Google’s Unification, IBM’s Smarter Planet; and Orwell’s 1984

17 May

So Google’s i/o conference was focused around Unification – one view across multiple devices/ collaboration/ convergence – call it what u may. I also read this really excellent article (highly recommend that you read it) at around the same time, which had the same concept – the programmable world.

This started around a decade ago when the smaller devices started talking to each other – I think probably the first avatar of this was Logitech’s universal remote – one remote that could operate most devices in the house. This was a truly good idea – took a real consumer problem and solved it.

Universal Remote

Then the devices started performing different functions – so your gaming console also became your internet screen, your TV also became your message receiving center, the radio enabled GPS etc.

The problem still was that you had bought different appliances as they got released for primarily different things – also, many a time the “secondary” function was not executed as well as the primary one, leading to a loss of user experience.

The big jump in this world of connectivity came when wireless came into its own. Made a network a reality.

The smartphone took all of this to the next level – and started gradually offering most of the potential applications from one screen. This also coincided with consumers becoming more and more addicted to the mobile screen – so it gelled well.

And ofcourse, now every appliance – many of them wearable (watches/ glasses) – is instantly sensing your movements – and telling the other what each is upto.

All very well, I’m sure. Apart from saving time and making everything easier, I see great uses in healthcare specially. GE is doing pioneering work in smart sensors and making huge savings in industrial production.

Big Brother

But I am reminded more and more of George Orwell and the Big Brother syndrome! Much like the “three stages of Winston Smith’s reintegration “There is learning, there is understanding, and there is acceptance“, there are 3 stages to this process – connecting, talking and then …hacking? (Imagine one “unperson”, thanks to the “Miniplenty” data available, hacking at it– and oops – there goes your privacy, “Minitruth” or not!)

Ironically, Steve Jobs, who’s brilliant 1984 Superbowl ad for Mac – aimed at IBM as big brother won him such accolades, must be smiling up in heaven – he partially helped create one version of unification – only, in his case, all the world is one – as long as it is an Apple world!

The good news (maybe) is that there’s many a slip between the cup and the lip. This degree of inter connectedness – or even a fraction of it – has yet to really manifest itself, and many a times hopes have been raised, only to be dashed to the ground again.

We’ll wait and watch – I don’t think it will take till 2084, but it certainly ain’t happening in 2014!

Stereotypes; and the Bucking of Them (Or Why I #$% Love Science)

8 Apr

A while ago, I wrote a post on patterns – and how solving for those patterns makes for a lot of fun and excitement.
This one is actually diametrically opposite – of late I have seen a lot of exceptions to “expected patterns” – in other words stereotypes – and bucking these is almost always more fun, and sometimes much more interesting.

chocoholic

- It started with an exhibition in my 2nd grader child’s English class – they were “publishing” a unit on “Non Fiction Writing”, where every child had to take a topic and research it – write it like a book – TOC, facts, conclusion, source, glossary etc. Achchu being the foodie she is, picked Chocolate as her topic.

nerds

Her friend Diya on the other hand picked Pokemon – she even did a simulated video Pokemon game. What I found very amusing is the teacher Shikha Ma’am saying – “Diya, I’m surprised you picked a video game – I would have thought you’d pick the Solar System or something.” Now Diya is, according to Achchu, “the nerdiest nerd ever” – nerd defined by her as – great tasting candy but also someone who works all the time – and actually LIKES working :) Hence the obvious stereotype triggering Shikha Ma’am’s comment.

Rajni Gandha

- In a similar story, maybe as a stress relieving mechanism (and maybe not – Im just looking to rationalize a bad habit!) over the past 3 – 4 years, my partner Shoma and I got addicted to this – awful really – “mouth freshner” (I guess is the best description of it – though according to my kids, my mouth really stinks now) called Rajni Gandha. Now, this is a really popular thing in India, most often combined with tobacco. The common reaction when a lot of folk saw us chewing it incessantly, almost obsessively, was – “wow, Shoma, you don’t look like the kind of person who wd eat Rajnigandha” (Pls note: Shoma is really classy – she’s tall slim nice looking and is always dressed well. She looks, and is, educated, from the upper echelons of society – and so NOT the kind of woman who would do infra dig things like chew Rajni Gandha. Pls note also – as my appearance is the exact opposite of Shoma’s MY chewing the same stuff was almost viewed as something folks would expect :) Another stereotype – busted again!

