Page 1

DECEMBER 2012

After the Squeeze How Modern Lending Works

Page 36

How Naveen Tewari Built InMobi into a Billion-dollar global business in just 4 years!

The Magazine for Growing Companies

How Naveen Tewari

Built InMobi into a billion-dollar global business in just 4 years! Page 26

The magazine for growing companies

Touch Laptops Ready To Tap and Swipe?

Page 19

December 2012 | `150 | Volume 03 | Issue 11 A 9.9 Media Publication | inc.com Facebook.com/Inc

@inc

Case Study Smart workplace design

Page 49


I wish I knew then...

Kanchan Naikawadi, founder, Indus Health Plus Her father’s untimely death due to cancer, because it wasn’t detected in time, led Kanchan Naikawadi to start Indus Health Plus, a preventive healthcare service company, in 2000. Naikawadi was driven by the aim to make preventive healthcare services both affordable and accessible to all. In the past 12 years, the Pune-based company has established its presence in 26 cities, and claims to have benefitted 3,25,000 families through timely health check-ups. Naikawadi shares a few lessons she picked up while running Indus which has now become a `100-crore business. Before starting Indus Heath Plus, I worked with my uncle Sadanand Bapat, a serial entrepreneur with multiple businesses in chemical trading and transport, for five years. I learnt all the ups and downs of running a business from him—right from managing finances to tackling everyday operational challenges. Even though I had my uncle, now director at Sahayadari Hospitals, as a guide when I started Indus, our proposition of selling preventive and not curative healthcare was very new for India. Because I had personally suffered, and had built the business to ensure nobody goes through what I had to in my father’s case, I had believed that when I went to people to convince them about the benefits of regular health check-ups, they would welcome our services with open arms. I was wrong. Instead, people would tell us they didn’t need preventive healthcare because they had medical insurance. I learnt during this time that people in India are used to seeing a tangible product and the idea of paying for preventive services wasn’t welcome. I remember finding it appalling that while most people took preventive care of their cars and scooters by

company was how important it is to use and manage IT services, data and technology in your company. Fifteen years back, they didn’t use computers or cloud to store data. At Indus, we got a whole lot of IT people on a contractual basis to do this for us. In the first year of starting IT-based services in the company, the person we trusted the most with our data locked the systems, took all our data and blackmailed us. We refused to pay him anything and for the next two months, we had to run the company without any data. Luckily, we had hosted a server Curing Mental Blocks Naikawadi had a tough time on our website which had most educating people on the need for regular health checks of the data there, but it took around two to three months to regularly servicing them, when it came to retrieve it and get things back on track. their own health, they only sprung into That incident taught me the biggest lesson action in the later stages of the disease. I about keeping your data secure. Now, we wish I had known then that it would take manage these services in-house, have us years to educate our customers. Today, source codes in place and take back-ups at we have a model where our agents target regular intervals. I don’t want to make that individual customers and talk to them on a mistake again especially as we plan to go one-on-one basis about the benefits of international in the next five years. going for regular health check-ups. Things —As told to Ira Swasti have slowly picked up now. Another thing I did not or rather could not pick up while working in my uncle’s


contents

December 2012

44 How I Did It A Room to Grow 26 Around the World in 1247 Days It’s difficult not to be impressed by Naveen Tewari, founder and CEO of InMobi. The 34-year-old has built his company into a global mobile ad network— across 30 locations in five continents—in less than four years.

36 After the Squeeze

You can’t blame banks for trying to reduce risk during the financial crisis. But for some business owners, the process continues to carry hard lessons about how modern lending really works.

Anil Madhok has moved from a professional career to being a successful entrepreneur with incredible ease. Sarovar Hotels, which he started with `50,000 in 1994, has today grown into a well-known hotel management company with five brands, 60 hotels and more than 5,000 rooms under its management. as told to sonal khetarpal

by bert helm

by ira swasti

56 The Way I Work

He might be the king of an ice cream empire. But, Rajesh Gandhi of Vadilal wants to instill his company’s repertoire of delights with healthy benefits, by introducing low-sugar treats and other snacks. His own diet includes five small meals, and a religious exercise regime. as told to sonal khetarpal

This edition of Inc. magazine is published under license from Mansueto Ventures LLC, New York, New York. Editorial items appearing on pages 11, 12, 14, 15,19-22, 23, 24, 36-43, 49-54 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.

2   |  INC. |  DECEMBER 2012

on the cover

Naveen Tewari, founder, InMobi. Photographed by Srivatsa in Bangalore. Cover design by Shigil Narayanan.

Photograph by JITEN GANDHI


December 2012

contents

49

19

06 09

05 Editor’s Letter

06 Behind the Scenes

Hand-crafted textiles, pottery and paintings: Companies that keep the Dastkar Nature Bazaar earthy and alive

09 Launch

Family businesses are resilient and modern, says PwC report A new online wedding planner  The Inc. Data Bank: Why you should give yourself a raise  A Skimmer’s Guide to The Half-Life of Facts, by Samuel Arbesman Research Corner: What really matters to VCs A new book busts workplace myths

14 Guest Speaker

By Phil Libin My company was recently valued at $1 billion. Does that mean it’s worth more than The New York Times?

16 Innovation

A watch that can monitor health parameters, and help you call in an ambulance

19 The Goods

 Windows 8 ultrabooks Testing out website-monitoring services A Moleskine notebook that works with Evernote Great space-saving luggage Tech Trends: Tools for managing contacts

Guidebook, No. 11

Is every customer a valuable customer? Not really. Know how to segment your customers effectively, following page 22.

Hands on 49 design A San Francisco firm makes the most of a small space and a small budget 52 technology Big Data, done cheaply—how businesses can get more out of customer data 53 managing The delicate art of managing employees from multiple generations

60 I Wish I Knew Then...

Getting trained at her uncle’s company didn’t quite prepare Kanchan Naikawadi for a data security crisis when she started Indus Health Plus in 2000.

23 Balancing Acts

By Meg Cadoux Hirshberg The two-business household— it’s the worst. Except that sometimes it’s the best.

DECEMBER 2012  |  INC. |  3


MAIL SEP/OCT 2012

Faces of Success

Delightful design

The missing link

Inc. is my favourite magazine in the US. I chanced upon the Indian edition a few months back at the Delhi airport. Since then, I’ve picked one on my travels back home. Given the last few issues I’ve read, it’s great that you keep getting better and better. The ranking of top 500 mid-size companies is an important task. What makes it great though is the way it is presented—a pure delight. Many compliments to the team.

Kudos to you and your team for the brilliant September/October 2012 issue. But, I was disappointed when I found out that the company, Arunjyoti Enterprises, with the topmost growth of 1231% was not covered in detail.

MANAGING DIRECTOR: Dr Pramath Raj Sinha Printer & Publisher: Anuradha Das Mathur

STUDIO Chief Photographer: Subhojit Paul Sr. Photographer: Jiten Gandhi

vikas malhotra, via e-mail from Singapore

Editorial managing Editor: shreyasi singh assistant editor: Sonal Khetarpal feature writer: ira swasti DEsign Sr. Creative Director: Jayan K Narayanan Sr. Art Director: Anil VK Associate Art Directors: Atul Deshmukh & Anil T Sr. Visualisers: Manav Sachdev & Shokeen Saifi Visualiser: NV Baiju Sr. Designers: Raj Kishore Verma Shigil Narayanan & Suneesh K Designers: Charu Dwivedi, Peterson PJ Midhun Mohan, Haridas Balan & PRADEEP g nair MARCOM Associate Art Director: Prasanth Ramakrishnan Designer: Rahul Babu

4   |  INC. |  DECEMBER 2012

The MAGAZINE for GROWING COMPANIES

—Harsh Chopra, country manager, Adizes Institute

MEET INDIA’S FASTEST-GROWING COMPANIES

My compliments for a very well compiled issue. I enjoyed reading the profiles of all the successful entrepreneurs. So far, I only knew of companies like Tally, Genesis Colors, Narayana Hrudayalaya and Barbeque Nation by name. Now, I know the people behind their success. Great Job!

OUR 4th ANNUAL RANKING

The Magazine for Growing Companies

SPECIAL DOUBLE ISSUE

Meet India’s Fastest-Growing Companies Under 1,500 crore

Profiles of some of India’s most vibrant companies:

TALLY SOLUTIONS MANTRI DEVELOPERS NARAYANA HRUDAYALAYA BARBEQUE NATION UFO MOVIEZ GENESIS COLORS JAKSON 4G IDENTITY SOLUTIONS September/October 2012 | `150 | Volume 03 | Issue 08 A 9.9 Media Publication | inc.com Facebook.com/Inc

@inc

It was really wonderful to see such diverse companies from all over the country. As an aspiring entrepreneur, it made me feel I could do it too. Thanks for that. Your team should be proud. Keep it up. saurabh srivastav, Gurgaon

amardeep singh, via e-mail

Desi, but global I couldn’t believe that Inc. India is a magazine published out of India. Its design and look-and-feel is very international. But, what’s great is that the stories are so Indian.

community team assistant product manager: Rajat gupta Sales & Marketing senior vice president: krishna kumar (+91 98102 06034) business development Manager: arjun sawhney (+91 95822 20507) assistant regional manager (south & WEST): rajesh kandari (+91 98111 40424) Production & Logistics Sr General manager (Operations): Shivshankar M Hiremath Manager Operations: Rakesh upadhyay Asst Manager (Logistics): Vijay Menon Executive Logistics: Nilesh Shiravadekar Production Executive: Vilas Mhatre

To submit a letter, or alert us to an error, write to us at inc.india@9dot9.in. Letters may be edited for space and style. Submission constitutes permission to use.

Logistics MP Singh, Mohd. Ansari OFFICE ADDRESS nine dot nine mediaworx Pvt Ltd A-262, Defence Colony, New Delhi–110 024 For any queries, please contact us at help@9dot9.in Published, Printed and Owned by Nine Dot Nine Mediaworx Private Limited. Published and printed on their behalf by Anuradha Das Mathur. Published at A-262, Defence Colony, New Delhi–110 024 printed at Tara Art Printers Pvt ltd. A-46-47, Sector-5, NOIDA (U.P.) 201301 Editor: Anuradha Das Mathur


editor’s letter

New Tales, New Heroes? Despite the fact that great stories of entrepreneurial successes abound across India, each time I broach the topic of role models with the founderCEOs I meet, a staple roster of names—N. R. Narayana Murthy, Dhirubhai Ambani, Ratan Tata, Steve Jobs, Bill Gates, Azim Premji—come up for discussion. Interestingly, this list of entrepreneurial icons barely varies on account of size, location or type of business. Understandably, wanting to become, or learn from Mr. Premji and Mr. Murthy is only logical. Yet, isn’t it equally important— especially for the benefit of younger entrepreneurs—to expand our repertoire of aspirational and “emulateable” entrepreneurs? Take our cover story on Naveen Tewari of InMobi, for example. Over the past couple of years, the 34-year-old has built his company into the world’s leading mobile ad network (second only to Google’s AdMob, he claims). His exciting expedition has included reaching more than 500 million mobile consumers globally and raising $200 million in growth funding from SoftBank in September 2011 (at a reported valuation of $1 billion). This global expansion spree across 30 locations in five continents has come in less than four years. InMobi’s journey is replete with valuable insights (literally, picked up on-the-go) on issues such as entry strategy, building a company culture across geographies, and negotiating the nuts and bolts of scaling up and travelling far simultaneously. You would think a story like this would make both Tewari and InMobi household names. Yet, as our writer Ira Swasti discovered, even in the software park in Bangalore where InMobi is headquartered, and where it counts biggies like Yahoo, Microsoft and Sun Microsystems as neighbours, nearly half a dozen people couldn’t help her out with directions to its office. In fact, in a conversation I had with Tewari last year, I

remember him telling me that he’s met cabbies in New York who had heard of InMobi (the US is one of its key markets); while business journalists in Delhi or Mumbai who hadn’t. We hope to correct that with this story. Like Inc., our parent edition, has always managed to do—with Apple’s Steve Jobs, Twitter’s Evan Williams, PayPal’s Elon Musk and Evernote’s Phil Libin—we are happy to have caught Tewari at a time when he’s only just “breaking out” into the galaxy of entrepreneurial stars. We certainly have somebody from within the Inc. India team cheering for that to happen soon. Our publisher Pramath Raj Sinha was a partner at McKinsey & Co., and had recruited Tewari into the company’s India office. It was Tewari’s first job after an engineering degree from IIT Kanpur (also Pramath’s alma mater). Incidentally, this issue seems to be teeming with coincidences. In the other stories you must read is a fantastic piece from our US edition by Phil Libin, Evernote’s founder & CEO. Libin talks about why he doesn’t get swayed by his company’s recent billion-dollar valuation; and, why it’s important for mega-promising companies to deliver consistently, and stay away from setting unrealistic expectations. It’s certainly a piece Naveen Tewari will find timely reading.

Shreyasi Singh shreyasi.singh@9dot9.in

DECEMBER 2012  |  INC. |  5


BEHIND THE SCENES

Companies at the Heart of Everyday Life

Security services No public event can take place without a retinue of security guards making sure the premises are protected and organised. Twenty-one guards and gunmen—from Anchor Security & Investigative Services—kept the Dastkar Nature Bazaar safe. Started in 1992 by retired Col. Manohar Lal, the 350-people company has a turnover of `1.5 crore and provides security guards, supervisors, bouncers and gunmen to a wide range of industries and segments like entertainment, clubs, exhibitions and museums.

Waste management No work is dirty! To make sure, Kisan Haat—the venue of the bazaar this year—glistened in the warm glow of Delhi’s November sun, Dastkar brought in an eight-people team from Chintan Environmental Research & Action Group for housekeeping and waste management. Established by Bharati Chaturvedi, an environmentalist and writer, in December 1999, Chintan aims to address the issues of providing marginalised wastepickers a shot at a respectable livelihood.

6   |  INC. |  DECEMBER 2012


Dastkar Nature Bazaar, Delhi

8.11.2012 11 A.M.

Tent and decoration Whether you’re planning a birthday, marriage or a crafts bazaar, a tent is an important part of any outdoor event. Prakash Chand’s Basoya Tent House pitched the colourful tents you see in this picture. Based in Delhi, the company which started in 1995, can supply up to 10,000 metres of tent fabrics to organisers of high-octane weddings or big shows. The company also takes up lighting and flower decoration services for events.

photograph by Subhojit paul

reported by Sonal Khetarpal


News. Ideas. People.

launch

Gene Wisdom Family firms a resilient and modern model, says PwC report

PHOTOS.COM

Recently, consulting and advisory firm

PricewaterhouseCoopers released Family Firm: A Resilient Model for the 21st Century, its annual report on family businesses globally. The report which talked to more than 1,952 family business owners and managers in 35 countries, found that family businesses are thriving the world over. 65 per cent of family businesses have grown sales in the past year, compared with less than half in 2010, and there was a particularly strong growth found in Eastern Europe, Latin America and the Middle East. Only 19 per cent of respondents said they saw a reduction in their sales in the last year, as against 34 per cent in 2010. Considering the turmoil in the global economy, these findings are heartening, to say the least. Interestingly, PwC says that the striking aspect of the survey has been that despite DECEMBER 2012  |  INC. |  9


launch

the diversity of companies across developed and emerging markets, sectors as diverse as manufacturing, retail, automotive and construction, and respondents varying in their size, location and industry, there was a marked similarity in their approach to business, and in what they considered to be the distinctive characteristics of businesses like theirs. That is, family businesses the world over share a somewhat common DNA. However, they are distinctively different from today’s publicly-listed corporates mainly because decision-making is very different when it’s your own money at stake, says PwC. This ownership tends to lead to a long-term commitment to jobs and local communities which gives a significant but often underrated stability to economies, at large. And, it’s this difference—a more patient, responsible and emotional approach—that is valuable for companies of all kinds to understand, and imbibe. The report also revealed some other trends: 1. Family businesses are ambitious and

confident about their prospects

Over 80 per cent of the businesses surveyed anticipated steady or aggressive growth in the next five years, and 39 per cent of those who aim to grow are very confident about their company’s prospects over that period. This increases substantially for companies in India, the Middle East, Singapore, South Africa and South Korea. Given the low levels of confidence in other sectors of the economy, this is a powerful proof of the significant role family businesses can play in creating jobs and stimulating recovery. 2. The economic environment remains the key external challenge

Just like every other business, the family firm is facing major challenges in the current downturn, and in this respect there is little change from 2010. The three issues identified by most respondents were market conditions (54 per cent), competition (27 per cent), and government policy and regulation (27 per cent). The latter category, however, showed a very wide variation on a

Tech Finery

market-by-market basis, ranging from 64 per cent in Greece and 46 per cent in the Middle East, to as low as six per cent for Austria and three per cent for Sweden. 3. Internally, the main issue is recruitment and retention of skilled staff

Recruitment of skilled staff and shortage of labour have become more acute challenges than they were in 2010, increasing from 38 per cent to 43 per cent. By contrast, the need for company reorganisations or restructuring is no longer so pressing, though larger companies with a turnover of more than $100 million were more likely to cite this as an issue. Cash flow and cost control has also reduced significantly as an issue from 30 per cent in 2010 to 17 per cent in 2012, which suggests to us that many businesses have now taken the action needed to streamline internal processes, improve inventory control, and reduce debtors. A number of businesses also cited the importance of establishing or improving their internal and IT systems.

