customer to an Upgrade But can you make him like it? Turns out, it’s a bit trickier than we thought
As readers of this column know, my company, 37signals, has
been working on one of our most ambitious projects ever: a ground-up redesign of our signature product, Basecamp. An online collaboration and project-management tool, it has more than five million users, and it is our top-selling and most profitable product by far. The redesign took about a year. And then, finally, on March 6 at 8 a.m., we hit the Launch button. We were live. By the end of the day, more than 10,000 new customers had signed up. We experienced no slowdowns, no downtime, and no disasters. But I don’t want to talk about what went right. I want to talk about one of the rough spots we hit, because it taught us an important lesson about customer psychology and how to manage expectations when introducing something new. One of the things our designers and developers spent a lot of time on was a migration feature that would enable current Basecamp users to move their projects, data, and users to the new version. Our goal was to make sure that the transition was smooth and risk free. Risk free it was. Smooth…not so much. Let me back up for a moment. The new Basecamp differs considerably from its previous iteration (which is still available as Basecamp Classic). It does many of the same things but has a new interface and does those things differently. The new Basecamp is better, faster, and simpler. But it is different enough that it really feels like an entirely new product. For the tens of thousands of new customers who signed up, that hasn’t been a problem. But many longtime users had a different experience. For them, new didn’t mean better. It meant different. And different is always a challenge. illustration by Prince Antony
For longtime customers—who rely on Basecamp to run their organisations—the upgrade was disorienting. I imagine it was like walking into your living room, only to find that someone had changed the wallpaper and rearranged the furniture. Figuring out whether it looks better or worse isn’t the first reaction. The first reaction is, “Something has changed; this is different”—a reaction that often leads directly to anxiety. No business owner wants to make customers anxious. But that’s what we did by enthusiastically encouraging existing users to try the new software—and by making it really easy for them to do so. Here’s what we learnt: New ideas take time to get used to. Inviting people to change to the new Basecamp while they were in the middle of their long-running projects didn’t turn out to be a very good idea. It kick-started anxiety. And customers weren’t shy about letting us know. Looking back, what we should have done was to invite existing customers to check out the new Basecamp without encouraging them to make a wholesale switch. Then, after they’d spent some time kicking the tyres, they could decide what they wanted to do. As with so many business lessons, it seems obvious in retrospect, but entrepreneurs need to think as much about customer habits and expectations as they do about design, code, hardware, and the like. Fortunately, our customers are awesome and understanding. Same with our service folks. With a little handholding, even the most-baffled users were able to get the hang of the new software. And now we’re getting a lot of “I wasn’t sure at first, but now I love it” notes. Follow Jason Fried on Twitter: @jasonfried. juLY 2012 | INC. | 13
Life Outside the Office
A nearly fatal car accident in early 2008 drove home a life-changing realisation for Sandeep Mall, founder of LNM Auto Industries, a precision manufacturing unit. "I was a workaholic but this incident taught me I needed to enjoy life, not just earn money.” Mall dabbled in singing, cooking and painting until a family holiday to the Madai forest reserve in Madhya Pradesh helped him spot his passion—wildlife photography. Since his first shot then—a python lying on the road— Mall’s lens has become a regular at national parks and sanctuaries in and around Delhi. At least once, and often, twice a month, Mall packs his gear to capture avians in the winters, and predators in the summers. A true widlife enthusiast, he recently became the promoter of Saevus (Latin for wild), a magazine to encourage wildlife photography in India. Wait and watch Wildlife photography has taught me that success comes to those who are patient. Sometimes it just takes five minutes, and sometimes you have to wait for hours to get that perfect shot. During my latest trip to Tadoba, I hung around for five full days to shoot tiger cubs, yet I came back without a single shot. Killer shot Velavadar National Park, Gujarat 2011: Capturing five wolves killing a black buck, and a female hyena suddenly
14 | INC. | JUly 2012
coming to snatch that kill away for her baby Favourite haunts n Sultanpur Bird Sanctuary n Bharatpur Bird sanctuary n Ranthambore National Park n Bandhavgarh National Park n Most eagerly awaited: Botswana (“hopefully this year”) His gear The whole Canon kit with three different bodies and four to five lenses—the Canon 5D, Canon 7D and Canon 50D.
“When you're in the wild, you don’t know what’s going to happen next. That adrenaline rush is incredible.”
photograph by Subhojit Paul
reported by Ira Swasti
The Scuba SutraS BY
Guhesh Ramanathan is a mentor at the entrepreneurship cells of IIM Bangalore and IIM Ahmedabad. He is also an advanced certified scuba diver. He believes in enjoying work.
The Journey is the Destination Don’t get caught up in only setting out targets. When you enjoy your work, results show. and I decided to take another diving vacation at our favourite spot, the Andaman Islands. But this time, it was with a difference: our 11-year-old daughter Sunayana was accompanying us for her maiden dive. The tides were in our favour and we landed at Port Blair to some fantastic weather. But the best part was that no one else had signed up for a dive at Neil Island when we had. So the intructor could only focus on us. When it comes to experiencing scuba diving, the rules are very simple. If you aren’t a certified diver, you can “discover” scuba diving by diving along with an instructor. The instructor will literally hold your hand and take you through the water, after he (or she) has carefully walked you Diving Fun Don’t just through the basic skills of divcount the fish you see on assured sources of income? How ing—that is, how to equalise the pressure in your ears as you the way, enjoy the dive. would they stay calm when their dive, how to clear your mask, how to maintain your calm, business faces serious challenges? and how to deal with emergencies. In many ways, what a dive instructor I watched with interest as Johann, the instructor does is very similar to what I do as a mentor at the NSRCEL Entrepreneurat India Scuba Explorers, sat down with my daughter ship Center at IIM Bangalore: guiding those who want to move on from and briefed her. He told her what to expect when she their current jobs into the untested “waters” of entrepreneurship. How entered the water and what fish life she was most would they deal with the pressures of entrepreneurship when they have no
16 | INC. | juLY 2012
photo Courtesy subject
In early April this year, my wife
The Scuba SutraS
likely to see. Also, while he allowed me to dive with them, he categorically asked me to stay away, even if Sunayana faced problems under water. And so it was. I hung around the periphery and watched Johann and Sunayana as they slowly descended to about 10 meters. I watched them as he calmly and firmly made sure that she stayed focused on the dive and her equipment. Surprisingly, she was quite comfortable, so Johann took her for a long swim through the clear waters of Bharatpur Bay—which has a white sandy bottom briefly interspersed with a few boulders of coral at Neil Island. When we surfaced about 40 minutes later, I looked at Sunayana, and the ecstatic expression on her face said it all. “It was awesome,” she screamed. And then asked if she could go into the water right away. Pleased, I asked her if she had seen the few fusiliers that came around us on that dive. “I saw them, I saw them!” she said. “But did you notice how I could just float along in the water? Appa, I was almost weightless!” On the second dive, the next day, it was a repeat performance. Sunayana was so thrilled with the experience of going on the dive that it didn’t really bother her that we didn’t see too many fish. Her enthusiasm at the experience of diving, and not its fruits, got me thinking about the two organisations that I mentor currently. AR runs Taxi For Sure (TFS), a booking service which aggregates demand from consumers across Bengaluru, and passes them on to TFS partners who own the taxis. He and his cofounder run a tight operation, recognising that they are the first point of contact for the customer, and that they need to carry their brand image all the way through till the customer finally steps out of the taxi. My conversations with AR are always around customer experience. He’ll happily recount every customer experience—like a user calling to say thank you, or another user referring their service to colleagues at work. At other times, it’s about what else they can do to enhance user experience such as blocking the easy-to-remember helpline number, or how all of their partner taxi service providers should carry their co-branding to help popularise the booking service. Within six months of starting up, they were booking between 10 to 15 trips a day with five partner operators. They had built their operations with such precision that as they attracted more prospective users, they could add more operators, scaling up smoothly as they went. A few months back, these two got a call from a large venture capital firm that had heard of them from a completely unconnected source. Two months later, they had been funded at a very handsome valuation by not one, but three venture capital firms that all wanted to co-invest in the firm. If you look at this example, it’s a classic case of focusing on the journey, and the results following! Contrast this to the second company I mentor. DC and his co-founder started up a retail brand selling children’s clothing
on the internet. For the first few months, I worked with them to put together the plans for the website—how it could be promoted, how the venture would deal with customer queries, etc. Both DC and his co-founder had prior experience in working with a large apparel manufacturing company, so to some extent, they really understood the business. They built a fantastic-looking website to get started. They had some creative aces up their sleeves such as making neighbourhood children models for their brand. They found a friend who was a brilliant photographer, and asked him to work on the shoots. They used social media to spread the word about their upcoming business. It was easy to see they were having fun as they built the basics of their venture. About a week ago, DC’s website went live—customers could now transact orders. On their second “live” day, DC and I chatted about the launch. He was thrilled with how the first day had gone. “We got over a thousand hits on the site”. Great, I said. How did it feel to get off the block? “Exhausted.” They had already got six orders and were busy getting them ready to be shipped tomorrow. That must make them very happy. And I was amazed by his next statement. “Guhesh, between you and me, I’m going to build this to be a $100-million business in the next five years,” he declared.
Focus on what you have promised to deliver to your customers, and the results will follow. I froze. How could DC, with just a single day’s effort online, suddenly jump to a conclusion that his business would become a $100-million company? What happened to the guy I had been working with who took great pleasure in ensuring that every one of the models that he photographed for kidswear had fun when they were at his warehouse? What happened to the person who had taken such pleasure in building a fantastic website so that his customers who visited the site would have no problems navigating it? Why did DC suddenly start “counting the fish” and not “enjoying the dive”? I’m determined that over the next few meetings with DC, we’ll be able to bring him back on the track he was on: enjoying the entrepreneurial journey. And this is a lesson for all entrepreneurs. Focus on your venture’s value proposition: what you have promised to deliver to your customers. Track that every single day to make sure that you are delivering on that promise. And once you have done that, the results will follow.
Follow Guhesh Ramanathan on Twitter: @guhesh. juLY 2012 | INC. | 17
Your Business Toolbox
Sharp Shooters Portable projectors are ready for their close-up Just a few years ago, portable business projectors were dim and their projected images muddy. New models are much brighter—they clearly project videos, slide presentations, and even small-type budget reports. We tested three of them to get the big picture. —John Brandon Asus P1
Though far brighter than projectors of the past, the 200-lumen Asus P1 was the dimmest in our test. A budget report looked OK, but video lacked rich colour. With a projected image up to 120 inches diagonally, the roughly 5- by 5- by 1-inch P1 weighs about 15 ounces and comes with a soft carrying case but no remote. There’s a VGA input but no HDMI or USB port or internal storage. The P1 uses an LED bulb with a 30,000-hour life span. cost: $499
Velocity Micro Shine
This 9-ounce, 3- by 4- by 1-inch projector is the smallest and lightest we tested. The 300lumen Shine projects a maximum 150-inch image. Video was colourful but slightly faint, and focus was a bit uneven for still images. The Shine has a USB port and a mini HDMI port, plus 2 GB of internal memory. Adapter cables for VGA and RCA inputs, a soft carrying case, and a remote are included. The LED bulb lasts 20,000 hours. cost: $430
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This 300-lumen projector was our top pick. At the 80-inch maximum image size, video was clear and colourful, and a budget report was razor sharp. The 4- by 4- by 1-inch MP410 weighs 1 pound and comes with a carry bag but no remote. It has 1 GB of internal memory, plus a microSD card slot, a USB port, and VGA and HDMI inputs. The MP410 uses a DLP, or digital light processing bulb that lasts 20,000 hours. cost: $599
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Products + Services
My favourite tool for iPad presentations grant stanley ceo contemporary analysis omaha
My company performs predictive analytics for businesses and other organisations, so we do a lot of client presentations. I was looking for a way to present complex reports on my iPad while clients followed along on theirs, and one of my Twitter followers recommended Idea Flight, an app that lets me remotely control up to 30 iPads over the same wireless network. Idea Flight is integrated with Dropbox, so before a presentation, I convert my PowerPoint and Excel files to PDFs and store them in my Dropbox account. Then, I use the app to send an e-mail invitation to the attendees, or “passengers,” who are prompted to download the app and join the presentation. As I flip through PDF pages and zoom in and out of graphs on my iPad, attendees see what I do on their own devices. They can also download the presentation to reference later if you allow it. Idea Flight also makes networking easy. When attendees sign in with their LinkedIn or Facebook account, the Passenger List is automatically populated with their picture, name, title, and company. Passengers can browse this list and tap to add people to their network. Idea Flight’s Enterprise version carries a one-time $9.99 fee, which lets you become a presentation “pilot” and get all future updates. —J.J. McCorvey
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Better, Stronger, Faster Second-gen ultrabooks up the ante The MacBook Air may have set the bar, but these new ultrabooks raise it, packing
features into an ultrathin package. These four models run Windows 7 and have a speedy processor, 4 GB of RAM, and a webcam. Which is the ultra-est? —J.B. HP Envy14 Spectre
At 3.9 pounds, this 14-inch ultrabook is heavy, but it does a lot. You can connect wirelessly to an HDTV or projector with an adapter and use near-field communication, or NFC, to transfer URLs from an NFCenabled smartphone. The Gorilla Glass display, lid, and palm rest are durable, if slippery. Bootup took 20 seconds; copying a 250 MB file to a thumb drive took 23 seconds. The keyboard sagged a bit, but audio was the best of the bunch. The battery lasts up to nine hours on a charge. cost: $1,400 Acer Aspire S5
With the best performance benchmarks in our tests, the 13.3-inch S5 is our top pick. It weighs just 2.9 pounds, the same as the 13-inch MacBook Air, and it’s an even slimmer 0.59 inches thick. A port panel on the back opens with the touch of a button, revealing two USB ports, an HDMI port, and a Thunderbolt port. The S5 boots up in 15 seconds and takes just 21 seconds to export a 250 GB file. The keyboard sagged slightly, and audio was thin, but the only real sour note is the 6.5-hour battery life. cost: $1,000
Samsung Series 5 ULTRA
The 14-inch Series 5 has an unusual perk for an ultrabook—an optical drive for playing DVDs and burning CDs. Unlike the other models we tested, it uses a 500 GB hard drive instead of a lighter solid-state drive. Still, at 3.9 pounds, it is the same weight as the HP Envy, which has no optical drive. Bootup took 20 seconds, as did ripping a 250 MB file to a thumb drive. The rigid keyboard was great for fast typing, but battery life suffers for the optical drive; it lasts just about seven hours on a charge. cost: $950 Dell XPS 13
This 13.3-inch Dell really stands out for its top-notch display. At 2.99 pounds, the XPS is just a bit heavier than the Acer S5. It’s also a hair thicker, at .71 inches, but its 12.4-inch width (displays are measured diagonally) gives it a slightly more compact profile. The keyboard is rigid, and video playback quality was the best in our tests, with rich, realistic colours. Bootup time is 16 seconds, and copying a 250 MB file to a thumb drive took 22 seconds. The battery caps out at about nine hours. cost: $999 illustration by prameesh purushothaman c
Products + Services
Showtime Lightweight displays for dazzling demos When you want to share a presentation or product demo, having
Seeing Double Mobile monitors, like this one from Lenovo, offer screens the size of a laptop’s, with a fraction of the bulk.
everyone hunker over your laptop can feel a bit too intimate. That’s where new mobile monitors come in handy. Much lighter than the standard desktop monitors, they are designed for portability, folding up to stash like a laptop and drawing power from your laptop via a USB cable. Here are three to consider. —John Brandon AOC 16-inch Portable USB Monitor
Though bright, this monitor lacked the colour quality of the Lenovo. The glossy screen has a good 500:1 contrast ratio, but it suffered from quite a bit of glare. It lacks brightness controls, and the USB port is inconveniently tucked into a cubbyhole near the stand. On the other hand, the rotating stand lets you flip easily between landscape and portrait orientation, which is a nice feature. The 2.3-pound, 1.4-inch-thick monitor does not come with a carrying case. cost: $139
Lenovo ThinkVision LT1421 Wide Monitor
Rugged enough for the travails of a mobile warrior, this 14-inch monitor had the best colour and brightness of the bunch, with a 400:1 contrast ratio. At 1.9 pounds, it was also the lightest. Though the display is just half an inch thick, a protruding motherboard on the back adds a little bulk. A hard plastic cover doubles as a base, and the monitor remains stable as you change the viewing angle from almost upright to a 40-degree tilt. Other pluses: easyto-find brightness controls and an easily accessible USB port. cost: $199
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Tough on Top Specially strengthened glass offers scratch protection and easy cleaning.