- Ofcourse the best example of this is the recent brouhaha over the originator of the extremely popular facebook page “I Fucking Love Science” , Elise Andrew, being a woman. Its a fantastic page actually – combines awesome facts, great humour and lovely pictures. Has 4.5 million likes! But when the originator recently revealed she was a woman, the reactions were really strange! Read here for a short description of how the page started, click here for an interview with the originator, and here for one random post on the reactions (again, “Science and Women?? nyaaahhhhh” – stereotype being busted – these guys forgot Marie Curie or what?)

- Elise’s site actually showed me another great example. Remember the actress Winnie in the old TV Serial The Wonder Years ? wonderyears . Well, that actress Danica McKellar is a Math Whiz, with a true blue book in her name (called “Math Doesn’t Suck)! See here for an interesting interview with her

- When you look for examples in org life, I’m sure we’ve all made hiring decisions that are powered by this similar stereotyping thing. Infact, our HR manager, had a clear bias against long hair and ponytails in men – and very often had to work past this bias. I once heard her telling a new hire politely, but with a definite glint in her eye – “it may be neater/ cooler for u to get a haircut”. I always had a bias against men from a certain state in India – in my mind they are almost always lazy, and have an attitude to boot! But we have all seen people that bust these stereotypes, even though organizational culture actually perpetuates really by following patterns/ stereotypes in groups – whether they are cultural/ age or interest related groups. (See related older post on org culture)

bullinchinashop

I wonder if this whole pattern-vs-stereotype busting arises out of the Johari Window model – it was one of the management concepts that I used to really like – I specially found the Bull in a China Shop very evocative :) . I think if we run a Johari Window on most of us, we will follow established stereotypes, but also one of the rooms will show those elements in our make up that bust the stereotype. Infact, maybe time to test a hypothesis that each of us in general can be stereotyped – maybe in a multiattribute model, but each of us has a few – maybe even as small as one – streak that busts the stereotype and THAT is what makes everyone different from each other – notwithstanding the “every man has a double somewhere in this world” theory :) Are we all a formula? Imagine God having this menu of features and attitudes and essentially mixing and matching all of those as he made us – OK if u want to be a little scientific – its DNA and all the Ribosomes on them – and they actually do get mixed and matched in menu options – so my theory of stereotyping is not all wrong!

What say?

Meanwhile, an old article I wrote on the MBA student – with a time series Johari Window construct used there – enjoy :)

StartUp Dilemma 4 – Pricing; OR How to Make Sure You Get Full-ish Value For Your Product/ Service

4 Apr

B2B StartUp pricing

Was reading a blog a couple days ago – this is a consultant who is rightly advising folks to never sell their services for free. As a corollary, one of the 2 newspapers we take, had a front page story on Infosys’ altered pricing strategy. (the other newspaper had a headline on how women now menopause in their 20s – you can see why I perused the Infy article with far greater interest :) ).

Brought me to a big dilemma we faced as a start-up – how to price/ how to get client to value your product or service enough/ can you raise price of a service one you set a benchmark to it.

Infact, when we got acquired that was one of the first strategic tasks the new management set before us – raise your cash ring/ increase your profitability/ get us better EBITDA – (as if we didn’t know we needed to do it :) )

The issue is – when you just start off, you ofcourse want to acquire clients – this is true whether you have a product or a service. You in general either have a slightly differentiated product/ service – so yours is better/ faster/ cheaper/ does more things than before – or your product/ service is doing something that’s very revolutionary/ disruptive – i.e. no one has done it before. In the first case, the client may be more or less satisfied with their incumbent provider – and if they don’t have an incumbent provider – they have not been convinced of the need for your product/ service. In the second case, if no one has ever done this before, they again either don’t need it, or will not believe that you can do it.

In all cases, the proof of the pudding to a certain extent will lie in the eating. So, you WILL need to introduce some element of promotional pricing – whether it be packaged as a beta client who is pretty much using yr product for free – but in this case atleast with attendant benefits that accrue to u; or introductory offer/ trial offer. Once your client likes your product, or service, you work next at making it more and more indispensable to her – and then I guess raise the price. This is why shampoos offer free satches/ food companies offer free tastings (I LOVE to visit supermarkets etc on weekends only because of all the yummy free food :) – my kids are now as bad as I am/was!). In a related way it also why Gillette prices razors low, and blades are where they skim the cream. But trial/ sample has been an entry strategy for FMCG products for a long time.

food tasting

Talking of betas, when we were trying to develop an NLP engine for our Social Media platform, we contracted another start up to develop it for us – we were in a slightly “4-yr-old-is-bigger-than-1-yr-old” type of “elder brother” syndrome fashion, their beta customer. I think we got a LOT of value out of them – just as they got a LOT of thinking out of us. And yes, despite having got them (or them having got us) to a point of really good results that we felt we could use in our platform, we never ever allowed them to raise their prices on us! Talk about arm twisting!