Shaadi-e-Khas embellishes weddings with snazzy online tools

Want to check the guest list or the contact details of the flower decorator for your wedding, or your cousin’s that you are helping to organise, but don’t want to flip through illegible lists in that thick brown diary of yours? Fortunately, there’s help at hand. In 2011, Bharat Kanodia, founder and co-investor in Veristrat, a San Francisco-based technology company, launched Shaadi-e-Khas, an online wedding management software, to give chaotic Indian weddings an organised, smart-tech avatar. In fact, Kanodia promises to make the planning of the treasured event a piece of mithai. The tool helps a wedding planner track and complete the dauting tasks of updating guest lists, sending invites, tracking RSVPs, creating checklists and schedules, and even finding and managing vendors. Loaded with nifty features like a Budget Calculator, SMS Server and Notepad Manager, it also allows couples to make their own personal “wedsite”, a microsite where they can share all the paraphernalia of their weddings—photographs, videos, event details—with friends and family. In a little more than a year, Shaadi-e-Khas has helped plan over 10,000 weddings worldwide, and expects to be a part of nearly 1,00,000 weddings by 2013. 10   |  INC. |  DECeMBER 2012

ILLUSTRATION BY PRADEEP G NAIR


A skimmer’s guide to the latest business books

You’re the boss. Why don’t you make more? According to a 2011 survey of 575 tech start-ups in North America, entrepreneurs often take home smaller pay cheques than some of their employees. They also get paid less—as much as $77,000 a year less—than start-up executives who are not founders. Founders who are CEOs are rarely the highest-paid individuals at their companies.

Entrepreneurs usually own larger equity stakes than outside hires do...

The book: The Half-Life of Facts: Why Everything We Know Has an Expiration Date, by Samuel Arbesman; Current.

17%

Founders

The big idea: Much of what we consider fact—because we learnt it in school or read it in a book—is no longer true. Science advances, and measurement techniques improve.

The founder gets the highest pay.

ceo

25% coo

10% cfo

10% 59%

cto

at least one employee gets paid more than the founder.

9% Hired Executives ceo

5% coo

2%

24%

The founder and at least one employee are tied for highest pay.

cfo

1% cto

1%

...but when it comes to salaries and bonuses, entrepreneurs typically earn a lot less than other start-up executives with the same titles.

ceo coo

$

founder

$226,000

founder

$174,000 $223,000 $218,000

$

hired executive

$275,000

$

founder

$361,000

$

hired executive

$

hired executive $

cfo

$284,000

hired executive $

cto

$

founder

$218,000

Sources: CompStudy, Noam Wasserman, Furqan Nazeeri

This so-called founder discount exists because entrepreneurs often give up compensation for the sake of their companies. Plus, founders may have less leverage in salary negotiations:

“A founder couldn’t credibly threaten to leave his start-up if his board didn’t give him a raise, because they know that he wouldn’t quit over a $50,000 shortfall. In contrast, a nonfounder’s similar threat would be a lot more credible.” Noam Wasserman Harvard BusinessSchool professor and author of The Founder’s Dilemmas

—Compiled by Maeghan Ouimet

The backstory: Arbesman is a senior scholar at the Kauffman Foundation and a fellow at Harvard’s Institute for Quantitative Social Science, which creates analytical tools for researchers. If you read nothing else: Chapter Seven explains how breakthrough discoveries, though they seem to spring from nowhere, can be anticipated by monitoring smaller, regular changes. Chapter Eight recounts how the refinement of measurement has led to an awareness of errors and changing facts. (Who knew the location and height of Mount Everest are constantly shifting?) We hold these truths: Though facts refuse to sit still, decision makers can stay fresh by reading omnivorously and questioning long-held assumptions. Arbesman disputes the popular argument that, by rendering information easily retrievable, the internet is making us dumb. Would you rather consult your dusty memory vaults or online data baked fresh daily? Rigour rating: 9 (1=Who Moved My Cheese?; 10=Good to Great). The book claims most scientists cite academic papers in their work without having read them. Arbesman appears to have read a library’s worth of papers on a variety of subjects. —Leigh Buchanan DECEMBER 2012  |  INC. |  11

COURTESY Photos.com

Give yourself a raise

inc. data bank


launch

How VCs Think It’s whom you know—and what you’ve got

research corner When a venture capitalist is deciding whether to invest in a young company, there are many variables at work besides the strength of the business plan. New research examines two of them—who referred the founders to the VC, and what other investors are already on board—and asks, how important are they? The Findings

Previous research has shown that social ties between entrepreneurs and venture capitalists play a role in funding decisions. Popular thinking is that VCs use these personal connections to help overcome a paucity of information with which to evaluate a start-up’s probability of success. A new study, conducted by Rolf Wüstenhagen and Nina Hampl of the University of St. Gallen in Switzerland and Robert Wuebker of the University of Utah, has found that these personal ties between VCs and founders carry more weight than whether a prestigious VC firm, such as Kleiner Perkins, has decided to invest. The researchers also unearthed other interesting insights into how VCs weigh decisions. The Methodology

In an e-mail survey, 86 venture capitalists responded to a series of scenarios involving a hypothetical early-stage clean-

What Matters to VCs

In a survey, VCs revealed that social connections influenced their investment decisions, but other factors were more important.

12   |  INC. |  DECeMBER 2012

energy company seeking its first round of funding. The survey used conjoint analysis, which asks indirect questions that get respondents to reveal how they weigh or prioritise different variables. Researchers manipulated factors such as product development (sometimes VCs were told the company had a finished product; other times that it was still in the design phase) and founders’ backgrounds (sometimes VCs were told the founders had run another

start-up; other times that they were just out of grad school). To better understand how a VC’s background influenced the choices, the researchers also collected each respondent’s location, age, industry experience and job title. As one might expect, attributes related to the deal’s fundamentals (including the potential return and the company’s market readiness) were found to be the most important drivers of venture capitalists’ investment decisions. The

30.4%

27%

3.2%

26.4%

potential return

Founders’ experience

market readiness

Lead investor

6.4%

social connection with founders

6.6%

Regulatory exposure

social network effect was small but significant. Overall, VCs were notably less inclined to fund companies that had sent pitches via random e-mail. Whether these VCs had social connections to the founders accounted for 6.4 per cent of the decision to invest, say the researchers. The identity of the lead investor, on the other hand, accounted for only 3.2 per cent. The Takeaway

Entrepreneurs who want VC funding should spend time networking. “Cold-calling Kleiner Perkins is not a very promising route to explore,” says Wϋsten­ hagen, a management professor at the University of St. Gallen. “You are more likely to get funded by building your social network.” However, it’s important to keep these results in perspective. A personal connection may help you get a foot in the door, but when making investment decisions, VCs still give far more weight to the business prospects. —Daniel McGinn illustration by RAJ VERMA


launch

The wheat from the chaff To get a great office culture, bust these workplace myths In his recently-released book, 101 Myths & Realities @ the Office, author Utkarsh Rai deconstructs a typical workplace, and offers both employees and managers ideas on how to better understand and work with each other. Rai, head of India operations of Infinera, an optical networking products company, and a recipient of the Udyog Rattan Award, hopes the practical suggestions he offers in the book will enable people to realise their true potential at the workplace, and manage some of the heartburn emerging from usual situations such as a missed promotion, or a trust deficit with one’s reporting manager. Understanding the “other” side of the story, and busting some myths, helps to reduce discontent, improve communication, and create a healthy work environment. Q: While all myths are undesirable, which one or two myths are potentially the biggest threats for an organisation? A: Any employee or manager can face any

of the 101 myths at any given point of time. It could be events around promotion, salary, appraisal or any other issue. For that person, the particular myth will be very important, and if not resolved could impact her career. An employee might not face all 101 myths at a given point of time, but over a span of time, the person will face a majority of them. If not handled well, any of these myths could have a profound impact on an employee’s morale and motivation.

Q: What do you think is the most common mistake managers make? A: More often than not, a manager listens

to an employee’s woes and quickly jumps into a problem-solving mode without even understanding the real issue. As the discussion progresses, it’s likely that a manager will force her point of view on a team member. At times, managers are prone to going on the offensive, and blaming the employee for her own mess rather than really offering a solution. A manager can be more effective if she develops the ability to think from the employee's perspective and understand

what is really bothering the person. Here, the “unsaid” becomes very crucial. People issues cannot be resolved just by coaching, training or mentoring, but by reading between the lines, hearing the unsaid and acting upon it. Peter Drucker captured it well when he said, “[t]he most important thing in communication is to hear what isn’t being said”. This is important because often the issues which are communicated are mere symptoms, misguided conclusions or general frustration. A good manager needs to be able to weave out the real story within, and help arrive at an approach to problem solving. Before promising anything, a manager must see the options available to resolve the issues that have cropped up—whether it is taking help from the senior management, peers, or the HR department. It’s also possible that when an employee begins to understand the real issue, she feels good that the actual pain point is different from what she first thought. She would also know the remedy lies with her and not her manager. Q: How can you balance the viewpoints of a manager and employees? A: Half the battle is won when there is

appreciation about each other’s viewpoints in an honest environment. I have seen employees accepting “no” as a response if the situation is explained well. If the con-

Utkarsh Rai Author, 101 Myths & Realities @ the Office

cern is not very confidential, managers can recommend employees to interact with other stakeholders to get a better perspective. Q: Do you think this focus on people issues is sometimes compromised in fast-growing midsized companies, where the focus is on chasing growth and sales? A: Each organisation, regardless of its size,

must contain an employee handbook containing HR policies from the very first day. Entrepreneur-CEOs are more likely to take ad hoc decisions especially when the team size is small. Often, these are minor decisions such as granting exceptions, benefits or flexibility to some people based on the particular situation or relationship. As the company starts growing, it becomes difficult to have consistent policies. An incident or two in these cases ends up acting as a trigger to bring out a real policy. Often, the new policy can create heartburn as the old employees feel withdrawn from some of the privileges they previously enjoyed, and the newer employees feel they weren’t extended the benefits the older employees were given. Often, to placate employees, many managers begin using discretions randomly. This further divides the employees, and some of the myths I mention in the book are likely outcomes—“the company listens only to those who threaten to leave”, “the company is not fair and consistent in applying policies”, or “HR and Finance pose obstacles on approval even though the manager has approved it.”

DECEMBER 2012  |  INC. |  13


guest speaker BY

phil libin

Phil Libin is co-founder and CEO of Evernote, a Redwood City, California–based software company. In 2011, Evernote was Inc.’s Company of the Year.

The Billion-Dollar Question Is my company truly worth more than The New York Times? My company, Evernote, recently raised

a round of funding that valued the business at a little more than $1 billion. There’s been a lot of talk lately about the valuations of internet start-ups and whether they’re really worth the prices they’re commanding. Unfortunately, much of the discussion seems to be confused about the basic facts. So, as someone fortunate enough to be the CEO of a company that’s just become a member of the Billion-Dollar Club, I’d like to try to clear things up a bit. A billion dollars is a big number, so a natural way to think about the valuation is to compare it with that of a well-known public company, such as The New York Times Company. It’s a great, famous, and long-lasting company. By many measures, its namesake publication is the most successful and important newspaper in the United States and a world leader in both traditional and electronic media. I’ve been reading The New York Times every day for about 25 years. It’s not an exaggeration to say that I love The New York Times. 14   |  INC. |  DECEMBER 2012

Around the time of our financing, in the beginning of May, The New York Times had a market cap of approximately $950 million. Does that mean Evernote is worth more than The New York Times? I was frankly a little shocked when I thought of the question. It feels like there is something wrong with the world to even ask. Luckily, though this kind of comparison might be natural, it’s not very useful. The valuations of mature public companies and quickly growing private start-ups mean very different things. Here’s why: The valuation of a public company represents a rough consensus among a large number of supposedly equally well-informed buyers and sellers. When companies are financed privately, however, there is usually only one seller (the company) and one buyer who sets the price (usually the lead investor). That means that a private valuation is not a consensus at all, but rather the highest price to which a single buyer will agree. So, if a company wants to jack up the valuation, all it has to do is find the

craziest investor who’s willing to pay much more than anyone else. That might sound good, and a lot of hot start-ups are quick to avail themselves of the multitude of crazy people with fat wallets. However, there’s a problem with this that entrepreneurs should consider: If you take money from a crazy person, you’ll get a crazy person as your boss. And soon, your boss will be an angry crazy person, when that unjustifiable valuation crumbles under the weight of eventual reality. That’s why we never chased the highest possible valuation at Evernote. We’ve been lucky enough to be able to start with the investors we thought would provide the best long-term strategic value and find the right deal that works for everyone. Besides finding crazy investors, there are other ways to inflate valuations. Public company valuations are usually determined by common stock. Common shares are shares that anyone can buy or sell, and they’re all the same when it comes to price, voting rights, and other privileges. Not so with valuations at startups. Most start-up investors buy preferred ILLUSTRATION BY MANAV SACHDEV


guest speaker

shares from the company, while founders and employees get common stock. Comparing common stock valuations with preferred stock valuations is tricky. Preferred shares are usually better than common shares, because they have some additional benefits, or preferences. For example, one typical preference guarantees that, if the company is ever bought or goes public, the investors get their money back first, before the common shareholders get a return. Sometimes, the preferred shareholders are even guaranteed that they’ll get their money back multiple times over before common shareholders get anything. Other preferences include the right to accrued dividends, guaranteed seats on the board of directors, antidilution protection in the event that the company loses value, and veto power over important business transactions. These benefits make preferred shares more expensive than common stock. How much more? That depends heavily on the details, but I’ve seen start-up company common stock discounted as much as 90 per cent. Some simple preferences are fair to both sides. After all, most start-up common shareholders (the founders and employees) will draw salaries for years, even if the company eventually goes bankrupt and the investors get nothing. So, a little protection for the investors makes sense. However, manipulating preferences gives the start-up entrepreneur another ill-advised tool for maximising valuation in a private financing. By agreeing to give the investors increasingly generous preferences, you can get them to pay more. Not happy with your valuation? Give the investors a guaranteed way to get more stock for free in the future, and they’ll pay more for the stock up front. This is a temptation that many entrepreneurs feel, but it’s a temptation best avoided. Excessive preferences can quickly create a conflict of interest between the founders and the investors if the company stumbles a little. These conflicts rarely end up favouring the

Evernote is not valued at $1 billion because our current business is worth a billion dollars today but because there is a good chance that it will be worth $100 billion in a few years. entrepreneur. And the start-up world is littered with founders who made nothing when their companies were sold, because they gave too many preferences to early investors. So, if we had looked for crazy investors and given them extreme preferences, Evernote could have had an even higher valuation than the one we have today. But is it still worth more than The New York Times? There’s one more thing to consider. The valuation of any company is an estimate of the present value of all expected future profits, discounted for risk, inflation, and other factors. Thus, the other key difference in how mature public companies and quickly growing start-ups are valued lies in how much emphasis is placed on expectations of future growth. Most public companies have relatively predictable levels of growth so their valuations are heavily based on the current values of their businesses. In other words, few investors expect The New York Times’s profits to grow tenfold in the next few years. Just as important, if the company does start to grow quickly (as of September, the company’s market cap had climbed to about $1.4 billion), investors will be able to buy and sell the stock at any time. So the market tends to wait to see sustained evidence of growth before rewarding the company. That’s why public companies that can produce that evidence consistently, like Apple, are worth such astronomical figures—and why public companies that make a mistake in setting expectations, like Facebook, are quickly punished.

A hot private start-up, on the other hand, is in a completely different position. Investors do expect the business to grow by 10 times, or even 100 or 1,000 times. Plus, the opportunities to buy stock in that start-up may be hard to come by. A venture capitalist who likes a company but decides to pass on investing one day may not get another chance. There are prominent investors who passed on Evernote at a valuation of $10 million and couldn’t get in four years later at $1 billion. As a CEO and a small investor, I’ve seen this from both sides several times. Because of this, start-up investors have to be much more aggressive in identifying and betting on future success. That’s very difficult, which is why the average return on VC funds is pretty low. But the small number of people who do it right can literally change the world. Simply stated: Evernote is not valued at $1 billion because our current business is worth a billion dollars today but because there is a good chance that it will be worth $100 billion in a few years. So, is Evernote really worth more than The New York Times? It’s hard to give a precise answer for all the reasons above, so let me answer personally, and from the heart: not today. But if we work hard, keep making an excellent product that millions of users will fall in love with, and continue to build the business on the same trajectory we’ve been on for the past four years, I think we will eventually be worth much more. And our investors agree.

