Posted on

The network effect playbook: Social products win with utility, not invites

The proverbial chicken and egg problem of building a new social product is well understood among tech startups, and it’s been commonplace to follow two contrasting mechanisms for getting traction.

Traditionally, startups have solved this problem by racing to connect users with each other, essentially providing them the pipes to interact with each other. Twitter, Facebook and LinkedIn have grown big with this connection-first model.

However, a new breed of networks is gaining ground with the content-first model. They provide users with tools to create a corpus of content, and then enable conversations around that content. Behance, Pinterest, Instagram, Dribble, Scoop.It have all gained traction by building a corpus of content before building a social network.

The two contrasting approaches are summarized below:

The rules of building a social product are changing. It’s important to understand this shift to build social products that can effectively gain traction on the internet today.The connection-first model is no longer as effective as it used to be. As the social web grows, and a larger number of social products compete for our attention, we are seeing a dramatic shift towards the content-first model. If you’re still getting users to send out Facebook invites, you’re adding to the noise, instead of standing out and getting noticed.

The Connections-first Social Product

Traditionally, the playbook for building network effects has been the following: Get users on board, connect them to each other and have them create content and conversations.

Social networks like Bebo, Facebook and Twitter used this playbook to create their respective networks leveraging address-book integrations and other hacks to rapidly build a large number of network connections.

The importance of building connections, in this model, cannot be emphasized enough. In fact, the growth teams at Facebook, Twitter and LinkedIn specifically aim for ‘X connections for a user within Y days of sign-up’ to activate the user.

Since a critical mass of connections is required before users experience value, the key to building a successful network is minimizing the friction in creating connections. Contact-list integration helped social networks like Facebook and LinkedIn gain initial traction through the removal of sign-up friction.

In spite of growth hacks like contact-list integration, there is always a lead time in getting users on board and reaching critical mass. This is the ‘gap’ where it becomes very difficult to demonstrate value in using the product.

Frictionless sign-up + Virality = Network Effects? Or not!
Startups often believe that removing friction in sign-up and creating some form of viral acquisition are the two key elements to reaching critical mass. In fact, with the rise of Facebook Connect and the social graph, a large number of social products have sprung up on the promise of frictionless sign-up and viral growth. However, users on the internet have limited time and attention. As more startups leverage the social graph and flood users with invitations to join their networks, users have started to develop invite fatigue.

Clearly, frictionless sign-up and virality are not the one-stop solutions we were hoping they would be.

The secret to network value
Startups often fail to appreciate the gap between technology and value proposition. For products like Evernote, technology serves the entire value proposition. However, for social products, the value proposition is a combination of technology and the content that users create on top of it. YouTube’s value lies in its hosting and streaming capability, but more importantly in its vast repository of videos.

The secret to creating a social product that demonstrates immediate value is to enable content before creating the network.

Content created on the network is the new source of competitive advantage. The videos on YouTube, the pictures on Instagram, the answers on Quora are the primary source of value for users and the key driver of competitive advantage for these platforms.

The Content-first Social Product

Today’s social startups don’t start off as networks. They start off as standalone apps. These products enable users to create a corpus of content first. They then connect the users with each other as a consequence of sharing that content.

Instagram started out as a photo-taking tool and built itself out into a social network subsequently. The initial focus was entirely on the creation of content and the connections were formed over time leveraging other social networks. It is unlikely that Facebook would have considered Instagram a direct competitor in its early days, largely owing to its model of deferring network creation.

How to create a network in stealth mode
Instagram started off as a standalone tool. In doing so, the product provides ‘single-user’ utilityto the user even when other users aren’t around on the network. There are two aspects to building single-user utility:

1. The single-user utility should allow creation of content that will ultimately form the core of the network. The core of Instagram is pictures. Discussions are centered around pictures. Hence, the single-user tool needs to allow creation of pictures. This is an extension of the OpenTable model, where a restaurant first manages its real-time seating inventory on a single-user tool, before that very inventory is exposed to consumers on a network, to allow them to reserve tables. Curation-as-creation products like ScoopIt and Storify also use this model to curate content which will serve as the core for network interactions.

2. The product should deliver greater value when users share their content with their friends. The product builds out the network at the backend as more content is shared. Hence, the social network gets created, effectively solving the chicken and egg problem. A new breed of curation-as-creation startups (Scoop.It, Paper.Li etc.) is gaining traction on a similar model.

The new playbook for creating social products is essentially the following:

  1. Have a vision for creating the network but do not start executing on network creation
  2. Enable a single-user tool that creates content that is core to social interactions
  3. Share this content on external networks (social networks, email, blogosphere)
  4. Capture interactions around the content to build network linkages at the backend
  5. Open out the network once a critical mass of linkages have been built

The rise of the content portfolio
Instagram demonstrates how a network is created around a portfolio of user-generated content. Behance and Dribbble have followed similar strategies by providing a portfolio for hosting designs, before adding value through the creation of a peer-review community. Initially, Pinterest appealed to the designer community as a tool to ‘bookmark’ their favorite designs, before it built out the network. Early adopters found enough value in the ability to store designs and pictures, to use the product before the network became active.

The new success factors
Frictionless sign-up and virality are important but they are no longer the key to building social products. The following are key to building content-first social products:

  1. Removal of barriers to the creation of content: Startups like Instagram, which succeeded in simplifying the creation process and in enabling users to spread the word, succeeded in eventually building the connections between users.
  2. Growing the creator base, not just the user base: Since value for the overall networks is scaled by scaling content creation, the platform needs to focus on incentivizing and increasing the percentage of users who create content.
  3. Strong curation models: Content-first social products scale well only when there is a strong curation model in place to separate the signal from the noise. Without strong curation, greater content can actually lead to a poorer user experience leading to reverse network effects.
  4. Incentives: The platform needs to encourage users to build out the connections. This works best when the platform encourages an innate motivation (self-expression or self-promotion) in the user to spread the word about her content. In doing so, the users build the necessary connections that set up the network.

The new growth hacks
In the connections-first model, the one hack that minimized friction in building connections was the contact list integration. In the content-first model, the hack that minimizes friction in creating content is the creation widget. Creation widgets have grown in popularity in recent times, spreading across the internet in the form of browser add-ons and one-click buttons. Several curation-as-creation startups like Pinterest and Scoop.it have used widgets to enable users to create content easily.

