November 25, 2009

Risk Culture - By Sanjay Anandaram

The board meeting at the startup was underway and the CEO proudly highlighted what he considered to be the most successful initiative of the company. The initiative had been embraced by customers and partners whole-heartedly and the signs of continued growth were very visible. The head of business development, present in the meeting and responsible for that initiative was understandably delighted at the acknowledgement by the board. He subsequently made an unusually peppy presentation on his department to the pleasant surprise of all. Later on, the CEO explained about business development and its head: “He’s full of ideas all the time. We tried several of his ideas earlier and they all bombed. When he came up with this latest one, I told him that this would be the last one we’d try. I also asked him to think through the idea and take full responsibility for its implementation. The results are visible. In addition, the business development head was so thrilled with the success that he took extra care to make a detailed presentation on his department, something that was sloppy, at best, earlier.”

The above highlights two important things: one, the role of the CEO in encouraging and nurturing ideas, in spite of past failures and two, the delegating of execution of the idea to its originator. All too often, the company culture is hierarchical resulting in a top down style of management. Where the CEO generally decides what to do and the rest of the organization simply executes. This implicitly assumes that the CEO has the monopoly on thinking. Of course, there are socio-cultural issues at work as well, typically visible in a class and hierarchy conscious society. In addition, the person who generates the idea and the person executing it are two different people. This quite naturally leads to problems – of egos, of understanding, of expertise and so on. On the other hand, if the person responsible for the idea is made part of its execution, the practical aspects of idea implementation come to the fore. It is one thing to suggest an idea, quite another to execute it. Participation of people from different areas of the company in problem solving is a great way to build a strong culture of team work as well.

A startup is founded on risk-taking and its management. So how come in many startups as they evolve, there’s this hesitation to experiment, to try out new initiatives? After all, no one really knows what specifically is going to work. If they knew it, all startups would be successful. There’s this endless cycle of trying and experimenting, seeing the results, modifying activities and then dropping some initiatives, re-launching some and starting off others afresh. One of the advantages of the startup is its ability to move fast. It makes mistakes faster, learns faster, launches faster, makes newer mistakes, learns,…..It is therefore critical that this culture of risk taking is encouraged and calibrated by the CEO. Else, it will be impossible to harness the intellectual capital of the people. There are market and customer insights that only those in daily touch with customers and partners have. It would be fool hardy not to listen to this group for their ideas and thoughts. Being afraid of trying new things is a sure recipe for failure for all companies, especially for a startup.

Creating and sustaining this culture of ideation, risk taking and managing it are therefore crucial for a startup. The entire company needs to be motivated to participate. Obviously, the effort needs to be calibrated in such a manner that, both, the cost of failure and the cost of trial need to be low not just for the startup but also for the customer or partner if they’re involved in the initiative. Quick and inexpensive course corrections need to be made based on results.

After all, jumping off a cliff without a parachute isn’t risk-taking, it is foolish.

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.

Strategic Hiring - By Sanjay Anandaram

“I hired him as President thinking he would transform my company. He was experienced, had worked for Indian and MNCs and we got along well. He was the highest paid executive in my company at Rs 45L plus incentives. Unfortunately, I didn’t see any impact on sales or margins and I had to ask him to leave”, said the founder-CEO of the startup. “How long did he stay in your company?” I asked the founder-CEO. The COO was asked to go after 4 months.

On further probing, the founder CEO explained, “I think 3-4 months is sufficient time to see results in sales. I want to see execution and quickly, not ideas and plans. He just spent time meeting customers, spent money hiring a company to train employees, wanted clearance to hire some more people and wanted to build a plan that he would then execute. Arrey bhai, what’s there to plan about when we know our customers and market and know exactly how much we can do.Instead of “doing”, he was wasting time and money in planning! Apparently, he couldn’t work without a plan in place. I couldn’t understand what his problem was – after all, we’ve been in business for a few years and are profitable and we never worried about planning-shanning. I think I made a mistake in bringing him on board. I think getting these high-fliers into a young and small company is not appropriate since they want all kinds of resources and time to execute. We cannot afford such luxuries.”

“I was excited to join the company to help it grow to 10X its current size. I really liked what they had done so far and I enjoyed good chemistry with the CEO. I was impressed by his knowledge and vision for his company. To grow at the desired pace would’ve required us to expand practice areas, enter newer geographies, build relationships with very senior executives, develop a brand, leverage technology and become a process driven organization. We would’ve needed to have strong operations and performance metrics. We would’ve needed to make investments in people, marketing, sales, and technology. But, the quality of the people around me left much to be desired. Many of them had poor communication and interpersonal skills. Learning to listen to customers problems didn’t seem important. While there was this intention to grow ten times, the details of how that was to be achieved were more than hazy. For example, What kinds of customers and markets and practices should we focus on? How much money would be required to be spent? In what areas and over what time frame? What kinds of people would be required to grow and manage the business? What kind of marketing needed to be done? What kinds of internal systems of measurement would need to be in place? And so on. To do this, required me to understand customer needs, capabilities and competencies of the current team, market trends etc.

There was no planning process in the company and that made it difficult to estimate resources, activities, headcount, time and outputs. There was seat-of-the-pants management with an enormous amount of focus on tactical aspects of the business, the here and now. There was no thinking about planning of any kind. If there’d been planning, then we would have understood what was an investment and what was an expense. Because some things take time to develop and one needs to budget that into the planning process. Else, treating it as an expense would result in dropping initiatives that would pay off over a 6 to 9 month period. The company would therefore not be able to grow multiple engines of growth to achieve its goals of growing ten times.” This was the former President speaking.

He continued, “The founder-CEO had achieved success over the past few years but I think he had become a victim of that success. It was difficult for me to make him see that what had brought them to this current point wasn’t going to be sufficient to take them to the next levels. They need to look around and see how larger better companies were doing and more importantly learn from them.”

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 15, 2009

IIM-A announces Business Plan Showcase

IIMA is organizing a Business Plan Showcase as part of its Finance Conclave 2010.

Entrepreneurs from following sectors are invited to submit their entries:
  • Clean Tech & Renewable Energy
  • Telecommunications and Mobile Services
  • E-commerce & Web Portals
  • Electronics
  • IT/ITES Services
  • IT Software
  • Power
Registrations for the Showcase

Registrations start on the 10th November 2009. To register your team, please send a mail to leverage@iimahd.ernet.in with the following details:
  • Name of Team Members
  • Contact Details
  • Category of the Business Plan
Please use the following as the subject line: "Showcase 2010: Registration for ". On registration, you would receive a mail confirming your registration within 24 hours.

Important Timelines
  • Registration Begins: 10th November, 2009
  • Submission of Round 1 Executive Summary: 25th November, 2009
  • Result of Round 1: 30th November, 2009
  • Submission of Round 2 Business Plans: 7th December, 2009
  • Final Shortlist for Presentation on Campus: 14th December
  • Business Plan Showcase at IIM Ahmedabad: 8th January 2010
For more information, visit http://www.ciieindia.org/?page_id=108