Startup challenges

Fact: Most entrepreneurs are driven by the passion to fulfil a dream and the companies they launch are the vehicles by which they hope to achieve them. These entrepreneurs often have the technological wherewithal to execute on their vision and to create the product and/or service that realizes their dream.

Fact: Eight of ten start up companies fail. Several of the failures do not even get off the ground and consequently are denied any serious market reckoning.

There is something about these two facts that makes reality very confusing. If passion and dreams are what is needed for success, then start up companies have them aplenty. And yet, we find that so few of them actually succeed. What is wrong here?

The truth is that the market for a business is an unforgiving place. Any single mistake can bring a business down just as any missed opportunity can allow a competitor to take control. Passion, confidence and skill are necessary attributes in this battlefield but cannot be substitutes for good business sense and appropriate business strategy. Here is a compilation of the typical lapses that start up companies are often guilty of.

Absence of basic market research – The entrepreneur does not believe in market research and instead relies on his ‘gut’ feeling. This is further reinforced by an inadequate rigour in finance, marketing, sales and human resources. The company is run on instinct and not on the basis of true market feedback and hard data.

Over confidence – Entrepreneurs are hopelessly optimistic, until they fail. Financial estimates about market size and penetrability, time to revenue and performance against competition are always biased in favour of the entrepreneur and his company. Formal marketing and sales departments do not exist until too late in the day, and even then are often added as necessary evils – not as core parts of the business. This has the result that professional ability in these spheres is unavailable to the entrepreneur, who continues to run the company on instinct and gut feel.

Neglect of sales – “If we build it right, it will sell” is often the startup mantra. This results in the entrepreneur neglecting the real difficulties in selling and especially in making the first sales and acquiring the first customers for the business. The importance of these initial sales cannot be overstated and must be planned and executed by the founding team with as much care and preparation as they would expend in product development. These customers represent the pivot on which swings the future fortunes of the company and to appreciate it, requires a mindset shift in how sales is viewed inside the company by the founding team.

Financial naivete – More companies fail because of financial imprudence than any other single factor. The importance of cash flow and sustainability needs to be well understood, with the time to break-even estimated pessimistically in financial planning. Product innovation and dazzling services require financial investment and must be supported by sales revenues and/or investments. There are too many sorry tales about companies that simply ceased to exist when money ran out, just as the product was ready for show time. Better financial planning would have given these companies an opportunity in the marketplace that they probably deserved.

Late entry of marketing – Businesses are about timing as much as probably everything else in life. The marketing and sales functions have a role to play quite early in a company’s existence, although this may not be apparent. A pipeline of leads have to be created and primed, collateral created, the company presence established at trade shows and other events – all of this well before the first sale is accomplished. Poor timing of these activities can yield terribly disappointing and delayed results that stress the company finances further. Delaying these activities may also lead to scrimped and inadequate financial support for them since the company is likely to be under increased financial pressure.

Inappropriate Legacy – The founders, especially if their backgrounds are in big companies, must realize quickly that their reputations or their earlier job titles alone do not guarantee success. The startup they have founded is as different from the big companies they worked for, just as water is different from oil and the two do not mix. This realization has impact on the decisions they will take in the course of running the company. For example, the expense account they were used to, does not translate well when running a fresh new startup. Decisions on hiring, travel and budgeting have dramatic impact on company viability and must be done with the perspective of a founder who is staking his life earnings on the success of the venture.

Inward Focus – There is no set formula for success despite the several hundred management books that are written to the contrary. Managing a startup to success is often a task fraught with difficult decisions and unexpected situations. Despite a firm plan and a resolute approach to execution, the entrepreneur must keep a steady ear to the ground, recognize changing market conditions, be willing to bend with the wind and be completely prepared to allow market feedback to determine how the company will evolve.

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Education and Technology

Given the rapid and phenomenal advances in technology – especially in communications and media – one’s natural expectation would be that the field of education would gratefully grasp these advances and make rapid strides to improving how education is imagined and delivered to the millions of students in our country.