Slim Profile New multitouch displays are just inches thick, for mounting flush in a table or hanging on a wall.
Toshiba 14” USB Mobile LCD Monitor
This 0.6-inch-thick monitor comes with a case that converts into a stand (total weight: 2.8 pounds). Velcro strips hold the monitor in place. With a 400:1 contrast ratio and brightness-control buttons, the display looked bright and clear, but color quality was poor. Though the AOC and Lenovo use a cable that requires two open USB ports on oldermodel laptops, the Toshiba offers an optional AC power adapter ($39.99) that frees up one port on the computer. cost: $200
Tables for two (or more) Like iPads on steroids, table-size multitouch displays allow multiple users to get on the same digital page. Play with images for a catalogue layout, use it as a digital whiteboard for all-hands brainstorming, give interactive multimedia presentations, edit documents, tweak spreadsheets, or plan a team calendar. There is a growing number of applications for the devices and an open development platform that lets you create your own, so the possibilities are virtually unlimited. Although the $12,500 sticker price of the original Microsoft Surface limited its appeal, new models from several manufacturers are cheaper and more versatile. The 40-inch Samsung SUR40 for Microsoft Surface (starting at $8,400) embeds a dual-core processor in its 4-inch-thick display, supporting up to 50 simultaneous touches and gestures and running Windows 7. The FlatFrogMultitouch 3200 (left, $5,500; available summer 2012), which registers up to 40 touches on its 32-inch screen, is a display only—you can connect it to a processor running Windows, OS X, or Linux. The 32-inch 3M Multi-Touch ($4,975) is 2.6 inches thick and can track 40 simultaneous touches. It also requires a separate processor and works with multiple operating systems. —Adam Bluestein juLY 2012 | INC. | 2 1
Products + Services
tech trends john brandon
Commando Presentations Leaving the laptop behind
Your digital signature here No need for a printer, scanner, fax machine—or even a pen—to sign and send important documents anymore. New apps for mobile devices let you create a clear signature with just your finger. —J.A.
This app for the iPhone, Android, and iPad lets you upload a Word document or PDF from your phone’s e-mail, camera, or Dropbox account and tap to insert your signature. You can sign with your finger or upload a saved signature. Copies of signed documents can be sent by e-mail or saved in the cloud. cost: Free
This free app for the iPhone, iPad, and Android devices is similar to SignNow but touts extra document encryption, authentication of signers’ identities, and an audit trail showing who signed, when, and where. The paid version, called DocuSign, also lets you send documents to multiple parties and create e-mail reminders. cost: Paid version, $14.99 and up
This app lets you create commonly used legal and business documents on your iPhone. Choose one of 15 document types—bill of sale, nondisclosure agreement, contract—answer a few questions to customise it, sign with your finger, and e-mail the finished document. cost: Free, but most documents cost 30 cents to $1.50 apiece.
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As far as I am concerned, giving presentations is a necessary evil. For one thing, I am not wild about public speaking. Plus, I loathe dragging along my laptop, extra cords, and sometimes even a projector. So when a group of local business owners asked me to speak, I did some advance testing of apps that would let me leave my 8-pound laptop behind and use my phone instead. Epson’s iProjection app for the iPhone, for example, lets you connect wirelessly to a number of Epson projectors—no laptop, router, or cables necessary. Paired with a 3.8-pound Epson PowerLite 1775W ($1,199), this seemed like a good way to go. Configuring the free app took just five minutes, but it supports static images only—no transitions, animations, or video—and there is a slight lag between phone and screen. Because I knew there was a projector with an HDMI port on-site, I considered another strategy. I’m a big fan of Apple TV, a compact $99 device that weighs just 0.6 pounds. After connecting Apple TV to the projector with an HDMI cable, I used Apple’s AirPlay to establish a wireless connection to my iPhone 4S. I had already created a presentation in Keynote and saved it to Apple’s iCloud service. Using the Keynote app ($9.99), I simply downloaded the presentation to my phone. (You can also edit your presentation or even create one from scratch right on your phone.) Setup took about 15 minutes, but there was a big upside: Swiping on my phone brought my full-blown presentation—transitions, animations, and video—to life onscreen (albeit with a delay of about a second). Apple TV doesn’t work with Android phones, so I also tried a free service called MightyMeeting on my Samsung Galaxy S II. (It works with the iPhone and iPad, too.) With MightyMeeting, you store your presentation in the cloud, which allows you to access it from a connected device
• iPhone + Epson projector
• Android phones, iPhone, and iPad
• iPhone 4S + Apple TV ($99)
anywhere. MightyMeeting does not support transitions, video, or animations, and you can’t edit or create a presentation on the phone, as you can with Keynote. You also must connect your phone to the projector using an HDMI cable with a special adapter. (A paid version lets you use your phone as a wireless controller, but you still need a laptop as a go-between.) On the plus side, setup took less than 10 minutes, and as I swiped through my slides, they were immediately mirrored by the projector. In the end, I went with Keynote with my iPhone and Apple TV for my presentation. It was a bit trickier to set up than the other options were, but the ability to edit slides on the fly was a big plus. And, even without an inherent gift for public speaking, I wowed my audience with the ability to call up animations and video with just the tiny device in my hand.
illustrations by Prince Antony and prameesh purushothaman c
Everything you need to know to run your business in today’s economy
: : : : : : : : : : : A monthly guide to policies, procedures and practices
Remove booklet along dotted Line
Develop a Killer App The soaring number of smart phone and tablet subscribers—who are increasingly relying on their handheld devices to shop, consume media and network—are making mobile apps the killer tool in a seller’s arsenal. Apps are coveted for being versatile enough to facilitate m-commerce as well as to run branding campaigns. Munesh Thusoo, brand manager for WagonR, a Maruti Suzuki model, concurs that mobiles are a potent medium that cannot be ignored—especially in urban areas. “But sending SMSs en masse is passé. Users expect businesses to engage with them more personally in novel, interesting ways.” That’s precisely where apps play a role. Maruti Suzuki’s WagonR re-launch promotion plan hinged on a car racing game app that brought out the features of the new model—colours, control and mileage—to potential clients in airport lounges, malls and other commercial establishments. Users entering these premises were invited to turn on their bluetooth to receive free entertainment, a brochure, an EMI calculator, and a test drive offer to boot. The WagonR app had that killer quality! It generated over 4,000 leads for the company. Even though creating a killer app is no rocket science, it involves including a few essential features. Follow these guidelines to make your own and whip up a storm where it’s all happening. —Charu Bahri
Vol. 03 No. 6 | inc. guidebook
develop a killer app : : : : : : : : : : : : :
Get Killer Features Utility: Utility is a defining quality of a killer app. In that, aim for sustained value. Narasimha Suresh, founder andCEO, TELiBrahma, a company specialising in mobile interactions, explains why,“If a consumer makes the effort of downloading an app, the enterprise must reward him by maximising the value.” Of course, apps vary in the kind of utility they satisfy. “Apps at the lower end of the value chain fulfil a basic need,” says Prashant Singh, senior manager, Alliances, Spice Labs. A case in point is a to-do list or a calendar app. Since there is little to choose between such apps from different providers, they are usually bundled with the device. “Killer apps top the value chain and iconic apps mostly create and satisfy a new need—quite like the way micro blogging app Twitter has revolutionised communication strategies,” he adds. For example, runaway successes such as the Angry Birds and Fruit Ninja apps are new-age entertainment. Usability: Usability denotes ease-of-use, that is, effortless processes. Singh says, “Killer apps are simple and hence, sticky. Users inadvertently get hooked on to them.” Stickiness as an “attraction”, Singh believes, kicks in when the app reaches the first 10,000 users— because by then, meaningful feedback can be gleaned and an iterative process of actioning user suggestions can commence. More and more, developers also conduct extensive usability tests prior to launching an app. Suggestions received at this stage could include requests to simplify the text on some screens or to adjust the colour shades in the user interface to enhance readability. inc. guidebook | Vol. 03 No. 06
The “go viral” quality: “The ability to go viral is the holy grail of killer apps,” opines Singh. To go viral, an app must catch on with users. This happens best when user engagement is built into the app design. Understanding people psychology, and why they would share or talk about the app is key to getting this right. WagonR’s Munesh says their app went viral because users were given the option to upload their game scores to social media. “It created the right noise for the app,” he says.
To go viral, user engagement has to be built into the app design. Maximise App Spends
Make the concept clear: “The success of a mobile app depends on its concept and design,” says Suresh. Each killer app starts with a great idea which is then built upon. As a rule of thumb, games provide a rich user experience and hence deepen brand recall. This explains the huge demand for conceptual games. While developing apps that facilitate serious business, it’s necessary to list out the utility that customers most need—like Indiabulls’ state-of-the-art Mobile Power (MPIB), a trading app developed to help their customers access their portfolio. Divyesh Shah, CEO, Indiabulls Securities, says, “We identified our target audience and con-
ceptualised this app to their needs.” The MPIB’s proposed functions include allowing customers to access portfolio updates, get real-time values of their investments while on-the-go, access ongoing market events, get live stock quotes, and trade on the NSE and BSE, in cash and derivatives. Indiabulls negotiated through that by devising a two-step authentication check involving a transaction password and RSA token. Identify the right developer: It makes sense to build apps in-house if the existing IT department has the relevant core competencies. Else, the process should be outsourced. Thusoo favours working with external specialists since the mobile platform is an evolving medium and in-house specialist mobile programers are a rarity. Besides, you can’t get into everything,” he says. Be it the challenges of programing for multiple phone models, network related issues, distribution or user experience issues; experienced developers can bring valuable inputs to the table. “IT departments are usually not geared up to take on a product development role. They are best suited to keeping the wheel moving, not to inventing the wheel,” adds Singh. Also, in-house programers may not be able to think beyond existing processes—in terms of optimising systems and adopting best practices. A “not invented here” outlook can limit the scope of the app, and reduce maximising the returns. Often, apps developed in-house are prone to getting stuck because of insufficient budgets or because the internal
product champion is re-allocated, and moved to fight other fires. Fix targets: While apps are a great way to drive sales, the IT strategy (and spend) should best be tied with business results by establishing the returns expected from the investment in terms of measureable indicators—such as leads or sales. Conveying these targets to the developer in advance allows appropriate reports to be generated as the app is put to use. Telibrahma provided Maruti Suzuki detailed activity metrics to support the creative spend on the WagonR re-launch campaign. “We received the number of downloads acation,” says Thusoo.
At IndiaBulls, the success of the enriched mobile trading platform is being measured in terms of spiralling trading volumes and the increasing number of clients who are migrating from the web-based application to MPIB.
Back up the App
The digital age is making a compelling case for businesses to lean on apps to reach out to customers and grow sales. The formula for the runaway success of an app extends beyond its features. Apps facilitating sales may necessitate the enterprise to strengthen back-end processes. That’s precisely what IndiaBulls did when launching MPIB—to make sure that customers receive world class services.
From a technical point of view, Shah of IndiaBulls says the Risk Management System and Order Routing Engine were rigorously tested to certify their robustness and platform independent features. Also, collaborations were entered into with mobile application download portals to enlist MPIB as a download option. Service provisions included staff training big-time. “Customer sales and support teams as well as back-office operations staff were trained on MPIB and provided with extensive product information to ensure a smooth launch and superior customer services.” Beyond doubt, killer apps can amp up your business. Backing up the app with that personal touch, however, can help it fire with the right intensity.
Vol. 03 No. 6 | inc. guidebook
Headlinearepeats develop killer app here : : dummy : : : : : : :headline :: :::::::::::::
Get more ideas Apps can help spread awareness about a product or push sales. Get the lowdown on two more such killer apps: Product awareness app: Annapurna Zinda Dil (AZD) app is a Telibrahma creation to help spread awareness about Annapurna, Unilever’s low sodium salt brand among target consumers—women in the 24 to 35 age group in major metros. The app includes a nifty Heart Age Calculator tool to evaluate the health quotient of users’ lifestyles. It also delivers health tips and runs contests to drum up user engagement. Consumers can refer the app to their friends and share their feedback on social media as well. AZD was integrated with Unilever’s print ad campaign—readers were prompted to capture the code from the ad to receive the app on their mobiles. Over 50,000 AR engagements and more than 3 lakh downloads via BluFi happened across a period of two months. Sales promotion app: Tesco Finder, a free Tesco store and product-finding iPhone application, is a creation of the in-house mobile development team of retail giant Tesco. Tesco Finder notched downloads in excess of one million in no time after it was launched in 2010. It allows users (in UK) to look-up the nearest Tesco store and create shopping lists. Once inside a store, the app guides shoppers to the alleys which stock items on their shopping list, or the discounts that the particular store is running. http://www.techfortesco.com/tescofinder/Welcome_to_Tesco_Finder.html
Usergenerated videos While killer apps are a “cool” way to bring in more revenue, usergenerated videos are also putting technology at the core of business promotion strategies. Amateur videos shot by product users are redefining the meaning of ‘user testimonial’ and ‘word-of-mouth advertising’. Such online videos garner many eyeballs and generate considerable interest in a product. If the content goes viral, the outcome can be runaway sales. Indeed, satisfied users are the best evangelists, as US-based NYX Cosmetics is experiencing. NYX Cosmetics avidly makes use of social media to communicate with clients. Plus, it is one of the most visible beauty brands on YouTube with over 4,00,000 user-generated video uploads. Amateur product usage videos could work wonders in India, which ranks second globally in terms of YouTube video uploads.
Resources Learn about the synergy between professionally-produced ‘how to’ video content and user-generated product videos, http://www.comscore.com/Press_
Events/Press_Releases/2012/3/ comScore_Study_Finds_ProfessionallyProduced_Video_Content_And_UserGenerated_Product_Videos_Exhibit_ Strong_Synergy_in_Driving_Sales_ Effectiveness
Understand why apps are being seen as the future of the workplace, http://www. infoworld.com/d/mobile-technology/ mobile-apps-the-it-pros-new-powertools-188380
inc. guidebook | Vol. 03 No. 06
great now Over the course of nearly 25 years and four best-selling books, Jim Collins has set out to systematically unlock the mystery of what makes great companies tick. In his most recent book, Great by Choice, Collins and his co-author, Morten T. Hansen, examine companies that have turned in exceptional performance—10 times the industry average—despite operating in turbulent environments marked by constant surprises. He says he wrote the book with entrepreneurs in mind— “to help them navigate from small to great, especially when they feel like small, vulnerable specks out there in a tumultuous world.” Inc. editor-at-large Bo Burlingham caught up with Collins at his office in Boulder, Colorado. 2 4 | INC. | juLY 2012
an Exclusive interview
jim collins PLUS
As much as you have written about what makes great companies tick, I don’t think I have ever actually heard your definition of a great company. You must have one.