Follow Phil Libin on Twitter: @plibin. DECEMBER 2012  |  INC. |  15


innovation

Companies on the Cutting Edge

Additional features A task reminder that helps senior citizens and Alzheimer’s patients keep track of medicine and doctor schedules A built-in GPS that helps track the patient’s location An android app that stores the patient’s medical history and health vitals real-time. Can be accessed by a doctor or the patient’s family anywhere in the world A built-in microphone and a speakerphone to interact with emergency personnel Achievements Gold Medal, Department of Science & Technology (India), and Lockheed Martin Innovation Growth Program 2012

photograph Courtesy Company

New Jersey Technology Council 2012 Innovation Award Cool Product at Intel’s mHealth Summit , 2011 Ranked #1 medical device in the world by Connected World Magazine in 2011

16   |  INC. |  DECEMBER 2012


VESAG Advanced Health Watch

Vyzin Electronics

The rescuer

His parents’ ill health brought Rajendra Sadhu to India in 2009. He was then working for Verizon Wireless in the US. After four months in India taking care of them—while his wife and kids continued to live in the US—Sadhu wondered if there was a way to monitor his parents’ health remotely. This need prompted work on what eventually became the VESAG Advanced Health Watch, a device that can be worn like a watch or a pendant, in 2011. The VESAG Watch comes with two key innovations—first, it can monitor and detect the wearer’s key health parameters; second, it can alert her family and/or the company call centre so that immediate rescue services such as medical, fire or police help can be provided, if required. The device has two buttons—an SOS red button and a green button—to facilitate a conversation with the emergency personnel. It can monitor up to 17 vital health signs such as heart rate, blood pressure and oxygen saturation. When any of these breach the critical threshold, VESAG automatically triggers an emergency call to a pre-fixed number. Price: `6,500

“Feedback has been great—an Alzheimer patient’s daughter recently told me the device helped her find her lost mom.” —Rajendra Sadhu, founder, Vyzin Electronics

IMAGING BY PETERSON PJ

reported by Ira Swasti


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Your Business Toolbox

Touch Laptops, Take Two A new breed of ultrabooks designed for taps and swipes The first generation of touchscreen lap-

tops never took off, partly because the Windows 7 operating system powering them treated gestures as an afterthought. This holiday season, manufacturers are rolling out sleek ultrabook laptops that run on Microsoft’s new touch-centric Windows 8 platform. Here are four to consider. —John Brandon

The Goods Acer Aspire S7 (13.3 Inch)

This 2.9-pound ultrabook has a 1920- by 1080-pixel touchscreen that tilts back 180 degrees. It also has a backlit keyboard that adjusts automatically to lighting conditions. Like the other laptops here, it is equipped with Bluetooth 4.0 technology. It also comes with a touch-friendly app for holding video chats on the HD webcam. The battery lasts about six hours. cost: Starts at $1,399 for an Intel Core i5 processor, 4 GB of RAM, and a 128 GB solid-state drive

Toshiba Satellite U925t (12.5 inch)

This 3.2-pound ultrabook has two cameras, near-field-communication technology for transferring data with a tap, and Intel Wireless Display for streaming your screen to a projector or HDTV. You can slide the Satellite’s 1366- by 768-pixel touchscreen down and over the keyboard to switch to tablet mode. It also comes with several touch apps, including an e-book reader. (Battery life was not available at presstime.) cost: $1,000 for an Intel Core i5 processor, 4 GB of RAM, and a 128 GB solid-state drive

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Lenovo IdeaPad Yoga (13.3 inch)

The Yoga’s 1600- by 900pixel screen folds back 360 degrees for use as a tablet. It has a backlit keyboard that adjusts automatically to lighting conditions and several touch-friendly apps, including one for holding web chats using the device’s HD camera. The battery lasts about eight hours. cost: Starts at $1,099 for an Intel Core i3 processor, 4 GB of RAM, and a 128 GB solid-state drive

HP SpectreXT TouchSmart Ultrabook (15.6 inch)

The 4.8-pound SpectreXT has a 1920- by 1080-pixel touchscreen, an HD webcam, and a Thunderbolt port for connecting external drives at high speeds. It also comes with Intel Wireless Display technology and several touch apps, including one for playing music. (Battery life was not available at presstime.) cost: $1,399 for an Intel Core i5 processor, 8 GB of RAM, and a 500 GB hard drive

DECEMBER 2012  |  INC. |  19


the goods

Products + Services

Must-Haves

My favourite tool for analysing financials jennifer cattaui founder babesta new york city

Have you tried a new product or service that helps you run your business? Head to www.inc.com/thegoods and tell us about it. We run the best comments in the magazine every month.

2 0   |  INC. |  DECEMBER 2012

Full Speed Ahead Tools to keep your website revving

A website slowdown or outage could be disastrous for your business. Site-monitoring tools

can’t prevent problems, but they can let you know when something goes wrong. We tried out three using a test site—and, as luck would have it, we experienced a crash. —J.B. Pingdom

Like the other tools here, Pingdom monitors websites and servers. To get started, you register on Pingdom.com and enter your site’s URL. You can log on to a dashboard to see historical data on uptime and speed and get alerts via text, e-mail, Twitter or smartphone push notification if your site crashes. Then, you can use diagnostic tools to find and fix problems. During our test, Pingdom detected a slowdown because of heavy traffic but did not register a crash when our host, GoDaddy.com, went down. Cost: Free for one site and 20 text alerts, then $9.95 a month and up New ReliC

Unlike Pingdom, New Relic can monitor web applications, including e-commerce platforms, running on a site. As with the other services here, it has a dashboard with

Duly Noted Moleskine’s hardcover Smart Notebook is embossed with the Evernote logo.

historical data on uptime and speed, along with diagnostic tools. It can alert you to crashes and slowdowns via e-mail, text, Twitter, Campfire and other third-party services. New Relic sent us text alerts when our site dropped below a critical speed and more alerts when it crashed. One gripe: Setup involved adding code to our server. Cost: Free for a basic version, then $24 a month and up Zoho Site24x7

Our top pick, this service can monitor database programs and web apps. Setup was easy: We simply pasted our site’s URL into a dialogue box on the Zoho site. If your site crashes, you can get alerts via text, Twitter, or push notification. During our test, Zoho detected a slowdown and sent several texts when our site crashed. Cost: Free for a basic version, then starting at $1 a month per site

smart accessories

Evernote, meet Moleskine Note-taking apps may be all the rage. But sometimes, nothing beats pen and paper. With that in mind, Evernote and Moleskine have joined forces to create a Smart Notebook optimised for use with Evernote’s note-taking app. Each page of the notebook features tiny dots designed to work with the Page Camera function in Evernote’s newest app for iPads and iPhones. When you take a picture of a page with the camera, it automatically improves skew, clarity and edge detection, and makes handwriting searchable. The notebook also comes with stickers that Evernote’s Page Camera turns into searchable tags. Cost: Starting at $24.95 for a pocket-size journal and three months of Evernote’s Premium service —Adam Baer illustrations by jacob thomas

from top: courtesy subject; courtesy company

My husband and I own a company that sells children’s clothing, gear and furniture, online and in two brick-and-mortar stores in New York City. We were looking for a way to get a quick snapshot of our finances and help our store managers understand how the decisions we make affect the financial health of the company. In April, I read about BodeTree, a visual financial analysis tool, and we started using it right away. After signing up for an account on the BodeTree site, we entered our QuickBooks credentials and filled out a brief questionnaire. Now, we can log on to our dashboard to check a variety of financial metrics, including cash balance, cash flow, and revenue. Each metric appears on a gauge. If the needle is in the red zone, we know it’s an area of concern. If it’s in the green zone, we’re doing well. We can click on any metric to get more detailed reports. After looking at an inventory turnover report, for instance, we realised we had been sitting on certain pieces of furniture that weren’t selling. Now, we’re carrying fewer of those pieces and increasing turnover. During our weekly conference call, we share the dashboard with our managers using Microsoft Lync, pointing out areas that need more focus. We pay $25 a month for BodeTree. It’s well worth it. —As told to Issie Lapowsky


Business Travel

the goods

Tired of paying for hotel Wi-Fi?

Many hotels charge $10 a day or more for Wi-Fi access. If your room has a free wired broadband connection, you can use a router to create your own Wi-Fi hot spot for your laptop, tablet and smartphone. We tested the following routers during a recent trip. —J.B. apple airport express best for: speedy wi-fi

Whether you’re cramming your suitcase into an overhead bin or under your bed, space is at a premium. With that in mind, luggage companies are rolling out innovative space-saving bags. Here’s the skinny on three of them. —Jennifer Alsever

Biaggi Contempo Foldable carry-on

This 8.4-pound bag has an expandable main compartment, four wheels for easier handling, and a micro nylon exterior that is both sleek and durable. After unpacking the bag, you can twist an interior dial and collapse the sides for easier storage. During our test, the bag collapsed easily, but the wheels protruded quite a bit. Available in six colors, including purple and turquoise. dimensions: 22 in. H x 14 in. W x 11 in. D Cost: $229

road warrior luggage Collapsible carry-on

Weighing in at 9.5 pounds, this two-wheeled carry-on has a rugged ballistic nylon exterior and a frame made of airplane-grade aluminium. The bag, which comes with a removable garment sleeve, collapses easily: Simply pull two interior ripcords and press down. Another plus? An included storage sleeve has a built-in hook for hanging it in a closet. Available in black and red. dimensions: 20 in. H x 16 in. W x 9 in. D Cost: $329

Briggs & Riley Baseline CX Domestic carry-on expandable upright

The 8.9-pound Baseline has adjustable sides that you can expand to increase packing capacity by 25 per cent. Then, you can close the bag and compress it back down to its original size for storage in an overhead bin. The two-wheeled carry-on, which comes with a removable garment bag, has a fiberglass frame and durable nylon exterior. Available in green and black. dimensions: 21 in. H x 14 in. W x 8 in. D Cost: $449

D-link SharePort Mobile Companion DIR-505 best for: sharing files

Unlike the AirPort, the palmsize, 3.7-ounce SharePort plugs directly into an outlet, eliminating the need for a bulky power cord. You can configure the router online or use an app for iPhones or iPads to create a mobile network. The router has a USB port for a printer and external storage devices, which means you can access and share files on a thumb drive. Another plus: You can use the router to charge your iPhone or Android phone on the go. On the downside, it took 11 minutes to transfer a 4 GB file using the SharePort network. Cost: $69.99 DECEMBER 2012  |  INC. |  2 1

courtesy company (3)

Great New Space-Saving Luggage Bags that grow and shrink

The palm-size, 8.5-ounce AirPort Express is easy to configure using your iPad or iPhone settings or downloadable software for Macs and PCs. As with the other router we tested, it connects to broadband using an Ethernet cable. The router has a USB port that supports printers, so you can print wirelessly, but there’s no port for a thumb drive. It also has an audio port for speakers, so you can stream music from any connected computer. During our test, we copied a 4 GB file between two laptops in five and a half minutes. Cost: $99


the goods

Products + Services

tech trends john brandon

Don’t Be a Stranger Tools for managing contacts I always thought customer relationship

An easier way to handle inventory Desktop inventory-management programs can cost thousands of dollars. New online platforms let you manage orders and inventory from any web browser for a low monthly fee. Here are two options to suit different needs. —J.B. Stitch Labs best for: online and offline stores

This service lets you manage orders, contacts, inventory and packing slips on a colourful online dashboard. A good choice for businesses with both online and offline stores, it works with several major e-commerce platforms, including Shopify and PayPal, as well as Sail by VeriFone, a mobile payment system for iPhones, iPads and Android devices. When you make a sale, Stitch automatically updates inventory levels in real time. Cost: Free for one sales channel (an online store, for instance), then $25 a month for unlimited channels Ordoro Best for: streamlined shipping

Exclusively for online stores, Ordoro works with several e-commerce platforms, including eBay and Shopify. The service lets you manage inventory and orders using an online dashboard. You can sync it with your FedEx, UPS and USPS accounts and print shipping labels customised with your logo. It also supports drop shipping from a wholesaler or manufacturer. Unlike Stitch, Ordoro can track one item with multiple components. Cost: Starting at $19 a month for one store with up to 500 products

2 2   |  INC. |  DECEMBER 2012

management software was strictly for salespeople. Recently, I’ve been reading a lot about basic CRM tools that seem to make sense for people looking for a better way to organise their contacts. I road-tested two of them, Contactually and Do.com, to see if they could help me get a handle on the thousands of contacts in my Gmail account and social networks. Contactually, a web-based service set to launch an iPhone app this month, is free for a basic account and $19.99 a month for the premium subscription I tested. After registering, I synced the service to Within 15 minutes, my Gmail, Twitter and FaceContactually had compiled book accounts. Instantly, it information on some 15,000 began to analyse my accounts contacts in a single online and scrape contact information address book. I was amazed. from e-mail signatures. Within 15 minutes, Contactually had compiled information on some 15,000 contacts in a single online address added some basic CRM features. I synced book. I was amazed. It found 950 duplicate the service, which also has an app for contacts and merged them into single iPhones and Android phones, to my entries. It also noticed when I was not con- Gmail and Facebook accounts. (Do.com nected to contacts on Facebook or Twitter. plans to introduce Twitter integration I could click a button on my Contactually shortly.) In about 20 minutes, it imported dashboard to follow them on Twitter or the names and e-mail addresses of some send Facebook friend requests. 13,000 Gmail contacts and 1,200 FaceEven better, Contactually zeroed book contacts and compiled them into in on my top 50 contacts, given the one online address book. It doesn’t scrape frequency of our e-mail interactions. e-mail signatures or identify top contacts, I organised them into several “buckets” as Contactually does. But it does have and set a contact frequency for each one— one big advantage for teams: Unlike Cononce a week for editors, once a month for tactually, Do.com lets you assign tasks to story sources, and so on. When it was other people. The service alerts them by time to get in touch, the service reminded e-mail and dashboard notifications. Then, me via e-mail and dashboard notificayou can log on to see which tasks have tions. As a result, I was doing a better job been completed. of following up with important sources My recommendation? If you’re looking and pitching ideas to editors. Another for a more collaborative approach bonus: Contactually lets you share conto contact management, Do.com is a good tacts with colleagues and see how many bet. Because I do most of my work solo, they have followed up with. Contactually made more sense for me. Next, I signed up for Do.com, a free Now, I’m a much better salesperson for my web-based task manager that recently own brand.


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

11

Segment Your Customers “The more, the merrier” is a well-accepted metaphor, certainly so when it comes to sales and customers in business. Sometimes, though, abundance can lead to problems of plenty. Keeping each customer happy, and understanding the needs and motivations of each category of customer is a hard-won battle. Moreover, customers aren’t alike in the contributions they individually make to your business —today or potentially, tomorrow. In this understanding, emerges a marketing secret—to reach out to each customer segment and devise effective segmentation strategies. This will enable your business to not only drive revenue and profits but to also score high on customer satisfaction metrics. A variety of frameworks exist to segment customers either on the basis of their current profitability, their potential to drive future sales and their happiness score with your brand (or conversely, their attrition risk). Together, these three frameworks help create a customer segmentation matrix that clearly shows you each customer’s attributes and correspondingly, how best to treat that customer. While understanding the customer is the cornerstone, segmentation also depends on current business objectives, and the data and analytical skills available to you. Read on for ideas on how to get this right. —Charu Bahri

Vol. 03 No. 11 | inc. guidebook


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segment your customers : : : : : : : : : : : : :

Understand the frameworks Segment by customer value: Brace yourself for an eye-opener. All these years you believed that every customer is a valuable customer. Not so. Bestselling authors Larry Selden and Geoff Colvin say that the top one-fifth of customers generates the lion’s share of profits while the bottom one-fifth destroys value. So, it makes sense to rank and segment customers by their value, and to pamper only the most profitable ones. Leading customer relationship management magazine COLLOQUY suggests using a Customer Equity Modelling to calculate customer equity and differentiate the leaders from the laggards. The formula is simple—to arrive at this value, deduct the direct and indirect costs of servicing each customer from customer spend. Segment by customer purchase potential: It’s logical that going after prospective big spenders yields the best returns on marketing rupees. So, adopt customer data analytics to identify customers with more wallet share to give you. Businesses that have sufficient internal data can rank customers on their current spending decile. Compare customers within each decile to determine which ones at the lower end of a spending decile can spend more. Companies lacking internal information must turn to external data, such as data describing the demand of customers at large for indirectly related products. For instance, a company manufacturing ice cream could use regional soft drinks consumption figures to project whether there is scope to grow the demand for ice cream in each region. Alternatively, use data representing cusinc. guidebook |  Vol. 03 No. 11

tomer purchases outside your business vertical to predict their incremental behaviour within your business. Segment by attrition risk: It makes sense to ferret out customers that are most likely to switch to a competitor brand and make an effort to win them back. COLLOQUY propounds assigning customers an effective grade it calls the Defection Defence Score, to identify

Begin capturing more customer data today to drive effective customer segmentation. those who are slipping away. Simply scan your customer database for those exhibiting signs of wavering interest— falling transaction frequency, slipping transaction recency and shrinking monetary value. Periodical scans allow you to mount timely interventions to prevent customers sitting on the fence from crossing over to your competitor’s side. For best results, link the scoring process to remedial strategies like shooting off mailers containing targeted offers tailored for high-risk customers.

Segmentation Best Practices

Capture more data: Online retailers have an edge over bricks-and-mortar outlets in this respect as they capture more customer data—purchase history, spending history, complaint calls and service fail-

ure. Begin capturing more customer data today to drive effective segmentation. More so as external industry macro data or cross-company purchase data, can be hard to come by. Usually, only partner companies are willing to share valuable data. Be innovative: Popular customer segmentation frameworks may need to be tweaked to suit the peculiarities of your business. A health insurance company modelling customer potential, for instance, would rank customers on the basis of their past claim ratios as opposed to their spending on premium. This is because reduced claim pay outs matter more to such companies than higher spending. Bajaj Allianz General Insurance differentiates between its health conscious customers and other customers for this very reason. “Jiyo Fit Health Debit Card, our customer relationship management initiative, offers members health-promoting benefits such as discounts on purchases from health food stores and partner chemists. But only genuinely health-conscious customers who exercise at partner gymnasiums or visit partner skin clinics and spas earn benefits,” shares Anamika Roy Rashtrawar, president, Bajaj Allianz. Be futuristic: Essar Hypermart, a retail steel chain, segments customers on the basis of their calculated lifetime value. It analyses parameters like business size and share, transaction frequency, product mix and growth of the individual customer to model each customer’s potential over her lifetime.