But one’s expectations would be belied! We are a country that loves technology for its own sake – and not one that seeks to apply it for the betterment of its citizens. Take our roads and the way in which our garbage gets cleared in our cities and towns. It is hard to believe that we cannot do better than build roads that disintegrate in one season or less and that we continue to allow citizens to dump garbage at street corners to be picked up with bare hands by workers toiling to keep the streets clean. Granted that these are not simple technology issues because they are intertwined with the politics of our country and the way our civic amenity systems work. Nevertheless, it still amazes me that with all the smart people we have in our country, these systems continue to languish in medieval era styles of doing work.

My point with this post is that the area of education is no different.  The system that delivers some of the finest minds this country produces, is tradition bound and shackled by obsolete content, ideas and methods.  I do not think schools use the Internet as a teaching tool as much as it could be. We have mostly shied away from using digital tools in our classrooms and continue to reinforce rote-learning, mechanical reproduction of answers and a blinkered approach to learning characterized by confining oneself to accepting information without confirmation and self validation.  Course syllabuses do not reflect contemporary ideas, and so students often have to learn ‘what is really needed’ after they leave school.

Change is impossible without pioneering efforts to introduce new models of teaching and to the using of new tools enabled by the new technologies of today. This requires a willingness to experiment and to discover new possibilities in this space. As with every other arena of life, there must be a commitment and a desire to improve how we teach our children. Otherwise, all technology development and all research and discovery will never reflect their full potential on society.

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The more things change….

Its true. The more things change the more they remain the same. In technology and everywhere….

Take setting up a website for example. In the early nineties, most websites were static and were set up to create a ‘web presence’ for a business (mostly) or an individual. The static pages took time to create because the HTML had to be handcrafted and had to cater to the many differences between browsers.  Today, a slew of tools allow you to set up the static pages very quickly and browser differences have all but been eliminated, to the extent that you could actually set up a simple website in a few hours. So things have changed, haven’t they?

Sure. but who is satisfied by a simple website today? You need content management for a blog or for that catalogue that is carried on the website. You need personalization and you need analytics to understand who is coming to your website and what they do there. You need web forms to take user input and you need the ubiquitous ‘like’ button to help advertise your pages on social media. Finally if you wish to monetize your website, you want to embed affiliate marketing tags that will earn you the ‘click’ dollars for directing traffic to your partner’s site. So that is a lot of stuff and it will take time to put it all up.

So setting up a website takes as much time and has as much complexity (relatively speaking) as it  had before. Just when you thought that you had conquered the problem, it just got bigger!

And so it is in real life.

The distance from Bangalore to Hosur is about 40 kms. In 1983, it took about 1 hour to travel that distance on an undivided (narrow) highway. Today, it still takes about an hour to travel that distance although we now have a broader multi-lane, and divided, highway. The increase in traffic through the years simply offset the speed gains of the better road and new settlements along the highway have increased the congestion along it.

Some things just do not change!

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The Outsourcing Mantra

I have always wondered if the word ‘outsourcing’ was invented to legitimise the  industry that we have created around it.  Often times, words have this power to mesmerise and to allure and to portray what isn’t. And words have this euphemistic power, to project by association, a virtue that does not exist.

The term ‘body-shop’, which sounds very gross today, was in vogue in the 80s and 90s. It was an accurate description of many companies whose only business was to loan bodies out to other companies that needed them, for whatever projects they wanted to use them for.  The body-shop would tout every individual’s skills as its own although it would have had very little to do with their acquisition, and as an organisation, would generally have little or no understanding of these skills, except as saleable traits.

Several of India’s outsourcing companies continue this business of body-shopping, although it is now referred by various euphemisms – team augmentation, on-site consulting, etc.  This stylised description does not change the basic truth that beyond the knowledge embedded in, and represented by the individuals who work for the company, there is little by way of organisational skills and knowledge – processes, techniques, patents, intellectual property represented by code blocks and algorithms – that the company can claim as its own beyond and above the skill-sets of the individuals in the company.