Yes, I do. In defining greatness, I think it’s important to differentiate between inputs and outputs. People sometimes confuse the two. There are a lot of important inputs, but
greatness is in the outputs. For example, I don’t think a company is necessarily great because it has a great culture. Culture is an input. Or what about a company with great systems? Also an input. So what are the outputs? I would say there are three. The first is truly superior performance in the arena in which
THE 13 TYPES OF LEADERS— WHICH ONE ARE YOU? PAGE 30
you operate. In sports, your team has to win championships, or it really can’t be called a great team. In business, the measure is financial—return on invested capital. I think that to be considered great, a company must have sustained returns on invested capital substantially in excess of other companies in its industry. But
that’s not enough. To be great, a company also has to make a distinctive impact. I define that by a test: If your company disappeared, would it leave a gaping hole that could not easily be filled by any other enterprise on the planet? Now, that doesn’t mean the company has to be big. A restaurant could have such great relationships juLY 2012 | INC. | 2 5
with customers—such a great community presence and such great food—that, if it went away, people would feel a gaping hole, and no one could easily come in and fill it. You are talking about George Bailey, the banker in It’s a Wonderful Life.
Exactly. The Wonderful Life factor. People would miss the company if it went away. It could be something unique or different or innovative, or the distinctiveness could be in the execution—you do something so well that you’re irreplaceable. If you can’t answer what would be missed, then you haven’t yet made a distinctive impact. The third factor is endurance. A truly great enterprise has the capacity to last beyond any product cycle, any founder, any individual leader, and still maintain superior performance and distinctive impact. Those are, in my view, the three outputs that define greatness: superior performance, a distinctive impact, and endurance. If you fail in any one of those three, you may have done fine. You may have built a good business that’s made a real contribution. But I would not use the word great to describe it. How important is it that we have great companies as you have just defined them? Given that there are relatively few of them, how big an impact can they have?
I think that, as role models, they’re very important. Role models are important for all of us. In the end, Bill Hewlett and David Packard may have had their greatest impact in the incredible role-modeling they
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did for an entire generation of entrepreneurs. People were tremendously inspired when they looked at Hewlett-Packard and realised the kind of company they could build if they put their minds to it. These companies epitomise what I believe is the distinctive American strength. We tend to believe that our ultimate trump card is innovation. But go back to Henry Ford, and then think about Moore’s law and about Bill Gates and Microsoft. Maybe the real American strength is our ability to scale innovation. How we scale it varies, depending on the technologies, the times, the way the world’s unfolding. But we didn’t win the Second
democracy. It’s management— because well-managed organisations are what allow a free society to work. They are the only means by which a free society can compete with totalitarian dictatorships, which are very effective. So what ties that into the changes happening today? It seems to me that this era is marked by something having to do with connectivity and networks and the ability to operate and lead within them. The internet is all about networks and connectivity across networks. So one possibility is that there’s a shift to a new fundamental building block of society, namely, the network. We may
ciations are, by their nature, networks. They’re fluid. But an association has to have some sort of unity and cohesion. So how do you create a great association when it’s inherently not self-contained? The association’s researchers analysed some really high-performing associations, in which you can see this network effect and the importance of being able to lead without direct power. I began thinking that associations may actually be on the leading edge of what more people are going to have to learn how to do. Instead of managing a company, you’re managing an ecosystem that is networked and connected over the world.
“If your company disappeared, would it leave a gaping hole that could not easily be filled by any other enterprise on the planet?”
World War because we invented tanks. It was our ability to scale production. Maybe job creation is also related to our scaling ability. The great companies I’ve written about are classic examples of how we’ve done it. The internet has been an integral part of doing business for years now. What do you think has changed the most?
I’ll start with an observation about social systems that Peter Drucker made 40 years ago. I think it’s one of the most underappreciated insights of the 20th century. The alternative to tyranny, he said, isn’t
be moving to a world of networks well led, as opposed to organisations well managed. You can’t really manage a network, but you can help lead within a network. In any case, networks are very alive and real and are becoming building blocks. Have you actually encountered this phenomenon in any of the work you have done?
Part of my thinking grows out of some work I participated in with the American Society of Association Executives. Asso-
I wonder what effect the internet is having on the expectations of young people entering the work force. I have a friend who employs a lot of high school kids. He says that, contrary to popular perception, they make great employees, but the old command-and-control approach to managing won’t work with them. They want to know why. If you explain the why, they will respond.
I agree on the importance of explaining why, but I think that’s a signature of great leadership, not an attribute of a generation. Great leaders in any generation have always helped people understand why. Mediocre leaders don’t.
Hedgehogs, Cannonballs, BHAGs, and Bullets
Jim Collins’ plan for growing companies
Jim Collins has spent a career probing the inner workings of great companies. Below, he boils 25 years of research into 12 questions that leaders must grapple with if they truly want to excel. Collins’s advice: Be systematic. Every month, have your leadership team discuss one of the following questions. Repeat the process annually for five years. 1. Do we want to build a great company, and are we willing to do what it takes? It begins by making a choice, with a clear understanding of what that choice entails. 2. Do we have the right people on the bus and in the key seats? You need to decide whom you do and don’t want to have with you. You should do that even before deciding exactly where you want to go. 3. What are the brutal facts? You can’t make good decisions if you don’t confront the facts, especially the most troubling ones, those that could represent a serious threat to your survival. The key is to do it without losing faith. 4. What is our hedgehog: What can we be the best at, with an economic engine, and for which we have unbounded passion? “The fox knows many things, but the hedgehog knows one big thing,” wrote Isaiah Berlin. Your hedgehog combines your passion and your special talents with what you can make money doing.
We should be careful not to confuse what’s rare with what’s new. Greatness is rare. It’s so rare that, when you come across it, it often feels like it’s new.
5. What is our 20-Mile March, and are we hitting it? That is, what is the specific performance goal you’ve made a commitment to meeting year in and year out, in good times and bad, and how are you doing with it?
9. What could kill us, and how can we protect our flanks? Paranoia is productive when it helps you survive the inevitable bad surprises that will come along and avoid the disasters that they are capable of producing.
6. Where should we place our big bets, based on empirical validation? You should devote major resources to a new initiative (fire a cannonball) only if you already know it’s likely to succeed. That means first conducting low-cost, low-risk tests on a range of possibilities (shooting bullets).
10. What should we stop doing, to increase our discipline and focus? In creating a culture of discipline, it’s as important to determine what you should not be doing as it is to know what you should be doing.
7. What are the core values and core purpose on which we want to build this enterprise for 100 years? The challenge is not just to build a company that can endure, but to build one that is worthy of enduring. 8. What is our 15- to 25-year BHAG? To build a great, enduring company, you need a Big Hairy Audacious Goal that is tangible, energising, and highly focused and that people can understand immediately with little or no explanation.
So what about customers? They seem to be playing a larger role in the decisionmaking process of companies than they did in the past. An extreme example is Threadless, a T-shirt company that invites its customers to vote on designs and then produces the ones that get the most votes.
11. How can we increase our return on luck? All companies experience both good and bad luck. It’s what you do with your luck that counts. How can you get the most benefit from it either way, and how can you minimise any damage that a run of bad luck will cause? 12. Are we becoming a Level 5 leadership team and cultivating a Level 5 management culture? The fifth, and highest, level of leadership builds enduring greatness through a paradoxical blend of personal humility and professional will. Are you providing it?
That’s interesting. Instead of an organisation selling a product, it’s a network connection that has feedback loops with customers, who are inside their network, not outside.
I’ve also noticed a trend of increasing customer power, and it will very likely continue. Companies have to adjust to it by learning new ways to interact with customers. That’s probably good for all of us, because it will lead to better companies and better results. juLY 2012 | INC. | 2 7
“The great leaders I’ve studied are all people whose energy
It’s not about themselves. It’s about
You admire entrepreneurs who have managed to turn their companies into movements—something that inspires actual passion.
I think that may be one of the most underappreciated aspects of leadership. I have personal experience with a leader who’s done that—Yvon Chouinard, the founder of Patagonia. When I started rock climbing in the early 1970s, we used to pound pitons into the cliffs. That was no big deal at first, but as the number of climbers increased, we started to see cliffs being permanently defaced by the pitons. Chouinard decided to take action. He brought out a set of tools for doing what’s called clean climbing. If you use one of his Hexentrics instead of a piton, there’s no pounding involved, so it leaves no trace of your having been there. In the 1970s, he put out a catalog that was actually a manifesto for clean climbing. I still have one. He basically said to all of his customers, “You need to change your behaviour and stop destroying the cliffs. Here are the products. You can trust them. You will not die if you use them correctly.” I was a young climber at the time and watched the entire behaviour of the climbing community change. Chouinard ultimately saved the cliffs. To this day, I am a loyal Patagonia customer. I’m still part of that movement. Yvon did the whole journey from idea to business to company to movement. I see it with Apple as well, which is closer to a 2 8 | INC. | juLY 2012
and it ultimately affected Rathmann’s own life: When he had to go on dialysis, he became an EPO patient. Every one of these leaders had the idea of shaping the world around them.
movement than a collection of customers who buy its products. Those are both consumer companies. Does your movement theory apply to other types of businesses as well?
A movement springs up around a cause, and I think there are different kinds of causes. Software that makes people more productive is different from Hexentrics that prevent the defacement of cliffs, but they both can be part of a larger cause. Gordon Moore of Intel projected the freeing power of microelectronics. Intel’s founders believed they were revolutionising the world, and they were. In the Southwest Airlines’s case, the cause was the workplace. Herb Kelleher, I believe, had incredible faith in what people working together could do. I don’t think it was ever really about airlines for him. It was about creating a culture that could defy all odds by having everyone in it together battling against the brutalities of the world, achieving stellar performance in a humane way. And someone like Kelleher isn’t an exception. The great leaders I’ve studied are all people whose energy and drive are directed outward like that. What do you mean by “directed outward”?
I mean that, as driven as they are, it’s not about themselves. It’s about something greater
They sound different from the Level 5 leaders you discuss in Good to Great, with their blend of personal humility and professional will. I don’t associate humility with people like Steve Jobs.
than themselves. Take Bill Gates. His deep, abiding passion was for what software could do in the hands of all kinds of people. He wanted Microsoft to be a conduit for it. I don’t think it ever crossed his mind that his work could make him a billionaire. That’s what I mean by outward. Or take Steve Jobs and his drive for beauty, for making something insanely great because you can, not because of what you will get for it. I think of him as an industrial Beethoven, a product artist, who came to view Apple itself as one of his creations. Or George Rathmann, the co-founder and first CEO of Amgen. He wanted to create products that would affect people’s lives. Amgen brought out a drug called EPO for treating anemia in patients with chronic kidney failure,
My concept of humility is somewhat broader now than it was when I wrote Good to Great. I think of it as being in service to something much bigger than yourself. The humility comes from realising how much bigger that something is. Humility aside, it seems as though the recurring themes in your books are discipline, preparedness, and persistence. Are those the essential qualities that tie all the companies and their leaders together?
There’s also the theme of BHAGs, Big Hairy Audacious Goals, as well as the creativity piece. Discipline stands out in our work because it’s so much rarer than creativity, but creativity and discipline go hand in hand. Years ago, I had the privilege of teaching the Cre-
and drive are directed outward.
something greater than themselves.” ativity and Innovation course at Stanford, developed by Michael Ray and Rochelle Myers. The basic premise of the course was that creativity is the natural state of being human. My wife and I are working our way through A History of the World in 100 Objects, by the director of the British Museum. One of the first objects is a piece of art from 13,000 years ago, and some jade hand axes from early civilisation were shaped for sheer beauty. The author notes that our creative, artistic urge seems to show up 50,000 years ago. What do humans do? We create. We don’t have to learn to be creative. We have to unlearn what gets in the way of our creativity. Discipline, on the other hand, is not the natural human state. What is superrare is the ability to blend creative thinking with discipline and to do it in such a way that the discipline helps rather than hurts the creativity. Do you think every business owner should strive to build a great company?
No, not at all. I admit it can sometimes sound that way, because I’m so passionate about the subject. I do believe that building a great company is a noble quest. But I view it as a giant “if/then” question. Yes, if you’re inspired by the idea of building an enduring great company, if you want to have an impact on the world through business, if that
would make you feel great about what you’ve done with your life, then the stuff I’ve written will help. But if people aren’t inspired by that idea, I’m not trying to convince them they should be. I would hope there are founders, Inc. readers, who’ve never really thought about it and—when presented with the possibility—find that it ignites something within them. But it’s also true that it may not be your hedgehog. Just to be clear, for those who haven’t read Good to Great, a “hedgehog” has to do with the intersection of what you are deeply passionate about, what you can be best at, and what drives your economic engine.
And I should note that building a great, enduring, 10,000-person company is not my hedgehog, either. What drives me is curiosity, questions, teaching. I’m inspired by the subject of building great companies, but I am very unlikely to build one myself. So it’s strictly a matter of choice.
It is. I’ve been very influenced by our research on that score—not just the research for Great by Choice, but also for Built to Last, Good to Great, and How the Mighty Fall. Altogether, we’ve looked at 6,500 years of combined corporate history using match-pair comparison. What we see are people who’ve made different choices and different decisions. This study really nailed it for me. Maybe other peo-
ple didn’t make the same choices because they didn’t know any better. That’s irrelevant. What’s relevant is the differentiator, namely, what people did.Clearly some unlucky things can kill you. But I keep coming back to the conclusion that it’s mainly about choices. Is it what happens to you, or is it what you do? These leaders come down squarely on the side of, it’s what you do. Our luck analysis in Great by Choice bears that out. You are talking about the last chapter, in which you show that the highest performers— the 10Xers—were no luckier than the comparison companies, but that they differed markedly in the benefit they got from the luck they had. I particularly liked the way you define a luck event—as good or bad. It made it possible to quantify the number of such events experienced by each company during the period you studied.
Morten Hansen and I spent months figuring out how to do it. Because you have to wonder: Were the companies we hold up as role models just luckier? When you look at the numbers, the answer is no. What’s important is what people did with their luck, how they did it, how they thought about it. The 10Xers achieved a higher “return on luck” by using the leadership concepts we write about. Of all the pieces of analysis we’ve done in almost 25 years, that, for me, hands
down, is the most exciting and the most interesting one. Has it really been almost 25 years? That’s quite a journey.
Yes, it began in 1988, when I started teaching the course on Entrepreneurship and Small Business at Stanford. It had always been positioned as a course in starting and managing small businesses. But for some reason, I changed the first line of the syllabus to say it was a course about turning a small business into a great company. So, in a sense, you have come full circle. What do you think it all adds up to?
A big part of it can be summed up in the luck analysis. It demonstrates how much success depends on choices and decisions, rather than circumstance and luck. Another part has to do with helping people ignore all the stuff that’s just noise. What do you mean?