So how can you apply “sampling pricing” to B2B products/ services. We had a way around it – for our service which was ongoing – needed everyday/ every week or every month, and therefore could have annuity type engagements, we offered a 3 day/ 1 week trial – for that trial time period, we wd give our clients a taste of the service – we worked it like the full service. Our conversion rates for trials were very high – hence, our sales teams had a great weapon in their armory. Of course, the few instances it backfired on us was when the client needed that ‘essential” service ONLY for that week and took advantage of the trial – but these were fewer. The success of the conversaion also lay on the fact that the targeting and sales pitch for even the free trial had to be very careful – the client had to have “skin in the game” – they needed to invest time and energy going through our output and feeding us back – everyday. When that didn’t happen, we knew the trial wouldn’t convert into an ongoing engagement.

Where this did not work however, was when the purchase was likely to be one time – so a piece of research on a specific problem say. This piece of work, once executed, would not be done again – if you gave it free, you essentially had a huge opportunity cost in not being to make money from that product/ service again.

And thus here is where we had the typical start-up problem – in a bid to convince our client/ to get them to start becoming a client/ and to prove to them we could do this, we would invariably end up pricing low – way lower than the true value of the output was. (What decided true value – good question – benchmark what top of the market guy would charge for comparable output – if you have no benchmarks, get proxies. If completely unheralded category – figure out how much its worth it to the client – what is the “cost of abstinence”) Client would buy/ LOVE the results – but then in their mind set the price band at that “low” ballpark. So that future requests came at the same ballpark (hey – u guys charged me 50K lst time, how can u say this is 100K now!) And that wd be a vicious cycle – made much worse when you realized that the same client had switched jobs, and at the new company – good news – wanted you to come and bid for a project; bad news – remembered you had charged the low/ breakeven price the last time and then weren’t able to jack it up.

In a product, the scenario is easier – specially if u sell a licence version, you can threaten to cut off licence/ revoke passwords etc once hooked (that’s why it is generally more profitable to run a product company – apart from the fact that you make one product and sell it multiple times, you also know that once your client has your product, cost of switching is high, and your licence/ royalty fees goes on for a long time) – so you could even have an escalating price menu. (not if you are beta though – as evinced by our NLP vendor situation)

So, coming back to the dilemma yes or no to “free/ trial” price? My answer – actually I don’t have a great one (given that even after acquisition we struggled with this). But, I can enumerate scenarios in which it makes sense to sell free trials/ price low:

Product_Life_Cycle

a) Evangelized product – You need to prove the very efficacy of the product category – in PLC terms, its a category at the introduction stage (you milk it at growth and early maturity – by late maturity you are in the Infosys state – fighting to uphold revenues/ market shares in a commoditized environment)

b) Recurring service – like FMCG/ our daily reporting service, the use cycle is short/ frequent, once bought it will need to be bought again. So, you can “bait” the client (not traditional “bait and switch” usage here i might add) with examples of your work, and then withdraw the service if they don’t pay.

c) Competitive market – When you don’t really have a clear differentiator (well, ideally then you don’t have a business being a startup :) ) in the idea – maybe only in the execution of it, or in the commercial structuring; you give the client a chance to “eat the pudding” for the proof of the eating

d) Large potential client – entry in your roster

In most of these scenarios, you have to be clear you are stating upfront that this is trial pricing for a limited time period only – maybe you even use artefacts like price cards per wish list but give stated/ obvious doscounts for stated/ obvious benefits.

Reminds me of an old boss Rajeev saying (for a very different product category) – when would you advertise your price – we are talking mainstream advertising for a semi durable product – a) either when you have a really low priced product – so u want to say “lowest price/ unbelievably low price”; or, when you have a really high priced one – and the price then is part of the indicator of the value of your product – so, like a lot of the posh/ snooty real estate projects now say – “if you cant pay over a million dollars, don’t even think about looking at this villa housing project!” In either case, your price is making a statement!

Read also an old interview about the 5 Rs. )(10 cents now) price point and its utility for FMCG products in India – I think this has become 10 Rs. now actually)

Having said that, when it comes to the crunch – i.e., the fight between getting revenues on yr ticker board vs getting higher commissions for higher sales (kind of like the “singles vs. sixers” problem in cricket) – it takes guts n balls to not remember the few additional salaries you will be able to pay with whatever the client is willing to give you; and really dig your heels in for the true value of your service!