Post segmentation, Essar Hypermart has rolled out tailor-designed benefits for each segment. Lower ranked customers get volume linked redeemable reward points and transaction frequency incentives. Customers higher up the pecking order get priority on their material needs and a guarantee of 100 per cent material availability. Best customers get to partner the brand on new product development.

Develop winning service strategies If you have segmented customers by profitability as well as by potential, plot these two value series on a graph. Then identify four key segments. Customers scoring high in profitability as well as in potential will fill the upper right area of

the matrix. They are your top priority. Roll out hot bonus offers for these customers to entice them to spend more with you. Some of these might also be flagged as high-risk. Handle them carefully. Next is the area banding together highly profitable but low potential customers. Keep these happy with recognition benefits, like “no waiting in line” but skip the tailored offers because their spending with you has already peaked. Still, focus somewhat on customers scoring low in profitability but high or medium in potential. ‘Buy 2, Get 1 Free’ styled offers can get them to open up their wallets. Lastly, don’t write off all the customers whose value and potential both don’t amount to much. Usha Periyasamy, VP,

Operations and Brands, Royal Classic Groups (RCG) suggests, “Pursue every customer that has taken an interest in your brand—especially if her first buy was fairly high in value.” That’s why Classic Polo, apparel company RCG’s dynamic brand sends out offers to both of its customer segments—active buyers as well as one-time and occasional buyers—just that only the former get exclusive offers. “Converting one-timers and occasionals into active buyers is helping us get into a rapid growth phase.” Segmenting customers is a fairly intricate multi-step process. If you don’t have the resources or you don’t see the need to go all the way, adopt the method that best meets your current needs—like RCG segments customers by attrition risk. Rest assured that it’ll yield results.


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segment your customers : : : : : : : : : : : : :

Segmentation Drives Growth

Segmentation and the creation of segment relevant offers can drive business growth, as Kaya Skin Clinic’s experience shows. Last year, Kaya segmented its customers by attrition risk and additional variables like activity levels, product and service usage, and affinity that indicate future potential. It then identified six key customer relationship management segments and developed tailored strategies for each:  ew Joinees: They are welcomed to the brand, asked for feedback and N provided with purchase recommendations based on their first transaction. High Net-worth Individuals (based on high value package purchases in the last one year): They are sent mailers with personalised services and products with the idea of cross-selling high value packages. Potential Stars (active customers who could become high net worth individuals): They are sent relevant up sell opportunities.  Actives (customers who have transacted at least once in the last year): Cross-selling offers, up selling offers and regular skin care maintenance services are pushed to them. On-the-Brinks (potential lapsers): They are sent out relevant hard offers. Lapsers: They are sent out ‘miss you’ mailers and brand happenings to encourage a return.

Notes:

Persona Segmentation Strategy If you’re finding segmentation to be too daunting, make a start with the persona segmentation strategy. This entails categorising your customers into broad categories on the basis of demographic variables such as age and gender, and spending parameters like inclination to spend on high margin products, product preferences, and customer needs and aspirations. Persona marketing builds on the fact that customers, not products, are more important in marketing. It is useful as a first-line segmentation tool to provide broad insights about your major customer categories. Personas also simplify sharing customer segmentation strategies with non-marketing insiders and outsiders. A few cautions, however: 1. Chopping and changing personas too frequently doesn’t work, employees simply will not digest these changes. 2. Personas tend to create customer stereotypes. A customer fitted in one profile could possess a few attributes of another persona as well. So, use the personas carefully.

Resources Read more about segmentation,

http://www.infoentrepreneurs.org/ en/guides/segment-your-customers/#2

Another perspective on segmenta-

tion, http://diymarketers. com/2009/03/how-to-segmentyour-customers-differentiateyour-business-and-thrive/

COLLOQUY’s Customer Segmentation perspective, http://www.colloquy.com/article_view. asp?xd=9975

inc. guidebook |  Vol. 03 No. 11


Balancing Acts

BY

Meg Cadoux Hirshberg

Meg Cadoux Hirshberg writes about the impact of entrepreneurial businesses on families. Her book For Better or for Work was published in the spring.

His and Hers Two spouses. Two companies. Untold issues on which to butt heads Hollywood loves power couples. Over

the years, we’ve seen movies about married lawyers (Adam’s Rib), married scientists (Outbreak), and married professional killers (Mr. & Mrs. Smith). But I can’t think of any movies about married entrepreneurs. That’s a missed opportunity, because the potential for both drama and comedy is legion. In real life, entrepreneurs do end up together, for a variety of reasons. Some meet after they’ve already started their companies—at trade shows or chamber of commerce events or CEO networking groups. Others agree to take turns starting businesses after they marry, the way some spouses take turns attending graduate school. Occasionally, a nonentrepreneur marries an entrepreneur and then wants to try what his spouse is doing, because, man, that looks like fun. But however they get there, two spouses running two companies doubles the chaos. Or more than doubles it: The absence of one adult able to maintain a semblance of normalcy introduces a multiplier effect. The chief sources of stress are (of course) money and time. Entrepreneurship requires households to put up cash before they start earning it. It’s an investment that works best—sometimes only— if one family member shores up the dam with a regular pay cheque and health benefits. The schedules of conventionally employed spouses are usually more predictable than those of entrepreneurs, illustration by Pradeep G Nair

which is critical when there are children in the mix. Employed spouses also get paid vacations. That means one adult is not working a full-court press 52 weeks a year, so a little pressure is being released somewhere. When one spouse owns a company, that business competes with the family for resources. When both spouses own companies, his business may compete with her business, and both businesses compete with the family. If both spouses’ companies go through difficult stretches at the same time, they are like twins in the womb: One may be fed at the expense of the other. With win-win not an option, the couple must negotiate who loses more. Which spouse will skip a pay cheque? Which will dip into savings? Who will have to lay off an employee? Because most marriages are founded on an ideal of parity, spouses may be

tempted to share the sacrifice, as they vowed to share pretty much everything in that innocent moment standing before the altar. Or the entrepreneur who is in less dire straits may want to help her flailing spouse, even if she can’t really afford to do so. But the mathematics of family survival don’t work that way. So, for practical reasons, many twoentrepreneur families choose which company to favour based on the relative contribution of each to the family’s income. That’s the understanding in the Flynn household. Lisa Flynn is founder of ChildLight Yoga and Yoga 4 Classrooms, New Hampshire-based companies that teach yoga and mindfulness to children. Her husband, John Flynn, runs Great Works Properties, a property and golfcourse management company. John’s business brings in most of the cash, so “if push came to shove,” said Lisa, “his busiDECEMBER 2012  |  INC. |  2 3


balancing acts

ness would take precedence. But that’s tough for me to admit out loud.” The problem with such arrangements is that they tend to perpetuate inequities. How likely is it that two businesses, even with comparable ambitions and resources, will progress along exactly the same trajectories? If a couple’s two companies have lopsided revenue, that can force uncomfortable—and sometimes premature—discussions about their respective viability. Such discussions get ugly when one spouse calls into question the other’s seriousness, even if it’s only in comparison to his own. The leap from “which company is healthier” to “which company is worthier” is both dangerous

and mine isn’t, I get jealous. I even try to beat him at Monopoly.” Or the entrepreneur whose company is doing better is tempted to offer advice to his struggling spouse. Such counsel may be appreciated or insufferable, depending on the spirit in which it is given. Mason Arnold is founder of Greenling, an organic-food delivery service based in Austin. His wife, Mylie Arnold, owns a large dance studio. Mason described how the couple defanged the tension that arose when they gave each other business advice. “Most of the time, Mylie just wants to be heard, not to have me fix her business problem,” he said. “So I just listen.” Now, when

emotional succour. In my experience, entrepreneurs need someone who is less stressed—or at least differently stressed— to whom they can confide their troubles. I had assumed entrepreneur spouses would be like two overflowing vessels futilely trying to pour their excess anxiety into each other. What I failed to account for was the deep satisfaction bred by affinity. Simply put, married entrepreneurs get each other. As my husband, Gary, built his business, I often felt as if I were watching a foreign film without subtitles. I had no idea why he did what he did; his thinking was so different from mine, it seemed incomprehensible. By contrast,

The leap from “which company is healthier” to “which company is worthier” is easy to make. and easy to make. Suddenly, it’s my growth company versus your lifestyle company. Or worse, my business versus your hobby. The same calculus comes into play with schedules. It’s easier to decide which spouse forgoes a sales trip or works the weekend when there is a primary family business and a secondary family business. But when spouses don’t agree which is which, bad feelings are inevitable. If there are kids, then the prospect of running two start-ups while raising a family becomes like riding a unicycle on a high wire while juggling lit torches. I know people do it. But if I had to watch them, I’d keep my hands over my eyes and peek through my fingers. Some dual-company couples don’t com-

pete for resources—they just compete. Lisa Landry owns the New Hampshirebased marketing firm Savvy Workshop. Her husband, Joe Landry, is founder of Build Savvy, a construction firm. “At the end of the day, we have to show each other our numbers,” said Lisa. “Sometimes, when Joe’s business is doing great 2 4   |  INC. |  DECEMBER 2012

either spouse wants to make a concrete suggestion, he or she asks for permission and has to be comfortable getting “no, thanks” for an answer. In the ideal dual-company marriage, relative size and success are unimpor­tant. Adrienne Cornelsen runs Insite Interactive, a Dallas-based company that designs websites and mobile applications. Adrienne’s business is much larger than Evolving Texas, the civil-engineering firm owned by her husband, John Cornelsen. But that may change: The Cornelsens expect that at some point, Evolving will surpass Insite in sales. Whichever business is bigger, the spouses respect each other’s contributions equally. “We have a ‘times-four’ rule in our household,” Adrienne said. “My company’s revenues are four times his, so when he gets a contract for $25,000, we are as thrilled as if I got awarded a $100,000 contract. Entrepreneurs have to celebrate every win.” I was surprised by how many twocompany couples I spoke to are as content as the Cornelsens. I had expected to hear more tales of overwhelming stress and exhaustion, compounded by a lack of

when a company-owning husband fumes over losing a sale, his companyowning wife understands why he finds the experience so galling. Resentments that can build in families that shelter only one entrepreneur tend to fizzle in dual-entrepreneur families. In many cases, married entrepreneurs share advice and strategise as equals. They form a CEO networking group of two. But even those who keep each other’s companies at arm’s length respect their spouses’ grit and resilience. Yes, two riskloving, overworking, superambitious adults in one marriage are a lot. But two optimistic, never-say-die adults are propitious for a happy future. “Our attitude towards our personal lives is the same one we have in business: Don’t give in to the challenges,” said Adrienne Cornelsen. “We just find the solution—whether our goal is to take an exotic trip or buy a house that right now seems unattainable. Our way of thinking lets us choose an exceptional life.” Contact Meg Cadoux Hirshberg at mhirshberg@inc.com. Follow her on Twitter: @meghirshberg.


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Journey through an Indian start-up's roadmap to build itself a global business across five continents, 30 offices, 578 million mobile customers in 165 countries, and a reported valuation of $1 billion By Ira Swasti

Design by Anil VK Photographs by Srivatsa | Imaging by Pradeep G Nair

2 6   |  INC. |  DECEMBER 2012


“Don't be intimidated by the thought of building a global brand. It's not that complicated."

DECEMBER 2012  |  INC. |  2 7


Black, white and blue

silhouettes of skyscrapers reminiscent of the Manhattan skyline, adorn the reception wall at the Bangalore office of InMobi, the five-year-old tech start-up that claims to be the largest independent mobile advertising network in the world. The sky-reaching buildings are a good metaphor of InMobi’s ambitions to win the mobile advertising race where it counts global giants such as Google as its biggest competitor.

With annual revenues thought to have crossed the $100 million-mark, InMobi says it reaches 578 million mobile consumers in over 165 countries through 93.4 billion impressions (the number of times internet ads are displayed on mobile websites or apps) every month. Basically, InMobi acts an intermediary between advertisers and content publishers for mobile phones. Its technology platform enables the company to connect publishers such as Pandora, NBC, CBS Interactive and Zynga with leading advertisers such as Ford, Disney, Microsoft and Reebok; and for both parties involved to target mobile internet users through ads “Don’t go international with a mediocre product, or you’ll be washed out as soon as you enter."

2 8   |  INC. |  DECEMBER 2012

on mobile websites and apps. InMobi says its platform, come as it does with real-time analytics, delivers two benefits—for publishers, higher fill rates of their ad inventory; for advertisers, superior ROI from their ads. While independent rankings of global mobile ad networks are hard to get, it does seem that InMobi is managing to deliver that value. The company claims it is already the largest mobile ad network in Asia, and is second only to Google’s AdMob globally. Recently, it claims to have left behind Millennial Media, an NYSE listed company, and a leading mobile ad network in the US. Largest or not, Naveen Tewari, InMobi's 34-year-old founder and CEO, has journeyed through an almost-unreal entrepreneurial itinerary, considering he founded InMobi (called mKhoj then) as a mobile search business (an idea which was soon abandoned because it didn't find traction) out of a small Mumbai flat in July 2006. Since Tewari's Plan B approach to build a mobile ad network instead, and subsequent rebranding to InMobi in July 2009, growth and change have both been frenetic. Three and a half years isn't a long journey, but in Tewari's case, it's been one packed to the very brim with milestones, and an enviable ability to grow—across locations and users—rapidly. Inc. India retraces InMobi’s tracks (and its 30 offices in five continents) to find out how Tewari equipped himself, and his company, for this global expedition.

A Global Vision

Soon after InMobi changed tracks to becoming a mobile ad network, Tewari realised that the scale and ambitions he had for his company could never be met by merely being an India player. As it is, his Bangalore office had begun to notice that several advertisers from South East Asia, Africa and the Middle East would land up on InMobi's technology platform— to see if the company could help them


Around the world in 1247 days

Mentor Speak

reach out to mobile consumers in these regions. "We might have a global technology platform but we could only penetrate these markets upto a certain level from Bangalore,” says Tewari, who is an IIT Kanpur, Harvard Business School alumnus. “We knew to scale up, we needed to go deeper, to understand these regions. That meant establishing a local presence in each of these geographies.” Moreover, mobile advertising was still at a nascent stage in India then, and continues to be so. Gartner recently estimated the global mobile ad market to be $3.3 billion in December 2011. India has just a $1.8 million contribution to that pie, found a recent CIIPwC report. Clearly, Tewari spotted the opportunities were elsewhere. Going global was a need for him. Fortunately, Tewari had roped in $7.1 million from marquee investors such as Sherpalo Ventures and Kleiner Perkins Caufield & Byers (early investors in Amazon, Google and Netscape) in January 2008. Much of that was used to fund his global plans. In July 2009, InMobi went international with an office in Jakarta, Indonesia. That set the pace for further expansion. By the end of 2010, the company had successfully grown to five other geographies. This situation posed a unique management challenge—most companies have the advantage of their home markets doubling up as their core markets. Quite logically, it's easier to play in a familiar battleground when trying to establish a stronghold. As unusual as his situation was, Tewari found a smart way around the problem. It was an approach that ditched the more-likely course of travel. Instead of being tempted by the "hottest" and most advanced mobile markets of the US and Europe, InMobi decided to tap emerging markets like Asia and Africa where they had already witnessed interest from advertisers. This approach worked perfectly. Setting shop in emerging markets had just the advantages young start-up needed—limited competition, low customer expectation, and a market size that might be small in context to bigger giants, but was big enough to build a strong base. Also, attacking these regions first gave the company enough time to get its business processes and systems into place before it ventured into more advanced western geographies with confidence. “If we’d started or ventured into the US right at the beginning, we would have

Unreasonable at Sea is a mentor-driven accelerator for tech entrepreneurs who aim to venture into new international markets. Each year, Unreasonable at Sea selects 11 start-ups from around the world, who set sail on a ship to visit 13 countries in 100 days. The objective is to learn the nuances of taking their businesses global. Since InMobi has crafted itself in the traditions of a global, product start-up, Inc. India spoke to Pascal Finette, mentor at the Unreasonable at Sea programme, and a founder of several mentoring companies to find out what goes into making a global business. What is the most important insight an entrepreneur must arm herself with before going international? Probably the most important insight I gained from launching products and services into new geographies is the fact that although we live in a mostly global economy, markets are still local. People in different countries perceive products and services differently, they expect Pascal Finette them to be marketed differently, and they require them to function in specific ways. Never underestimate culture. What works and is right in one market might not work at all in a different market. Take internet chat services for example. While the user interface in the western world is streamlined and clean, it is colourful and chaotic in Asia. How do you know when is a good time to go international? Generally speaking, I believe you can't afford to be only in your home market for a very long time, at least not if you aim for fast growth. I urge entrepreneurs I mentor to think global from day one—you might not launch in more than one country to begin with as you need to develop and refine your business model and processes; but you should have the plan to go international in your drawer. Having said that, if you operate in a large home market (like the US or China), it is easier to put off internationalisation longer than if you operate from a small home base. This in turn means that companies coming out of smaller home markets can be at an advantage as they have to think global much earlier in their lifecycle. How important is it for entrepreneurs to physically spend time in major geographies before after they set up an office there?   I believe you can't understand culture of a place if you haven't experienced it. And experiencing culture doesn't mean staying at the Hilton and spending a week in meetings in coffee shops of a Seattle-based company. If cultural differences are small, say when you expand from UK to Germany, you can probably get by with having a local leader on the ground but if you need to bridge oceans (figuratively and literally) you're better off with spending time in the locale you want to enter. Also, expect to spend a good chunk of your time in those locales even after you have set up your office. When you have offices in multiple geographies, is it a good idea for all of them to be similar to one another?   A strong company culture can transcend local cultures and helps unite people under a single flag. But, be cautious not to "export" your culture to your outposts. Allow them to add a local flavour, and make your culture their own. There are obvious differences among countries especially when it comes to labour laws. Some of these you can't work around. It's why working very hard on a "unique" company culture becomes important. It enables your global workforce to feel united, regardless of where they come from or what their cultural background is. DECEMBER 2012  |  INC. |  2 9


Around the world in 1095 days

17-18 networks to compete with. Our probability of being successful there would have been very low and we would have fizzled out like most of the networks at the time there did,” says Tewari. Today, having savoured the wins of his approach, Tewari enthusiastically recommends an "emerging market" strategy to other entrepreneurs. Indian companies that don’t find India a big enough market for their products or services should try out South East Asia, the middle East and Africa because US companies don’t necessarily look at these markets, and companies based in China are very happy being at home since it’s a huge market. Plus, Indian companies often find it easier to culturally relate to some of these regions.