I mean it’s easy to spend a lot of energy on things that really don’t make a difference. You hear about this new trend or that new development, and you wonder if and how you should respond. Yes, you need to pay attention to how your world is changing. But it can also lead to confusion. There is great simplifying power in being able to say, “We need to start first with whatever problem we have.” It’s a decluttering mechanism. You don’t have to be distracted by the stuff that’s not going to determine whether or not you’re successful. juLY 2012 | INC. | 2 9
Ways of Looking at a
Leader Our endless fascination with leadership has inspired an endless parade of leadership books, many of which strive to identify distinctive styles of top-doggery. Whether CEOs can learn to lead from the prescriptions of academics, consultants, and management thinkers is open to debate. For those wishing to try—or at least to be inspired—here are a baker’s dozen of the most prevalent types of leaders. We have also cited a book associated with each leadership style, as well as some real-world examples of each archetype. —Leigh Buchanan
In normal times, there may not be easy answers, but at least there are answers. In times of crisis or King Kong–scale change, leaders must devise entirely new approaches to doing business. Adaptive leaders rise above the noise to interpret dynamic situations, adjust their values to changing circumstances, and then help their people stretch to meet the unfamiliar without sacrificing their trust, says Ron Heifetz, director of Harvard’s Center for Public Leadership. Sam Palmisano, late of IBM, is one such change maestro. Ford’s Alan Mulally is another. For more: The Practice of Adaptive Leadership: Tools and Tactics for Changing Your Organization and the World, by Ronald A. Heifetz, Marty Linsky, and Alexander Grashow 3 0 | INC. | juLY 2012
Psychologist Daniel Goleman correlates leadership success with awareness of one’s own feelings and the feelings of others. Emotionally intelligent leaders are expert managers of themselves and their relationships with others, and consequently they are masters of influence (but in a good way). Howard Schultz and Warren Buffett fill the bill. Though neural hard-wiring plays a part in emotional intelligence, Goleman believes even nonempaths can learn it. For more: Emotional Intelligence: Why It Can Matter More Than IQ, by Daniel Goleman
These are the folks who put the I in Iacocca. Charismatic leaders influence others through sheer leaderishness. Ninety years ago, sociologist Max Weber described charismatic authority as deriving from exceptional character, heroism, or sanctity. These days, it is more often a function of personality and, consequently, tough to teach. Though charismatic leaders are tremendous motivators and often run fantastically successful organisations, they tend to suck up oxygen, and their reigns can grow cultlike. Think Jack Welch, Theodore Roosevelt, and Voldemort. For more: Charismatic Leadership in Organizations, by Jay A. Conger and Rabindra N. Kanungo
You Know the Type
Of the four leaders below, one is emotionally intelligent; one is a storyteller; one is charismatic; and one is tribal. Can you guess which is which?
Authenticity—like passion—is a potent word thinned to pablum by overuse. But it still felt fresh when former Medtronic CEO Bill George used the term to describe leaders with integrity and character. That was in 2003, two years after the collapse of Enron and eight years before Medtronic, under a different CEO, paid more than $23 million to settle claims that it paid physicians kickbacks to implant its pacemakers and defibrillators in patients. That said, authentic leaders—like James Goodnight of software giant SAS—are polestars of constancy and discipline. By contrast, “shooting stars” rocket to the top, with no time to reflect or deepen. For more: Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value, by Bill George
As defined by business guru Jim Collins, Level 5 leaders pursue goals with the ferocity of lions while displaying the humility of lambs. This very rare breed (Good to Great identifies just 11 examples) bestows credit generously, shoulders blame responsibly, and puts organisation before self. Although many entrepreneurs consider Level 5 the gold standard, it is not for those whose egos won’t fit in the overhead bin. (Good to Great lauds such nonhousehold names as Darwin Smith, former CEO of Kimberly-Clark, and Colman Mockler, former CEO of Gillette.) For more: Good to Great: Why Some Companies Make the Leap… and Others Don’t, by Jim Collins
(Editor’s note: Some leaders we have named as examples are suggested by books’ authors; others we nominated ourselves. And bear in mind that many leaders fall into multiple categories. Herb Kelleher, for example, exemplifies both emotionally intelligent and servant leadership. Steve Jobs was both charismatic and a darn good storyteller.)
Too many leaders cruise through life on old assumptions and unquestioned rules of thumb, according to psychology professor Ellen Langer. If those leaders paid close attention to their environments—noticing, probing, analysing, and, most important, listening to others—then they would ask smarter questions, detect nascent change, and become better learners. Mindfulness plays to entrepreneurs’ love of novelty and is probably easier for founders of young companies, who have not yet developed rigid habits of thought. But corporate giants have birthed mindful leaders, too, such as former Procter & Gamble chief A.G. Lafley, who loved talking to customers in their homes and grocery stores. For more: Mindfulness, by Ellen J. Langer
juLY 2012 | INC. | 3 1
Aesop taught by negative examples. Similarly, many business authors write almost as much about toxic leaders as terrific ones. One breed worthy of attention is the narcissistic leader. Narcissistic leaders don’t listen, they don’t learn, they don’t teach, and they don’t brook dissent. But they are not all bad, psychoanalyst Michael Maccoby explains. “Productive” narcissists, in whose ranks Maccoby includes Bill Gates and Andy Grove, thrive in turbulent times and attract followers with their compelling visions. Just as important, they have “obsessive” operational sidekicks (say, Steve Ballmer and Craig Barrett) to keep them grounded. It’s a Don Quixote–Sancho Panza kind of thing, Maccoby says. For more: Narcissistic Leaders: Who Succeeds and Who Fails, by Michael Maccoby
The military is a seemingly endless source of vivid leadership lessons and metaphors. No Excuse Leadership is the title of a book about the U.S. Army’s elite Ranger Corps by ex-Ranger Brace Barber. But the concept applies to any approach that emphasizes accountability by both leader and led and a knack for making decisions quickly, despite incomplete information. No-excuse leaders don’t have to act tough, but they must display mental toughness. Is it a coincidence that a 2006 study found that companies led by ex-military CEOs outperformed the S&P 500, and that such leaders lasted longer in their jobs? Ask Frederick Smith, the ex-Marine who has run FedEx for almost 40 years. For more: No Excuse Leadership: Lessons From the U.S. Army’s Elite Rangers, by Brace E. Barber
Richard Boyatzis and Annie McKee contend that emotions are contagious: Morale rises and falls with the mood of the leader. Hopeful, charged-up leaders infect their troops with enthusiasm.
3 2 | INC. | juLY 2012
Narcissistic leaders don’t listen, don’t learn, and don’t brook dissent.
But they are not all bad. That’s important to remember as you design your company and calculate how much space to leave for your life. Among Boyatzis and McKee’s favorites is Southwest Airlines president emeritus Colleen Barrett, who makes time for reflection and to reconnect with what’s important to her. For more: Resonant Leadership: Renewing Yourself and Connecting With Others Through Mindfulness, Hope, and Compassion, by Richard E. Boyatzis and Annie McKee
The servant leader’s dictum—“wash each other’s feet”—speaks volumes. Such leaders desire first to serve, then choose to lead so as to serve better. They are empathic, aware, and healing. Former AT&T executive Robert Greenleaf introduced the idea in 1970, although the authors of the New Testament laid the foundation a bit earlier. Not surprisingly, companies known for servant leadership are perennials on bestplaces-to-work lists. See Southwest Airlines (Herb Kelleher) and W.L. Gore & Associates (Bill Gore). For more: Servant Leadership: A Journey Into the Nature of Legitimate Power and Greatness, by Robert K. Greenleaf and Larry C. Spears
Leaders must tell stories: about themselves, about their companies, about what employees do now, and about what they will do in the future. Arresting stories evoke emotions in ways data can’t, argues Harvard education professor Howard Gardner. No surprise, then, that this style of leadership is especially well suited for entrepreneurs (Richard Branson, Steve Jobs), whose stories are by definition their own. For more: Leading Minds: An Anatomy of Leadership, by Howard Gardner
Strengths-based leaders identify and invest in their own—and their individual employees’—talents. Are you an excellent executor, an incomparable influencer, or a superb strategic thinker? Pick one and run with it. Tom Rath and Barry Conchie cite such examples as Teach for America’s Wendy Kopp (execution) and former Ritz-Carlton CEO Simon Cooper (influence). For more: Strengths Based Leadership: Great Leaders, Teams, and Why People Follow, by Tom Rath and Barry Conchie
Cultures are shaped by naturally occurring tribes or amalgams of tribes—groups of 20 to 150 that may make beautiful music together or choose to bludgeon one another with their instruments. The leader’s job is to understand those tribes’ shared values and beliefs and unite them under a common culture. Consultant Dave Logan urges leaders to help organizations discover, or rediscover, the “sacred flame” that makes them great. Tony Hsieh, CEO of Zappos, is a proud torchbearer. For more: Tribal Leadership: Leveraging Natural Groups to Build a Thriving Organization, by Dave Logan, John King, and Halee Fischer-Wright
3/23/2010 2:32:15 PM
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JULY 2012 | INC. | 3 5
THE RURAL WAY
Job Creation | HarVa
The Desi Advantage By Jen Swanson Ajay Chaturvedi, founder and CEO of HarVa, is amazed that others can’t see what he does—incredible business opportunity in villages across India. According to this banker-turned-entrepreneur, these untapped villages can also be the key to helping India regain its footing in a sector of the economy that helped create many jobs—BPOs. The global BPO market—valued at $120150 billion—is said to grow 15 per cent per year. Yet, over the past few years, competitors from China and Philippines have threatened to topple India’s position as the world’s premium provider of low cost BPO services. Although, according to Nasscom, India grew its market share within the global industry from 51 per cent in 2009 to 58 per cent in 2011, and accounts for nearly 7.5 per cent of the GDP, several western clients who predominantly farmed out work to India are now being forced to take their work elsewhere as input costs rise dramatically here. “Most people haven’t cracked through tier II cities,” Chaturvedi says of the foreign clients 3 6 | INC. | JULY 2012
who find outsourcing to urban India too expensive, and the recruiters who only consider tier I and tier II cities when staffing their firms. “If we don’t look at rural India soon,” he warns, “we may lose our competitive advantage.” The business sweet spot lies here, he says. Which is why HarVa, (derived from the Hindi word for green that signifies prosperity), and short for “harvesting value” sources talent from the villages—where, according to Chaturvedi, there are nearly 130 million rural skilled workers who are unemployed due to lack of opportunity. All successful businesses segment customers. Chaturvedi has done those studies on his employees instead. His initial pilots in Teekli, a village off Gurgaon’s Sohna road, showed the really untapped demography were rural women. “They wouldn’t jump jobs, are truly appreciative of a chance to work, and are committed.” So, since launching in early 2010, HarVa has built up a 300-odd all-women team for its
four rural centres in Haryana, Rajasthan and Andhra Pradesh. In these centres, women who are trained for free by HarVa, work on mostly non-voice outsourcing projects for a clutch of international clients. Each one of them earns between `4,000-`7,000. Before you can even congratulate his do-good women champion’s role, Chaturvedi makes it apparent he steers clear of politically charged descriptives such as women’s empowerment. “We hire them because they’re smart, efficient and capable.” Chaturvedi, a BITS Pilani alumnus, and an MBA from Wharton School of Business, is confident of healthy growth despite the
Nasscom’s Strategic Review 2011 report, says lower cost of operations and better employee retention is driving the growth of rural. Here are some new ventures:
slow beginnings. From his current base, he wants to grow HarVa to 2,000 women by 2013-end. “We should have 10,000 women across 50 centres in 10 states by 2015.” Yet HarVa’s aim isn’t to be “just a BPO”. That is only the starting point, says Chaturvedi. His rural centres are designed to evolve into “perfect information hubs” for the village community. So, HarVa offers farming help desks, microfinance initiatives and career counselling at its BPOs. This integrated approach differentiates him from other rural BPO firms, he claims. “I don’t believe that a rural BPO can follow a linear business model like an urban BPO. It can’t Photograph by subhojit paul
Rural Shores: Founded by former E&Y partner VV. Ranganathan, Mastek MD Sudhakar Ram, former MD of Xansa India Murali Vullaganti and CN Ram, president and group CIO of Essar Group in 2008, Rural Shores offers jobs to 1,000 educated youth. Desi Crew Solutions: Incubated at IIT Chennai, DesiCrew Solutions launched commercial operations in early 2007, and has a network of half a dozen centres in Tamil Nadu. GramIT: Based in Hyderabad, GramIT employs more than 400 rural youths in three villages of Andhra Pradesh.
In The Right Company Ajay Chaturvedi is confident of growing HarVa to 50 centres, staffed by 10,000 women, across 10 states by 2015.
just be built on cost arbitrage. When you work in a rural setting, you have to embellish it with other parallel lines of businesses to make it viable.” Indeed, the HarVa model is gaining attention at home and abroad. London School of Business recently did a case study on the company too. Of course, there are challenges to working in villages, the most crippling of which is power supply. The second is simply convincing villagers that HarVa is for real. “They think you are there to either use or mislead them,” Chaturvedi explains. “But once we break through that barrier of mistrust,” he says, “it is easy enough.” JULY 2012 | INC. | 3 7
By Amrita Roy
Agricultural Technology | VINFINET Technologies
Harvesting Technology 3 8 | INC. | JULY 2012
Mobile technologies have revolutionised sectors as diverse as communications, banking, digital entertainment and publishing. Now, a Bengaluru-based start-up is betting on the cellphone to revolutionise Indian agriculture. Led by its CEO Vijay Bhasker Reddy Dineppu, Vinfinet Technologies has developed a GSM-enabled device that allows a farmer to remotely control his irrigation pump with their mobile or fixed line phone connection. The remote motor starter, aptly-named Kisan Raja, can be fitted to a pump of any make and is
THE RURAL WAY
India has a double whammy problem where irrigation is concerned. Agriculture continues to be monsoon dependent, and water scarcity has been rising rapidly. Agriculture, in fact, accounts for a predominant share of the total freshwater usage, and the widely-used flood irrigation method leads to lower yields and is labour intensive. Several companies, including Driptech, are attacking this problem head-on: Driptech: Driptech is an international water technologies company based in Silicon Valley with offices in Pune and Beijing. Through its proprietary manufacturing systems, Driptech claims to produce affordable irrigation systems for small-plot farmers in countries like India and China. The World Economic Forum selected Driptech as a 2012 Technology Pioneer, and the Tech Awards honoured Driptech as a Laureate in 2009 for its innovative use of technology benefiting humanity.
Sprouting Innovation Vijay Bhaskar Reddy Dineppu believes Kisan Raja can reduce irrigation wastage, and help him boost Vinfinet Technologies to a Rs 1,000-crore firm.
activated via IVRS in local languages. What’s more, it sends SMS alerts to the farmer’s cellphone in case of power failure, disruptive water supply, theft or malfunction. Because Dineppu is a farmer’s son, he understood first-hand the challenges an Indian farmer faces every day: “Even the apparently simple task of watering a field is fraught with risks. Water is generally supplied at night and farms are usually located at some distance from the villages. Most farmers have to go out to their fields in the dark to switch on their motors at considerable risk—of Photograph by S RADHAKRISHNA
injury, snake bites and attacks by animals.” Then, there’s erratic power, and if pumps are left running when there is not enough water in the well, it damages the motor. So, after working for 13 years as a product developer for companies like Intel and Cisco, this IIT Madras post graduate knew there was a huge potential, and need for affordable agricultural technology. After coming on board at Vinfinet Technologies in August 2010, which was originally set up by a group of IIT Madras alumni to impart soft skills and technology training to the rural youth, Dineppu reoriented the company’s focus to finding smart tech solutions for the farming sector. “Water and electricity are the two most scarce resources today. Nearly a third of the electricity produced in India is for the agricultural sector, and irrigation uses up more than 50 per cent of the fresh water supply in the country. Yet, our irrigation pumps run at only about 20-30 per cent efficiency. The rest is wasted,” he says. So, Dineppu and his team developed a prototype of Kisan Raja two years back, and launched a pilot study. While there are other self-starter or timer kits available in the market, what differentiates Kisan Raja, which is priced at `5,000 a unit (including SIM and a rechargeable battery), and went on sale last year, is its ability to send messages back to the farmer on the state of motor operation, says Dineppu. The market potential for such devices is enormous, he adds. There are about 35 million agricultural pumps in use in India.
