Category: ProductNation

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Launching Pune Chapter of iKen, pre-Entrepreneur bootcamp !

After much experimentation elsewhere we feel confident and glad to Launch iKen in Pune on November 13th.

Please check the original blog posts on iken history at the blogs below.

https://pn.ispirt.in/launching-ispirt-pre-entrepreneur-program/,

https://pn.ispirt.in/kicking-off-the-second-edition-of-pre-entrepreneur-boot-camp-arthasiddhi/

At a high level iKen is a 6 mandatory weekend (and access to an year of sessions) toastmaster style bootcamp around entrepreneurial skills.

We had a pilot session in October and glad to find many high quality entrepreneurs willing to put their weight behind this chapter to retain the essential nature of  the program that is “By Entrepreneur For Entrepreneur”.

To gain more information about the program please take a look at stories of entrepreneurs who attended the program.

Please signup at https://ikenstartup.com/pune-bootcamp-applications/;

We deliberately limit the size to a very small group to make better impact. 

Contact/Tweet @doshi_darshan for more information.

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Ease of Doing Business – Is India Game?

Conducting business in one’s own country is never easy, let alone conducting business overseas, where rules, regulations and business environments differ. ‘Ease of doing business’ is also an Index created by the World Bank. It ranks economies from high to low, with the former indicating easier, simpler and better conditions for business as compared to the latter, indicating difficulty in conducting business. This article aims at giving you a glimpse into the world of investing in and conducting a business in India.

Economies are ranked based on parameters such as starting a business, dealing with construction permits, availability of electricity, registering property, availing credit, protection of minority investors, paying taxes, international trading, distance to frontier, entrepreneurship, good practices, transparency in business regulation, resolving insolvency and enforcing contracts. For any business, it is important to acknowledge these factors, or at least those that apply, as they decide how easy or difficult it is to conduct or start the business in a country.

For the year 2016 by World Bank’s records- India moved up from 134th to 130th rank in the Ease of doing business Index. Among the parameters mentioned earlier, India has best ranked in the protection of minority shareholders. It has also bettered its rank in the availability of electricity, getting construction permits and starting a business. On the downside, paying taxes and accessing credit have been the most difficult for business. Additionally, two key parameters that India needs to work on are enforcing contracts and resolving insolvency, that have both been a hindrance in conducting business.

To give you an idea of how few other countries fare in the rankings; Singapore, New Zealand and Denmark occupy the first three spots in the world, whereas Eritrea, Central African Republic and Libya occupy the last three spots.

The Indian Government has taken several initiatives towards increasing the ease of doing business, here are some that deserve a mention:

Ease of Doing Business.png

Registration

  • The availability of www.ebiz.gov.in, a Government portal where services are provided such as employee registration, name availability, Director Identification Number, PAN, Certificate of Incorporation, TAN, RBI (Foreign Remittances), EPF, Importer-exporter code, Foreign currency – transfer of shares, etc. Making registering and running a business much easier than before.

  • Now Aadhaar eKYC and eSign are being used to grant Digital Certificates to directors (DSC) of the company. This process is now made paperless and takes only a few minutes.

  • The requirements for minimum paid-up capital and common seal for companies has been removed as per the Companies (Amendment) Act, 2015 and the process for starting a business is now streamlined.

  • The Indian Prime Minister has shown particular interest in building a positive entrepreneurial spirit. He launched MakeInIndia, a website helping young entrepreneurs set up, access information, and build a business of their own.

  • Employee Provident Fund Organisation (EPFO) and Employee State Insurance Corporation have online portals so that businesses have real-time registration, online application for clearances and payments be made through 56 partner banks.

  • An Investor Facilitation Cell has been introduced as a first in order to help investors and guide them through the course of their business.

Taxation

  • GST (Goods and Service Tax) will replace indirect-tax, to be implemented by 2017. That is the removal of several layers of multi-layered taxes and multiple tax rates into one uniform Goods and Service Tax. This will make India attractive to foreign Investors as well as boost India’s exports because of less regulatory and bureaucratic tangles.

Infrastructure

  • In cities like Delhi and Mumbai, online construction permits such as DPMS (Development Permissions Management Systems) are in the process of being launched. Since the permits are completely digitized, the biggest impact this will have is speeding up the process of getting a permit by 5-8 months. It will save one the trouble of meeting someone in person, which has a direct positive impact on reducing corruption, delayed work and human error to a large extent.

  • A business being affected by a cyber crime is every founder and investors’ nightmare. Training programmes for officers in the sensitization towards cyber crimes and related infringements is also a significant initiative taken by the Indian Government.

