November 20, 2006

Think Big! - By Sanjay Anandaram

I remember reading an Akbar and Birbal tale many years ago. In this story, Akbar and Birbal wager on something. Akbar tells Birbal that if he (i.e. Akbar) loses, he could give Birbal as much gold as he wanted since he was the emperor, but what would Birbal give Akbar if he lost? Birbal said that if he lost, the first person who comes to the royal durbar the day after the loss would be asked to name the highest number he could think of. And Birbal would give Akbar as many gold coins as the number mentioned. Sure enough, Akbar wins and asks Birbal to prepare himself for the following day when he’d have to pay Akbar a huge sum in gold. The next morning, a beggar is the first person to come to the royal durbar and upon being asked to name a big number, says “100”. Birbal with a knowing smile promptly hands over a bag of 100 gold coins to Akbar. He later mentions to Akbar that for someone like a beggar who has to struggle for survival, the sum of 100 gold coins was an unimaginable amount and was the highest number he could think of. Knowing that the beggar was always the first person everyday in the royal durbar, Birbal was confident of his ability to pay.

This story came back to me recently when some of us were at a national business plan competition organized by a premier management school. Most of the business plans were very innovative and had been prepared with a great deal of thought. However one recurring theme emerged as we sat in on presentation after presentation. And that was the incredible ability of these bright smart people to think small! How small? Well, how about wanting to be a Rs 100 million (approx. $2.25m) company in 5 years? This from a team of management students from a top school who one would have imagined would have higher and bigger ambitions.

I don't know if it is part of our DNA or eco-system or both but the innate capability to "think small" appears to be pervasive. And the resultant outcome is that we do things "small". We've encouraged people through the years to think and behave small like the beggar in the story thanks to the largely self-imposed resource constraints. A look at our industrial policy over the years, especially the reserved list for the small scale sector, is enough to illustrate the point. By operating in a resource starved environment, we have learnt to make do with less. The worst thing that has happened to us is that we have learnt to dream very small dreams, sometimes have no dream, goal or ambition even. We are paralyzed with inaction and self-doubt when there are resources to be deployed. We employ constraints based reasoning, i.e. we impose constraints before we decide the goals and our ambitions. We also assume that the constraints are somehow unchangeable and try and fit our ambitions and desires within them.

Fortunately, the last decade or so of economic reforms has brought in global brands, global processes, global awareness and global scales to some of our thinking. Capital is no longer a severely scarce resource at least not to the smart team of entrepreneurs. So why do we continue to think small? Why cannot a team of entrepreneurs think of the globe as the market, think of the globe as a sourcing platform, think of becoming a $1 billion company? So if capital is no longer a scarce resource, what is holding us back from thinking big?

The scarcity is in our imagination and will power that we continue to think small. The ability to think big on global scales is what makes a world class entrepreneur. Look at the examples around us – entrepreneurs who could and did think big were the ones who created Reliance, Bharti, Pantaloon, Infosys, and many others not just in India but around the world. These entrepreneurs have focused on their goals and ambitions and worked diligently to remove the constraints that could hold prevent them from achieving their big dreams. Why should our dreams be constrained?

So what does all this mean for an entrepreneur today?

Focus on large market opportunities. Focus on fast growing market opportunities. Focus on dominating that market opportunity. Ask: what does it take to dominate the market opportunity? Capital availability is the easy part. The hard part is building out the product/service, hiring globally scalable talent, and penetrating global markets. Capital will make this happen in large part. And the ability to think big (obviously backed by a clear focus and execution plan) will make the capital happen!

Remember to reach for the stars if you want to reach for the tree-tops. Those who are happy trying to reach the tree-tops are unlikely to get their feet off the ground.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

November 10, 2006

Stages in the evolution of a company

Brad Feld provides a framework (created by his friend Barry Culman) to explain the evolution of a company.
Following is a quick summary of the stages according to Barry.