“Even if 20 per cent adopt Kisan Raja or other starter kits, that amounts to about seven million units. After accounting for competition, Kisan Raja is looking at a market of two million customers over a five year period." Vinfinet has set itself an ambitious revenue target of `1,000 crore by 2017. With a dedicated sales team in place now, the company has built up a roster of around 450 dealers. Sales in recentlylaunched states like Maharashtra, Gujarat and Rajasthan have been encouraging. “We need to have at least 100 dealers in every state. By the end of this fiscal, we are aiming to sell between 12,000-15,000 units. And triple that number next year.” The company is in talk with investors, banks and credit companies to raise funding. “We need around `1.5 crore per state to build a distribution and after-sales service network.” So far, he has had to depend on demonstrations at krishi melas and village fairs to advertise his product. The rest he leaves to word-of-mouth. But, he admits that a more comprehensive market outreach strategy has to be developed. For now, Vinfinet is busy producing the 3,000 units they need to deliver in the next two months. Production costs should go down once orders go up, the company says. Vinfinet is also developing two more products to be sold under the Kisan Raja brand umbrella—a smart valve controller to regulate the flow of water into a field and a sensor-based irrigation system, which is expected to be ready within a year. JULY 2012 | INC. | 3 9
By Shreyasi Singh
A Sack Full of Ideas
Gutter Credit here
SUPPLY CHAIN | SV Agri Processing
As somebody who spent his corporate career in companies such as Pepsi, ITC and Walmart, Hemant Gaur experienced firsthand the ills that plagued agricultural supply chain in India. Fortunately, for himself, and the 1,500-plus potato farmers he now works with in Maharashtra, Uttar Pradesh, Madhya Pradesh, Gujarat, Punjab and Karnataka, he spotted the immense entrepreneurial opportunities these gaps throw up.
THE RURAL WAY
So, along with his director of operations Ganesh Pawar (who also had successful stints in Pepsi and ITC), Gaur founded Siddhivinayak Agri Processing, an end-to-end potato supply chain company in 2008. “It’s all very easy to talk about farm-to-fork but not many people have been able to actually execute that.” Gaur thought a start-up had advantages none of his big employers did at cracking that puzzle. “Corporates have entered and failed to make an impact here because remote control
management doesn’t work in agriculture. Flexible, frugal organisations can make this happen.” Also, corporates only worry about sourcing agricultural products, or setting up mechanisms to move post-harvest yield. Indian agricultural, Gaur says, has deep deficiencies at every level. “It’s a much more complex story. Interventions and corrections have to be seeded in at every stage—from plantation to transport logistics. Unless you have that end-to-end solution, it won’t work.” Although the story of every crop is the same, Gaur realised in the early days of the business that he first needed to demonstrate the model's effectiveness on a single crop. So, he focused on potatoes. In the farming communities SV Agri works in, they begin with providing farmers best-quality seeds, and then help provide every input element— fertilisers, irrigation, insurance, mechanisation—to enhance the yield. In these four years, the company has gathered distributors from nearly 22 companies to supply these inputs, and also help farmers tie up with banks and insurance companies. “The goal is simple—to provide a conducive agro-ecosystem.” It’s actually a model which is weaved from a series of backward integrations. Gaur explains that they first figure out who their ultimate buyer is—companies like ITC, Bharti Walmart, Parle and Aditya Birla Retail—what their needs are, and then work backwards to fulfil them. Post the crop harvest, SV Agri also takes care of cold storage, and movement of the produce. Well, the model seems to be working, and how. Gaur rattles off growth numbers. “In the first year itself, we did around `12 crore in turnover, `23 crore in year 2, and `31 crore in year 4. This year, we’ve bagged a turnover of `50 crore, and helped cultivate 30,000 tonnes.” In total, they have a
Gutter Credit here
Yielding Returns India's agriculture needs intervention at every stage, says Hemant Gaur. It's why he believes his end-to-end potato supply chain has heaps of potential. Photograph by jiten gandhi
catchment potential of two lakh million tonnes of potato. The growth forecast is looking even more bountiful now with their recent round of funding for an undisclosed amount by the SONG Fund, an early stage impact-focused VC fund that makes investments in agriculture, education and health. Both sourcing talent to work in the company, and inking potential partnerships with large players is now easier to attract. Gaur says confidently, “We will breach `500 crore in revenue in the next five years, and should cross revenues of `100 crore in two years.” For Gaur, two learnings fertilise these ambitions. One, is the ability his teams have in building trust with the local community— helping farmers adopt new technologies, opening up new access to capital, and show-
According to data compiled by Grant Thornton India, agriculture and related business segment attracted 14 M&As and 8 PE deals amounting to $586.56 million and $19.12 million respectively in the year 2011. In 2010, in fact, the sector witnessed 26 M&As and 8 PE deals worth $354.73 million and $157.41 million. These players got some of that action: Star Agri: Founded in 2006, Star Agri today has 183 locations across seven states, and holds commodities worth `1500 crore. Zameen Organic: Zameen works with 5,000-plus marginalised farmers to increase efficiencies and lowering input costs.
ing them SV Agri is not some make-a-quickbuck urban company. Being rooted to the village is key, says Gaur. “You can’t sit in a fancy corporate office and do this.” More importantly, macro indicators will provide a fillip. Vegetables and fruits rotting on the sides of streets is an oft-seen sight in India right now, he says. “But will anybody waste crop if they saw economic returns in saving it?” The sharp rise in agri prices will open up a lot of opportunities, both to increase crop yield, and to save wastage. It incentivises the whole chain—farmers want to invest more in inputs to increase productivity, and those in the supply chain have greater incentives to improve. JULY 2012 | INC. | 41
COMMUNICATION TECHNOLOGIES | Uniphore Software Systems
Getting Heard By Jen Swanson Nearly 900 million Indians own a mobile phone today, says Umesh Sachdev, CEO and co-founder of Uniphore Software Systems, a rural telecommunications startup. But still the enormity of this figure won’t send Apple rushing to launch solutions for the Indian market. That’s because only 10 per cent of Indians are using smart phones, Sachdev explains; the majority of Indians, particularly in rural parts, still use basic feature phones that lack the capability to download apps or surf the internet. “These people would be happy to use their phones for their business or personal information needs,” Sachdev explains, “but the reality is that current existing applications aren’t meant for the average Indian consumer.” The two major usability barriers—low use of GPRS applications, and the fact that 40 per cent of India’s population is illiterate or semi literate which makes them uncomfortable with any kind of text-based communication. Since 2008, when Sachdev and his cofounder Ravi Saraogi set up Uniphore, their second telecom start-up, they have been trying to understand how rural India uses its mobile phones. “We found that most people make calls in their local language,” Sachdev recalls, a finding that led him to determine that whatever products the young company might develop, voicebased communication would be the central component. “In a market like India, the opportunities for voice are what the Internet was two decades ago,” he explains. 4 2 | INC. | JULY 2012
Today, Uniphore has grown into a voice-based enterprise mobility network solutions provider used by half a million people across India to transfer secure content, and conduct financial transactions in 11 languages and 100 dialects including Indian English, Hindi, Tamil, Kannada, Malayalam, Telugu, Marathi, Punjabi, Bengali, Assamese and Odiya. Along with voice-based solutions, what Uniphore did cleverly was to create speech recognition software; when a user dials into any of the company’s platforms (for example, a mobile banking call centre, or
The penetration of mobile phones has opened up avenues for great experiments in value-added services, voice-based solutions and data-based mobile applications. Simmortel: Started from IIT Kanpur, Simmortel provides hosted telephony, voice and automatic speech recognition solutions. Mobien technolgies: Founded in 2006, Mobien helps organisations plug the digital divide by enabling them to extend their ERP or CRM solutions to the last mile through its award-winning iNotify™ Mobile Application framework. AccelTree: Headquartered in Pune, AccelTree Software uses its expertise in the mobility space to develop device and network-agnostic custom applications for their clients.
an agri market helpline), the computer can understand what she wants to say. Later, the company added speech biometrics into the mix, offering clients a more advanced technology that Sachdev likens to “an audio fingerprint”. This fingerprint matches the caller’s voice to the stored personal information on them, and through a combination of these two platforms, the company has created a variety of prototypes for enterprises working in financial services, mobile health and other sectors. Uniphore’s clients, including large public sector banks, a leading job portal, NBFCs and education delivery firms, use these platforms to tailor their services to the rural population. “For example, now a job seeker in a village can search for jobs just by calling a number, and a housewife can open a bank account, save money and make payments with her phone—all in their spoken language, and without having to type anything.” Sample other services created—Uniphore’s mobile voice banking product allows a user to speak the nature of the transaction (“transfer `500 to A/C no. X”). The system transmits the message to a core banking system, fulfils the transaction and confirms to the customer by voice. Similarly, Uniphore’s m-health platform has the capability to automatically call a patient, ask questions about her condition, and dole out medical advice which has been developed in conjunction with doctors based on the patient's responses.
Prompting Dialogue Umesh Sachdev wants to deepen the mobile revolution by developing voice solutions for those outside the halo of text-based apps.
Because these voice-based, vernacular applications are technology-based, users don’t need to download anything onto their phones which makes the quality of the actual phone irrelevant. Uniphore, which has been incubated at Dr Ashok Jhunjhunwala’s lab in IIT Madras, as well as Villgro Innovations Foundation use the Cloud which considerably brings down set-up and running cost.
When they started out, Sachdev and Saraogi thought of themselves as a B2C entity. Within the first six months, they realised their core strength was technology, not its marketing or distribution. Beyond business logic, this model also allows them to focus squarely on creating technology which best serves the end user. "We’ve learnt how people across India speak,” says Sachdev. In Uttar Pradesh,
Photograph by subhojit paul | IMAGING BY PETERSON
people answer the phone with a formal “ji” as opposed to “haan” while end users in Haryana say “hello” before launching into their questions. These nuances might not seem like much but this intimate understanding empowers his team to come up with the right solutions. “This isn’t stuff that can be learnt in textbooks, or put in business plans,” he says. This confidence serves as a base for their grand plans now. Sachdev hints at a fresh round of funding “very soon”, and says his team has outlined aggressive targets—reaching over two million end users by end of 2013, and over 10 million users by 2015. “We exist because there are 700 million people in India hungry for these services.” JULY 2012 | INC. | 4 3
Healthcare | Glocal Hospitals
The Right Dose By Shreyasi Singh Tracking down Dr Sabahat Azim, founder and CEO, Glocal Hospitals, for an interview is fraught with missed calls and bad mobile network. Based in Kolkata, Glocal is a rural healthcare chain with five hospitals in villages like Sonamukhi and Dubrajpur across West Bengal. Azim spends much of his time travelling from one hospital to another, and also driving through parts of Uttar Pradesh, Bihar, Orissa and Assam as he trots up thousands of miles to grow Glocal to 50 rural hospitals by the end of 2013. This punishing travel schedule through India’s interiors has been a habit for Azim, a former Indian Administrative Services (IAS) officer of the Tripura cadre, and a trained doctor. What’s new though is the business jargon—terms like break even points, revenue targets, recovery on investment and consumer satisfaction—he generously uses to describe his company’s trajectory. “My biggest learning from my IAS days was that grants don’t work. If you really want to create services that benefit people, and make sure they are run efficiently, people must pay. Otherwise, the value of goods and services goes down,” says the former bureaucrat, who resigned from government service after seven years to found Glocal. “A 4 4 | INC. | JULY 2012
A Shot of Health Glocal wants to show it's possible to provide low cost, quality healthcare in villages.
good business’ intention should be to make these services affordable and accessible.” Glocal, which was funded by marquee VC firm Sequoia Capital and Elevar Equity, has crafted a canny business model to achieve its main objectives—to bring protocol-led, quality healthcare to rural centres, and to do so at price points that make sense. Essentially, it does this by careful disease mapping (to identify the most prevalent diseases that must be treated), and hawkishly controlling operating expenditure and wastage. Glocal’s first hospital in Sonamukhi, 126 kilometres away from Kolkata, has validated their model since it opened up in
July 2011. Built at a cost of roughly `3 crore, this 50-bed secondary hospital which treats up to 200 patients every day offers common medical services at affordable prices—`25 for an injection, `35 for urine test, `100 for X ray or an ECG, and `2500 for normal birth deliveries. It also successfully met its first benchmark target. “Our hospitals are designed to reach operation break even in six months, achieve their revenue targets in 12 months, and have return of investments of 36 months.” Actually, the Sonamukhi hospital took six months and 18 days, Azim painstakingly points out. “But it was our first, and helped establish our learning curve. My sense is the others will get there quicker.” This dogged monitoring of business fundamentals and performance might seem at odds with his hospital’s local surroundings. But Azim believes it’s the key to working in rural India. “Many people think they can enter the rural market with a lowcost, pared-down product but that will never work. With the mass media and mobile revolutions, aspirations here are very high. To survive here is tougher than in any urban centre—you need incredible efficiency to offer that quality at lower prices.” He likens the situation to the automobile market in western Europe where everybody already has a car so for every extra rupee they spend on a vehicle, they expect a higher return. “We can’t treat these customers like second grade citizens, or beneficiaries.” Of course, there are challenges, he says, including getting doctors to view medicine as a profession, not as a “business practice” although he’s quick to add that this is an ill which afflicts the medical fraternity across India, and not just rural areas. Yet, he'd rather focus on the opportunities “The Indian rural healthcare market is valued at $20 billion. Trying to crack that was never easy.”
photo Courtesy subject
THE RURAL WAY
Smart Flows Waterlife India's Sudesh Menon (extreme right) has demonstrated that rural Indians are willing to pay for safe water.