The future
This new model of building networks allows a social product to gain traction while value is being created by users. Once enough content is created, the users are connected and the network builds out. Social products that win will focus on enabling users to create content first and generate conversations around it. The creation of the actual social network will be a final step, as a consequence.

Note: This article was first featured on Sangeet’s blog, Platform Thinking (http://platformed.info). Platform Thinking has been ranked among the top blogs for startups, globally, by the Harvard Business School Centre for Entrepreneurship. 

Posted on

The Indian startup ecosystem should look at Israel as a role model

I love Israel. Having been there 7-8 times over 5 years when I worked for a company (Mercury Interactive, acquired by HP) that had its development center there, I believe they have some of the best developers, product thinkers and execution oriented folks.

They are also amazing at marketing. They have successfully convinced the world that they are the “startup nation“.

Never mind that they have 1/3 as many product startups as India produces annually and never mind that Indian companies acquire or get acquired twice as much as Israeli companies.Indians also make up 52% of Silicon valley startup founders, whereas Israelis make up less than 8%.

Take a look at those 3 data points and tell me they are not facts. The PWC report is for 2012, so its relatively recent. The # of companies we track in India versus Israel startups in our database is three times as well. The # of companies on Angel list or Crunchbase reveals a similar statistic.

Still its Tel Aviv that creeps up on Silicon Valley as the top startup center. If you read the startup genome report, you’ll be convinced of the same based on their methodology.

What are the arguments I have heard against India being the startup nation?

1. Quantity not quality:  We produce numbers, but not quality. Many of our startups are clones of Silicon Valley companies featured on Tech Crunch 3 months post launch. I looked at the 3 top Israel incubators and found that over 60% of the companies they were helping were clones as well.

2. Exits: We dont have a significant number of $billion or hundreds of million $ exits. I have found that while we do not have those exits, the number of companies listed on the stock market in the US for both Israel and India are comparable.

3. Market access: Israel has excellent knowledge, insights and know-how about US markets. Since Israel itself is a fairly small market, most Israeli entrepreneurs focus on US markets solely, even though they are geographically closer to Europe. Technically the # of people with market knowledge of the US in India far exceeds that of Israel, but they are not in product startups but at large companies.

4. Services mindset & positioning: Thanks to the ginormous success of Indian services companies who helped position India as the “world’s backend” (comparable to China being positioned as the world’s manufacturer) we have been already positioned as low value, low margin, consulting providers.

5. Late start: Even though Israel is 60 years old and India as a nation is a little older, we had a late (2001 or so) start to technology startups. Compared to Israel which had some interesting companies (need references here, what I have heard is mostly anecdotal) in the late 90′s as well.

Why do I still say Indian startups should look at Israel as a role model?

1. They champion their startups very well. They are very well vested in their startups success. They are constantly talking about how good their startups are, how they are possibly better than the valley and why they have the best talent in the world focused on startups.

2. They take significant risky bets. The # of investors in Israel (seed, angel and institutional) is comparable to those in India even though the number of startups is a third.

3. They look out for each other. The community is so well connected with each other that they genuinely look out and help each other. I dont know of any other place that supports their own as much as Israel does.

If you have been to Israel or have lived / worked with Israeli’s please tell me in the comments if there are a few data points I missed.

If you have any good data (not anecdotes, I have enough of those) to counter any of my arguments, feel free to call those out as well.

Posted on

#ReversePitch “The day VCs pitch the Startups”

Depending upon who do you ask the question, the answer to “Indian Startup ecosystem has a shortage of good quality?” would oscillate between kick-ass investors and great customers. While the presence of both is crucial to validate the success of the startup, founders always seem to be cut-off from both of kick-ass investors. With India poised towards climbing up the entrepreneurial ladders, no wonder we would see more first generation product startups coming out of unheard Indian towns and cities.

With this in mind, the recent edition of #ReversePitch took place at 91SpringBoard. The premise is simple, at any conventional networking/demo event the startups are the ones pitching their ideas and its potential to a room full of investors. But by turning the tables in favor of the startups the idea of reverse pitch was born. Investors now make their pitches to a room full of potential startups as to why they are the best bet.

For those of you wondering whether this was another bout of “networking” and “gyaan” session by investors making tall claims for their funds haven’t seen Mukund Mohan in action. Seeing that the founders were taking time to warm up that too in a room full of people having the exact same question in mind. Mukund brought everybody at ease and what followed were interesting rounds of presentation by VCs and subsequent Q&A by the audience.


The questions were spread across the entire spectrum from the usual one on how to raise their seed fund to a startup specific. What tricked both the founders and the VCs were the most simplest of questions which required the greatest insights. Not many might have wondered about “How do VCs actually decide their investment amount?” or our personal favorite “Who gives money to the VCs?” The latter had the entire crowd glued should they find their secret!


With the wheel set in motion the post event discussion was full of its own share of fun. Where else can you find a startup sharing their experiences on raising their first round with a former-founder-turned-VCs chipping in to reminisce about his own life.


This was not the first time #ReversePitch took place in India and this will definitely not be the last time it takes place in Delhi. Nothing is more better than learning from shared experiences. For those of who missed the event can search for the official hashtag #ReversePitch on twitter and relive the moments and maybe even catch the VCs no hold barred in the after party!


A handy list of the VCs who presented at #ReversePitch in no particular order of their likeliness to fund your venture:

 


The pitch sessions was followed by networking with the investors and the community had an amazing time. Thanks to Subhendu(ReversePitch), Mukund, Mukul(Saif Partners), Apurv & for the 91Springboard team for putting together an amazing show. Stay tuned for some more excitement in the next few months!

Posted on

10 Rules for Effective Product Company Advisory Boards!

Advisory boards are rarely meant for fixing fundamental flaws with business plans. Having big names on the advisory boards, purely for their name value, rarely works. It might help a little in raising venture money, if at all. However, when composed and used wisely, advisory boards can help your product company choose the right corporate, product, market and sales strategies. Simply put, your advisors should be people whose expertise or experience you respect highly, and feel sincerely that their advice will benefit your business. And if giving advice is an art, asking for, receiving and using advice is also an art!