  • Special management teams have been set up to fast track and facilitate investments made to India from South Korea or Japan. The plans are coined ‘Japan Plus’ and ‘Korea Plus’.

Compliance

  • If your business deals with cross-border trading, you’re in luck. The Government has made the process highly efficient by reducing the time utilised at ports and airports. Necessary clearances for exporters and importers has also been prioritized. As a result of the improvements made, export and import clearance that once used to take nearly 5 and 11 days has reduced by more than half the time.

  • Minority shareholder’s Interests are well protected in India. Apart from ranking high on the ‘ease of doing business Index’, a greater disclosure is now required of the board members on matters of ‘conflict of interest’.

Legislations

  • A National Company Law tribunal and an appellate tribunal was set up to replace the existing Board for Industrial and Financial Reconstruction (BIFR) and Company Law Board (CLB). The National Company Law Tribunal was set up to resolve corporate disputes faster and efficiently, to examine existing laws that relate to winding up procedures and to suggest reforms regarding winding up and insolvency in an effort to match up to international standards and practice in this field.

  • The ease of doing Business in India is also about exiting a business efficiently as much as it is about starting and running one. Thankfully, the Government is soon to enact the ‘Bankruptcy Code’, which will make it easier for investors to exit a business in case of Insolvency.  At present, it takes 4 years to resolve an issue related to insolvency. With the new code, time taken to exit from a business will be reduced to a period of under a year.

Foreign companies that invest in Indian businesses have contributed heavily to India’s economic growth over the past years. The Government has set up FDI and FEMA measures to increase economic activity, set regulations and caps on sectors and generate employment opportunities.

Foreign Direct Investment (FDI)

Money that India receives from investors abroad is FDI. Foreign companies that invest in Indian businesses gain a monetary advantage in terms of labour wages and benefit from the high economic growth rate prevailing in India.

The Foreign Direct Investment allowed for an entity based in another country is:

Sector FDI Allowed
Direct route Indirect route
Insurance and Pension 49%
Defence 49% above 49%
DTH, Cable, sky broadcasting 100%
Brownfield Airport Projects 100%
Scheduled Air Transport Services 49% 49%-100%
Foreign Airline Companies 49% of paid up capital Upto 49%
Marketplace Model of e-commerce 100%
Food products manufactured/produced in India 100%
Asset Reconstruction Companies 100%
Brownfield Pharmaceuticals 74% above 74%
Private Security Agencies 74%
Non ‘News and Current Affairs’ linking channel 100%
Mining and Mineral separation of Titanium Upto 100%
Publishing/Periodicals/Journals Upto 100%
Publication of foreign newspapers Upto 100%
Publication of Indian versions of foreign magazines Upto 26%
Satellites Upto 100%
Telecom 49% 49%-100%
Banking Private Sector 50%-Upto 74%
Banking Public Sector Upto 20%
FM Radio Upto 49%
NBFC 100%
Commodity Exchange 49%

(Figures as of August 2016)
Source: http://www.makeinindia.com/eodb

The Foreign Exchange Management Act, 1999 (FEMA)

The Foreign Exchange Management Act, 1999, was set up with the aim of Increasing foreign exchange through increasing external trade and promoting foreign exchange markets in India. All Offences relating to Foreign exchange are considered Civil offences.

Some of the revisions in regulations of FEMA to promote the ease of doing business are:

  • Acquisition and transfer of fixed/immovable property – several conditions for which RBI approval is no longer required to buy immovable property outside India by a company registered in India.
  • Possession and Retention of Foreign currency – an individual can have up to a maximum of USD 2000 in foreign currency at any time. This applies in all cases other than if the individual is not  a permanent resident of India, he obtained the foreign currency while being resident outside India or if such currency was brought in compliance with the laws applicable.
  • Export and Import of Foreign Currency – the upper limit of notes an individual can take outside the country or bring into India is INR 25000 (currency notes or RBI notes).
  • Import of Foreign Exchange – foreign exchange sent to India has no upper limit except in the case of currency notes, traveler’s cheques and bank notes. The upper limit on these types is USD 10000.
  • Postal Order/Money Order – any person can buy foreign exchange from any Indian Post Office in the form of money order or postal order.
  • Declaration of exports – for businesses that are either engaged in exports or those that are set up in Special Economic Zones or Special Technological Parks need to declare their exports backed up with evidence.
  • Insurance – regulations that are stated for an individual resident in India that avails a general or a life insurance policy issued by an insurer outside India and vice-versa.

Routes to Invest in India

Automatic/ Direct Route – No permission from the Central Government required under this route.