It is a brave entrepreneur who manages to get his/her wish list price even 30% of the time with the first few clients :) – so, if you manage it, kudos! And if you don’t, try try again :)

Creative/ Innovative Business Processes – Oxymorons?

2 Apr

bruce n spider

Every day of the week – I hear my kids grumbling. Basically they don’t want to go to whichever class it is that they are taking these days – tennis/ music/ swimming/ dance/ drama. They don’t like it/ they are not good at it/ the coach is too strict/ they don’t like the people – grumble grumble grumble…My take on this is – that they in most cases they haven’t acquired enough expertise at that skill to really enjoy it. And my earnest blandishment to them is always – come on, unless you practice again and again, you will not acquire that threshold level of ability, and will never ever have fun doing it – its a hump, u just need to “try try again” but once you get it, voila!

Indian dishwash process

I experience a similar feeling but a bit in reverse while executing household chores – now that my girl Friday Tulasi is no longer with me, I have to wash dishes, sweep and swab the house and cook a lot more than I ever did before. But, since I perform these jobs infrequently, I am sure I don’t really employ the most efficient way of doing them – in every subset of the task actually – whether it is the washing, the stacking, the drying or the storing! I do it well, but if I did it everyday – I wd do it so much better.

And this is actually what makes the process industry. As we know, processes are made up of steps and sub steps that can be repeated endlessly – this is the reason they can be documented, then taught and then performed by a wide variety of people – and that’s also why they can be outsourced.

In EmPower, we had an interesting scenario in which our 3 operations department were actually at different levels of “processizability” (yes, I just coined that word). And therefore covered pretty much the whole spectrum. The “Process” oriented departments needed the basic skill/ expertise of the process – in some places it was domain knowledge of healthcare/ in some cases it was good knowledge of Microsoft office functions/ in some cases it was English writing and summarizing (unfortunately, 30 million dollars or no, Summly didn’t work for us (we tried it much before yahoo bought it :) !); and then they needed the skill of taking a series of task steps and performing them as documented. The characteristics that merited excellence in performance here were the ability to undertake these same tasks faster/ better/ cheaper – so, process improvement; productivity efficiencies; and ofcourse quality were the metrics of evaluation. This is where the normal process engineering measures like lean and six sigma were applicable – and folks did green belt and black belt projects…So focus was on automation/ tools to make work better/ business process management techniques etc..

sixsigma cartoon

From the demand side, what these functions necessitated were task orders that were essentially the same/ similar business problems, for many different businesses/ brands/ industries – with some minor twists. So, you couldn’t throw in a “new” angle to the problem – the client had to choose from an almost predetermined menu of choices – a bit like a buffet meal. They got solutions that worked like clockwork – because over a period of time we had gotten so good at doing them.
Also, the business problem itself was not so much exploratory/ unstructured but a repetitive one – and the focus was on the “what” not so much the “why” and “how”.

On the other end, we had a department which got faced with business problems that no one knew the answers to – it was about finding out reasons/ detecting patterns – so fairly exploratory/ research and analytics oriented. The brief was “tell us what we don’t know”! The evaluative metrics therefore became frameworks/ client satisfaction/ hypotheses generated and methodology of proof provided and presentation simplicity and clarity…

The issue for us in order to scale however was – how would you processize this – the consulting companies have done versions of this – they templatize frameworks, have standard modus operandi – and I think, pretty much by the sheer bank of experience of solving problems over the years, have quasi answers to most questions they will see. But, when you are using a very new, very evolving medium – in our case Social Media – and part of the brief is to find out “what the client doesn’t know” – it was tough to use previous experience.

Having said that, we still injected processes – there was one for brief capture, then for what to research, then a source database for where to research, the research process was documented and continuously kept getting evolved, then there were processes for analytics and then one for story writing. Our teams followed all these in most cases – but interestingly, for this department, the places where one output scored over another – by leaps and bounds – was when the folks doing it actually “broke the process” i.e., went beyond the bounds of it – and injected some of their own thinking/ innovation into it.

I guess that made the difference between the first and the second type of functions – in one, the process WAS the solution, in the other, it was the means to get the solution – and a means that we attempted to replicate in order to scale, but the solution would get much better – the more creative you got at it.

This made for many many fights between the market facing and the operational folks – obviously, for the client facing folks, the attempt was to throw the ball out of the park – always! Great ambition – and one that would ensure that the client was delighted and came to you for more – the ops guys however had to battle doability/ bandwidth/ kind of resources and ultimately the cost of this creativity – vis-à-vis the meager returns they got out of it. Their point – you want innovation, you pay for it – the whole point of processizing something is that it can be repeated in a human agnostic way – that also reduces the price due to efficiencies built in and the resource cost which you can keep arbitraging – but then you cant expect creative/ innovative thinking! If you want a Ferrari or a Bugati, you jolly well pay for it – if you want cheap, buy a Nano!