Water | Waterlife India
Pure Drops of Profit
photo Courtesy subject
By Amrita Roy India is critically poised on the brink of water disaster, warns Sudesh Menon. The CEO of Waterlife India, a Hyderabad-based enterprise that provides clean and green water solutions to rural communities, trots out statistics to back up his grim prognosis: “The demand-supply gap is expected to be 50 per cent by 2030. In the 1950s-60s, the per capita availability of water was about 5,000 cubic litres. It is less than 1,700 cubic litres now. In the next 10 years, we will have less than 1,200 cubic litres of water per person.” He has more damning statistics. Mainly, India is besieged by two types of drinking water problems—of quality and access. “Of 123 countries surveyed for the Civic Water Index, India ranks among the last three. In rural hospitals, more than 2/3 of the patients admitted suffer from water-borne diseases,” Menon adds grimly. To address these challenges, Menon set up Waterlife India to provide safe drinking water to everyone by 2020 with a specific focus on underserved markets with two of his colleagues, Mohan Ranbaore and Indranil Das. Essentially, Waterlife sets up microutilities for water purification in rural communities. These plants provide highquality, safe drinking water at an affordable price—jars of 10 and 20 litres are priced at `3
and `5 respectively. Menon, an IIT Kharagpur engineering graduate, who gave up his corporate career with GE to work on water, says their model works because of two elements—involving all key stakeholders of a community, and creating revenue streams to ensure the solution is economically viable. Menon admits that when they first started out, naysayers abounded. Few people believed that in a country where water is irrationally priced even for rich urban dwellers, those at the bottom of the pyramid would shell out money for it. Yet, the success of Waterlife’s first project at Sukantanagar, a village on the eastern fringes of Kolkata, in March 2009 proved non-believers wrong. Here, villagers had been suffering for decades from arsenic contaminated ground water. When Waterlife put up its treatment plant, nearly 50,000 residents came forward to pay up. Sukantanagar spawned a healthy stream of success stories. Within a year, Waterlife was setting up utilities in 250 villages in Bengal. In the three years since, Waterlife has expanded to seven more states—Uttar Pradesh, Maharashtra, Karnataka, Andhra Pradesh, Tamil Nadu, Bihar and Jharkhand. “We impact about 1.2 million people now,” Menon claims, adding that they have grown two to three times
every year, and currently operate more than 2,000 systems across the country. Waterlife goes beyond installing systems though. It provides operations and maintenance support for five to 15 years. “We focus on sustaining the efforts. We don’t walk away,” elaborates Menon. After a system is installed, users pay a nominal fee modelled on annual maintenance contracts (AMC). A service team—usually hired from among the local youth—is set up. This has been an important link. “The government has adequate policies on potable water supply but the problem lies in ground implementation. Often, a water treatment plant comes up with great fanfare but due to lack of proper maintenance, the quality of water soon becomes suspect.” By demonstrating that their model works, Waterlife's target for the mid-term is to impact 25 million people across the country. Of course, challenges are aplenty. A key concern—capital—was surmounted in December 2011 when Waterlife raised `22 crore in investment from Matrix Partners India. Yet, the biggest difficulty lies in being able to adapt to on-ground conditions. Menon confesses rural markets can be disruptive and unpredictable. “It’s not just about resources; there has to be will.” Encouragingly, attitudes at the government and private enterprise level have been rapidly transforming. “There is a lot of traction. Several government bodies have adopted our model, and there are private players entering the sector,” points out Menon. The water market, he says, will see much more action in the next few years, and will give rise to large, flourishing national-level companies, he believes. Clearly, the trends point to swelling streams of revenue for Waterlife. JULY 2012 | INC. | 4 5
THE RURAL WAY
OPINION | BY Kartik Srivatsa
Rural to RUrban Most people continue to see India as two distinct entities—urban and rural, and have used this construct to design businesses that specifically serve one of these segments. However, given the tectonic changes in the demographic organisation of the country since its transition to a market economy, this is an incorrect premise to build a business on. First, there is urbanisation. Every developed country has gone through it and so is India now but the Gandhian legacy of romanticising the village has made the Indian state inadequately prepared for urbanisation. Sometimes denial, this lack of preparation has led to the chaotic expansion of mega cities with inadequate focus on the growth of smaller towns. It is inevitable though that these small towns—typical district headquarters such as Satara or Pudhukottai—will drive the next wave of consumption and employment growth. While villages would be the bread basket of the economy, they will be tightly integrated with next rung of “district” cities which will act as hubs for the efficient flow of products and services within the district. Another significant change is in the way the urban-rural divide is perceived. A decade ago, a distinction would have been palpable but this dichotomy no longer exists, thanks to the penetration of mass media and the mobile phone revolution. Information barriers have broken, and migrants to the city take back purchasing power and aspirations to their homes. How these aspirations can be fulfilled in a rapidly urbanising India defines the entrepreneurial opportunity that exists outside big cities. The answer to this lies in getting three things right—identifying the right unit size, using technology to manage costs and integrating local entrepreneurship into the business. Defining the size and spread of a single standalone profit centre (unit model) is very strategic and often where entrepreneurs struggle. Given the low price point and sub-critical population of small towns and Indian villages, the economics of having a store or centre may not be of scale and consequently not profitable. Developing a hub and spoke model to service a set of villages and towns that together form the unit and provide for the necessary volume often becomes the viable solution. Having defined the unit, how do you keep your costs low? The role of technology both in terms of remote delivery and improved tracking to reduce cost-to-serve is increasingly becoming relevant. In our portfolio companies, we’ve derived significant leverage from technology for this. The final touch is when you include “local” in the equation. Villages are close knit communities, and locals must be part of the business model. Paradoxical as this may sound in the context of the earlier points, this is the secret sauce to tackle the difficulty of serving the rural segment. One of our key learnings in making “local” successful is that business models that create opportunities for local entrepreneurship, not local employment find the going easier. Large companies and MNCs find it baffling to assimilate this in their model, and this presents a great opportunity for Indian entrepreneurship to fill the gap. More than anything else, the quality (and passion) of entrepreneurial talent in businesses launched for the rural market assures us the next billion dollar business will indeed get built here. Kartik Srivatsa is the managing principal of Aspada Capital Advisors, the investment advisor to the SONG Fund. SONG is backed by Soros Economic Development Fund, Omidyar Network and Google in partnership with ISB.
4 6 | INC. | JULY 2012
OPINION | BY Vikas Nath
A long, worthy road “Going rural” is viewed as a punishment posting in the public sector, a far from prized posting within the corporate sector, and barely registers as a career option for millions of educated youth entering the job market each year. Juxtaposed with the image conjured of rural areas as backward and poverty-afflicted, lacking good education and health facilities, it makes it difficult to attract talent, investment and opportunities. So, it should come as no surprise that three-fourths of the 1.2 billion people who live on less than a dollar a day live in rural areas. For too long, rural areas remained artificially closed under the exclusive purview of the government. Participation of other actors, apart from handful of governmentapproved industries and agro-processing units, was not encouraged, indeed dismissed. This model clearly did not work; it failed to transform rural areas. And it did nothing to modernise farming or diversify the rural economy. The private sector had eyes only for urban markets and densely populated cities in emerging economies. Where it did enter rural areas, it was for extractive industries like mining, logging and building hydro-electric dams that were directed to using rural resources to satisfy urban demands and potential, rather than capturing and transforming rural markets. The rural entry points for private companies continued to be shaped by urban markets and trends. Then, increased competition in urban areas and saturation of demand in big cities forced companies to look for customers elsewhere. Rural areas in proximity to cities seemed a natural extension. In tandem with the notion of “bottom billions” which sees rural people as potentially profitable customers, rural markets started to make more sense and there was a strategic shift to tap them. More companies started to look at rural areas as potential markets in their own right, independent of urban demands and trends. Some companies simply extended the distribution chains of their existing products, while others added new features to their product lines to better serve rural
THE RURAL WAY
markets. For instance, Nokia launched a basic mobile phone with a torch, and followed it up with Nokia Life Tools to provide farmers with SMS-based agriculture and weather related information. Their customer retention improved, and Nokia expanded this model from India to Indonesia, Nigeria and China. The opening up of the rural sector timed perfectly with the rapid rise and ubiquity of cheap information and mobile technologies, and their improved availability in rural areas. It started the trend towards “white collarisation” and let loose a new breed of rural entrepreneurs and innovations. Suddenly it does not seem odd to find a management graduate or an MNC going rural. A growing number of investors and angel financiers have also entered the bottom-of-the-pyramid businesses, of which by far the most popular one is microfinance. Microfinance has spread like wildfire across the globe, including in India, and is making horizontal linkages with agriculture, healthcare, housing, education and other aspects of the rural economy. There is a lot to be said for the changes happening in rural areas, but it is important not to get carried away. There is still a steep learning curve ahead for most companies: businesses thrive when societies prosper. Rural areas, with their extreme poverty, have their own development needs, and it is in the interest of the private sector to look for solutions which can bring prosperity and broaden their markets. Even farmers need roads to drive cars. And you need electricity before you can sell a washing machine to a rural housewife. It is necessary for businesses to adopt a long term vision for rural areas, to make investment in hardware (infrastructure and technology) and software (research and development, education and skills). Emphasis should be on coupling innovations and business models with local needs to create scalable solutions instead of immediate and excessive profits. A case can be made for the fair-trade model, where companies (like Starbucks) invest in agriculture supply chains to ensure farmers are fairly remunerated. Equally, companies must adhere to global standards when they enter rural markets, and follow nationally and internationally accepted norms on environmental standards, human rights and child labour. The private sector itself has to be flexible and innovative, and explore different kinds of arrangements to enter, serve and maintain a long-term presence in rural markets. This could take the shape of public-private partnerships—the government is still a major player in the rural sector and should be engaged. It could mean setting up rural franchises to promote local ownership and generate local employment opportunities, which in turn will increase rural incomes. It could even mean innovative home-grown models such as that of Amul, which spurred the White Revolution in India making it the world's largest producer of milk and milk products. Doing business in rural areas provides us with a wonderful opportunity to serve the people, and to do so in a profitable way. And that may make the lives of rural dwellers a little easier! Vikas Nath is the associate director of FUNDS (Future of the United Nations Development Systems). He has worked in over 50 countries on e-governance and ICT.
OPINION | MARK KAHN
Let's start with some basic truths: people have to eat, and as they get richer, they eat better. Multiply that trend by a billion people, and then consider that the resources required to increase food production in India are diminishing at an astonishing rate. Welcome to the future of Indian agriculture. Why has India grappled with food price inflation for most of the past decade? Because economic growth has increased rural and urban income, and the first thing people spend money on is dietary improvement. Protein intake increases so that means more demand for dairy, dal and (for some) eggs, fish and meat. Likewise, diets diversify beyond grain with an increased salience of sabzi, fruits, sugar, and edible oil. Not surprisingly, the drivers of inflation in recent years have been these categories, not the staple food grains overflowing in FCI godowns. India has the world's largest malnourished population so this dietary transformation is expected to accelerate. If you compare the country's per-capita consumption of any core food item to the global average, the gap is huge, and the future stress on Indian agriculture becomes clear. Can the system handle the pressure and meet India's future demand? Well, the short-term answer is no. Every resource required to drive future agricultural growth in India is currently either bottlenecked or declining absolutely. Cultivable land is disappearing so we need higher yields from fewer hectares. Groundwater levels are collapsing across India, making irrigation ever more difficult. We have a critical soil fertility crisis, especially in Punjab, from decades of grain monoculture and imbalanced fertiliser usage. Rural labour scarcity has been exacerbated by NREGA and Indian farmers pushing their children off the land and into urban jobs. Finally, even if we can increase food production, the supply chain is completely unprepared to handle the additional volumes. What happens when you combine growing food demand and bottlenecked supply? You get high prices which makes agriculture increasingly remunerative. When farm profits rise, farmers invest in new technologies to improve their productivity. What new technologies do I have in mind? Specifically those which address the core bottlenecks holding production back—water, soil, labour and the supply chain. Each bottleneck will have certain promising technologies to focus on—hybrid seeds, low cost drip irrigation, bio-fertilisers, agricultural mechanisation and cold storage innovations. Where are these new technologies coming from? MNCs and large Indian corporates will drive some but the greatest revolutions at the farm level are being catalysed by startups which shatter incumbent business models and push the boundaries of the possible. The opportunity for ag-tech entrepreneurs is massive. You have structural conditions resulting in high agricultural prices which encourage rapid technology adoption, a virtuous cycle that was unthinkable 10 years back. There are reservoirs of scientific and engineering talent who I like to call the "3 Idiots Generation"; because young people in India today increasingly seek holistic fulfilment beyond lucrative commercial jobs. Moreover, trade channels to bring new technologies to farms are well established, and mobile penetration enables direct farmer outreach. Anyone who wants to launch a startup today should look beyond urban e-commerce and towards solutions for the 60 crore Indians who are tied to the land. Mark Kahn is a co-founder of Omnivore Capital, a venture fund investing in agtech startups in India. JULY 2012 | INC. | 47
Subhasish Chakraborty knew helping others dream—in this case, DTDC’s nearly 6,000 franchisees—was the way to build a network.
HOW I DID IT
You’ve Got Mail Subhasish Chakraborty
DTDC Courier & Cargo
When your company becomes the subject of case studies the world over, clearly you’re doing something right. Subhasish Chakraborty, the founder of DTDC Courier & Cargo, was a quick learner. Within the first year of launching his courier delivery services, Chakraborty figured out the formula for growing big in this industry—a strong network. Twenty two years on, his `450-crore company reaches 10,000 pin codes in India and covers more than 240 global destinations including the US, UK, Canada and China. The credit, he says, goes to their 5,900-people strong team and a robust franchisee model of nearly 5,750 franchises. As told to Ira Swasti / Photograph by Subhojit Paul
I was born in a lower-middle class family in Kolkata. We didn’t have money to pay for my college so as I pursued my chemistry honours from Ramakrishna Mission Residential College, I also freelanced at Peerless Insurance. In those days, ambitions were very clearly laid out. One was expected to complete your graduation, get good marks and follow that up with a good job. I’d fallen in love with chemistry, and was a gold medallist in my college. Yet, I continued working at Peerless even after completing my bachelor’s as I simultaneously studied for my advanced course in chemical engineering. Around 1981, B K Roy, the managing
director of Peerless which was then a
`5,000-crore insurance agency told me
that even though the company was per-
forming well in the northern, eastern and western regions of India, it wasn’t doing well in the south. Mr Roy encouraged me to go to Bengaluru to build their company there. I was a good performer at Peerless, and he showed great faith in me. So I took his advice and landed in Bengaluru that year. After building Peerless in Bengaluru for
six years, I realised I had learnt enough to start my own business. Because of my chemical engineering background, I wanted to begin a chemical production enterprise. But I knew to be successful there I must learn the distribution side of the business. In 1987, I started a small distribution agency in Bengaluru, Chennai and Hyderabad to understand the dynamics of july 2012 | INC. | 49
HOW I DID IT
distribution. I begun using conventional postal services but the experience wasn’t great. So I switched to couriers. While dealing with one of these courier companies, I realised there was a big gap between what postal services offered and what customers required. I studied this particular courier company for a month or two and found the business very interesting. It struck me that I should start a courier company of my own. And, DTDC Courier and Cargo was born in 1990. Because I already had a small distribution
channel in Bengaluru, Chennai and Hyder-
creating that network. Armed with a business plan, when I went to the bank to ask for a loan, they blankly refused. In those times, there were no venture capitalists who were ready to invest in a business if you showed them a well-chalked out idea and a market opportunity. You either needed high-value property to offer as security or have a godfather who could back you up. I had neither. To ease my financial crunch, I tried a few chit funds. I also sold our family jewellery but that money vanished soon. That’s when I realised—there must be hundreds of thousands of people like me who want to build companies but can’t.
“The key to my success has been my relationships with people. If you can make your dream their dream and, their dream your dream, it’s easy to work and grow together in business.” abad, I decided to target my courier services in the south to begin with, with a plan to expand to the rest of India later. While working for DTDC, I realised the growth opportunities in courier services were more than what a chemical production business could provide. So I closed operations of my chemical distribution agency and focused solely on DTDC Courier. With the limited capital I had, I had initially
thought I’d focus only on the main cities in the south. But my customers needed products to be delivered to Mysore, Mangalore and Hubli. They didn’t think connectivity to Kochi would suffice their needs. It was clear that I needed to go into the interiors of Kerala, Tamil Nadu and Andhra Pradesh. That was the key to making this business work—having a vast, far-reaching network.