This is an important reality for buyers of outsourced services. Skill descriptions and experiences touted by outsourcers do not mean much, unless they were acquired as company projects and more than one invidual in the company participated. It is a common practice for buyers to ‘interview‘ individuals whom they would like to hire from the outsourcing company. I think it represents the first false step that one can take in starting an outsourcing relationship, because by doing so, the buyer virtually admits to buying the individuals and demits the seller of responsibility for the project. Instead it would be prudent to examine historical evidence of project execution, artefacts and organisational residues generated from them and interview the management team much more closely to understand the true organisational capabilities the company possesses. Such an act would also, very strongly emphasise their equal share of responsibility for the success of the relationship.

I had had one occasion to consider an outsourcing arrangement to develop an online web book-store. We had decided on the framework to be used and I was looking for companies that would build the application for me. I spoke to several of them and received a variety of proposals, but not one of them pointed out that the framework we had chosen would not scale to the number of books  we had in our catalogue. They had all professed knowledge in the framework because they had employees who had worked on it (in whatever capacity) and that was good enough for them to claim expertise in that area. They had no organisational or management experience with the technology and hence could only rely on the paper skills projected by their employees. Thankfully, we did not outsource on that occasion we executed the project on our own, discovered and fixed the scaling issue and took the system to production on schedule and within budget. I wonder if that would have been possible if we had outsourced, because for sure, if the framework did not scale, the problem would have been ours.

Outsourcing requires a careful consideration of vendor resources, experience and management expertise. Interviewing a few individuals alone is inadequate and would put the responsibility for success entirely on the buyer.

 

 

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Advertising in the age of Facebook

We still have newspapers in India today although it is a dying breed in the several parts of the world where on-line news consumed through mobile devices has become the preferred way to update oneself of developments in the world.  And it is only a matter of time before the same phenomenon catches up in India too. One way of looking at this transition to the on-line world is to view it as a natural consequence to the networking of computers, the emergence of the Internet and the rise of the mobile device – that is, looking at this change as a change in media and in presentation format rather than anything else. True, the browser, and the rise of HTML make for a glitzy and breath taking user interface that allows streaming multi-media to transform your world. You no longer read the news alone – you also see it in still photos, watch it in HD motion, hear it and interact with it. True, our world and our habits stand transformed forever.

But there is a difference about the way that news is distributed to the reader (viewer or listener) that is often unnoticed and mostly ignored.  The Internet, like the newspaper and the TV and other mass media are broadcast mediums. They allow news generated at one point to be broadcast and delivered to entire populations who may happen upon the printed or the on-line page or be watching the the television screen at the right time. Advertisers love this because it presents an opportunity to direct an advertising message to a very wide swath of humanity in one single instance. How else can you reach so many people at the same time with the same message?

However, intrinsic to this method of advertising was the awareness that a large number of people who read or saw the advertisement would take no action on it at all, simply because it was an inappropriate message.  For example, how important would a TV commercial for a fast bike be to an aging grandmother? Or what are the chances that struggling youth would be fascinated by the qualities of a pension product? So it is, that in the advertising world, it is with a shrug of inevitability that advertisers accept the small yields (the number of people who respond to their advertising) that their ads return. They try to determine the demographic of the population that is likely to see their advertisement through proxies like classification of the audience for that medium’s content (who is likely to  watch Star Movies?), the time of day it is broadcast (who is likely to be watching TV at 2pm in the afternoon?), ratings (how many people below 35 buy the Times of India?), etc.  This heightens the advertiser’s chances of reaching the right audience, but it is not perfect.