Pitching Tents

For their first few international offices, Tewari and other senior leaders from the Bangalore office would go visit the new geography, whether it was Indonesia, Singapore or South Africa, do a recce of the place, explore the market and set up the local office. Despite their frequent travelling, and spending considerable time in each new geography, Tewari soon realised that despite their best efforts, these “study” tours could

“Because India couldn't give us an opportunity to be a core market, we had to make sure we were winning elsewhere."

only result in a superficial knowledge of the market. The best way to set up offices in unknown markets and scale up fast was to hire a local leader and let her lead the charge, he says. “However hard you might try, you can never understand a market like a local person would.” So the team concentrated their efforts on finding somebody who was plugged into the domestic market, had the ability to quickly grasp the InMobi culture, and could bring an entrepreneurial zeal to set up new offices. Of course, scoping out the perfect local office head wasn't easy for an unknown start-up. But, Tewari says he was always confident that InMobi's fun, young and international culture was the perfect hook to bring the right people on board. Sample this: the average age of InMobi’s senior leadership team across the globe is around 36 years. The average age of its total workforce is lower still at around 28 years. Even in its Bangalore headquarters at the Embassy Golf Links Business Park—where it has neighbours such as Microsoft, IBM and Yahoo—InMobi has the Silicon Valley

Make your brand travel

Truly international companies travel across geographies really well without compromising on the “core value” of their brand. Whether your brand value is in the fact that you are an industry pioneer, or that you provide low-cost technology, this brand promise cannot change when entering a new market. Only the outward manifestation of the brand should change. So, a Walmart in India may tie up with Bharti to have a different format of real estate but it will not move away from the fact that it is low-cost. When entering a new geography for the first time, entrepreneurs should keep in mind that a one-size-fits-all policy does not work. The product or service your company offers may not change but customer behaviour and responses vary in each country. Thus, it’s important to develop different marketing strategies for different regions. While you’re doing that, it’s a good idea

3 0   |  INC. |  DECEMBER 2012

Figuring out the strategy or ideating to look at the country’s conformity is only the starting point. Actually getindex. For instance, in a risk-averse ting the brand going in a new market is country like India or a country like a big challenge. An important decision Japan where there is a cultural preferto be made is how you decide who leads ence to conform, the brand campaign the branding in a new market. In my should pick up on the fact that the serexperience, it’s usually better to send vice is trusted by customers across 100 somebody who has worked in your countries, or to showcase certifications company for a considyour company might erable period of time to have received. In contake care of your prodtrast, in a country like uct’s marketing. This is the US where people regardless of nationalconsider it cool to try on ity. So if a German guy different things, if the has worked in your brand campaign works Switzerland office for on the theme that five years, and you send “everyone is doing it”, him to set up your marthe response is unlikely keting team in Gerto be positive. In a marmany, it works well. But ket like that, pitch your if you just try to hire a brand as one that gives local person in that consumers an opporturegion and try to launch nity to stay ahead of Jessie Paul your service, it doesn’t the curve.


Around the world in 1247 days

Inside view

stamp all over it (Tewari spent a year working for vQube, a mobile VoIP start-up “Naveen is doing a great job given how tough it is to run a company that is growing so rapidly. Within a before founding InMobi), courtesy the short span, InMobi has established itself as a key bean bags, funky bar-stool chairs, bowls of leader, if not the global leader in mobile advertising. bananas for people to snack on, and meetThey have been able to keep pace with the growth ing rooms named after popular games the market is demanding. What is most admirable (Angry Birds and Talking Tom) and blockabout Naveen though is that he is pragmatic, and works on growing the business in a sustainable buster movies (Madagascar and Toy Story). manner. Navigating through the organisational pitTo further extend the globalised feel, and falls of scaling up rapidly is one of the areas where I stay true to its mobile universe, InMobi work closely with him. I ask him a lot of questions— offices only have two landline connections, can we go faster? If so, what are the risks of doing usually for the reception area. Everything so? When you're adding so many people to the team, how do you ensure everyone is being as proelse—including communication across ductive as they can be? How are communication geographies—gets done using Skype, or processes scaling up with the growth of the comother instant messaging tools. pany? As you keep growing to match the pace of the Michael Abbott Other cultural requisites to be a global, market, it’s important to ensure that the train product start-up destined for a bright doesn't fall off the track. Much like Google or Apple, a founder leading his company is very important. future, are embedded in the young comPlus, they have a great product and technology. As pany’s way-of-life as well. For one, there’s a investors, we’re excited to see InMobi do so well in healthy disregard for hierarchy and a comthe US." mitment to merit. It’s common to see Michael Abbott, general partner, Kleiner Perkins someone much younger than the rest of Caufield & Byers; independent director, InMobi the team in charge. All of this helped InMobi’s core need to hire exceptionally tal“Everything is based on merit here,” says Tewari. “We have ented people locally as it went global; and, to be able to do so withpeople in their late 20s leading the same initiatives as those in out needing to tap head hunters. In every geography it entered, their 40s in different locations.” InMobi relied on referrals from industry contacts and networks of classmates from the founding team's—Amit Gupta, Abhay Singhal and Mohit Saxena—business school days. Today, the company is proud to have demonstrated an impressive ability to hire the best people. “We have people who are real leaders in what they do. Rob Jonas, the guy who heads our Europe division used to run a very large component of the business for work because Indian firms are not usually clear about their company’s brand values and so indocGoogle. When you hire people like that, you don’t need trinating that local person into the company culto teach them how ture is a tough task. Another way of doing this is it’s done,” says sending someone from your headquarters to the “Use your networks, not Tewari. target market and letting her hire a local person headhunters when hiring. Not just Jonas, to help set up the marketing team there. The quality of people Finally, to make sure you don’t incur high the team has been you'll bring in is much marketing costs when you go international, avoid higher that way." able to bring Crid high-cost channels such as advertising and go Yu and Atul Satija, for more targeted lower-cost channels such as two other exPR and events. Even if you have to make ads, Googlers to head its North America and Asia-Pacific get them made in your home country instead of the new market. Since production costs are operations respectively, as well as Peter Bassett, former a large component of marketing costs, make SVP sales at Millenial Media, one of its strong competitors sure you look around for regions that allow the in the US, to run InMobi’s North American sales division. lowest production costs and set up your producThe on-boarding process has been well thought out. Each tion there. new local leader spends the first four to six weeks with the Jessie Paul is the former chief marketing officer leadership team in Bangalore—sometimes through long, at Wipro. She was also the global brand manager extended Skype conversations, or by flying in to the headat Infosys Technologies, and is credited with conquarters to get to know the InMobi culture. They spend the tributing to these companies’ journeys of next few weeks laying down the foundations of setting up an becoming “global brands”. office, and strategising on how to enter the new geography. DECEMBER 2012  |  INC. |  3 1


Over these past couple of years, InMobi has evolved a scalable approach to get the business up and running in a new geography. Instead of approaching local partners in a new market, the company gains access to local users in new markets through international partners who are already operating in those regions. This ensures they get access to more than 1,000 publishers even before they have set up shop. "Imagine entering the market for the first time when you don't even know the local guys," says Tewari. With a significant number of publishers on board, the company begins pitching advertisers for ads. It’s only when they are well-entrenched in a new market that they start to think about targeting local suppliers. “You can’t do it the other way round because local players have specific needs in terms of language or the kind of content, which you can’t scale up. You can provide customised services and Ashok Soota satisfy the local market only once you have a standard framework,” he says. Of course, things weren’t an easy trek many times. While some seemingly difficult-to-navigate places, such as Africa, were a breeze to set up an office in because the governments there are determinedly trying to promote business, others posed serious bureaucratic obstacles. China took the cake on that. In 2011,

“Your chances of success are going to be very low if you are not confident about hiring exceptional local talent. And to attract local talent, you need to have a bigger, broader vision for your company and at the same time, keep it fun." —Naveen Tewari

3 2   |  INC. |  DECEMBER 2012

Been There, Done That

Prior to founding Happiest Minds, an IT firm with offices in four geographies in August 2011, Ashok Soota led MindTree to become a global entity with more than 9,000 people across 13 cities in the US, Europe and Asia in 11 years. Here, he lays down three tips entrepreneurs must keep in mind before taking the plunge to go international: 1. Each market is unique with its own characteristics so the business’ core strategy has to be fine-tuned for every country. For example, at Happiest Minds, our core strategy is built around disruptive technologies like cloud, mobility, social media and unified communication. While one country may be further ahead in cloud migrations, some others may have a higher focus on consumerisaton of IT and therefore, higher demand for social media and mobility applications. 2. Build a network of alliances, partners and relationships to reduce the costs of entry into a new geography. 3. Never compromise on the quality and culture fit of the country head and her key personnel. The cost of failure in hiring the wrong people is not just in the expenses incurred but the opportunity costs are much higher.


when InMobi decided to open offices in Beijing and Shanghai, the language barrier coupled with the vast number of regulations and the many licenses required to get started proved to be a hugely complex exercise. Russia sprung up similar issues when they entered the Russian market in April earlier this year. Even Africa, where it was easier to deal with the government, staffing especially in an industry as new as digital marketing proved to be a herculean task. Even here, Tewari managed to staff his office with much star power. Isis Nyong'o, their vice president and managing director for Africa, was nominated as one of Africa's most successful women by Forbes magazine. A former MTV and Google employee, Nyong'o was also nominated by the World Economic Forum for its Young Global Leaders award. “I’m proud that we've been able to solve for challenges within the local context of each market,” says Tewari. “A lot of coordinated approaches are required to make a global operation work. I think we’ve been able to crack that code. " Nickhil Jakatdar, founder and CEO of VuClip, a Californiabased mobile video service, and InMobi’s first customer in the US, isn’t surprised at the way the story has unfolded. He recalls his early breakfast meetings with Tewari. “Naveen had a very good sense of what he was doing and why he was doing it. Even then, he had the ability to attract good talent around him,” he says.

Timeline: InMobi July 2006 Founded mKhoj, an SMS-based mobile search engine, roping in two IIT Kanpur friends Amit Gupta (now VP revenue and operations) and Abhay Singhal (now VP sales) and an IIT Roorkee friend Mohit Saxena (now VP technology)

January 2007 Raised $5,00,000 angel funding from Mumbai Angels and retuned the business model to build a mobile ad network

January 2008 Received series A funding of $7.1 million from Sherpalo Ventures and Kleiner Perkins Caufield & Byers

July 2009 Rebranded itself from mKhoj to InMobi and ventured into its first international market—Indonesia

May 2010 Reached 100 million customers globally

30 Countries: One Culture

Scaling up and starting offices in multiple locations is a tough enough trek. Creation and nurturing a unified culture across each location is harder still. Tewari says there isn't a single silver bullet that does the trick; a host of little practices ensure people feel part of a single, cohesive workforce. “Our offices across the globe may not be very similar in terms of the way they look, but they are very similar culturally,” says Tewari. To instill this shared culture, the company holds a three to four day programme called the Catalyst at the beginning of each year. At the Catalyst, the top 20 per cent of the company's management from all geographies (in terms of performance and leadership positions) get together in Bangalore to put their heads together for the year ahead. Roughly, 100-150 people interact with one another across departments, geographies and functions. The agenda is packed, and peppered with product demos, workshops and presentations during the day, and live musical events, karaoke and cocktail dinners in the evenings. It's an event eagerly awaited by InMobi employees as it helps form personal bonds with people you have been working with closely, but who are halfway across the world. Or as Gaurav Gupta, an InMobi employee who is a part of the organising committee of the event puts it, “It’s great to attach a face to the e-mail address one has been working with for so long.” Tewari concedes that sometimes teams in smaller centres have voiced concerns about feeling disconnected and disadvantaged compared to their colleagues in Bangalore, or buzzing centres like San Francisco and London. To make sure every employee in

July 2010 Received series B round of funding of $8 million from Sherpalo and Kleiner and ventured into Japan, Europe and the US

August 2011 Acquired US-based Sprout, a rich media mobile ad building platform for an undisclosed sum

September 2011 Received Series C funding of $200 million from Japanese internet major SoftBank, the largest single investment in an Indian mobile internet company. Opened offices in Chicago, New York, Beijing, Shanghai, Paris, Seoul and Sydney

March 2012 Reached 578 million customers globally and opened offices in Selangor, Moscow, Hamburg, Dubai, Mumbai and Delhi

July 2012 Acquired San Francisco-based mobile and Facebook app distributor MMTG Labs and UK-based Metaflow Solutions, a mobile app management and distribution company for undisclosed sums DECEMBER 2012  |  INC. |  3 3


The World Over Clockwise from top: InMobi's office in London; InMobi's Paris team; the Nairobi team; the San Mateo team. The company is currently working on a customised intranet that will foster greater interaction and communications between teams across the world.

every office feels like an equal player, InMobi decided to invest in an intranet where employees from across the globe could be plugged in. Uptil now, the company has be been using Podio, an online work collaboration platform, for real-time internal communication and networking across geographies. But, the rapid scaling up of the company has warranted a much larger, more customised company intranet which the company is currently working on. Of course, Tewari recognises that even in an era where business communication has been revolutionised, there is no trumping the benefits of a face-to-face interaction. More and more, InMobi employees are given the chance to work closely with their colleagues in other offices. Teams from Bangalore are sent to their offices abroad, and teams from other offices come to Bangalore for short tenures of three weeks, or longer stays of up to six months to thrash out problems in a product, or work on a new strategy. An employee-rotation scheme is also being institutionalised where top performers of a certain geography will be given the opportunity to work for a quarter in another geography. “You get to learn so much while working in another country,” says Tewari. 3 4   |  INC. |  DECEMBER 2012

Personally, Tewari ensures he spends enough time communicating with his teams. Clocking up flyer miles is a given when you have 834 people working for you across 30 locations round the globe, he says. He travels roughly half the year— crisscrossing the globe to visit InMobi’s major markets namely, the US, Western Europe, China, Japan, Australia, Korea and Indonesia, a few times every year. When he's not travelling, he meets senior leaders from all locations virtually once a week, and physically every quarter in Bangalore. "Culture flows from the top. And, when we are growing so rapidly, it's important for people to hear from me where we are, and where we are headed." Beyond his employees, Tewari's story is an important one to hear. InMobi is, without a doubt, a rare story of an Indian start-up that has built itself into a global brand in a short span of time. Having established a leadership position in the Asian Pacific market, its future plans include going deeper into the American market. Can it create the same magic on the Manhattan skyline? If its recent travels are anything to go by, a journey of a lifetime definitely awaits both Tewari and InMobi.


Vikas House, 34/1, East Punjabi Bagh, New Delhi-110026 Tel: +91-11-43144444(25 Hunting Lines) Fax: +91-11-43144444 mail: info@vikasglobal.in Website: www.vikasglobal.in

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the printer

In 2008, David Moyal’s bank agreed to provide financing for a $3.8 million stateof-the-art printing press. A year later, after the press had been assembled and shipped, the bank pulled out.