The trade offs were actually spectacularly different – business processes in general have higher probabilities of client satisfaction. The client’s expectations are well understood – both by you and her, and since you have done this many times before, you can execute well. Think of the fast food chain restaurants (we have our own versions here called “darshinis” – those are probably the best processized service outlets I can think of – every task is pre-known, documented, broken down; every person is assigned one (or more) of those sub tasks – these are all sequenced in a particular manner – even exceptions (like if your chicken wings are taking too long, the KFC front desk folks offer you either coke or crispy chicken) are envisaged and recorded. At our darshinis, the job sequencing is brilliant – one person takes orders, another puts banana leaves for u to eat, the third serves you, the fourth serves you a different set of dishes, the fifth offers you seconds, the sixth offers you water again and the seventh comes and takes the banana leaves after you are done – and cleans up the mess – to start all over again! Fast, cheap, efficient…great client satisfaction

veg selling process

I see examples of it in my vegetable shop – this is an open market stall – has the freshest veges, and an assembly line service operation – every client is asked what they want/ helped in selection – with the salesmen actually filtering out the not so fresh veges/ weighing done/ upsell – cross sell done/ money totted up and checked out – all done in matter of minutes. On top of which, these guys greet you with a smile, generally remember what you bought the last time (all in their heads – no computer/ loyalty database); send a man to help drop your heavy load to your car, ask about your maid Tulasi who they know has gotten married; know when you buy a new car – and even give you a discount when you don’t have exact change! Customer satisfaction? No, delight!

On the other hand, the customers who have asked you for the holy grail “creative insights” – take much longer and harder to get satisfied – coz they don’t know themselves what will satisfy them. So, then it’s a looong engagement process to align expectations, take them along in your journey – keep them abreast of your findings so they are always in the know – on short repeatedly and iteratively manage them…client relationship leading to client satisfaction maybe..But, the flip side is, if they are satisfied, it may be a “higher level” of satisfaction as you pulled out a rabbit out of a hat – almost!

For us therefore, both ends of the spectrum had their place in the sun in our portfolio – the “research and analytics” innovation stuff was the flagship service we would sell – its what gave us entry into clients and got the big names in (after all, for the largets spenders on research and analytics in the world, you had to show results out of the ordinary – only then would you acquire them as clients). And these innovative services were also then the loss leaders ☹ (which is a little counter intuitive but well what to do) The process services on the other hand were not only the bread and butter – ie, got us the bulk of our revenue, but also were the jam – ie provided us the profitability – we needed both therefore to make a good mix…

But I really worry about this – can you processize innovation? You can processize the process that leads to innovation maybe, but I really think the two are polar opposites. I know Gary Hamel and the like have attempted to devise enterprise processes to fuel innovation – even some 10 years ago, my company had undertaken a big exercise under his aegis (I actually think all that came out of it was “foreign jaunts” for many delighted managers) 3M is maybe one of few companies – oh yeah and Google I would say where this seems to have been done well. Any others?

To me, innovation – real innovation, atleast the IDEA – is about a smart brain spotting a clever idea – a gap/ a better way to do it/ a customer need – it’s about making connections that another brain/ other men have NOT made – it’s about that unusual lens you have applied to existing data and patterns to detect something unprecedented – THIS is difficult to processize/ train/ impart…..What you CAN do is like I said devise processes for generation of ideas/ to constantly make those ideas be visible/ to enable working on those ideas – and sure, in many cases, genius is 99% diligence/ dedication and 1% inspiration. But u can processize the diligence – u can’t the intelligence!

But wouldn’t it be nice if u cd undertake / implement the innovative stuff also ina processized/ profitable way – I guess too much to ask for?

In the meanwhile, if you agree that innovation and processes are oxymorons, and if u are the kind of person who likes interesting twists in language, here are a few lists. A few that tickled my fancy were:

“act naturally”
abundant poverty”
“crisp tender”
“buffalo wings”
intimate stranger”
and my new favorite – “ethical hacking” :)

In pursuit of Excellence

29 Mar

passion and excellence

While on a walk yesterday, I saw this amazing sight – a truck driver carefully diligently and lovingly washing the decorative bells on his truck. It really astounded me – after all, these bells are like less than a foot away from the road – within 3 minutes of its first trip post the rest, the bells will all be caked in inches of mud and dirt – I would NEVER wash these bells (in cleaning, I survive on the theory that “what the eye doesn’t see is not worth cleaning :) “). But, this guy clearly has a passion for his work/ workplace/ means of livelihood and is making sure that all aspects of it are impeccable!