Other courier companies were busy setting
up offices in the interiors and smaller towns already. But, this was an expensive proposition. I didn’t have tens of lakhs to invest in 5 0 | INC. | july 2012
This is when I thought of designing the franchisee model for our business in 1991. DTDC was the first supply chain and logistics company in India to introduce the franchisee model. Franchising is a doubleedged tool. Yes, working with franchisees eases your need for capital but it also necessitates a huge focus on quality control. To ensure that each one of our franchisees lived up to our standard of quality, we developed a comprehensive structure. We’re much bigger now, yes. But, even when we began, we divided the company into four zones which are further bucketed into regions. These regions are further segregated into areas and finally, branches. Each branch controls between 20 to 30 franchisees. For the first five years of our operations,
our focus was to build a strong services network. Once we had that, the challenge was to manage all those people. You can’t manage such large numbers manually. We used to give customers information about
their order either over the phone or in person. Doing that for lakhs of people across the country was not possible. We had to digitise our operations so that customers could track their orders on their PCs and we could maintain our records effortlessly. By 2000, we had developed a fantastic software to manage and track all assignments online. We digitised our main offices and then developed a scheme to provide computers, printers and scanners to all our franchises. Having created a pretty strong network in India, in June that year, we decided to expand abroad. Starting with UK, we moved to the US, the Middle East and then UAE. Just last year we entered Canada and Singapore and in March this year, we expanded to China. We invariably go to countries where Indians or Indian businesses are operating because that brings us more business. We usually design our services map according to the requirements of customers too. For instance, if a customer says we already have good connectivity in Darjeeling, we need services in Kalimpong, we see if a franchise is available there and we bring that location on our map. The other way is when we build a last-point railway line. What we do is we calculate the number of remote or inadequately-connected stations between the first and the last point, and establish operations in those locations. Today we have 5,750 franchisees on board. One key understanding has helped us with this—when you work with people, if you can make your dream their dream and their dream your dream, it’s easy to work and grow together. I started this business with only `20,000 capital and it has now grown to a turnover of `450 crore. The key to my success has been my rela-
tionships with our partners, clients and employees. We have almost 6,000 employees in DTDC and no employee unions till date. That’s because we have an open culture of sharing information about our company, whether good or bad, with employees, franchisees or clients. There are
HOW I DID IT
some things that, as an organisation, isn’t in our control. It’s best to be transparent at those times. Very often, flights and trains carrying our cargo get delayed. We can’t control that. But, we can control our relationship with our customers, and how we communicate with them. When unexpected, unavoidable delays happen, our teams have been trained to go back to the customer and inform them. In 2006, Reliance Capital bought 40 per
cent stake in our company for `70 crore. That was the turning point for DTDC. We were just a `140-crore business then. Beyond just having capital to help us expand, when a company like Reliance Capital invests in your company, people suddenly begin to look at you differently. They know you must be doing something right for a Reliance to invest in you. Nearly every top company in India— Wipro, Infosys, Tatas—began using our
services after that. That Reliance deal did wonders for our brand value. In business, when you make big decisions like the Reliance deal was for us, you need to balance your gut and instincts. For me, both those approaches have equal importance. I try and play one off the other. If my gut points to something, I analyse and calculate the risks of it turning out to be bad. But it works the other way round too. If logic says this deal will turn out to be good, I eventually listen to my gut to arrive at a final decision. Thankfully, all my decisions so far have been successful for the business. It’s just the beginning though. Last year, we grew at a record 38 per cent. It was our best year yet. But we need to make brand DTDC much stronger and more visible. Our aim for the next few years is to brand all our franchises from Leh to Kanyakumari, with the same logo, interior design-
ing, look and feel. Beyond the company, what gave me greatest pride is when we crossed 5,000 employees and 5,000 franchisees in 2010. I come from a very humble background, and I feel tremendous satisfaction that I have been able to create so many jobs. In fact, with the DTDC Institute of Supply Chain Management, which we set up a few years back, we have been able to provide employment to so many people from humble backgrounds who really needed jobs. After establishing ourselves in the courier
industry, we are all set to open new verticals. This year we plan to launch our e-commerce project to provide surface transport and warehousing for e-commerce businesses. We also plan to launch 500 retail stores in the next few years, that will provide almost every service element a customer can think of—air tickets, train tickets, mobile recharges.
The World How to recognise great ideas from developing countries—and bring them home We imagine innovation as a trickle-down process. Companies in places such as the United States, Europe and Japan, deploy sophisticated technology to produce premium products for developed markets. Then they strip out some features, maybe substitute cheaper materials and eliminate most options, and ship their diminished creations to presumably less-demanding customers in Africa, Asia, and South America. But the days of rich countries’ hegemony over innovation may be numbered. In their new book, Reverse Innovation: Create Far From Home, Win Everywhere (Harvard Business Review Press), Vijay Govindarajan and Chris Trimble describe the developing world as a fertile research and development lab for companies in any market. The authors, both professors at Dartmouth’s Tuck School of Business, argue that increasingly, breakthrough ideas will sprout in poor countries and be replanted here. Govindarajan spoke with Inc. editor-at-large Leigh Buchanan about how American entrepreneurs can take advantage of this bidirectional model.
What are some products or business models that moved from the developing to the developed world?
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A well-known one is microfinance, which originated in Bangladesh in 1983. It is now operating in more than 100 countries, including the richest country in the world, the United States, where it is transforming people’s lives. An earlier example also started in Bangladesh, where Western doctors had gone to treat a cholera epidemic. They found the local people there giving patients carbohydrates and sugar to
keep them hydrated. The doctors found that very surprising, because medical opinion at the time said that if you put carbohydrates and sugar into someone suffering from diarrhea, the diarrhea will get worse. But the local people had been using this treatment for hundreds of years, and when the doctors saw how effective it was, they published a paper about it in a British medical journal. That was picked up by doctors at the University of Florida, who were trying to
concoct a drink to rehydrate their football players fast. Their team was the Gators, so they called the drink Gatorade. Do companies here sometimes innovate for developing markets and then reimport those innovations?
Walmart is a good example of that. The main concept in the United States is the big box. But when Walmart went into South America, what it found was that the dynamics of shopping are different. Consumers there are poor. They can’t buy large quanti-
as R+D Lab i l l u s t r at i o n s by P r a m e e s h P u r u s h o t h a m a n C
ties of a product and store it at home, because they don’t have the money and they don’t have the room. They also don’t have huge SUVs to load up. Walmart decided to innovate a small-store format in these countries. The beauty is that, even in a small store, Walmart’s products will be cheaper, because they have economies of scale at the back end. This was a very big success in South America, and now Walmart is bringing the small-store format into the United States. It will open them in cities that
are too crowded and expensive and in rural areas that are too sparsely populated to support a big box. The companies practicing reverse innovation in your book are all global corporations. Are there opportunities for smaller businesses as well?
The kinds of innovations you see in poor countries are ideally suited for start-ups, both homegrown and from the developed world. That’s because they don’t require a lot of resources. And start-
“When entrepreneurs see an opportunity, they should partner. There are lots of people in developing countries looking for alliances of this sort.”
ups, of course, are starved for resources. They do, however, require creative thinking, which entrepreneurs are good at, also. In these circumstances, entrepreneurs should flourish. Do you have any sense that entrepreneurs in poor countries are imagining products for their home markets but also eyeing rich ones?
I think they’re focused on their own markets. Their passion is to create business opportunities in those countries. Entrepreneurs here should have a venture fund or something to monitor these innovations. Then, when they see an opportunity in a poor country, they should partner. There are lots of people in developing countries looking for alliances of this sort. Another example from health care: I was in India two weeks ago, and there was an entrepreneur who had started a business of making hospital beds. Currently, hospital beds in India are supplied by a large
Partners in Health developed the accompagnateur model— in which people in poor communities are trained to provide health care for their neighbours—for use in Haiti. PIH has since brought the model to 10 other countries and to its hometown of Boston.
talk is cheap
By outsourcing every last bit of network management to big European carriers, India’s Bharti Airtel was able to offer cell-phone service for as little as a penny a minute. Sprint liked the model well enough to bring it to the US.
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GE Healthcare created low-cost and portable EKG and ultrasound machines for use in India and China. American doctors saw them and wanted them, and now represent a valuable market.
turn it up
Harman International designed its cheap, flexible automotive infotainment system for Chinese carmakers—because who would want it for American consumers? Turns out Toyota would; it uses the Entune system throughout its lineup.
American manufacturer. They cost $10,000. This entrepreneur’s beds cost the same, but they take up 40 per cent less space, which means you can fit in more patients. Of course, you can’t shrink a hospital bed, so instead, this guy had incorporated all the things that take up room around it. He built an IV pole into the bed and the hand-soap dispenser and a space for patient records. He built a cupboard underneath the bed for the patient’s clothes and personal effects. He has just started production and already has a backlog of orders. This is a very smart guy, but his aspiration is just to be in India. I can imagine an entrepreneur here striking a deal with him to bring this hospital bed into other emerging markets, or even the United States, where hospitals have problems with space. How do you recognise mainstream developedworld demand for developing-world innovations?
Picking up on traditional remedies, P&G developed a honey-based cough medicine for Latin America. When that worked, the product was renamed and directed at the Hispanic market in the US. Now it has a third name, Vicks Nature Fusion, and is available nationwide.
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If you’re an entrepreneur considering bringing an innovation to a developed country, you need to take three steps. First, don’t bring it to the rich world right away. Think about poor countries instead. And, by the way, when I use the words poor and rich, I’m not making any value judgment. It’s the World Bank definition. You take the GDP per capita
“Come into the rich world, but don’t go straight to the mainstream. There are always poor people in rich countries, just like there are rich people in poor countries.” and find the average for the world. A country above the average is rich. Any country below the average is poor. According to that definition, there are 164 poor countries, with a total GDP of $30 trillion. Thirty trillion dollars! And those countries are growing faster than the rich countries, at 5 per cent. That’s $1.5 trillion of incremental growth every year. So if you’re a America entrepreneur looking for a market for an innovation from India, look to the developing world first. Step Two is, come into the rich world, but don’t go straight to the mainstream. There are always poor people in rich countries, just like there are rich people in poor countries. So target that group first. Step Three is, think of the mainstream. What are the marketing challenges for products imported from the developing world?
You have to convince people low cost does not mean poor quality. That takes some convincing.
What are the greatest obstacles to developedworld business leaders’ recognising and capitalising on the potential of developing-world innovations?
The biggest obstacle is the mindset. In the developed world, we have been so successful for so long catering to a very sophisticated customer, supplying premium products with high margins. That dominant logic does not work in poor countries. It is a fundamentally different customer set with fundamentally different problems. Sometimes, countries can become insular when they are so successful. For American entrepreneurs to tap into this opportunity, they have to be curious about the problems of people in poor countries. This curiosity—if you can acquire it, can lead you to success.
Sales They hold door-to-door selling challenges at this B-school. this page Technology Why CEOs in the US are brushing up their coding skills page 56 The Way I Work BharatMatrimony’s Murugavel Janakiraman follows a simple guiding principle at work—make an honest attempt and throw the stone. Whether the mango falls or not should not be your concern. page 60
Will investors glam up Secret Wardrobe with `1crore? page 58
strategy Sales Hard-knock life An M.B.A. programme sends its students door to door to learn about selling Cory Older, an M.B.A. student at the Acton School of Business in Austin, steeled himself as he prepared to knock on yet another stranger’s door—the 100th he had hit in two days. Frankly, he wasn’t proving very good at selling dictionaries, but he had to make quota to stay in school. The classic story of a hard-working, duespaying student? Not exactly. Selling books door to door isn’t Older’s way of paying tuition; it’s a mandatory part of his school’s curriculum. Acton, a private school whose primary offering is a one-year M.B.A. programme, was founded by a group of entrepreneurs in 2002 and designed specifically to teach the fundamentals of entrepreneurship. Last year, it ranked No. 13 on the Princeton Review’s list of top graduate entrepreneurial programmes. Every year following winter break, Acton’s class of about 25 students breaks into small teams for the Acton Sales Challenge—a threeday competition in which students go door to door to see which team can sell the most children’s dictionaries. The challenge is a core part of the experience at Acton.“When we started this programme, I couldn’t find a single M.B.A. Illustration by SHIGIL N
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programme that taught anything about sales,” says Jeff Sandefer, an Acton professor and one of the school’s co-founders. “Sales is seen as kind of the ugly stepchild of business.” The Sales Challenge is Sandefer’s attempt to close the gap between that perception and the reality that successful entrepreneurs must know how to sell. It’s not only mandatory to participate; it’s mandatory to succeed—students have to sell a modest quota of three books each, or they are expelled from the programme. To make it even more difficult, the dictionaries are deliberately overpriced, at $30 each. “The books are something you could probably get on discount at Amazon for $20,” says Sandefer. “It’s not the books; it’s the pitch.” Door-to-door sales may seem as antiquated as a travelling vacuum salesman, but Sandefer is convinced that the skills required to sell a product to a complete stranger are fundamental to every entrepreneur. Besides teaching the art of the pitch, he says, the Sales Challenge weeds out wannabe entrepreneurs who lack courage and persistence. It also teaches how to interact with customers and helps future CEOs develop an appreciation of how hard their employees work. But of course, selling door to door does have its downside. Acton students have been screamed at by Austin residents, had people threaten to call the police on them, and even had dogs sicced on them. Students work from morning until dark or later. “We’ve had people selling into the evening to make it,” says Sandefer. Brad Holden was part of the team that won this year’s competition. He sold 15 books and knocked on nearly 900 doors in the process. He found that to succeed, he had to sell an idea, not a product. “If you say, A ‘ re you interested in a kids’ dictionary?’ they say no. But if you say, A ‘ re you interested in expanding your kid’s vocabulary?’ they say yes.” Chase Nall, who graduated from Acton last year, sold stereo equipment while an undergraduate but still found the Sales Challenge difficult. “It wasn’t an overly enjoyable experience,” he says. “You get rejected continually. I figured I’d have some advantage, but then you get out there, and it’s very challenging to knock on doors.” As for Cory Older, whose background is in accounting, he had little sales experience before enrolling at Acton. “It was pretty frightening at first,” he says. At the end of the second day, he says he had a mind shift. “All of a sudden, I began to look at it as a plant manager would look at an assembly line,” he says. “It looked like dials I needed to adjust.” He realised his approach was immediately putting people on guard. Around the 175th door, he changed gears and began telling corny jokes. “I’d knock on the door and say, ‘Hey, I’m in charge of telling jokes in the neighbourhood.’ ” After rolling out a joke like, Why don’t aliens eat clowns? (Because they taste funny), he found that most people would usually say, “OK, why are you really here?” By the end of the third day, Older says, “Some people I know would have closed their doors earlier ended up becoming customers.” When he graduates this spring, he plans to return to his former employer, a real estate firm. “I’m going to help them start some new ventures, and it’s definitely going to involve reaching out to people I don’t know,” he says. With his newfound expertise, cold calls now seem less intimidating. “I’ve been more confident since the Sales Challenge,” he says. “I can go back to that experience and say, ‘This is a lot easier than knocking on a stranger’s door.’ ”—Rachel Kaufman 5 6 | INC. | juLY 2012
Technology CEOs Learn to Speak in Code Executives are learning the benefits of learning programming languages. As the co-founder of Byte Dept., a New York City web
development firm launched in 2009, Phillip Reyland would have appeared to be every bit the typical web-savvy tech entrepreneur. What he lacked, however, were coding skills. At Byte Dept., he handles sales, billing, project management, and client relations, while the company’s inhouse and freelance programers take care of the technology side of the business. “I told them, ‘You code; I’ll do everything else,’ “ says Reyland. That arrangement worked just fine during Byte Dept.’s early days, when the firm specialised in building simple WordPress sites and interactive banner ads. But as the company branched out into more sophisticated web and mobile applications, Reyland’s technical team started running into delays. It was difficult, with a very limited knowledge of web development and programming, for Reyland to understand the cause of those delays. It was then that he realised he needed to learn to code.