This used to be true for the on-line world too. One advertised on Rediff.com simply because it was the most popular Indian portal once upon a time. You advertised on the Hindu on-line because you wanted to reach out to non-resident South Indians living in the Gulf and South-East Asia. But it was a generalization, nevertheless, that relied on the presence of a dominant demographic for every website.

Then the cookie-era dawned on the Internet and browsers began saving information about what you did, or searched for, or purchased from a particular website. This information was saved on your computer with the intent that when you visited the website again, the software would recognize you and be able to offer you superior services by knowing about your preferences.  That is why your will notice that the more you visit a website, you begin to get the feeling the website already knows you and is able to read your mind. Take Amazon’s preference engine for example that generates lists of books that you may like to read. Sometimes, it is uncanny how closely they resemble the books you really care about and wish to buy.

This is all very well for the customer because he or she is being better served now by virtue of being recognized. This technology had the advertisers drooling, because such intimate knowledge of the customer is what they had always wanted. How could this information be used to target customers more precisely?

Re-targeting is a term used in on-line advertising to describe how user preferences that were exhibited when they visit a website are used to target them again for new advertisements based on this awareness of their preferences. It is accomplished by technology that goes by the arcane term ‘pixel integration’.  A single pixel (invisible to the human eye) that is embedded on independent sites (say, a news portal) allows the information that resides in user cookies on their computers to become available to advertisers. So, in one blinding instant, your behavior at a retailer’s on-line store becomes fodder for an advertiser. If you had turned back at the last instant without making that purchase of an airline ticket to Goa, you might find yourself magically barraged by advertisements for air-tickets to Goa, everywhere you go on-line. And if you did make that purchase, those advertisements might change to what you can do or buy in Goa. Magical, yes. Appropriate and useful, yes. Ethical, I am not so sure.

I do not want to turn this post into a technology discussion on on-line advertising. And so, here is the bottom line. Unlike other broadcast mediums of the past, the Internet now has this amazingly powerful means to train a laser on you and to track your movements on-line. This allows advertisers to use very personal information to advertise to you. So, despite it being a broadcast medium, advertisers can use the same medium to advertise different things to different people – the pension product to the aging executive and sporty bikes for the young and rich – simultaneously. In this age of Facebook, where users share more personal information than ever before, on-line, the advertiser finally has that deep knowledge about you and the magical power to target their advertising exactly where they want it. No more, the hit and miss advertising of the past.

It is almost like that famous picture of Uncle Sam (the US government) with top-hat and cane, pointing at you. Only this time, it is the advertiser who is doing the pointing. And there is nowhere to hide!

 

 

 

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Hello, World!

Whoever thought of the “hello, world!” phrase as a way to introduce something new, may not have imagined how wildly it would catch on and how wonderfully popular it would become. And when you sit back and reflect on it, you realize that there is much going for the phrase because it eloquently captures the thought and idea of “something new!”

It is hard to think of businesses the same way because you can always come back and say, “what’s in a name?”.  But personally, I think there is some connection. Take Google, for example. The name seems so appropriate (in retrospect) and in keeping with what the company stands for and conjures up a million ideas. Apple is another company that springs to mind that affects you the same way. Now take Infosys or TCS – do these names strike the same chord within you? These are business names, very appropriate no doubt, but lack the dazzle of imagination, and I have to humbly submit, do not shatter the panes of reality. They are quite simply businesses – enormously successful in their own way, but distinctly different from the Apples and the Googles of the world. Now, clearly, Apple and Google are not successful companies simply because of their names. But I would like to think that the minds that came up with these names have an ingenuity that created their successes and the names themselves, as a product of those minds, propel and infuse a special brand of success.

I write this post as an introduction to this blog. I wish this to be a place for musing on business, technology and the business of technology. I will try to cover the commonplace as well as the unusual. It will be unique because it will be a personal view of what is happening in this world we live in. I hope this blog will be a way to reach people far and wide who have an opinion on these same subjects.

So, I hope you will enjoy the posts that follow. And, of course, “hello, world!”.

 

 

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