Here are 10 rules that can help you make effective use of advisory boards:

1. Friends and Family may not be good candidates:   A natural instinct with some entrepreneurs is to appoint some of their friends and family members to the advisory board. They usually may not turn out to be good advisors unless they are otherwise qualified to be there.

2. Get advisors with fully complementary skills: Have three or four advisors, maximum. Find people with strong engineering and product development skills,sales experience or marketing experience in products related to yours or subject matter expertise.

3. Find the right people for your advisory board:  With LinkedIn and search engines like Google and Bing available, you can always find the right people for your advisory board and reach out to them. Their experiences need to be related to your product company. You may need to do the research to make sure that your company and products may be of interest to them currently. With internet connectivity linking people all over the globe easily, a company need not limit itself to any particular city or even the same country. You can even reach out to people in the US or Europe if you think they may be interested.

4. Clearly outline the time commitments to advisors:  Typical time commitments for advisors are one face to face meeting for a few hours every quarter (if everybody is in the same city or online, if not) and one full-day meeting and discussion once a year.  This may work out to be about 40 to 50 hours per year including their time for reading your materials and preparing answers and discussing them in your meeting.

5. Prepare a list of questions or topics you want advice on and send it ahead of time as an agenda:  Prepare an agenda of topics or list of questions in different areas like technology or science involved, product strategy, product management, engineering, marketing or sales. Sending it ahead of time to advisors will help them prepare properly for the meeting, quarterly or the annual one.

6. Arrange for convenient ways to participate:  With web conferencing services and tools like Skype and Google Hangouts, it has never been easier to arrange online advisory board meetings when advisors are geographically dispersed.

7. Compensate them for their time, expertise and advice:   Product companies rarely can compensate advisors with cash but the customary way to compensate them is with stock options. Usually it is around 1% or less of the company vested over 4 years or so. You can vest the first year’s options  (1/4th) at the time an advisory board agreement is signed and 1/4th the total number of shares every year after that.

8. Hold the right to fire them:  Advisors may sign on with the best of intentions in the beginning and for many reasons, it may not work out well for you subsequently. They may not find the time or may not be interested any more. The agreement should have a clause that lets you remove them from the advisory board if it is not working out for any reason.

9. Don’t confuse the advisory board with your board of directors:  Keep a clear separation and distinction between your advisory board and your board of directors. Your board of directors can introduce you to potential clients or customers, and they can help you with thorny issues with your management team, stock options or compensation issues. Advisory board members are there for a different reason and may not be compensated enough on the same scale for such activities.

10. Don’t confuse your advisory board with an extended sales team: Some companies sign up advisors for the board and also provide them with a small commission percentage for prospect introductions and such. This rarely works out in practice and confuses issues and may cause problems down the road. It is better to keep advisory services separate from sales activities.

All of us, at certain moments of our lives, need to take advice and to receive help from other people graciously- Alexis Carrel.

 

Posted on

Indian Products- Creating a market

Building products when you know the need is hard. Building products which create a new market is harder.In the first case, you know a problem, you envisage a solution and you build a product which solves the problem. People start buying your product as they know they have a need for it.In the second case, you have to first convince the customers there is a need. You have to show them that things can be better. And only then will they start buying your product. It needs a lot of self belief to do this.Some examples which come to my mind are Harry Potter and Justin Beiber. Though J.K Rowling wrote Harry Potter, there is a big machinery which runs behind which has created the need for more Harry Potter books. It is now a billion dollar industry. Same is the case with Beiber.

Coming to the tech world, in this series I would like to explore products made in India which have created a new market.

I will start the series with a concept that is very Indian in nature, missed calls.

Couple of years back, missed call market did not exist in India. People did not know you could make money out of missed calls. People may have been using missed calls for random jobs, but there weren’t any companies which were using missed calls to their full potential. It was during this time that Zipdial came into focus. They made the missed call, a call to action event. The systematic way in which Zipdial has created value for the end consumers and provided engagement for brands through a missed call is commendable. It is not just about the tech. It is about understanding the ecosystem. And Zipdial has been able to do that. Other players have also now joined the fray and brands are now willing to pay serious money for missed call services. In its basest form, a missed call is a form of communication and companies are now being created for providing this communication channel.To do this, it takes a lot of effort and money. Companies providing missed call based services demonstrated the great power of their product through a lot of free campaigns. They created the need. Then they reached out to companies to get them to use their product by showcasing statistics of user engagement. Through their sheer will they created the market.Hope these companies continue with their innovation and conquer other countries as well and create new markets.In the next blog post, we will look at travel.

Posted on

Entreprenuers should’t sweat small stuff!

Was going through popular book “Don’t Sweat the Small Stuff … and it’s all small stuff” by Richard Carlson, PhD and realized lot of the points outlined by Richard are applicable precisely for enterpreneurs in their startup journey.

Make peace with imperfection:

As a startup, we always are short of resources that are typically available for a big corporation. When resources are scarce, its difficult and often impossible to achieve perfection in all things. Its better to accept the same and make peace with imperfection. The same applies to all activities in startup – whether it is do with kind of talent we might want in the team, the kind of expectations you have with the sub-ordinates/peers or simple things like the way office is maintained, non availability of admin support when you have your important meetings scheduled in the office.

Remember that having zero items in ToDo list doesn’t mean success:

As an entrepreneur, your To-Do list is almost infinite. You have hundreds of things to do and the more you complete the activities in your to-do list, the more seem to get added. Don’t worry about this as this is more than natural for all entrepreneurs. So never get yourself so tensed up to complete all activities in your ToDo list. Prioritize and work on important tasks and move on.

Learn to Live in the Present Moment:

It’s important to learn from the mistakes in the past and plan for the future. But the most important success factor for any startup is execution. And key for succesful execution is to focus on the present moment. Focusing on present moment, important tasks that we are working on hand will give us best results and success.

Allow Yourself to Be Bored:

As entrepreneurs, thanks to the infinite ToDo list, we will ending up having no time for ourself or to relax. It’s a good idea to take some time out of our busy schedules and be idle. Being idle atleast for few minutes each day will give us new perspective and believe me this is the time most of us will come up with breakthrough ideas to scale the venture to the next level.