Birth

* Idea created
* Product or service utilized to deliver idea
* All energy on creation
* Leader is the core driver of revenue
* No process or structure
* Project or products – not a business

Teenager

* Add overhead and infrastructure
* Grow revenue base
* Leader comes “in-house”
* Cash is King
* High energy
* All executives involved in all parts of the business
* Everyone feels like “I know what’s going on”

Young Adult

* Add process and structure
* Profitability dips
* Must determine “who we are” / what do I want to be when I grow up
* Leader is an evangelist
* Separation of duties
* External funding
* Loose budget
* People issues being to appear

Adult

* Answer to board / investors
* Tight budget controls
* Consistent processes
* Leader deals with external forces
* Business is in a steady state
* Emphasis on managing people

Senior Citizen

* Death or Rebirth


Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Brad Feld on demos

VC Brad Feld has a couple of posts on demo-ing here and here. (Read the interesting comments on his post as well.)
I learned - early in my first company – that the first 15 minutes of a meeting will make it or break it. I learned how to do a great demo – even if it was simply my sales pitch on a white board or flip chart. This meeting reminded me how important it is for a young company (and a MatureCo) to be able to nail their demo and do it quickly.

...I much prefer “top down” demos – these are ones that approach the demo from a user / use case perspective. Show me what the software does and why I care, not how it does it. So, rather than start at the top left menu choice and go through each feature (usually starting with “creating a new account” which I never have to see again in my entire life), walk me through a use case that is relevant to me and is populated with a complete and interesting data set. Occasionally, I’ll have a “how” type question, but then it’ll be in the context of a use case, rather than a technical feature.

I will sure pass this advice on to the companies who would selected to demo at the Venture Intelligence DEMO sessions.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

November 04, 2006

"Sell! Sell! Sell!" by Sanjay Anandaram

Indipreneur column (No. 6) by Sanjay Anandaram in the Financial Express:
Sell! Sell! Sell!

In the competitive nature of the world we now live in, there's no running away from the sales function. And the chief salesman in a startup is the CEO.

A recent conference brought together entrepreneurs and VCs from various places. What struck me the most was the total lack of a sales culture. Everyone was in their allotted booths or rooms and waited for people to walk in and ask questions about their product.

Imagine the opportunity: about 750-1000 people present. And as CEO of a startup, there could be myriad opportunities for selling, striking alliances, partnerships etc for your company.

Each and every such opportunity should converted into sales events. The CEO and other company executives should be busy meeting people and building relationships.

Indians in general are hesitant to talk about themselves. We are hesitant to say "I created the business" or "I designed the system" or "I took revenues from INR 10m to INR 100m in 2 years".

In a corporate setting, this shows up in laconic answers to questions about capabilities and achievements. This shows up in nondescript product literature. This shows up in plain-vanilla product demonstrations. This shows up in the inability to create and close deals. While the prevailing logic used to be: "If the product and company are good and reliable, customers will come" or something to that effect. It sounds uncannily similar to the earlier production-side argument "build it and they will come". It was not considered 'nice' to be talking about yourself or your company. Others had to do it. Unfortunately, given the competitive nature of the world we now live in, there's no running away from the sales function. Else, 'others' will start talking about 'other' companies, not yours!

CEOs have to sell the vision of the company to the other founders or key management to get them to sign away a few years of their working lives towards making this vision a reality. They have to sell the vision to savvy investors and get them to believe in the possibilities the company has to offer. They have to sell the company's vision to their employees. They have to sell the company's capabilities (no more sales of visions and possibilities!), its products, services, processes to prospective customers and partners. And now imagine things go sour - as they usually will. The sales function gets into overdrive: keeping employee motivation high, managing angry customers and partners, managing upset investors in the boardroom. It is important to keep in mind a few realities:

- Sales is NOT about smooth talking, wearing designer clothes and carrying a cell-phone. Sales is about understanding the product and service, understanding what the company stands for, and COMMUNICATING it clearly, forcefully, and simply.

