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?

_____________________________________________________________
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.
______________________________________________________________