3 6   |  INC. |  DECEMBER 2012


After the worst financial crisis in decades, banks had no choice but to reduce risk. For business owners, the process carried hard lessons about how modern lending really works

After the Squeeze

By Burt Helm Photographs by Greg Miller

Joe Bliss thought the worst was over. Revenue at JBC Technologies—a Cleveland-based die cutter that makes products as diverse as materials used in electronics and small components for automobiles—had plunged 40 per cent when the recession hit. Bliss had dismissed half of his 96 employees, cut wages across the board, and slashed his own salary to almost nothing. Now, in the summer of 2010, sales were finally back. Bliss had restored his employees’ salaries, repaid lost wages, and begun hiring again. He also resumed planning the expansion he had envisioned for the company—which included 40,000 square feet of additional manufacturing space and new corporate offices. DECEMBER 2012  |  INC. |  3 7


Then, on August 17, the men from Charter One bank came $26 billion, and then kept falling: By June 2012, small-business to visit. loans were down $56 billion from their June 2008 peak of Bliss, who had been banking with Charter One for five years, $336.4 billion. had $6 million worth of commercial loans outstanding. He says he Of course, it helps to remember what banks were going never missed a payment or, as far as he knew, violated any of the through at the time. Once the financial crisis was in motion, covenants—the financial metrics—that banks mandate to ensure banks faced tremendous pressures. Government regulators the health of their borrowers. But the Charter One reps told him introduced capital requirements that compelled banks to reduce the bank wanted the 22-year-old company’s loans off its balance their exposure to risk—mandates that often meant shifting more sheet, part of a retrenchment that would affect billions of dollars’ risk onto the borrower in the form of larger down payments, worth of loans in the bank’s commercial portfolio. more collateral, and more onerous personal guarantees. Given It didn’t matter that JBC’s business had recovered; the decithat banks have watched hundreds of their peers struggle with sion had been made months before. The men recognised the insolvency, it’s not surprising that banks began enforcing their irony. Under different circumstances, “we’d be aggressively purcovenants more strictly than they had in years. suing you as a customer,” one of them told Bliss. But JBC had Lending is finally beginning to crawl back, though the emphasis been deemed, in the oblique vocabulary of Charter One and its should be put on crawl—the stats would qualify as bad news if the parent companies, Citizens Bank and the Royal Bank of Scotpast few years hadn’t been so grim. Most banks are no longer tightenland, noncore. ing credit standards for small businesses, according to the Federal The problem was not Bliss’s company but his Reserve. And the volume of small-­business industry and region—both of which, in an effort to loans fell just 1 per cent from June 2011 to stem future losses, his bank had essentially written June 2012, compared with an 8.5 per cent off. Charter One, like other banks across the coundrop during the corresponding period 12 $1.5 $350 try, was using a sort of predictive math to sever billion ties months earlier. Part of the reason for the trillion with struggling borrowers before they stopped slow recovery is that businesses remain too making payments. In the process, banks were abanspooked to borrow. “Demand is down,” says doning businesses that were recovering, too. “It was Jordan Peterson, senior vice president for $1.2 $300 trillion billion Small-business a bizarre situation,” Bliss says. “We were successful. business banking at PNC Financial Services loans outstanding It was so frustrating.” Group. “We’re seeing small businesses deleTotal commercial $250 $900 Charter One’s divorce from Joe Bliss was just abillion tiny loans outstanding veraging, taking cash to pay down debt. But billion June 2008—June 2012 part of a precipitous pullback by the banking industry. we’re anxious to lend money.” From 2008 to 2010, the volume of business loans Still, many entrepreneurs remain more dropped some 22 per cent. In cash terms, commercial than a little traumatised. “We’re terrified of % of banks that left % of banks that tightened lending experienced a $325 billion decline over those what a bank will do now,” says Lowell Jaestandards unchanged lending standards three ger, owner of Jaeger Lumber, a Union, $1.5 loans (gen$350 years; the volume of small-business 100% trillion billion erally defined as loans of less than $1 million) fell by New Jersey–based chain of seven lumber-

The problem was not Bliss’s company but his industry and region—both of which, in an effort to stem future losses, his bank had essentially written off.

$1.2 trillion

$300 billion Small-business loans outstanding

$900 Recovery? What Recovery? Banks are lending again, but not to entrepreneurs. At least, not yet. billion

Total commercial $250 loans outstanding billion

June 2008—June 2012

Lending standards for small businesses remain tight. % of banks that left standards unchanged

But banks are once again lending to large corporations.

% of banks that tightened lending standards 40%

100%

January 2008—July 2012 source: Federal Reserve Senior Loan Officer Survey

3 8   |  INC. |  DECEMBER 2012 40%

January 2008—July 2012

And fewer small businesses are borrowing regularly.

Small businesses that borrowed in the

25%

Small businesses that borrowed in the past three months

$350 billion

$1.5 trillion

$300 billion Small-business loans outstanding

$1.2 trillion

Total commercial $250 loans outstanding billion

$900 billion

January 2007—August 2012

source: NFIB Small Business Economic Trends

June 2008—June 2012 source: FDIC

% of banks that left standards unchanged 100%

% of banks that tightened lending standards


after the squeeze

The Die cutter

For five years, Joe Bliss never missed a loan payment. But after revenue at his business took a hit in 2009, Bliss’s bank cut his lines of credit—part of a nationwide retrenchment that affected borrowers deemed noncore.

Top right: iStock

banking has made the relationship between banks and small businesses more remote, more mathematical, and less personal. In the next downturn, you can’t assume that a warm relationship with your loan officer will protect you. It’s also clear that as the economy recovers, entrepreneurs and banks will need one another again. The question business owners should be asking isn’t whether the system will go back to the old ways—it won’t—but whether they have taken the right steps to protect themselves and borrow prudently in this new world.

yards. In 2011, after the chain posted its first annual loss in more than four decades, PNC abruptly canceled its $4 million line of credit—despite the fact that Jaeger Lumber expected to be back in the black and had banked with PNC for about 20 years. Jaeger managed to get credit from TD Bank. Still, he has been shaken up. In the past, his inclination was to pounce on an economic recovery, acquiring distressed competitors and upgrading facilities. Not this time. “I’m not going to take a chance on expanding and have another bank pull out,” he says. For anyone with a stake in the US economy, that’s the last thing you want to hear. Although the financial crisis was (one hopes) a once-in-a-generation disaster, there will always be business downturns. And in a dynamic economy, some industries will inevitably end up on the wrong side of new technology or shifting consumer tastes. But the latest crisis made clear that the era of personal banking is over—indeed, that it had been for years. The scale of modern

To understand how we got to this point, consider how different banking was, a mere 30 years ago. Before ATMs sat on every street corner and sports arenas had names like Citi Field and Bank of America Stadium, US banks were far smaller and far more numerous; in fact, there were about 10,000 more of them. They were, on average, a tenth the size of an average bank today. They were prohibited from operating across state lines, and most states capped the number of branches they could have. Corporate lending worked differently, too. Companies and banks tended to pair off by size. The community banks that did the bulk of small-business lending tended to make subjective judgments, relying on personal knowledge of the local economy and the character of the local business owners. “You’d go to a loan committee, and there’d be six or eight people who knew the market and probably knew you,” says William Dunkelberg, chief economist at the National Federation of Independent Business, or NFIB, since 1973. Even by 1993, 55 per cent of small-business loans (in dollar terms) were held by banks with less than $1 billion in assets; the largest 25 held less than 9 per cent of such loans. The merger wave of the 1980s and ’90s upended this model. As regulations were scaled back, banks joined forces and expanded nationally, and small banks got gobbled up by bigger and bigger ones. This was bad news for entrepreneurs: From 1989 to 1994, the number of DECEMBER 2012  |  INC. |  3 9


the manufacturers

Demand at Stam is finally increasing. In the past, CEO Kent Marvin (right) would have sought to expand. But Stam, which was dropped by its bank in 2009, plans to sit out this recovery. “Heaven forbid there’s another recession,” says CFO Brendan Anderson (left).

4 0   |  INC. |  DECEMBER 2012


after the squeeze

small-business loans fell 34 per cent, and many economists worried that big banks might stop troubling with them altogether. Lending eventually came back—thanks to technology. As more data went online, a bank could access a potential borrower’s payment history, compare a company’s financials with industry averages and the finances of competitors, and use economic projections to assess prospects. When companies such as Fair Isaac and Dun & Bradstreet began offering business credit-scoring software online, a large bank’s credit department no longer needed local experts with local expertise; an analyst with a computer and an internet connection could make decisions from hundreds of miles away, and small businesses could get cheaper rates and approvals without knowing the local bankers. By 2007, the 25 largest banks were nearly six times larger than they had been in 1993 and held 32 per cent of all small-business loans. Then came the financial crisis, which flipped the hard-data model on its head. Banks had used data mainly to identify prospects and turn them into customers. Now Big Data went to work—in a real-life version of the science-fiction film Minority Report—identifying which paying customers were riskiest, so banks could quickly turn them into ex-customers.

portfolios for review by a visiting RBS executive from Michigan, she dutifully complied. The review would determine which loans would go into a new noncore group—assets the bank decided were either “high risk or not a strategic fit,” says RBS spokesman Jim Hughes. “In a time in which banks have been forced to make tough choices,” says Hughes, “relationships with some customers have had to change.” When the noncore list was announced to staff, Madsen was stunned. A third of the companies in her portfolio were on it—including nearly every auto-parts supplier she had. “They were all people who worked diligently and lived up to their loan agreements,” Madsen says. She understood that the bank had to shore up its balance sheet. Still, she says, “it was very difficult to justify it to myself. I felt personally responsible.” Madsen asked the head of the Ohio region to reconsider severing the relationship with Joe Bliss. He tried to help but couldn’t. She then wrote an e-mail to the CFO of RBS, pleading for JBC specifically. She got no response. Then, about a month after Bliss’s loans had been pulled, Madsen was driving back from a client call with an out-of-state colleague toward Charter One’s offices in downtown Cleveland. As they passed by shuttered stores and half-filled parking garages on 12th Street, her co-worker sighed. “Ohio—it’s just a black hole,” he said. The bank wasn’t just writing off her clients now. She felt it was writing off her hometown. That was it, Madsen says. “I knew northeast Ohio would rebound. I have a lot of faith in the Joe Blisses of the world. I didn’t see a black hole. I saw a storm we needed to get through together.” She resigned a month later.

“It’s not personal,” says one former banker. “Lenders will say, ‘These are really nice people. It’s really too bad what’s happening to them. Move them out of the bank.’ ”

On February 26, 2009, Stephen Hester, CEO of Royal Bank of Scotland, told analysts how he planned to defuse what he later termed “the biggest balance-sheet time bomb in history.” The year before, the Edinburgh-based bank had lost $34.2 billion—the biggest loss in British corporate history—leading to a government bailout and the departure of the bank’s then-CEO. Hester stepped in and within three months identified about $612 billion worth of assets to be sold or dumped altogether. Next, he turned to the assets the bank planned to keep, including its US subsidiaries: Citizens Bank and Charter One. In addition to cutting jobs and closing branches, the bank would look to eliminate individual credit lines, credit cards, and loans. The retreat would begin in the company’s backwaters, where Citizens and Charter One lagged the market leaders, he said. In the greater Cleveland area, where Joe Bliss and JBC Technologies had Charter One loans, the bank ranked fourth. Cheryl-Ann Madsen, Bliss’s relationship manager at Charter One, had worked as a banker in Cleveland for decades, starting at Charter One in 2005, shortly after it was acquired by RBS. When the bank moved underwriting to Pittsburgh in 2007, she had adapted; in fact, she planned to retire at the bank. So in July 2009, when the Cleveland relationship managers were told to prepare their loan

When banks move to stem problem loans, they follow a standard procedure, says Mitchell D. Weiss, a consultant who ran financing subsidiaries at Webster Bank and SunTrust. Underwriters are always looking for patterns in the numbers. Once they identify a problem group (“You might notice that real estate developers in Florida are having a higher instance of write-offs,” Weiss says, by way of example), they put those companies on a watch list. Then, the bank starts looking for red flags: a late payment, a missed financial covenant, or a sudden drop in business. During normal times, banks can be flexible. After a crisis, however, the stakes are much higher. When banks are under pressure from shareholders and regulators, there is little room for subjective judgments, exceptions, or forgiveness. If a “watched” company’s credit agreement is subject to annual renewal, Weiss says, it may not be renewed. “It’s not personal,” says Weiss. “In these meetings—and I’ve been in these meetings—lenders will say, ‘These are really nice people. It’s really too bad what’s happening to them. Move them out of the bank.’ ” During the recession, contractors, lumberyards, printers, and other companies tied to struggling industries came up again and again in these analyses. DECEMBER 2012  |  INC. |  41


after the squeeze

When a bank decides to sever ties, a ticking clock starts for the privately held printing operations in New York City, churning out probusiness owner. He or she must find a new bank to refinance the grammes and fliers for Broadway shows and the fine print for preloan or pick up the balance of the credit line, typically within 90 days, scription drugs like Lipitor. Over the years, as demand for paper at which point the full balance “balloons” and becomes due immedi- products declined and larger competitors hammered down prices, ately. Money that might have gone to purchase inventory, pay staff, Moyal managed to stay competitive by using the latest, fastest presses. or keep the lights on must go to cover the principal, or the company In 2005, he expanded to New Jersey, opening a larger facility will default and go out of business. just on the other side of the Holland Tunnel, using equipment When a large bank decides to retreat from an entire industry, it loans from People’s Capital and Leasing Corporation, a can have seismic effects. On October 24, 2008, the day PNC subsidiary of People’s United Bank. On July 24, 2008, Moyal purannounced it would acquire National City, becoming the fifth-largchased a custom-made, state-of-the-art, $3.8 million est bank in the US, CEO James Rohr identified a $20 billion disMitsubishi sheet-fed printing press, capable of printing 10,000 tressed-assets portfolio of bad residential real estate development two-sided pages an hour. As it had in 2005, People’s provided him loans, subprime residential mortgages, and brokered home equity with a down payment for the new press (in this case, $200,000) loans. He also went a step further, saying the bank would begin and made a written offer to finance the rest. But in January 2009, “accelerating efforts to exit their noncore loans.” Bank spokeswoman after the press had been assembled and shipped and was ready for Amy Vargo specifically cited “equine lending” (loans to horse farms), delivery, People’s refused to make the loan. payday lenders, and some mortgage lenders. PNC wound up shrinkThe bank, Moyal learnt, was in the midst of a rapid retrenching its commercial loan portfolio of the newly combined banks by ment. Rather than increasing equipment financing 20 per cent in $21 billion, or 21 per cent, over the next two years. Loans to manu2009, as it had expected before the crisis, People’s CEO Philip Sherfacturers alone decreased by $3.9 billion—the equivalent of 30 per ringham had told analysts that the bank planned to “put the cent of its manufacturing portfolio in 2008. The moves reverberated among customers, many of them legacy National City clients in its Rust Belt footprint across Michigan, Ohio, and Illinois. In Mentor, Ohio, Brendan Anderson, 1. chief financial officer and co-owner of Stam, got a call from his new PNC loan officer on June 8, Perform How to Manage 2009. Revenue at Stam, which makes air-intake your own a Banker and exhaust lines for heavy machinery, had As your business seeks stress test fallen steeply. But Anderson had kept up the Read the fine print on your loan to expand, chances are company’s loan payments. Still, the rep told him covenants, and then imagine you will need bank worst-case scenarios. What that PNC now took issue with the way Stam financing to do so. The happens if real estate values calculated its net worth. As the bank saw it, the challenge is to approach plunge, or your sales fall 50 per company’s value had fallen below a mandated your bank with eyes cent? Assume the bank will play hardball. Will you be able wide open. Here’s how. level, which put Stam in violation of its loan to stay in business? agreement. Anderson quickly dug up an e-mail from his old National City loan officer spelling out how the two sides agreed to calculate net worth. The dispute continued for weeks. Finally, the PNC rep was blunt: “You’ve been designated an exit credit. My goal is to get you out of the bank.” (PNC declined brakes” on the portfolio. Loans to printers would fall 32 per cent. to comment on specific clients.) Moyal called the bank “9, 10, 15 times” to see what could After the PNC breakup, Stam managed to move its equipment be worked out. Meanwhile, as he was stuck with his old presses loan and revolving line of credit over to Park View Federal Savings, and unable to match competitors’ prices, sales cratered. When he but CEO Kent Marvin says he’s no longer interested in expanding. called People’s to see if he could extend his payment schedule, his He will keep the 50 employees he has and cap hiring there. “It’s just loan officer told him that the bank had decided not to change not worth it,” he says. Demand is increasing, but the investment loan terms for printers unless they were already defaulting. required to add another shift wouldn’t pay off for at least two to In September 2011, People’s United sued Moyal to get back three years, estimates Anderson, the CFO. That’s too long, he says, the $200,000. Moyal, incensed, is now countersuing the bank for and cash is too tight. “Heaven forbid there’s another recession.” breach of contract and fraud. (People’s United did not return numerous phone calls for this story.) Business owners who decide to fight their banks hit a Suits like Moyal’s face steep odds, says John McFarland, a different set of challenges. David Moyal runs one of the last partner at Houston-based Joyce, McFarland & McFarland who 4 2   |  INC. |  DECEMBER 2012


represents banks in lending-litigation cases. Loan contracts often provide outs for lenders, including “material adverse change” clauses that can cover a sudden drop in sales. Even the most bitter breakups between borrowers and lenders rarely end up in court. “There’s a lot of gnashing of teeth and some really badly damaged longterm relationships,” says Buzz Trafford, a managing partner at Porter Wright in Columbus, Ohio, who has represented both sides on debt issues. “But there’s not a lot of litigation.”

So what should entrepreneurs do? Weiss, who now is a finance professor at the University of Hartford in Connecticut, advises entrepreneurs to seek loans from community banks rather than large institutions, at least when your borrowing needs are relatively small. “Your deal is more important to them, and there’s more negotiating room,” he

2.

Spread the risk

Rather than relying on a single line of credit, apply for several smaller credit lines at different banks. If one decides to cancel your line, it won’t kill all your working capital.

fornia. “Clients are hypnotized by interest rates even when they’re getting pummeled by a baseball bat.” It’s worth noting that all but one of the entrepreneurs profiled in this story found new banks. Still, the credit squeeze remains fresh in the minds of many business owners. In January 2011, JBC’s Joe Bliss moved his equipment loan and credit revolver to FirstMerit Bank, a regional bank in Akron. After sales grew fast enough that he believed he could double his manufacturing capacity, he decided to put the experience behind him and take out a new loan. Banks made offers. Even Charter One. But when JBC heard the bank’s presentation, the company’s controller, Rick Gucwa, cut the conversation short. “How do I know you’re not going to screw me again?” Gucwa asked Charter One’s rep. That’s something all banks, as they attempt to rebuild their small-busi-

“It baffles me,” says one community banker. “Clients are hypnotised by interest rates even when they’re getting pummeled by a baseball bat.”