It’s why my driver came back in the middle of a week long vacation from a place 400 kms away – just so he could perform the vishwakarma puja on our cars (a special kind of worship on a specific day of all worktools).

Reminded me of my husband’s cousin Hema (no more in this world sadly) who was a national level table tennis player and yet kept a fantastic,. sparkling house, was raising lovely well mannered and bright kids and was a super seamstress/ knitter and cook to boot. All this she did herself despite having a household full of domestic help. She told me – a quote I will always remember – “See, you are working at a job, and doing well there. But if a housewife doesn’t do the house related work well, then she is NOTHING”

It reminds me also of folks like my nephew Dhruv who is always striving to do better than his own best (remember Bubka?) – he is ALWAYS studying/ trying new algorithms/ models/ business ideas – has recently written a paper that got published in a peer reviewed journal (he’s not an academician!) – just driven by the pursuit of excellence.

Its what drives (or should drive) our sportspeople — hmm, maybe murky waters those :)

But, shows how folks tend to get defined by what they are doing, but take pride in excellence in that work – it doesn’t matter whether you are head honcho in a large corporate or a truck driver!

That’s why I have NO patience with the kind of stuff you hear about – as an example in this latest study – when you hear that folks don’t take pride in their work and still feel entitled to enjoy the benefits of happiness!

As an old professor of mine said, “Anything that’s worth doing, is worth doing well”!…….

Short post today – its good friday and the kids are home :) . But i will write more on this topic later – maybe this becomes the first of another series – infact perhaps worth making it contributory, so if any of you feel you have any stories to contribute, pls feel free to become a guest blogger :)

Happy Long Weekend everybody!

StartUp Dilemma – 3 (When to Stop Doing Everything Yourself)

26 Mar

outsource vs hire

Last week I got a call from the founder of an ex vendor partner. She is CEO of a customer software and apps development company that is roughly 10 years old. She basically called me for a ref check on a key hire. They are now 65 people, want to expand geographically – not just from a sales perspective, but also wants to open an entity in the U.S., is thinking of maybe creating an employee stock option plan; and ofcourse is beginning to think of exit options – not necessarily now, but atleast consider a possibility in the very distant future. On the HR side, she is saying while she does have a solid core of early employees, she is thinking of hiring senior talent, and of offering her employees benefits that will make her competitive in the market.

So far, her way of dealing with all of this was to do it herself. She said – she’s read more books on finance and accounting now than she ever did before, and she has even attended conferences about company structure etc.

Now ofcourse she has finally realized it’s high time she stopped stretching her own self thin enough to do everything, but more importantly, its stopping her from focusing on what she really should be doing – business development!

outsource benefit

Her question to me, as we were discussing this issue, was – what is the right time to start hiring “support functions”. Is it a waste of precious money to get someone early on when you can so easily do it yourself – specially, as in the case with a lot of start ups, you are self funded! Familiar, right?

My advice/ experience as follows:

a) In the beginning in many cases you will deal with these issues yourself. But, it would be prudent to get some degree of expertise in these functions you don’t really consider important – the expertise could be friends and family if you are lucky. But if you are not, talk to as many people in your network to get different points of view. Most importantly, contract some degree of expertise to an expert service provider – you don’t have to hire; but you can outsource – if you don’t need full time help, you could use a project based, or a consultancy model. But think of what can happen if you don’t:

i. Enterprise structure: In our case, we were 4 partners, with very different citizenship statuses (should it be statii?) – In the beginning, we just created a Delaware LLC on our own, and had one of the partners appointed as the defacto “CFO”. Thank god we figured out soon that we didn’t want to do this – and contracted out to a small but respectable accounting firm both in India and the U.S. Otherwise, at exit, we may not have been able to exploit the full valuation due to a problem in what was “seed money” – we faced a hotly debated issue on whether sweat equity was considered enough investment! Uff!!!