Profusion of Classes
More entrepreneurs are following suit. A recent proliferation of online courses and night and weekend classes from start-ups such as Codecademy, Code School, Girl Develop It, and Treehouse has made learning how to program accessible even to time-strapped CEOs. For many CEO students like Reyland, the goal is not to make programming their full-time job. Some want to converse more intelligently with developers; some want to make smarter decisions when hiring tech talent; and others just want to be able to update their company’s website or fix a simple bug without bothering their engineers. Codecademy, Code School, and Treehouse offer bite-size, selfpaced online lessons on a range of technologies. Codecademy, which has attracted more than a million users since last August, is free. The other schools charge by the month or the course. For Reyland, the trouble at Byte Dept. began when communication gaps between the designers and developers meant project designs were being approved that couldn’t be programed. His role was to act as an intermediary between the Illustration by anil vk
Jessica Gupta Location
No. of stores
Online model and one store in Mumbai Rental Products
Bridal lehengas, sarees, shervanis, wedding gowns, cocktail dresses and bridal jewellery Designers on board
Anita Dongre, Malini Ramani, Rohit Bal, Sabyasachi Mukherjee, Satya Paul, Wendell Rodricks Pricing
Rentals range from `1,500 to `8,000 2011 revenue
FUNDING SOUGHT FOr
To increase our collection, expand to other metros
Elevator Pitch Secret Wardrobe provides designer wear on rent. Will investors fashion out `1crore? Pitch: “Every woman struggles with the dilemma of a cupboard full of clothes but nothing to wear. Secret Wardrobe, an online shop where you can hire designer wear at a fraction of the outfit’s actual price, comes to your rescue. When the organised market for designer wear is pegged at `350 crore, we offer our clients an opportunity to experiment with a “Sabyasachi look” without having to dish out the little fortune that a Sabyasachi Mukherjee outfit costs. There’s also a try-before-you-order option with our “Book for Trial” facility where outfits are sent to a customer’s home for trial at a minimum charge of `300. Once satisfied, customers can rent out these outfits. They can also visit our warehouse to try options out, and get styling advice or put up their personal designer pieces for rent with us. We share our rental revenues with them, and it helps us build a wide collection—a dream closet, if you wish. —As told to Neha Gupta
The Experts Weigh In ENGAGe WITH CUSTOMERS
The company will be able to pull it off since recycling designer garments is a good economy balancing factor. Who wouldn’t like having the chance to wear an outfit you love, but saving the huge expenses on buying it? To ensure Secret Wardrobe is successful, Jessica must make sure she sticks to the value proposition of providing designer wear at affordable prices, while maintaining a good inventory to satisfy customers. Plus, this is a service she is running, so the responsibility of ensuring all aspects of making the experience stress-free for consumers rests with her and must be meticulously planned. ANJU MODI, designer, New Delhi
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Get the experience right
WORK ON THE TOUCH-N-FEEL
It’s a great idea for the Indian market which is getting increasingly aspirational. The key to this model’s success will be tackling the reverse logistics of returning the garment. Efficiently managing “wear-and-tear” of the goods as scale-up happens will be essential. Finally, a significant part of enjoying a designer garment is the luxury experience. Even on an online channel, the venture would need to ensure that even though a rental model is being followed, the customer ends up feeling special at the end of the renting experience, and the overall activity is not perceived as commonplace.
With aspirations soaring high and affordability remaining a constraint, this is a great plan. Target customers will need to overcome two significant mental blocks—the aspect of wearing a “used” garment and that of not owning it. The former cannot change as it is integral to the business model. However, the latter could be addressed by providing the option of purchasing the garment at (say) 50 per cent of the original price, with the price moving further down with each subsequent purchase. This, coupled with a service offering of home-trial and alteration could work well for her business.
SOUMITRA SHARMA, analyst, IDG Ventures, Bengaluru
VIVEK BIHANI, CEO, Bedrock Ventures, Delhi
Dressed to Kill
Jessica Gupta lets you dress like a diva without spending a fortune. Will her business model catch the investor eye?
Photograph by jiten gandhi
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The Way I Work | Murugavel J, BharatMatrimony.com
“The country’s future does not depend on politicians, but happy marriages.” Murugavel Janakiraman doesn’t seem like your quintessential matchmaker but then this founder-CEO of BharatMatrimony.com, a leading matrimonial website, never set out to be one. He was happy being a software consultant till the business equivalent of Cupid struck him in 1997 while working on a project in the US. There, he saw Indian techies struggle to find spouses. That was then. Now, his website has redefined how marriages are made in India—one click at a time. And, despite BharatMatrimony’s predominant position (JuxtConsult says it has more than 80 per cent of the matrimony market), Janakiraman’s ambitions and purpose are nowhere close to being scaled despite the 20 million registered members. His aim—facilitating successful marriages —keeps him busy thinking up new ideas. As told to Meenakshi Kumar | Photograph by Subhojit Paul 6 0 | INC. | juLY 2012
I enjoy waking up early, somewhere around 6am because it keeps me fresh and energised
the whole day. Most mornings, I hit the gym followed by a session of yoga which sets my day for me, and keeps my stamina levels high. Breakfast is crucial family time. I have a traditional South Indian breakfast with my wife and two children, after which I leave for office. I am in office by 9.15-9.30am. Fortunately, office is just a short 20-minute drive for me. It’s a big blessing. I don’t have to battle crazy traffic every day. My first few minutes in office is spent checking my e-mails and replying to them. As a rule, I don’t check work-related e-mails at home. The BlackBerry is only for calls and not e-mails. I don’t like carrying work home at all. Every day, we have a scheduled 9.45am meeting with the top management. I dislike people who don’t value, and appreciate the importance of time. In fact, it is to push this understanding that I introduced the morning meeting in office some
Motivational Mornings Murugavel Janakiraman plays an inspirational audio message for his team during morning meetings.
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two or three years back. No latecomer is allowed in the meeting, and everyone knows that this is sacrosanct. You can’t enter even if it is 9.46am. People took time to adjust to this rule but I think the initiative has been successful in setting a culture. I wanted each person in my team to realise that this is a core workplace value for us. Some years ago, I had attended a seminar based on the book “Mastering the Rockfeller Habits”. Among the many things I picked up there was the idea of focus in business. I learnt that it was important to stay in tune with the market dynamics. For that purpose, a daily meeting of the top management is essential. After I returned from that seminar, I immediately started the morning meeting. These daily meetings help in keeping everybody in sync with the happenings in the business as well as the matrimony office. It doesn’t leave any room for people to become complacent. Rather, it ensures that nobody is in for unpleasant surprises. Over the years, I have found this effective as my team is much more alert and confident about the job. The morning meeting with my top management is the most important part of the day for me because it lays out the agenda for the rest of the day. In those 15-20 minutes, ideas are discussed, sticky issues resolved and future plans made. We also play an inspirational audio message for a few minutes. These messages are from the philosophy of Infinitism, which believes that knowledge may be justified by an infinite chain of reasons. My favourite question is—which customer do you want to fire? Essentially, the point is that demanding customers take up too much time and energy, which in turn could have been used for good customers. So it’s best to drop unreasonably demanding customers. These messages motivate people and fill them with positivity. Once the meeting is over, I check my e-mails and at around 10.30am, have a nice, strong coffee while pondering over the day’s agenda. This mid-morning cuppa is a must for me. It gets my creative juices flowing. When I really need to recharge my batteries, I head out on nature trips. I love being surrounded by nature and my family and I travel regularly. As an entrepreneur, you need creativity. You can’t do the same thing every day. At BharatMatrimony, our philosophy is clear—each one of us in the company believes we are building a better Bharat. It might sound grandiose to others but think about it. The future of a country depends on its citizens. Good citizens emerge out of good parenting. Good parenting can happen only in a good marriage. And we are the gateway to happy marriages. In that sense, the future of the country doesn’t depend on politicians but on happy marriages. I could never have imagined in my wildest dreams though that I would one day be a “matchmaker”.
Yet, that one decision, that ability to realise the potential of the matrimony space gave birth to the idea of a matchmaking website. Since then, thinking up of new ideas to make the website work has been a passion. It’s what keeps me going. I am thinking of ideas all the time—one never knows when a great, new idea will strike. Being able to innovate and introduce new products to the website gives me a high that’s unmatched by anything else. I think of what next and what more. I like to do something new and redefine things. What’s even more exciting is to see these products become successful.
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hen you are a matchmaker, your
responsibilities are huge. A matchmaker’s job is unlike any other— after all, we have to ensure that everyone finds a partner they are looking for. Nobody should meet failure. This in itself can be quite tricky because finding matches is not all that easy. But I am one of the best living examples that it is possible. The site was launched after I realised what a huge opportunity an online matrimonial market would have. I was in the US then. There were so many single Indians desperate to get hitched. The internet was booming and I realised it would make perfect sense to launch a matrimonial site. I was proven right. BharatMatrimony was an instant hit. I even put up my profile. And soon, I met my future wife and began corresponding with my to-be father-in-law. Our horoscopes were matched and since I was in the US, my brother went to meet my wife’s family. Within three weeks of that meeting, we were married. Today, it’s my small family—my wife Deepa and two kids—that is my happy world. In a way, I am the best ad for the site. Since the time BharatMatrimony started in 2000, we have helped facilitate more than a million marriages. Even after 12 years of the company being launched, I believe in being extremely hands-on, especially when it comes to developing products. Of course, we have different departments and the company is carefully structured but I make it a point to be in touch with what our clients are saying. I don’t directly go to clients or try to solve their problems but by tracking the engagements that happen at the customer service department, I know what is going on. I can confidently say that I know the pulse of the consumer. That is not to say that we’ve not made mistakes, or not got things wrong. Not all ideas take off. Sometimes, market trends help to develop new products and smart ideas can come from various sources. But sometimes, even initiatives that seem best suited for prevailing trends don’t prove fruitful. For example, we were confident about mobile matrimony but it didn’t take off like we expected it to. In fact, we’d introduced a voice message and video facility on
it as well so that people could hear and see each other. We’d launched Of course, the working experience has to be open, honest, mobile matrimony as a paid service but later we made it free. transparent and value-based —that is at the core of a successful Despite that, not too many people registered for it. Today, we only company. But I believe in discipline and hierarchy at work too. I have about a hundred people who use it regularly. don’t want people to bypass their seniors. It’s important for Similarly, we had also introduced a verification service, where organisations to make sure that a sense of respect is maintained. we would help our users verify the background of the prospective I am honoured to have some really qualified people in my team. groom or bride. Unfortunately, it didn’t find too many takers and I believe it’s better to be surrounded by people who are more we had to discontinue the service. On the other hand, Elite—a qualified and talented. It keeps discussions enthusiastic and premium service for the rich and affluent, and Privilege Matri- creativity flowing. mony, where a relationship manager helps users find a suitable partner have done very well. Because we track user preferences and user behaviour vigilantly, we have a fairly satisfied member base. Honestly, we’ve not had too many complaints from our registered members. As a company, you also have to know which feedback to ignore, and which to take seriously. When free members post frivolous things like—why doesn’t a specific profile have photos, or why somebody is not responding— we know we don’t need to get worked up. In fact, I follow a simple guiding principle in my business—“Make an honest attempt and throw the stone. Whether the mango falls or not should not be your concern”. I tell that I Am My Own Ad Much like these couples, Janakiraman also found his wife through to my team all the time—do BharatMatrimony. Today, the couple is happily married with two kids. your best. Great teams and great employees don’t just work for the organisation. They should work to their best effort possible. I urge my team members to showI see my role as being that of a connector—getting everybody case their true potential. People not giving something their best is aligned to a common objective. Other than that, on a day-to-day actually what I dislike most. It really upsets me. You have to perse- basis, I like to leave people to their roles and not interfere in their vere, and stay committed to a purpose. work. One of the most important achievements for me has been that Also, setbacks or the unexpected don’t rattle me. I believe a lot despite the company being 12 years old, there is still a lot of energy in “unintended intentional consequences”. Certain events in my life and dynamism here. We feel excited about coming to work every have made me believe in this. One is my studying Master of Com- day. I’ve never felt there is nothing more left do to. In fact, my puter Applications (MCA) when I always wanted to pursue an employees who have been here for a while feel as if they joined undergraduate degree in Chemistry. But circumstances led me to yesterday—they have new challenges to meet every day. MCA and eventually I fell in love with computers and launched my On most weekdays, I manage to get home by 9-9.30 pm. I’d love business. Then in 2008-09, the global economic downturn helped to reach earlier and spend more time with my family. But that never me to realise my true potential. It helped me to become a CEO from happens. My evening routine is simple. After a home-cooked meal, an entrepreneur. So, today, if I am faced with a new, unpalatable I watch around 20 minutes of television, some news and then a few situation, I don’t panic. I know that something good must be in store comedy shows. Then I try to read, mostly books on business, marfor me. I should just put in my best. It’s what I tell my team too. keting and entrepreneurship, before calling it a day.
“You have to know which feedback to ignore.”
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I wish I knew then...
Murali Bukkapatnam, co-founder, Mandava Spas & Hotels After running three businesses in the US, M. Bukkapatnam chanced upon an opportunity in Hyderabad for his fourth. While scouting around to buy a house in 2007, the serial entrepreneur met his future co-founder Yashodhar Vallala, who was then looking for some angel investments for a budget hotel chain. Bukkapatnam was so impressed with the potential in value-for-money hospitality in India that he offered to become a partner instead. Five years on, Bukkapatnam is excited about the key advantage his fourth venture has—the many lessons he’s picked up from his 13-year entrepreneurial journey. Innately, I’m a risk taker. I like to go after opportunities that I spot. It’s a qood quality, of course. But, I’ve learnt over the years that entrepreneurial instincts must be backed with proper structures and plans. I began my first venture, a gas retail business, in 1999, along with a friend in Washington DC. Because the two of us knew each other very well, I thought running the business would be smooth. Yet, things went wrong, mainly because we had absolutely no paper work in order. Our partnership broke apart because there was no clear definition of roles and responsibilities. We were running the business on trust and verbal understanding. That was my first lesson in entrepreneurship—put things down on paper, sign agreements even when you’re doing business with friends or family. Proper documentation costs time and money but it is absolutely worth it to spend your first one or two lakh rupees in formalising things. Doing things right in the beginning has benefits in scaling up, as well. I founded my second venture, Bukkapatnam Associates, in 2001 because I’d identified a huge
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a lifestyle business, you need to invest in proper paperwork to scale up. Come to think of it, I am not embarrassed to say that my entrepreneurial journey has been a success of failures. But I have tried to learn from my mistakes. When I came to India to run Mandava in 2008, my fourth venture, I made sure I put things down. The second most important learning for me has been— assume the worst. When you enter into business, your primary objective should be to put your heart and soul into bringing an idea to fruition. Money Formalising Structures Bukkapatnam now prefers should be your secondary putting ideas, plans and targets on paper. objective. If making money is your primary objective, you will demand for real estate in the Washington not get anywhere. I made this mistake in area. A lot of people were migrating there almost all of my ventures and now when I after the dotcom bust. The business started look back I realise I missed out on building well but could never grow to the next level my companies, and losing out on a few because we were not able to garner enough contracts because we were too anxious funds mainly because the mom-and-pop about the rates, not the product offering. It style of accounting does not go down well was a crude understanding of how busiwith banks, angel investors or even smaller nesses should be built. investment groups. Anyone who wants to —As told to Ira Swasti pitch in with funds would like to evaluate your management style and the company’s documents. Unless you are happy running