Repeat to Yourself, “Startup Isn’t an Emergency”

One can’t run a startup or a business as an emergency. Startup will usually go on if things don’t go according to the plan. And infact most of times in startups, things will not go per the plan. If one feels it as an emergency, things will only go worse from where they are.

Do One Thing at a Time:

Multi-tasking will do no good to any entrepreneur. Focus is the key. Work on one thing at a time, complete the same and move on to the next one. Your productivity will go manifold by just focusing on one thing at a time.

Get Comfortable Not Knowing:

You will not know about many areas of the business. Instead of feeling overwhelmed on multiple facets of business which you don’t know, get comfortable with the same. Most of the times, it will turn out to be a blessing in disguise. People who know all the things, will end up not doing anything as they are scared how tough it is to do!!

Give Up on the Idea that “More Is Better”

It’s always easy to believe that “More is Better”. Who doesn’t want more funding, more people in the team? But the point is that if you always want/desire more then you will not be able to focus on achieving results in what you have. Focus on what you have and maximise the results from it. If you do it right, automatically more will come to you.

Keep Asking Yourself, “What’s Really Important?”

With limited resources, limited time its important that one focuses only on few important things that have a maximum impact. In the rush of things, lot of us end up spending lot of time on things which are not really important. Always take a step back and keep thinking what’s really important and that will help you to focus and maximise the success.

Startup Is a Test. It Is Only a Test

When you look at startup and its many challenges as a test, or series of tests, you begin to see each issue you face as an opportunity to grow, a chance to roll with the punches. Whether you’re being bombarded with problems, responsibilities, even insurmountable hurdles, when looked at as a test, you always have a chance to succeed, in the sense of rising above that which is challenging you. If, on the other hand, you see each new issue you face as a serious battle that must be won in order to survive, you’re probably in for a very rocky journey. The only time you’re likely to be happy is when everything is working out just right. And we all know that won’t happen anytime.

Do add to the list of the “small stuff” that entrepreneurs should not sweat about based on your experiences in the comments section!

Guest Post contributed by Pawan Thatha, CEO, Arrayshield Technologies
Posted on

Announcing the First Playbook Roundtable: Positioning and messaging for Product Entrepreneurs

We are pleased to announce the first Playbook RoundTable for Product Entrepreneurs around Messaging & Positioning. A strong, differentiated & memorable product messaging is essential in creating traction for your product. Effective product messaging speaks directly in the langauage of your target audience. This Playbook Roundtable is brought to you by iSPIRT. One of the initiatives of iSPIRT is to convert conversations into playbooks for product entrepreneurs.

This Playbook Roundtable is led by Shankar Maruwada and is intended for companies that have a software product (consumer or enterprise), have initial customers and are trying to scale to the next level. They are keen to make more crisp their value proposition to the target audience and more clearly articulate their position relative to competitors.

This Playbook RoundTable will be interactive and will help your team step into the role of your target audience, map your features to benefits, organize those benefits into message themes, and summarize the product in a positioning statement.

To apply for this workshop please send a PDF document(one pager) to avinash(at)ispirt.in with the following information by 23rd March ‘2013:

  • Name of the company
  • Name and title of the intended attendee
  • Mobile phone of attendee
  • Email ID of attendee
  • The top two practical problems your company faces in messaging, communicating, positioning your product, that you would like help with. 
  • Top 2 desired outcomes from the workshopPlease share, as briefly as possible, your current resources and efforts in this area
  • Write (max 150 words) on the ‘What’ and the ‘Why’ of your product, in simple language. You may accompany this with a single visual (optional).
Find more details about the playbook roundtable here.
Posted on

Inspiring quotes from Woman Leaders in the Product Space

Everywhere you look, there is an Indian woman in pursuit of an entrepreneurial dream. With a GDP growth rate of 8.2%, women product leaders have a whole reason to be bullish. This International Women’s Day, we choose to celebrate pioneering Woman Product Leaders among us, choose to celebrate the success of these efficacious women. This is not a comprehensive list, and if there are some Women Product Leaders whom we have missed and should be in this list, please feel free to email us or drop in a comment and we will add it to the list. 

Read along as these women share what advice would they like to impart to aspiring women product leaders. Please find the views in an alphabetical order below.

Anuradha Acharya, Ocimum Biosolutions: CEO with a vision for better health for Indians using technology, Anuradha believes in management as a fine balance between delegating and getting things done. More than often one needs to get theirs hands dirty, she quotes. 

Anuradha Bansal, Verity Solutions: Anuradha admires the women who juggle the pressures of corporate life and rear a family. She considers Failure and Success a sinusoidal wave that indicates the state of affairs in the organization during different points in time. Even if one were to wind up an enterprise – the terrific learning that one takes away cannot be ignored. Even the most substantial started small.

Entrepreneurship in common parlance often gets construed as “risky”. To her it’s a misnomer – everything is risky, just that the risk matrix differs. 

Pooja Goyal, Intellitots: As an entrepreneur so many benefits which seemed meagre in a corporate. Environment feel like hefty perks be it IT support or HR support or for that matter janitorial support. It is a tough transition especially in the early days when you have to be extremely hands on and set the tone for the company culture. Having said that it is also the most fulfilling opportunity to create something from scratch and shape it and grow it.

What I have learnt in my two entrepreneurial ventures is ‘ a bad decision is better than no decision.

Sairee Chahal, Fleximoms: The co-founder for the most women inspiring start-up, FlexiMoms, assures us product is less about code and more about people skills, conversation and trend spotting. Our constant job is to keep looking for the best people and move their discretion in our favour. Sometimes the best brains don’t come from expected quarters but the most unlikely places hence it’s most important to invest time in ourselves and people around us. And one has to enjoy the process and the journey – the most exciting part. 

Sangeeta Patni, Extensio Software: Sangeeta Patni, President, Extensio Software, considers the journey as a worthy mountain to climb. She affirms that entrepreneurship is all about leadership. A product leader will always tell you “What to do” and not “How to do”. 

She admits that a woman is a product leader because she has the passion for your product, and vision for her business. To embark on being a Product Leader means being able to have a very clear vision of the value you want to bring to the world, and the immense passion required to execute the vision, and also to be able to successfully make money from it – in face of competition, the technology changes that render the window of opportunity to be really short, and to be able to have confidence in ones ability to change and innovate. 