ii. Funding/ ownership status: More in the U.S., there are restrictions on what type of funding allows what kinds of benefit – hopelessly complicated to folks not in the know, and you want to make sure while you take angel/ seed money you are getting the right bang for the buck

iii. Tax Breaks: A decision we didn’t take in the beginning – because we thought – why hurry/ we are too small/ its not worth it – came back to haunt us very often. This was the registering of our entity under the then prevalent STPI – if we had done it at the beginning, we would have saved us a lot of cash in tax breaks – as it happened, when we did finally get advice, we kept resisting it – and when we finally made the conversion, we could only do it for a small part of the entity – and it was too little too late (the STPI law expired soon thereafter anyway)

iv. Perfect Book Keeping: Thanks to having hired our CA firm on a retainer and over a cple of years having bargained for a dedicated resource on our account, we had our financial books in perfect order. When we did finally start/ hire our finance department, this resource was one of the first people we took onboard – he remains with us still – and so our history was intact in people as well as ofcourse documentation

v. Finally, during exit : As our acquiring company was undertaking accounting due diligence, our financial MIS/ processes and books were in perfect order – so much so, that a company 150 times ours in size, and an expert at financial services processes to boot had to confess that we beat them at the process game!

The most important part in all of this was – we never – really never, struggled with the boring details of audits and books – we just left it to the experts. Ofcourse, it’s important to therefore get the RIGHT experts – in our cases, our partner was a firm of really experienced accountants, who kind of “took us under their wings” and pretty much mentored us on all aspects. More importantly, realizing the stage of startup – their retainer fees for us was smallish. – it grew as we grew, so it wasn’t entirely charity!

Some 3 years down the line, when we were like a hundred people, we figured – like the CEO who had the problem to begin with – that we did need to take our finances inhouse. Here there was not only accounting issues, but we really wanted to start using our money effectively. So, we started our finance department – our CFO essentially helped us invest wisely, got the accounts streamlined; put in place super practices for sales invoicing in the U.S. as well; helped us quasi – start a financial services business; helped set up our employee phantom stock option plan; in short – became a friend, philosopher guide. In addition, he was the first person outside of the partners that knew of the potential acquisition – and he pretty much single handedly navigated those waters. He made many fans in the process amongst the investment bankers and in the acquiring company ☺. Again, we were maybe fortunate in the person we had join us, but he ensured that we never took the load of “non core” activities.

non core bog down

A similar story can be told for all our support functions – in the beginning we used the services of agencies for Hiring; of a consultant for devising some initial HR process including appraisal ones; and of-course did our own ‘welfare” programs such as they were :) . Year 2 we hired the HR Manager – and almost overnight we became almost a copybook HR entity – we started developing documented processes; started formal programs of welfare and engagement/ motivation; in short, became a “company” and not just a “startup”. Our HR folks also helped set up our third service division – which needed hiring of 100 people within a month, thus catapulting us from a small start up to an SMB! And then worked out a really innovative outsourcing solution for ramp up and down headcount – repeatedly! A practice which is still in place.

The same was true of IT, infrastructure and admin support – sporadically outsource in the beginning (we had an all-jobs-man-Friday for the longest time – not very highly skilled but really handy at miscellaneous jobs from getting generator diesel when the power was out (with deadlines of multiple daily reports looming large, and not world class bandwidth, this was our biggest nightmare – how often have we had to cart all folks with USB keys to Cyber Cafes!) to chasing down defaulting carpenters; to arranging bribes to policemen; to fixing transport arrangement for guests; and to finding new office space each time we grew out of the old one – he was invaluable!); but then hire first one, then another, specialised resources till we had a fully functional admin department towards the end. We did have a vendor sponsored resource for IT just like Finance, who soon became our first IT hire! Infact, our head of Ops was probably our first “non-core” hire – we got him when we were maybe 40 – 50 people and had started experiencing the beginnings of growing pains in a people business. Over time, the number of odd jobs this poor gent carried out was astonishing (he got such variety at his job, that it may have spoiled him forever from working at a more staid/ structured environment :) ) – he created valuation spreadsheets when the first few investors started sniffing around (at that time, we had no interest in any kind of fund raising (see post on when to acquire funds here) – but did need to show “professionalism” – so poor Prashanth did that, to moving a few offices, to setting admin and ops processes in place – to getting our first functional process documentation – which later led to our getting the ISO certification; and in general being a good sounding board apart from providing enormous entertainment with his mean dance moves on the party floor!

The good news, the kind of folks that made up the senior guys in these functions became very much our core senior management – they were/ are ALL without exception the kinds you need helping you in an entrepreneurial venture – all wear many hats; all can be generalists as well as specialsist; all are clearly domain experts; but can spot and take on myriad roles. This dynamism/ ability to work – nay thrive in, an unstructured atmosphere – is what after all you need as you grow a start-up!

So, from my perspective, if you are running a start-up, specially one wbich is people intensive i.e., in the services area; and specially if you live in a country where services are not formidably expensive (but even if you are) – just as you have client milestones – set yourself up with milestones for first outsourcing , and then hiring teams for support functions. In our case the milestones seem to have been 50 people/ 100, then 200 and 400..