3.

Be Too Big to Fail

Consider a community bank. The interest rates could be higher, but small banks have the flexibility to tailor loans to your needs. If you’re a more important customer for them, they will be more likely to work with you if business goes south.

says. “It’s a better deal.” And Ami Kassar, founder of Multifunding, a start-up that helps businesses find financing, pursues only deals in which the business owner can work directly with the people who approve the loan. “At a big bank, the underwriter and the loan officer working on it are often in different states and don’t even know each other,” Kassar says. “If we’re not dealing with the decision makers, we won’t go there.” Still, many entrepreneurs are drawn to the wider array of services and more advanced technology offered by big banks. Since 2008, the 25 largest banks’ share of small-business loans has grown 5 percentage points. Regardless of the size of the bank, borrowers need to read the terms of their contracts carefully. “It baffles me,” says Todd Massas, a manager at Plaza Bank, a community bank in Irvine, Cali-

4.

Stick with what fits

If you plan to use a piece of equipment for five years, get a five-year loan. The smaller payments of longer-term debt may be tempting, but you never want to be making payments on something you no longer use.

ness portfolios, should keep in mind. For entrepreneurs business is, almost by definition, personal. Some will have a harder time than others with accepting the new nature of lending. In April, Moyal laid off all 120 employees at his New Jersey facility. In July, he auctioned off his old presses. Since he retrenched in his smaller Manhattan operation, sales have dwindled from $17 million at their 2007 peak to a projected $9 million in 2012. The Mitsubishi press remains in storage. Moyal sounds as much like a spurned lover as a businessman. “I want to hurt them really bad,” he says. “I am dying to know who forgot about all the years of relationships and said, ‘You know what? The guy never defaulted on a payment or anything. But too bad.’ ” Burt Helm is Inc.’s senior writer. DECEMBER 2012  |  INC. |  4 3


HOW I DID IT

A Room To Grow

Anil Madhok Sarovar Hotels and Resorts Much like the sharp suits he wears, Anil Madhok, MD, Sarovar Hotels and Resorts, seems cut out for success. As a professional, he rose to become the vice president of operations at the The Oberoi Hotels and Resorts. But, that wasn’t enough. In the mid 1990s, he founded Sarovar Hotels, a hotel management company which has grown into a leading hotel company in the country with five brands, 60 hotels and more than 5,000 rooms under his management. Yet, even at 67, he’s ambitious for more although he doesn’t like setting targets. “We constantly exceed the ones we set,” he says. As told to Sonal Khetarpal / Photographs by Jiten Gandhi

Enamoured by the army, I decided to leave my bachelor’s in Economics at the University of Delhi and join the profession of the brave and the strong. But, as I was about to begin my army training, I stumbled upon the hotel management programme offered by the Oberoi School of Hotel Management. In any case, my parents were not keen on enrolling me in the army and pushed me to sit for the Oberoi entrance exam. I cleared the exam, and opted to join hotel management over the army. It was an intensive programme. We had 12 hour days with six hours of on-the-job training and the remaining six of classroom teaching. I was just about finishing my course when I got my first job as a management trainee with The Oberoi, New Delhi in

4 4   |  INC. |  DECEMBER 2012

1966. Two years later, I was promoted and became their restaurant manager. There was no looking back after that. I worked with the Oberoi Hotel and Resorts for the next 25 years. It was a rewarding career. I was given the opportunity to work in interesting positions across Mumbai, Colombo and Singapore. What I value most about my innings with the Oberoi is that I worked very closely with the chairman, Rai Bahadur M.S. Oberoi, and vice chairman, Prithvi Raj Singh Oberoi. There was a lot to learn from them—it was phenomenal the level of detail they brought to conceptualising, designing and executing a hotel. With their guidance, I gradually became the vice president of operations. Even then, out of my interest, I


Ambitions Galore

Anil Madhok has built Sarovar Hotels into a well-known hotel brand. Now, he is looking at Africa to continue the company’s impressive 35 per cent growth.

DECEMBER 2012  |  INC. |  51


HOW I DID IT

was actively involved in the planning and conceptualising of the newer properties. There’s great joy in working on a property from its initial blueprint to the final stage of completion. The Oberoi, Singapore stands out in my memory precisely for that. Though it was an existing 600-room property, it underwent a major refurbishment when I was there from 1978 to 1982.

Surpassing Milestones With 60 hotels and resorts across 40 cities in India, Anil Madhok has a well-charted growth map for Sarovar Hotels.

The hotel industry provides you a com-

fortable working environment spent in great surroundings. After a few years in my job, I could organise parties for two hundred people at the drop of a hat. I had access to unlimited resources, and the best of everything. But, a chance meeting with the President of Walt Disney Parks and Resorts in Singapore in the early 1980s put things in a different perspective for me. He called a hotelier’s life a mirage—of living like a king, and wining and dining with the finest people and falling into the trap of believing you’re one of them. It’s a make-belief world, he cautioned. His thoughts stuck in my mind. I’d often think about what he said. Finally in 1991, after ten years of that meeting, I decided to move on from the Oberoi. I had plans of starting out on my own.

But, decided to take up an offer from the Al Bawadi group in Dubai to help them embark on their hotel business. That was a short stint. I didn’t enjoy the work and I came back to India after 18 months at the end of 1993. Once home, I didn’t wait any longer. Due to the liberalisation in 1991, there were a lot of hotels mushrooming everywhere but there was no company to manage them. So, I started Sarovar Hotels and Resorts in 1994 with `50,000 from my personal savings. I believed there was an opportunity to give a burgeoning, amateur hotel industry access to operational expertise, and I could do that. Once I began Sarovar Hotels, I was determined to take a real go at it. In fact, soon after I started out, Manu Chhabria, the liquor baron and founder of the Jumbo Group, offered me to join his hotel business. He said my idea of a one-man hotel management company was too far4 6   |  INC. |  DECEMBER 2012

fetched, and I should join his hotel business. But, I remained firm on Sarovar. The initial years were quite difficult.

When you are working for an established brand, the infrastructure backs you up. As a start-up entrepreneur, you are the typist, peon and clerk all rolled into one. Building the infrastructure ground up is a huge challenge. It’s a conundrum, a chicken-and-egg situation really—do you wait till you make the money to invest in infrastructure, or does it work the other way around? Also, an entrepreneur has to be extremely prudent when it comes to managing finances. As we went along, I continued to pump in my personal savings, as a loan, into the business for our expansion. And, I always ensured the revenue from expansion pays for the infrastructural development.

Our first project was Bogmallo Beach

Resort, a 126-room hotel in Goa, in 1994.

Oberoi Hotels had terminated their contract with them and the owner asked me to manage the hotel. But, our first big push came with the Marine Plaza, Mumbai in 1996 though. It was an old, rundown hotel that had been shut for several years. Although it was only a 60-room hotel, we positioned it right. After we opened it for business in 1996, it did exceedingly well. Undoubtedly, we were fortunate to keep bringing in good hotels such as Park Plaza, Ludhiana and Muthoot Plaza, Trivandrum in the early years. Of course, there was an element of being in the right place at the right time, but I would credit ourselves for figuring out the right approach to business. It was simple—none of the big chains were looking at small hotels. We were virtually the only company to do so. Things have continued at a brisk space for

us since then. The mid-2000s until now have been a period of much activity. In


HOW I DID IT

Having been an employee for almost 25 years helped me to empathise with the problems they face, and understand the environment people want at a workplace. By the end of the first year, we had around 25 people in our company. Today, we have close to 1,000 employees on the payrolls of Sarovar Hotels. Another 7,000 people work in the many properties we manage. The biggest change in my role from when

we began the company to now is that I’ve let go of a lot of decision-making power. As an organisation grows, it’s critical to delegate most of the operational work so that the entrepreneur can concentrate on more profitable tasks such as strategies for

in, like the one in Chennai which we are looking forward to. With the Telangana issue in Andhra Pradesh, several companies are shifting their base to Chennai, creating an opportunity for the hotel industry to flourish there. We are also targeting religious destinations and opening hotels in Bodh Gaya, Tirupati, Amritsar and Rishikesh to cater to the increasing number of pilgrims and tourists. We are also focusing on expansion in East Africa. At present, we operate three hotels in Africa—Ole Sereni in Nairobi, New Africa Hotel in Dar-es-Saleem, and Heron Portico in Nairobi. The company is planning to add two more hotels—a 100-room hotel in Nai-

“Of course, there was an element of being in the right place at the right time, but I think we had figured out the right approach to business. None of the big chains were looking at small hotels. We were, in fact, virtually the only company to do so.” 2005, we introduced Sarovar Premiere, Sarovar Portico and Hometel to our portfolio of Park Plaza and Park Inn hotels. Sarovar Premiere has full-service, four and five star hotels that target the upmarket crowd whereas Hometel is a limited service brand of budget hotels for the huge middle class segment. Our other brands, Sarovar Portico and Park Inn have three and four star no-frills and full service hotels. The mid 2000s was also when we raised our first round of funding, `37.5 crore from Bessemer and New Vernon in 2006. In all, we today manage 60 hotels and resorts across 40 cities in India and overseas.

growth, negotiating new contracts and reviewing the infrastructure and the expansion plans.

Getting the right people from the hotel industry—those who would be willing to leave big brands like Taj and Oberoi to join a start-up company with an uncertain future—was a big challenge. To attract people, we had to create a culture in which people could feel they can grow and thrive.

We have a growth map well charted out for the future. We plan to manage more than 85 hotels by 2014. Currently, we are in a major expansion spree in South India. We have 13 operational hotels in different parts of South India and we plan to open eight more—some of them we’ve invested

I still outline the parameters and the prin-

ciples for work although I have to admit, I don’t believe much in milestones. Every time I’ve set a target for the company, we’ve exceeded it, and I had to recalibrate all over again to see if we could manage the “excess”—the infrastructure required, the new projects—and outline, a new and revised plan for the future. Planning and reviewing is an ongoing process. You can’t do it once, and leave it. The moment you stop thinking, you just stop growing.

robi and another hotel by the game park there. Our expansion into Africa is in tune with the way we approached the Indian market when we started out. Like India, Africa has great potential but everyone seemed to be overlooking it. We wanted to focus on a market that everyone seemed to have ignored, or didn’t know how to make it work into a viable business. We have been growing for the past two years at around 35 per cent, and we are confident our focus on India and Africa can continue to deliver that growth to us for the years to come. Of course, the slowdown is a worry, and our core market in India has been affected. If market conditions were better, we could accelerate our growth. But, that doesn’t mean we will chase more markets because we want an X pace of growth. In fact, it’s even more critical to stay focused—we don’t want to expand to Europe, Far East or any other geography, and not be able to handle it. DECEMBER 2012  |  INC. |  47


Tactics. Trends. Best Practices.

Hands on

Quid employees at work in a meeting room made from freezer curtains

main office space

To make the most of Quid’s relatively modest 5,200 square feet, the office is divided into zones—including an open collaboration area and this enclosed meeting space.

Design Smart people, smart office A well-designed space for a team of data scientists— done on the cheap

When Bob Goodson first walked into the San Francisco space that

would become the offices of Quid, the text- and data-analytics startup he co-founded in 2010, he was met with a blank canvas. The walls and floors were concrete. There were no conference rooms and no offices. In fact, the space had never been used as an office—it previously functioned as a Spartan showroom for a neighbouring furniture company and had become a makeshift storage space. As a design aficionado, he saw potential. “I was thinking about what it would be like to interact in here, to build things, to solve problems,” says Goodson. Quid has raised $17 million from investors, but it spent surprisingly little of that on the new design. Working with DECEMBER 2012  |  INC. |  49


hands on

Studio O+A, a local interior design firm, Goodson set a budget of $25,000 for the 5,200-square-foot space. One way he kept to that budget was by striking a deal with Young Office Solutions, the furniture company next door, to supply a discount on some of Quid’s furniture in exchange for letting Young’s potential clients view the furniture in action. Likewise, instead of installing plaster walls for a conference room, O+A designed a yurtlike circular meeting space (shown on the previous page) with walls made of industrial-grade freezer curtains—at a cost of less than $2,000. And as the photos below attest, the thoughtful design didn’t end there. —Eric Markowitz

“There’s some very complex, and very hard work that has to get done in this space,” Goodson says. “And if we’re going to be successful as a company, how do we support—by the design of the space— those interactions?” The book wallpaper is particularly relevant to Goodson, who studied medieval English literature at Oxford.

Reception Area

Quid’s office is accessible only through a narrow, winding passageway. It takes visitors at least three turns and more than 30 paces to arrive at the front desk. Besides looking cool, this flowing mural, based on the infographics Quid’s software generates, helps guests navigate the mazelike entrance.

Library

conference room

Quid’s office is playful, but the company’s sole conference room is all business. Everything in the room—from the tables to the carpet to the walls—is either black, white or gray. The design sets a more serious mood for when clients from the military and large corporations visit.

5 0   |  INC. |  DECEMBER 2012

“I felt it was important that the space looks very clinical, almost scientific,” says Goodson.

Spread: jasper sanidad/courtesy quid (5)

Many of Quid’s 44 employees spent serious time in PhD programmes, and Goodson wanted to make them feel at home. “Since we recruit right out of grad school,” he says, “we thought it would make a warm and familiar element coming into a corporate environment.”


These monitors display Quid’s key metrics and output. “Guests know this is a data company right when they walk in,” says Goodson.

q&A

Meet the Designer: Denise Cherry In addition to Quid, Studio O+A has created offices for Facebook, Microsoft, Square, PayPal and Yelp. Denise Cherry, the firm’s director of design, shares her thoughts on what makes a successful office space and how entrepreneurs can get the most out of working with a design firm.

Collaborative area

The long, narrow table lets engineers get up from their desks and interact with their colleagues face to face. Goodson wanted employees to feel connected with one another, which is why the table is in the centre of the room. Goodson says the table brings teams from different divisions together, and occasionally serves as a communal dining table.

“Where we could get it cheap, we got it vintage. We filled a van with furniture from the Alameda flea market.”

Q: How do you work with an entrepreneur to build an office that fits? A: What we want to do is create a space that represents that company’s culture. But it’s essential to look at its existing office, to get a sense of how employees use the space. That always informs the design. Q: What’s a common mistake when it comes to floor plans? A: A space isn’t going to be successful if it doesn’t address all the different ways people work. An office that’s full of collaborative space but has zero quiet space is just as unsuccessful as one that’s full of offices and has no collaborative space. It’s also really nice to have a tertiary workspace that’s not a conference room, and that can be a quiet place to get away from your desk and work. Q: What’s the worst type of design you see? A: There are aesthetic things we try to avoid. We want a space that represents a company’s values without resorting to plastering the company’s logo all over the place.

WOrkstations

Goodson didn’t pinch pennies when it came to workstations. “It’s really important that people are comfortable,” he says. Rather than cubicles, modular desks made by Artopex, based in Toronto, save the company space, which was important, as Quid plans to eventually staff up to more than 60 employees.

Q: What if the founding team doesn’t agree with the designers? A: There’s always a way to find a solution. It doesn’t have to be compromise, because that implies people are giving something up. It all comes down to trust. The most successful spaces we’ve built were those where we were trusted by the founders. DECEMBER 2012  |  INC. |  51


hands on

Technology Big Data within reach Low-cost tools that help make sense out of all that customer data When Kobie Fuller was hired as chief mar-

keting officer at Revolve Clothing, in July 2011, one of the major challenges he faced was how to encourage customers to become repeat buyers. He was sure that the answer lay somewhere in the mass of customer-order data the 160-employee online apparel retailer collects daily. But when he arrived, that data was stored in a difficult-to-navigate database. Pulling sets of data meant asking an IT guy to run a special query. And even figuring out where to start was tricky. Revolve’s data reached back to when the company was founded, in 2003. “I wanted ready access to key statistics without begging someone to mine the data for me,” says Fuller. So Fuller turned to Custora, a company that specialises in data analytics. For $1,000 per month, Custora copies data from Revolve’s database, crunches it on its servers, then groups Revolve’s customers by purchase date and calculates their “lifetime value” down to the dollar. Almost immediately, some major revelations emerged. Custora confirmed that shoppers who made repeat purchases within 90 days of first patronising Revolve were particularly profitable. Fuller tested retention e-mails at the 30-, 60-, and 90-day marks and found the 90-day messages most effective. He says the e-mails have already generated 30 percent more second-time purchases. “We were able to take the data, trigger action, and see what worked, all within one comprehensive tool,” Fuller says. Thanks to affordable storage rates and intelligent software, companies now have access to a staggering amount of data about their customers, operations and markets. This information, and the industry that has blossomed around it, has come to be known as Big Data. Even small businesses now have terabytes of information (1 terabyte equals 1,000 gigabytes) at their fingertips, material that includes customer names and transaction histories as well as Facebook likes. The data often contains key

5 2   |  INC. |  DECEMBER 2012

insights, but unearthing them can be pricey. Recruiting data scientists and building analytics tools in-house, as some large corporations do, can cost more than $1 million. Hiring a big-name software provider or consultancy can be costly as well. To fill the gap, a handful of start-ups have emerged that deliver a version of Big Data analytics to small and midsize businesses. Some, like Custora, emphasise customer forecasts. Others focus on data aggregation and reporting (InsightSquared, RJMetrics) or data visualisation (SumAll). Not all are recognised as Big Data specialists— the definition of the term is a topic of some dispute—but all help businesses evaluate large amounts of data for less than a few thousand dollars a month. A low-cost solution was exactly what Justin Winter, co-founder of Diamond Candles, was looking for. The 13-person online retailer sells scented soy candles with jewelled rings hidden inside. The comillustration by daniel zender


hands on

“I wanted ready access to key statistics without begging someone to mine the data for me.”