Sangeetha Banerjee, Apartment Adda: Sangeetha is convinced of a woman’s natural virtue of sincere empathy, which enables them to understand Customer Pain Points and pump those into their Product Strategy.  The founder for Apartment Adda, Sangeetha shares that while Building or Enhancing a Product substantial forethought is required towards After-Sales Support – Deployment & On-going Support, which is critical for the survival of a SaaS product. 

Interestingly, she connects it with a woman’s natural instincts, because when we buy that cosy bulky Sofa, we are not thinking only about the Comfort. Women are thinking how easy or difficult will it be to clean or move around, and whether the maid will double her rates just at the sight of it in her Living Room! 

Zeba Zaidi, GameOnIndia: ‘As a woman you lack nothing that would bring you success’,  Zeba Zaidi, Co-Founder and CEO, Game On India, believes that the satisfaction you get from running your own business is something worth striving for. The economy in India is perfectly poised to support new business, people are getting more and more open to newer ideas, there are enough funding options out there and all in all it’s a fantastic time to be thinking about your own business. There is a lot of knowledge sharing and avenues where your goals can get support. So my advice would be to just go for it.  

Our goal is to highlight what worked for these successful product leaders. Every input is appreciated for raising a new challenge for women in the entrepreneurial world. 

As mentioned, if (and we must have) we have missed out on some names, either yours or another you know of, and would like it to be added to the list, please comment below here, or email us. 

With Inputs from Kanika Bhatia, Boring Brands

Posted on

The Gap Unfilled

No one is sure of their exact number, but a census of micro, small and medium enterprises (MSMEs) done a few years ago estimated that there are 26 million small and medium enterprises in India. It is well known that this market is fragmented and price-sensitive and, hence, large companies have tried to tailor products and services to target this market. But, is that enough? Take a look at the case studies below and see for yourself. 

MSMEs often complain that they don’t have adequate access to financing. One reason for this is that banks and financial institutions find it expensive and difficult to do a thorough analysis of a small firm’s credit-worthiness. Seven years ago, Crisil, India’s premier rating agency, stepped in to address this problem. The challenge was that any credit-worthiness assessment had to be completed within a reasonable period of time, maintain Crisil’s standards of analysis, and yet be affordable.

Crisil launched SME ratings in 2005. It created a network of qualified individuals in more than 180 cities, who were given intense training based on a specially-developed methodology, and had to meet rigorous certification requirements. This network of trained professionals became the bedrock of the SME rating system. To attract these individuals who are not formal employees of Crisil, the company even brought their parents to the Crisil office to show them that the company was solid and that this could be a career option. Reputed chartered accountancy firms with an all-India reach were hired for verification and oversight. The rating was based on a simple, two-dimensional scale of performance capability (five categories) and financial  strength (two categories). Once all the data is collected, technology is used to complete a rating in a few days. Overall, the rating is completed within about a month. With this process in place, Crisil is able to do about 10,000 SME ratings a year, making it the largest SME rating agency in the world.

With a credit rating, an SME can get better access to bank finance and, sometimes, even lower interest rates. However, even with these benefits, the Rs 50,000-1 lakh price tag was found to be too expensive by many SMEs. So, in spite of the well-designed product, and the business and process innovation that Crisil introduced to make the rating product accessible, the government had to step in to provide a subsidy for those MSMEs who couldn’t afford it. But, pricing is not the only barrier to adoption of new products by MSMEs. In 2007, India’s largest IT services company, Tata Consultancy Services, identified SMEs as an important segment. But since it lacked adequate experience in working with SMEs, the company met with more than 250 organisations to understand how they use technology.

TCS found that SMEs had made significant investments in devices and hardware, including networking, and used their computers mainly for accounts and inventory. But MSME owners complained that the reports they generated didn’t reflect actual performance because there were islands of data that were not integrated with each other. Others reported that they struggled to keep up with technology changes, keep their systems virus-free, and to hire and retain staff for IT. Even evaluating offers made by vendors was a tricky task.

Based on these customer inputs, TCS saw an opportunity to take responsibility for running SMEs’ IT, based on some basic principles such as covering all key business processes and providing for all statutory compliances. To avoid fresh capital expenditure, the company provided an operating expenditure-based service.

The resultant TCS cloud-based solution, TCS iON, was launched in the market in March 2011. iON is periodically upgraded by TCS, but the user doesn’t have to do anything extra at his end. Though iON is available across six verticals, in the first year and a half TCS had only about 300 installations, with the largest concentration in the education space, apparently much less than what the company hoped to achieve.

Overcoming the trust deficit between technology acceptor and new product is the biggest barrier to innovating for the MSME market

At the other end of the spectrum is Tally, arguably the most successful product ever built for MSMEs in India. It is estimated to be in use by about two million users although less than one million users have purchased licences. Right from the beginning Tally was built with Indian users in mind — it used minimum hardware resources, and was tailored to Indian accounting practices. Even novice users were able to quickly learn how to use the product and it rapidly gained a large installed base of users, thereby creating a platform for the positive returns of network economics. Tally worked closely with hundreds of institutes across the country to impart training and thus create a base of accountants with Tally skills. Early on, Tally created good relationships with the chartered accountants community. With its huge installed base, Tally has become a basic requirement for any accountant in India — if you don’t know how to use Tally, you can’t be a practising chartered accountant! 

To address the piracy issue, Tally reduced its prices substantially a few years ago. The product has also kept up with changes in technology and applications — it was very quick in providing VAT functionality after the law changed; it is available on the cloud; and the product today addresses much more than just accounting, it has become more like an ERP software. Of course, Tally’s success was also the result of some historical factors such as the decision of the Income Tax department and the Department of Company Affairs to make e-filing compulsory. Not all companies will have this path-dependent advantage.

The formula for success

So, what does it take to innovate for the SME market? Recently, a senior industry executive told me that the key to meeting the needs of the MSME market is realising that it is more like the enterprise market of the West than the consumer-like Small Office Home Office (So-Ho) market. Early adopters in the MSME market are very small in number and crossing the chasm to a larger “technology acceptor” market is very difficult. Many “technology acceptors” are reluctant to buy a new product even when they see a business case for it because they have had bad experiences in the past with products that were pushed to them with exaggerated promises, at high prices, and with limited post-sales support. Overcoming this trust deficit that has been created is the biggest barrier to innovating for the MSME market.