- Sales is about building relationships with various constituents. This implies getting to know other people and their motivations. This means leveraging relationships in a mutually beneficial manner.

- Sales is not the art of the hard sell. But it means being persuasive. It means being persistent and relentless. It means having a driving desire to make the other person acknowledge the superiority of your product/service by paying for it. It means having the ability to spot an inch-wide opening to sell a mile-wide product.

- It does NOT mean being dishonest.

It is essential to be articulate, to have good presentation skills, to have good inter-personal skills. These skills have to be practised and learned. After all, if you are unable to communicate your capabilities, how can you expect the other person to know of them? What is the incentive for the other person to spend time to get to know of your company, its products and services when there are any number of competitors?

Winston Churchill once said this about a fellow parliamentarian: "He's a very modest man. With much to be modest about!" Well, next time you are modest about yourself, your company, its products and services, think of this saying.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.

November 02, 2006

Hocus-Focus?! - by Sanjay Anandaram

Indipreneur column (No. 5) by Sanjay Anandaram in the Financial Express:

Hocus-Focus?!

Sometime ago, I sat in on a presentation by a startup venture that had implemented solution involving bluetooth technology. The CEO, in the course of the presentation, also said that his company had a group that developed application software for hotels and hospitals, undertakes hardware design, had a Java-Web services group, apart from claiming expertise in mobile solutions. The company had all of 40 people and revenues of about Rs 15 crores and had been around for a few years.

Then, another company presentation I sat in on: this 100 employee company developed educational CD products, web-sites, and built software applications. They had some customers in the US and Europe. Revenues: Rs 50 million. Their immediate plans? to establish a presence in Japan, UAE, and Germany, some through joint ventures!

A third company I met answered me thus when asked who their customers were: ISPs, ASPs, Corporates, System Integrators, IT Service providers, Wireless service providers, device vendors, platform vendors, and of course end users! I left wondering whether we had left out any category at all! Yet another company responded "Anyone who has a web-site" to the query "who is your customer?"

One of the big complaints about Indian entrepreneurial ventures is regarding their lack of focus. It is perhaps a legacy of the Indian environment that traditional Indian companies are widely diversified into power, telecom, software, consumer products, medical equipment et al. The reason for this phenomenon has been analysed by academics such as Prof Krishna Palepu of HBS.

But in the India of today and tomorrow where, increasingly, the market decides the fate of ventures rather than government largesse or the ability to “manage the environment”, it is all but impossible to be leader in a segment without focus. Especially true for young companies. Lets look at the need for focus from that perspective.

For a young company seeking to dominate and win a market space it is critical to have ALL available resources of the company behind a set of clear goals and objectives. These goals and objectives have to be time-bound and driven by achievable milestones. However, the tendency is to chase all kinds of opportunities in the hope that revenues will come in and payrolls will be met. It is extremely tempting to chase all opportunities, but by doing so the company will be diverting valuable resources in a highly sub-optimal manner. To the outside world, it would appear that the venture has no clear idea of who its customers are, that it is unsure of the market dynamics, and what strategies and tactics to follow.

In an era where customers and competitors are of global quality it is critical to have a clear understanding of the market and customers being served by your venture. Spend a lot of time meeting customers, partners, understanding competition, and the channels in the market to understand the dynamics. This in turn will lead to an understanding of the opportunities that can be profitably exploited by your company, given the operating constraints of your venture. Train yourself to get answers from the market to questions such as: Why will you buy my product or service? Why not? What will make you continue buying from me? What will not?

It is only through this iterative process that you will discover the “right” business model and the “right” value proposition. Now, you need to deploy all resources in making that business model deliver the value proposition to customers. And revenues and profits to you. It takes great discipline, great understanding of the opportunity, and appreciation of the startup situation to do it. And so naturally not everyone can do it.

In the late 80s, I remember seeing a by-line in an ad of a well known Silicon Valley company, Sun Microsystems: All the wood behind the arrow. Or, all the organizational resources towards an objective. Or simply, Focus.

What do you think?

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Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.
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