“I can visually comprehend things now, instead of just staring at a large data set,” says Winter. The company recently spent the modest sum of $50 for a year’s premium access to SumAll. A more heavyweight platform was needed for ThinkNear, a Los Angeles– based company that matches mobile ads with consumers on the basis of their location, activity, and local weather or traffic. Since May, ThinkNear has been reviewing terabytes of this situational data each week through a dashboard from analytics provider, Metamarkets. ThinkNear CEO Eli Portnoy pays about $500 a month for the software; he says his ability to quickly evaluate billions of data points has doubled his ads’ click-through rates. “It’s been a massive help to our business, because we’re providing better value to our clients,” says Portnoy. “Data ultimately wins in our business. The companies that have the best data, and the quickest way to manipulate it succeed.” —Elizabeth Woyke

Managing Bridging the generation gap Building a culture that embraces employees of all ages—from boomers to Millennials With employees whose ages range from 18 to 55, managers at SceneTap have a pretty complicated job. The 26-employee company, which sells an application that lets barhoppers scout out the ratio of male to female patrons at local nightspots, has younger employees in the IT department who are keyed in to social media, and are always connected by smartphone. Thirtysomethings prefer e-mail, instant messaging and videoconferencing. Jump to sales and business development, and you will find people in their

The Great Divide Managing multiple generations in one workplace can be difficult, but it’s not impossible.

50s, whose favoured mode of communication is old-fashioned in-person visits or phone calls. “We actually keep a spreadsheet so everyone has everyone’s contact information, including a column with the preferred contact method,” says SceneTap co-founder and CEO Cole Harper, who is 28. Of course, managing multiple generations under one roof often involves challenges that extend far beyond the preferred mode of communication. Older employees

naturally have more work experience, but they tend to be steeped in hierarchical mindsets, says Margie Blanchard, a cofounder of the Ken Blanchard Companies, a management consultancy in San Diego. By contrast, younger workers prefer level management structures that let them contribute and give them a voice—a fact that may not sit well with older workers who spent years working their way up the ladder. “We have moved from a hierarchical world to a side-by-side world,” says Blanchard. “We need management DECEMBER 2012  |  INC. |  5 3

PHOTO COURTESY PHOTOS.COM

pany has been compiling masses of Web data since its February 2011 launch. Initially, it managed this information in Excel spreadsheets and an application offered through its e-commerce platform, Shopify. As that data piled up, Winter realised he needed a better evaluation method. He balked at the cost of hiring a consultant, and soon discovered SumAll’s analytics software for online merchants—free because it is still in beta. SumAll imports Diamond Candles’s data and feeds it back through a dashboard that tracks customer and sales trends. In particular, Winter has used SumAll to determine the effectiveness of offering daily-deal discounts. By tracking the results of a recent promotion on the daily-deal site LivingSocial, Diamond Candles was able to determine that the promotion increased orders from new customers 14 times compared with its existing sales channels. Given that information, Winter decided to continue using daily-deal sites as a way to broaden his customer base.


hands on

and leadership that goes along with that.” To accommodate the varying work styles, some companies are What’s in a Name? migrating toward flatter management structures. Mark Can’t tell a Gen-Xer from a Millennial? Here’s a quick primer on the traits of the various age groups, as well as some of the influences that helped define them. Vaughn, senior partner at Navint Partners, a New York City management consultancy, Baby Boom Generation X Generation Y/millennials says such set-ups create situa1946–1964 1964–1980 1980–2000 tions in which leaders emerge business ICON Bill Gates Jeff Bezos Mark Zuckerberg on a project-by-project basis according to their particular The Beatles Madonna Eminem strengths and experience. “The MUSICal The Rolling Nirvana Lady Gaga influences benefits are that people enjoy Stones work more when it’s structured this way,” he says. Fall of the September defining Vietnam War That’s certainly the case for 11, 2001 moments Watergate Berlin Wall Andrew Cummins, SceneTap’s O.J. Simpson trial Rise of social media director of business operations, Personal Smartphone breakthrough Fax who joined the company a year technology machine computer and a half ago. Cummins, 29, came from the rigid management Hardworking and Crave work-life Prefer flexible work confines of Boeing, where at least balance, sceptical structures, having direct workplace goal oriented, traits comfortable in of authority input in projects seven thick layers of managehierarchies ment stood between the youngest workers and upper management. contact Call me E-mail me Hit me up on method “At Boeing, your role is very Facebook much defined,” says Cummins. it’s 9 p.m. ...in the office ...home with the family ...out with friends “You are put in a box with your I’m... but checking e-mail own little portion of the world, and that is what you focus on. You are not really encouraged to go outside of your lane too much.” By contrast, SceneTap employees of all Acquity employees all work in a fluid keep groups smaller than 10 people, ages collaborate, move around, and try structure, combining into groups for projwhich gives everyone a voice. Younger new roles. They are also asked to volunects that typically last about three months. workers are then exposed to the experiteer solutions and ideas directly to the That means all the consultants are conence of older workers and encouraged to company’s top brass. “We are not organstantly working with a changing cast of learn from it. ised around seniority,” says Cummins. characters. “We separate their role on each The company also assigns a career “We are based around who can get the job project versus the experience level they manager to younger consultants to done most effectively.” have within the organisation,” says Jim help them set and keep track of goals. In Companies that have a hierarchical Newman, Acquity’s executive vice presithis way, management stays somewhat structure but want to grow flatter can use dent of operations. vertical and pushes employees to advance a hybrid approach. Acquity Group, a ChiThat’s not to say the system is perfect. in the corporation. Both solutions mean cago-based consultancy that focuses on The flexibility of the groups sometimes these workers are less likely to get lost in e-commerce, branding and marketing puts younger consultants at the head of the shuffle, get bored, or leave. Ultimately, strategies, has about 500 consultants from teams, which can cause conflict with older Newman says, it all comes down to manages 20 to 60. The company maintains a workers, says Newman. The fluidity can aging consistently, “which means commuproject-management structure that also create confusion about career paths nicating effectively and not being overly blends traditional top-down decision for employees who lead in one project controlling or micromanaging.” Advice making with a more horizontal, collaborbut play lesser roles in others. Acquity that spans all generations. ative work environment. addresses the latter problem by trying to —Jeremy Quittner 5 4   |  INC. |  DECEMBER 2012


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Thinking Ahead Rajesh Gandhi starts thinking about work the moment he steps in his car.

In spite of inheriting the `8-crore Vadilal business of lip-smacking ice creams in 1979, Rajesh Gandhi did not take things for granted. This fourth generation entrepreneur set on the bandwagon to do things differently. Not only did he put the organisational structure in place, he added another scoop of the processed food business, and placed the company on the international map. With over 1,200 employees and a turnover of `430 crore, Ahmedabad-based Vadilal’s 54-year-old managing director, Gandhi spends most of his time in branding, product development and brainstorming, even 33 years since joining the company. As told to Sonal Khetarpal | Photograph by SUBOJIT PAUL

5 6   |  INC. |  DECEMBER 2012


HANDS ON

The Way I Work | Rajesh Gandhi, Vadilal Group

“Capability in itself is not enough. The right approach is much more valuable.” I follow a regular regime of getting up in the morning at 6.30am and exercising for an

hour and a half, which includes a long walk and yoga. While working out, I listen to soft, soothing music, and consciously try to keep work-related thoughts at bay. My exercise routine kickstarts the day for me. After having breakfast with my family, I leave for office around 10am. My work day actually begins the moment I step in the car because here I start thinking about the day ahead. In strong contrast to my fixed exercise routine is my work schedule. No two days are ever the same for me. The first thing I do as I reach office is look at my digital diary for my to-do list, and prioritise my tasks. I make sure I attack my tasks in that order, and try not to keep the to dos pending. After that, the next few hours are usually spent in replying to e-mails, following up with my managers, reviewing reports from DECEMBER 2012  |  INC. |  5 7


HANDS ON

various departments and scheduling planning and strategy meetings. But, it’s after lunch that I get into the most productive part of my day because that is when I have various meetings—on product development, new product lines or basic problem solving. This is the best part of my job—the ideating and the brainstorming. It energises me, and keeps me going. We constantly try to innovate our product portfolio by introducing two or three new products every month, and removing the same number from our product basket. Even though we have more than 150 flavours of ice creams, the widest range in the country, we plan to launch candies and other varieties of ice cream to target children and also focus more on health foods—ice creams with less or no sugar. We are also the only food processing company which offers a variety of frozen regional cuisines and snacks. In spite of our wide array of products, we had to forgo our number one ice cream brand by sales slot to Amul when it entered the ice cream business in 1996. It marketed its ice creams almost 30-40 per cent cheaper than existing brands, and pushed us to the second slot. We had to arrest that slide, so we went on a marketing and promotion overdrive. We revamped our branding and invested `20 crore in advertising through television, commercials, print media and billboards to target more youth and increase sales from the impulse category. We have also embarked upon increasing the production capacity of our plants, thereby increasing profits by economies of scale. We are upgrading our two manufacturing units, one near Gandhinagar in Gujarat and the other at Bareilly in Uttar Pradesh. In the last two years, we have invested `800 million in our manufacturing facilities and we want to set up another four to five new plants in the next five years. Due to all these efforts,

our company has been growing at about 30 per cent annually for the last 10 years and has around 50, 000 retail outlets, 700 distributors and 40 stock points across the country. In spite of our growth, we are still not at the coveted No. 1 position. By volume of sales, Vadilal with 3,50,000 litres stands next to Amul with 7,00,000 litres. Our market share is 15 per cent as of now and we are trying to scale this up by another 8-10 per cent in the next few years.

T

to misuse our situation. It isn’t sufficient to only supervise though. I put aside considerable time in mentoring and training my people. I do a detailed review of my senior staff’s performance every quarter. I strongly believe that continued, constant communication helps to solve many problems. To forge a bond with people who work for you, you have to go beyond just treating them with respect. I ask after their families, and how they are doing. It’s not unusual for my teams to seek my advice on their children’s educational and matrimonial issues. The thing that upsets me most is if there has been a misrepresentation of facts. I can’t tolerate that—I appreciate people who own up to their mistakes, and try to rectify them. Which is why when we hire somebody new, we make sure we ascertain a person’s attitude. Capability in itself is not enough. The right approach is much more valuable. I try and be open-minded myself. It’s important for a manager to be open to criticism, and to keep ego awry. My senior colleagues can freely tell me if they disagree with my decisions, or my way of thinking. I’ve often changed my decision if I am convinced of their logic or rea-

“To forge bonds with people, go beyond just treating them with respect.’’ 5 8   |  INC. |  DECEMBER 2012

o achieve the plans for sustained growth, it is very important for each department to focus and work towards the long term goals of the company. I usually do not get involved in operational issues at all. Yet, in terms of company expansion and decisions on investment, I’m fully engaged and tuned in. In operational matters, I keep a bird’s eye view to see if everything is going okay. But, I believe in delegation, and don’t micromanage— it’s important to give people space to work, empower them and let them take decisions. I encourage people to speak up. When it comes to problem solving, I let others come up with solutions first. I only intervene when I feel the decisions are going against the company policy, or a third party is trying


HANDS ON

‘‘Give people space to work, and let them take decisions.” son. I’m aware I’m prone to being stubborn. But, it’s a flaw I don’t let myself forget. I’m conscious of it. Beyond managing people, when your role is to think strategy for the company, it’s imperative to be aware, and on top of the latest trends in the industry. I spend a lot of time on research to keep myself updated of the trends ongoing in the industry. I visit the market twice a month and randomly talk to retailers about the new products introduced. I attend conferences, seminars and regularly read trade journals and e-newsletters. I share my insights with our R&D centre and plan on indegenising the trends to bring it in our market. I want to be active in social media too because it is a valuable tool for gathering and interacting directly with consumers. In fact, I created Facebook and Twitter accounts for myself but it’s not something that I’ve been able to make a habit of. Yet, I am actively involved with our customer feedback unit. I monitor the complaints from customers very closely. Our external research

agency analyses and determines the magnitude of the complaint which helps us to take corrective measures. I ensure all such steps are being taken and decide on the future course of action. Because we are an FMGC industry, customer satisfaction is the main determinant of our success. Small successes—one happy customer at a time—ensure us of greater success. Taking care of customer satisfaction, and company’s health is not enough. I take out time for my own too. I ensure I eat five small meals a day and avoid high calorie and unhealthy food. I try to leave office by 8pm so that I can join my family for dinner and spend time with them later in the evening. I never take work home. I would rather stay late and finish all tasks at hand. My father, Ramchandra R. Gandhi, is a strong influence in my life and a lot of my work habits and lifestyle are inspired by him. Around 11.30pm, I call it a day looking forward to another early morning and gearing up for just another busy working day.


I wish I knew then...

Kanchan Naikawadi, founder, Indus Health Plus Her father’s untimely death due to cancer, because it wasn’t detected in time, led Kanchan Naikawadi to start Indus Health Plus, a preventive healthcare service company, in 2000. Naikawadi was driven by the aim to make preventive healthcare services both affordable and accessible to all. In the past 12 years, the Pune-based company has established its presence in 26 cities, and claims to have benefitted 3,25,000 families through timely health check-ups. Naikawadi shares a few lessons she picked up while running Indus which has now become a `100-crore business. Before starting Indus Heath Plus, I worked with my uncle Sadanand Bapat, a serial entrepreneur with multiple businesses in chemical trading and transport, for five years. I learnt all the ups and downs of running a business from him—right from managing finances to tackling everyday operational challenges. Even though I had my uncle, now director at Sahayadari Hospitals, as a guide when I started Indus, our proposition of selling preventive and not curative healthcare was very new for India. Because I had personally suffered, and had built the business to ensure nobody goes through what I had to in my father’s case, I had believed that when I went to people to convince them about the benefits of regular health check-ups, they would welcome our services with open arms. I was wrong. Instead, people would tell us they didn’t need preventive healthcare because they had medical insurance. I learnt during this time that people in India are used to seeing a tangible product and the idea of paying for preventive services wasn’t welcome. I remember finding it appalling that while most people took preventive care of their cars and scooters by

6 0   |  INC. |  DECEMBER 2012

company was how important it is to use and manage IT services, data and technology in your company. Fifteen years back, they didn’t use computers or cloud to store data. At Indus, we got a whole lot of IT people on a contractual basis to do this for us. In the first year of starting IT-based services in the company, the person we trusted the most with our data locked the systems, took all our data and blackmailed us. We refused to pay him anything and for the next two months, we had to run the company without any data. Luckily, we had hosted a server Curing Mental Blocks Naikawadi had a tough time on our website which had most educating people on the need for regular health checks of the data there, but it took around two to three months to regularly servicing them, when it came to retrieve it and get things back on track. their own health, they only sprung into That incident taught me the biggest lesson action in the later stages of the disease. I about keeping your data secure. Now, we wish I had known then that it would take manage these services in-house, have us years to educate our customers. Today, source codes in place and take back-ups at we have a model where our agents target regular intervals. I don’t want to make that individual customers and talk to them on a mistake again especially as we plan to go one-on-one basis about the benefits of international in the next five years. going for regular health check-ups. Things —As told to Ira Swasti have slowly picked up now. Another thing I did not or rather could not pick up while working in my uncle’s


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• AGRA • AHMEDABAD • BARODA • BELGAUM • BENGALURU: BASAVESHWAR NAGAR, HSR LAYOUT, INDIRANAGAR, JP NAGAR, KALYAN NAGAR, KORAMANGLA, RMZ INFINITY OLD MADRAS RD., RICHMOND TOWN, SAHAKAR NAGAR • CHENNAI • COCHIN • DELHI: DAYANAND VIHAR, DWARKA, EAST OF KAILASH, FARIDABAD, INDIRAPURAM, JANAKPURI, PUSA RD., RAJOURI GARDEN, ROHINI, NOIDA IHDP SEC. 127, NOIDA SEC. 30 • GURGAON: PALAM VIHAR, GURGAON SEC. 14 • GUWAHATI GANESHGURI • KOLKATA: ALIPORE, JN RD. , SALT LAKE • HUBLI • INDORE: AMITESH NAGAR, PALSIKAR COLONY, VIJAY NAGAR • JAIPUR • KANPUR • KOLHAPUR • LUCKNOW MAHANAGAR • MANGALORE • MEERUT • MUMBAI: ANDHERI (E), ANDHERI (W), BANDRA, CHEMBUR, GOREGAON (E), KANDIVALI (E), KANDIVALI (W), LOWER PAREL, MULUND, PEDDER RD, POWAI, SANTACRUZ, VASHI • MYSORE • NAGPUR • NASHIK • PATNA BORING RD, RAJENDER NAGAR • PUNE: AUNDH, KALYANI NAGAR, LAW COLLEGE RD., NIBM • PUNJAB: AMRITSAR, JALANDHAR, LUDHIANA, MOHALI • RAIPUR • SANGLI • SECUNDERABAD • SURAT • UDAIPUR (OPENING SOON) • PUNE: HADAPSAR • PUNJAB: PUNCHKULA SEC 16 • GUWAHATI: ULUBARI • LUCKNOW: GOMTI NAGAR www.goldsgymindia.com

For franchise enquiries email nikhilkakkar@goldsgymindia.com

A Valecha-Advani Group Enterprise

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