Innovation may be the solution to this problem as well. iSPIRT, a think tank recently launched by software product companies, is creating iSMB to be a market maker for software products in the MSME community. iSMB will bring out product guides for important segments of the MSME sector so that they can make informed choices regarding the software products that suit them. They will also certify products and encourage product companies to create visible dispute settlement mechanisms.

So, the key to innovating for the MSME market is not only tailoring products to their needs at easily affordable price points, and updating them to adapt to evolving use needs as Tally has successfully demonstrated, but providing effective ways of bridging information gaps, establishing and communicating a clear business value proposition and lowering the risk of purchase by the customer.

This article was first published in Outlook Business

Posted on

Great Mentoring Session for Product startups with Piyush Singh & Greg Toebbe

Both, Piyush Singh(Sr. VP & CIO) & Greg Toebbe(Sr. VP) at Great American Insurance, are active participants in the Indian software ecosystem and are acknowledged speakers in the NASSCOM Product Conclave. This time they selected 4 companies to have one-on-one sessions with them on February 27, 2013 after reviewing several companies that had applied for this mentoring session.

Objective of these one-on-one meetings was mentoring/guidance on product strategy, Go-To-Market (GTM), scaling and sales among other things. The number of companies selected was consciously kept less so that each startup gets quality time of one hour with Piyush and Greg.  The time was split as follows: 15-20 minutes of introduction and product presentation followed by a few minutes of the product demonstration. More than half of the allotted time was suggested to be used for seeking advice and feedback. These sessions were voluntarily given by Piyush as part of helping the Indian Software Product ecosystem. Participants were at liberty to seek out the mentors for any advisory role or future involvement. I am sure that every company walked away feeling satisfied and renewed energy to pursue their dreams after these meetings. The companies selected were:

Here are some of the snippets of advice given to the companies (in random order):

  • Presentations should immediately connect with the audience. Great way to do this is to start with user stories/perspectives so that people immediately see the product’s value rather explaining the technology involved or the general problem that the product is solving. He also mentioned that CxOs like numbers. Numbers hit them more than anything else. One of the startups declared that their product reduces the testing effort, increases productivity and saves license costs too. They were advised to take a specific case study and put the actual savings in numbers. These would then make people see the value instantaneously.
  • One company had built a great enterprise technology platform over the last couple of years. However, it had difficulty in selling it to the big guys. Piyush advised them to build vertical-based solutions on their platform and target one or more marquee customers in that segment. He said they could keep the core common and build vertical-focused modules. This would help them differentiate from their competitors as well as have potential customers see the value immediately.
  • While everyone is clamoring for moving their applications into the cloud, he said cloud is not meant for everyone and everything. Companies should not make superficial efforts to move their product into the cloud if it doesn’t make sense to their customers. Alternatively, if they could offer the hybrid model (cloud and on-premise) then customers are free to choose what they want. Ultimately the development should be driven more your customer needs rather than general technology trends around you.
  • For selling in the US, he said there is no alternative to burning shoe leather. Companies will have to meet the leads face-to-face and sell. Specific targeted Tradeshows as well as exposure in right magazines are another avenue to generate good leads. He also advised the startups to tie up with bigger player in their domains and use their sales muscle, if it works out symbiotically for both parties.

Once again, ProductNation and the participating companies would like to thank Piyush and Greg for their valuable time and advise. And last but not the least, we would like to thank Pramati Techologies (Syed Khadar) for hosting these meetings and helping us with the arrangements at a very short notice.

Few testimonials from the companies:

Thank you very much ProductNation for the opportunity to Mr. Piyush Singh and Mr. Greg Toebbe.  The feedback and suggestions shared by them was quite valuable, especially good to know the buyers perspective, which will be helpful in presenting a business case to the prospects.  Once again thank you ProductNation for all support extended to start ups – Sudhir Patil, Qualitia Software

It was a great experience meeting Piyush & Greg, very high return on my time spent (RoT).  The quality & amount of, to the point, practical and meaningful advice I got in one hour of our interaction was invaluable and is impossible to get by even attending a dozen startup events.  Very productive, very helpful, expecting more of such interactions with people who know and understand the needs of your target customer segments besides knowing technology! – Sumeet Anand, Kreeo Software

Our main intention was to validate some of the assumptions we have made for building the Enterprise Software. Piyush, being the CIO of a huge enterprise, provided that validation as well as helped us prioritize a few things. His offer for using out free Lite version (when it is available) was also deeply appreciated. Overall, we felt it was time well spent. – Chandra, i7 Networks

The interaction provided some valuable feedback for our company growth and scale. Even though the session time was limited, ROI was there ! Today we need to interact with wide/diverse network of people due to the product DNA nature in the business model and the pace at which this model is growing as compared to the old mentoring model and nature of the companies/business model.
Also he was good enough to keep the interaction beyond the session as well ! I would like to quote Jim Rohn in this context – “You are the average of the five people you spend the most time with.” Lot to learn from their expertise and hopefully the session provided the platform for the same/to get started with. Thanks to ProductNation for organising such a session and expect to do more sessions. Abdulla Hisham, Fordadian Technologies
Posted on

Why More Indian Software Product Companies will Emerge

Any discussion about building products from India is lost in the hype and din about India as an IT services powerhouse. However, the mostly unnoticed surge in product start-ups marks the beginning of a new movement, with potential to re-invent the Indian software industry. Emergence of globally recognized Indian product companies will represent the final step in the software value chain. If India can become the hub of the world’s most successful IT services as well as product companies, it can truly lay claim to being a knowledge superpower.

Building products requires a mindset, capabilities and an environment, which is very different from delivering services. Achieving this final frontier won’t be easy and Indian entrepreneurs face major challenges. There are very few role models who have built successful product companies, which limits access to mentors, who can provide guidance. Access to market requirements is difficult, since major consumers of software products are in Western markets. IT spend- ing in India is growing but still limited and global vendors are preferred. Finally, early stage funding is a major problem, and getting engineers to work in start- ups is a big challenge.