After all, you yourself have code to write, teams to build, clients to persuade – a dream to fulfill – that’s why you became an entrepreneur – NOT to figure out how to balance balance sheets (mine never did – even in Accounting class in B School!!!)

Coming back to the lady who called me, I think she will finally hire the guy but as a part time resource – her business doesn’t necessarily have the requirement and the spare cash for a full time resource; but she will still be better off than trying to solve for all these activities herself…

Sales Promotion vs. Trade Marketing; Paying vs. Incentivizing; and the Power of Relationship in Sales

25 Mar

dealer display

As I entered my grocery shop yesterday, I saw what used to be bread and butter (pun intended) for me a couple decade ago – but a sight I hadn’t seen in a while. It was a “merchandiser”/ “sales rep” clicking away at a very nice end cap shelf display – the brand in question was Kelloggs. Clearly this was either a display contest – designed to have participating retailers give up some of their precious shelf space up to a brand in a bid to enhance impulse purchase – the payoff being, like a lottery, the possibility that they win a prize and therefore money and more importantly prestige; or was “bought shelf space”, more the norm, but a fair drag on the brands’ trade marketing/ sales promo expenses.

But that’s not the story – the story was the action of the retailer personnel immediately after the merchandiser type finished clicking – they immediately got down to restoring the end cap to its usual position – this time with some nuts/ dry fruits (depending on where you are reading this ☺ – english is a funny language isn’t it? or maybe american is… )

So, either the Nuts guy had payed more money, but the retailer wanted to participate in the contest; or the retailer was scamming both companies – greedy pig (but hey, he’s not running a business for charity ☺ ); or the nuts guy had payed more money, and the sales rep/ merchandiser had prevailed upon the retailer to “just put up the display so I can show my bosses” (remember, depending on the company’s scheme – he either gets money or prestige too!) . All scenarios are likely, but for a low margin branded product that relies more on the “pull” created by advertising/ branding than the “push” created by the retailer actively promoting its brand, it is probably the last one that is applicable.

Reminded me of my years in trade sales years ago – with Leo Mattel – a joint venture company that sold toys – more a “semi durable” category. So while there was an “impulse” element to purchase sometimes, it was also equally pre meditated sales (say for gifts); and certainly purchase occasions were not too frequent/ replacement cycles were large. I used to tour the Delhi market with a young “sales rep” on my scooter – this guy was BIG – 6 feetish, heavy – and hence my arms and shoulders always ached whenever I took him around. He was also, and I hate to sound prejudiced, but its true, blessed with one of the ugliest faces I’ve ever had the fortune to see. But every retailer that he took me to – had ONLY nice things to say about young Chakrapani – “Ma’am, please do not remove this guy from our sales beat” – basically the guy was SO good at customer service, and the retailers – an admittedly tough breed in new Delhi – found him so endearing in his mannerisms, that as one guy told me – Ma’am, I have to only look at Chakrapani’s face, and I can NOT say no to him ☺. So, Chakrapani would have done what my Kellogg’s sales rep in M.K Ahmed was doing – but he would have prevailed upon the retailer to keep the display on for longer. Sorely on the basis of his relationship!

Having said that, in an impulse purchase item, its not really a bad thing to have a front display for even a few minutes – atleast for those few minutes, the brand has grabbed eye balls! Its like when a regional sales manager in the then Gillette told the then CEO as he complimented the sales team on an excellent field visit, “but you do know that these have all been window dressed for your arrival, right?” Pradeep gave a hearty guffaw and said – yes of course, but for the 2 – 3 days that this window dressing is up, more people will tend to buy our products than they would have otherwise! And true enough, even in the less than half hour that I saw action on the Kellogg’s display, 3 ladies were fingering the K for Kelloggs boxes, and I saw atleast 2 sales being made right in front of me at the checkout!

So, yes, the relationship is very important in sales, the money tradeoff while important will not ensure action necessarily – after all, the next brand may come in and offer more money! A sales guy needs to be building those relationships at all points. This is true whether you are selling Kelloggs and Razors, or Engineering services and tech products –

As Vrinda, one of our sales people in EmPower told me, the true test of my rolodex is if when I leave this company and go to another, I can call every name here and ask them to try my new product/ services, and they will say yes! (the equivalent in the FMCG world is Balbir, a rambunctious sales guy telling me – you are truly a powerful sales manager if every retailer on your field trip greets you with cashews ☺ – nuts anyone?

For a POV on the “other side” of the coin – the dealer salesman, read this old article of mine here

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