An increasing number of motivated entrepreneurs are working to overcome these handicaps, just as founders of services companies did in the early 1990s. A convergence of factors is ensuring the emergence of successful Indian product companies:

  • A large pool of talented engineers and managers who have worked at global companies in India and US
  • The rapid growth of local market and increasing adoption of IT with India-specific requirements especially for consumer facing apps
  • Technology disruptions including the emergence of cloud computing, which make national boundaries irrelevant, and reduce cost of global sales
  • Flair for innovation and risk-taking amongst a generation that has grown up in post-liberalized India
  • Self-confidence that comes from an economy that is the second fastest growing in the world
  • Weakening US economy that is motivating an increasing number of experienced software professionals to return to India

Since services culture dominates Indian IT, the book will continue to high- light how software product companies differ from their services counterparts, and the specific challenges that they must overcome.

Reprinted from From Entrepreneurs to Leaders by permission of Tata McGraw-Hill Education Private Limited.

Posted on

An iSPIRT’ed Budget

One of the pillars of iSPIRT’s mission statement is a focus on converting the needs of the product ecosystem to policy direction.

One of the first undertakings of the iSPIRT community will be to formulate suggestions on how to improve Finance and Investment related policies to yield better results for this industry. And what better time to do this than in the run-up to the Budget presentation on 28 th February?

We plan to host and facilitate open and transparent online discussion around the key topics where current policies should be revisited. The discussions will be seeded with the release of a series of Blue Papers –short discussion documents identifying the key pain points, what is at stake, and how we should proceed as country.

Over the coming four days, we will release a new Blue Paper each day on the following topics:

We encourage everyone to help us collaboratively build on these initial viewpoint documents. We will close the discussions as we approach Budget Day, and after the release of the Budget will then create a set of assimilated viewpoints stemming from the Blue Papers, the discussions that have transpired online, and reflecting on the actual Budget.

These viewpoints will then be shared back with the Government as inputs reflecting the views of hundreds, or hopefully thousands, of product entrepreneurs and ecosystem participants.

Keep checking back here over the coming days, and we hope to hear your voice, too!

Posted on

Sustaining India’s IT Exports Growth: Why Products are the Way?

Going by its 12th five year plan projections, the Indian government expects that the IT/ITES exports from the country would reach $130 billion by FY 2016-17, up from $69 billion in FY 2011-12. That is a CAGR of 13.6%.

How realistic is it?
The Planning Commission’s (it  has got those figures from IT ministry which in turn would have consulted with the industry before suggesting it) projection is obviously based on the past trends. Between 2002-07, IT exports from India grew by a CAGR of 32.6%. In the next five years, between 2007-12, the IT exports registered a CAGR of 17.2%. Purely going by those number, a 13.6% growth does not seem too unrealistic for the period 2012-17.

But that does not give the real picture. While the government has its own five-year plan periods, and all its numbers are synchronized to those blocks of periods, the industries do not necessarily work that way, least of it, an exports industry.

Indian IT services exports industry had its distinctive growth periods. The period between 2003-04 to 2007-08, was the high growth period when, on an average, the exports grew 30% year on year, growing by a whopping 37.2% in 2004-05. Of course, the industry was much smaller.

The new phase began in 2008-09. From that year onwards, the industry has grown between 5-19%. In short, the growth of FY 2007-08, which belonged to another era, skews the figure for the five year period that the government has taken—2007-08 to  2011-12. A better idea, hence, would be to compare with the CAGR of the four year period 2008-09, which was 14.2%.

On a much bigger scale, is is possible to replicate that kind of growth, with business as usual. The current year growth is not likely to be more than 10-11%, considering that the top companies have grown by 9% in the first nine months. If the first year of the block shows a growth of 10%, it will be panglossian to believe that the exports will grow by 13.6% in the five year period.

That is, if we go on doing business as usual. The 12th Plan document also does not mention any new initiatives in this area that would make one hopeful, unlike in case of semiconductor and electronic design segments, where a lot of new initiatives are listed.

So, how do we sustain the growth? It is difficult to believe that changing a tax structure here or duty structure there for IT/ITES exports would help the industry grow. We need to look at comppletely new areas/new dynamics to make the industry growth accelerate.

I believe engineering services and software products are two such areas which have potential to drive the next phase of growth for Indian IT. Here are the reasons why I bet on these two

  1. Both these areas are not really completely new areas for Indian IT. There are some leve of action already and the world has noticed the ability of Indians in both these areas
  2. The opportunity and scope available to expand is immense. Hence, the growth will be sustainable for some time
  3. There are passionate people and organizations trying to furher the cause of both these segments.

With a little help from government in terms of incentives and promotion, these two segments, I believe, can drive the growth for the industry in the medium term.

This year’s budget could be a great beginning. The government could well begin by announcing some concrete incentives for encouraging creation of software products from India. Here are some of the ideas that are worth exploring (in the area of software products).

  • Creating direct tax incentives for companies engaged in creating software products
  • Incentivizing government department, agencies and private companies in India to buy made-in-India products through a mix of fiscal and non-fiscal incentives
  • Creating product-only SEZs
  • Instituting awards and honors for software products made in India
  • Encouraging software companies to create products for solving e-governnce problems in the country
  • Creating a comprehensive policy statement to encourage creation of Intellectual Property in computing/information sciences in India 
Posted on

Will B.PAC and iSPIRT Transform Urban Politics & the Software Product Industry Respectively?

While we usually focus on product, process and business model innovation as the main facets of innovation, some of the most impactful innovation can be the result of new organizational forms.

Take the case of India’s white revolution. This was driven by a unique 3-tier structure of organizations – the farmers’ cooperative at the village level as the basic organizational unit; a district-level federation of cooperatives with milk processing and marketing capabilities; and a state level apex body with brand and product management capabilities. And, behind this structure were larger organizations like the National Dairy Development Board at the national level that channelizes resources, support long-term investment activities, and accesses new knowledge and inputs. This arrangement takes advantage of flexibility – when required NDDB can look like an extension of the government, when required it is an independent body working with farmers’ cooperatives. This flexibility has helped it manage in a complex environment.

Last week saw the birth of some organizations nowhere as complex as the milk production structure, but with the potential to have major impact.

B.PAC

NR Narayana Murthy launched the Bangalore Political Action Committee or B.PAC as it is being called. This is the first time we are seeing an organization christened as a PAC in India, though this is a common term in the US. I presume this similarity is not just a matter of coincidence. PACs in the US are not political parties, but organizations created to advocate and support a particular agenda. The B.PAC has similar objectives. At one level it aims to restore the quality of life of the city of Bangalore. But at another level it is a pressure group for more political power to cities which are the value creation engines of a modern economy.

The B.PAC’s initial agenda is to enhance urban (read middle class, educated) voter enrolment and voter participation. They also promise to support candidates who back their agenda (new forms of city government, more resources, better urban planning, etc.) In the forthcoming assembly, parliament and municipal corporation elections. Subject, of course, to their meeting other criteria like no criminal cases against them, no record of corruption, etc.

B.PAC has been formed by a group of resourceful and successful individuals who have for long been expressing their dissatisfaction with the state of affairs like Kiran Mazumdar Shaw and Mohandas Pai. It represents their response to many of the issues they have raised in the past falling on deaf ears, and their inability to have a sustained impact on the political system.

Of course, the “involvement” of successful industrialists in efforts to improve Bangalore is not new. During the chief ministership of SM Krishna (1999-2004), the Bangalore Agenda Task Force was created under the chairmanship of Nandan Nilekani. The BATF tried to play the role of a coordinating body, creating a platform for different civic agencies, citizen groups and the state government to come together. While the BATF did manage to do some of this as well as have new bus shelters and toilets built, it was a body without any political legitimacy and was hastily disbanded after the Congress lost the 2004 elections in the state.

Newspaper reports indicate the existence of a similar attempt in the last few years under the chairmanship of Rajeev Chandrashekar. However, this one has been low key, restricting its role to that of a think tank. But again the long term impact doesn’t appear to be substantial.

B.PAC is an interesting development because it shows an inching of rich, successful “middle class” entrepreneurs towards electoral politics. Though apolitical in the sense that it is not a political party, B.PAC clearly has a political agenda. It represents a growing realization that technocratic approaches can’t solve India’s problems. It also suggests that the efforts to create alternate public spaces such as those tried out by Janagraha or the BATF itself could have only limited success. The creation of the B.PAC is a welcome development, for the next logical step will be immersion in electoral politics. I hope to see a party such as the German Green Party emerging out of this process with the ability to push urban issues at the national level.

iSPIRT

The second organizational innovation in the last week was the creation of iSPIRT – the Indian Software Product Industry Round Table. It came into the public view amidst controversy with a Times of India headline announcing it as a breakaway trade body from Nasscom. iSPIRT’s spokesmen were quick to assert that the organisation is an industry round table (not a trade body), that it will not offer membership, and that the founders will continue to be part of Nassom (Disclosure: I am a part of the iSPIRT Founding Circle).

I am excited by the prospect of iSPIRT because of the new activities it is promoting. An important role it will play is to act as a market maker. India has lakhs of small and medium businesses. These businesses are important sources of employment and economic growth but they face a major challenge of maintaining their competitiveness. Information technology has the potential to enhance the efficiency of these businesses. However, these SMBs often lack the ability to evaluate vendor proposals. They are price-sensitive, and risk-averse as far as IT is concerned. Burnt by past experiences, they are wary of making fresh investments in IT.

Under its iSMB initiative, iSPIRT plans to bridge the gap between domestic software product vendors who have relevant solutions and SMB customers. ISMB will study different verticals, map needs, and certify products meeting the vertical’s needs. Only product companies that have customer dispute resolution mechanisms in place will be accredited. Product companies will get feedback on where their solutions fall short of customer requirements. This initiative is designed to bridge the trust deficit that exists today between vendors and users.

ISMB will build on the positive experience of CIO Connect, an earlier effort to bring Indian product companies and large Indian corporate IT users together.

Both B.PAC and iSPIRT are Market-Makers

Though in theory markets provide the opportunity for sellers and buyers to come together, information asymmetry and high transaction costs can prevent markets from functioning efficiently. Initiatives like ISMB and CIO Connect help smoothen out these market imperfections.

B.PAC can also be seen as a market maker. A democratic system in which a whole chunk of voters does not participate will not reflect the needs of different interest groups accurately.

We tend to expect government to combat market failure. Both B.PAC and the ISMB initiative of iSPIRT represent voluntary, community efforts to do so. I will watch both these organizational initiatives with interest.

Posted on

Product Business is Very Different from Services

What is the difference between software services and products? Why is it important for India to be developing products?

First Invest, and Then Reap

The business cycle in a services company starts with sales, and ends with project or product delivery. On the other hand, a product company must first invest in building the solution. Then begins a long and complex business cycle to sell, support and continuously evolve the product. This reversal of sales and engineering sequence has a profound impact on how product organizations get built.

Services industry provides manpower to build software apps and products, which belong to the customer. Typically, IT departments of retail, manufacturing, financial, insurance and other businesses require new applications, or enhancements to existing ones, for in-house use. They turn to Indian companies for design and implementation. Needing long-term support, global product companies establish extension engineering teams at Indian subsidiaries or services companies.

In services, clients own the Intellectual Property (IP). All gains (cost savings, productivity improvements, revenue) and risks are entirely the clients’. The service provider gets paid in proportion to the cost of development, irrespective of whether the pricing model is fixed cost or time and material (T&M).

This means that the services revenue growth is directly linked to number of engineers. The industry’s competitiveness is determined by cost of engineers. But the number of trained software engineers in India, cannot scale indefinitely. Even today, good talent is becoming scarce. Salaries are rising to a point where low-cost economies such as China, Vietnam and Philippines have started to compete. Nevertheless, superior talent, project management expertise, processes, and English language skills continue to provide an edge to India. However, others are catching up, thereby causing a slowdown in the industry’s growth rate.

In comparison, products have the potential to fetch non-linear revenue. A product business creates intellectual property. Once developed, the same solution is sold repeatedly to a large number of buyers.

The graph above shows the famed hockey stick revenue model for a successful product company. A services organization can have positive revenue from day one, and grow very quickly too, but the headcount-centric model will eventually become a drag.

Reprinted from From Entrepreneurs to Leaders by permission of Tata McGraw-Hill Education Private Limited.