Government Route – Applications that are considered by the Foreign Investment Promotion Board (FIPB) come under this route.

Who can Invest in India?

  1. An Individual – FCVI, Pension/PF, Financial Institutions

  2. A Company – Non-Resident Indians, Foreign Trusts, Wealth Fund

  3. Foreign Institutional Investors – Private Equity Funds, Partnership Firm, Proprietorship Firm

Note: Investors from Pakistan and Bangladesh can Invest only through the Government of India. Residents from Pakistan cannot invest in Defence, Atomic, Space and other select sectors of the economy.

How to Invest?

Foreign Investors can invest in India in the following ways:

  • Incorporating a company – Either a ‘Private limited’ or a ‘Public Limited’ Company.
  • Sole Proprietorship/Partnership – Under RBI approval.
  • Limited Liability Partnerships – Allowed under Government Route in sectors that have 100% FDI.
  • Other Structures – Not for Profit entities, etc. are subject to FCRA regulations.

The steps an Investor should follow before investing are:

  1. Identify Sector
  2. Obtain Central Government approval if required for that sector
  3. Transfer Funds through eligible financial instruments
  4. Meet the stipulated requirements of the RBI Act
  5. Registration and Document Filing (PAN, TIN)
  6. Find Ideal Space and obtain clearances, if any
  7. Obtain Licence(s) if required
  8. Finding staff, paying taxes, etc

Taxation

An individual – Is taxed on the net income earned based on the tax bracket

A company – 30% tax + surcharge + education cess. Profits withdrawn are Taxed

Branch Office or Permanent Establishment – 40% + surcharge + cess

Incentives provided by the Government

  • Special Economic Zones (SEZ), Export Oriented Units (EOU) and National Investment and Manufacturing Zones (NIMZ) offer incentives such as tax reduction and tax holidays for businesses set up in such zones. Manyata Tech Park and Eco-Space are examples of SEZ’s.
  • Incentives on exports such as duty remission/exemption scheme, market schemes, focus products, duty drawback, etc.  to increase exports.
  • Area based Incentives for operating in particular areas of India such as Uttarakhand, Assam, Jammu and Kashmir, etc.
  • Apart from these Incentives, each State Government has its own incentive policy.

It is safe to say that with the Governments several acts and initiatives to stimulate increased investment and growth, India has truly built favourable all-round business conditions. India emerged as the top destination for foreign direct investment (FDI) by capital investment in 2015, attracting $65 billion worth of investments, overtaking China and USA. Business in India? Absolutely.

Guest post by LegalDesk.com, a Do-It-Yourself legal platform for making legal documents online. LegalDesk.com helps startups with incorporation and legal documentation services. It also provides Aadhaar-based eSign service to businesses.

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Learnings from iSPIRT Product Roundtable: Building a supercharged team in Silicon Valley

How should Indian entrepreneurs think about hiring and scaling teams in Silicon Valley? What are the thorniest hiring challenges? Who should the first hires be? How can founders scale culture globally?

To focus on this topic, iSPIRT  organized its 2nd Bay Area playbook roundtable– “Building a supercharged team in Silicon Valley”. It was moderated by Jaspreet Singh, Founder and CEO of Druva, a leading platform startup that operates across the Bay Area and Pune. Other participants included the founders of RecruiterBox, StrikeDeck, Supply.AI, 42Gears and ShieldSquare.

This blog shares themes that emerged from a discussion focused on Leadership, Hiring, and Growth.

Playbook with JaspreetHiring for wartime is different than for peacetime  

Borrowing from Ben Horowitz’s “peacetime versus wartime CEOs” concept, the group discussed how startup hiring is more like wartime whereas many well-meaning management principles are derived from peacetime environments, where certain scale and stability are assumed. Key ideas discussed included:

  1. In early stages, you just need 10X type talent i.e. women and men who can scale 10X on any problem thrown at them, and those who are 10X aligned with the founder’s vision
  2. Hire those who understand the “truth you know”, are deeply curious and aligned to your mission.
  3. This often means talking to 3-5 candidates to find the right portfolio of skills that works for you
  4. Using a sporting analogy, hire athletes who can scale as player-coaches, versus people coaches
  5. Stress test in interviews with questions as “if you fail in 90 days, where will you fail”?
  6. Recruiting is exactly like sales and founders should use all channels at their disposal including networks, investors/advisors, and personal meetings with talent in critical areas

Leadership and culture strengthen from hard Socratic questions

All the founders in the roundtable observed that scaling personally is the starting point to becoming a great leader and building strong leadership. Key ideas were discussed around how founders can scale.

  1. How do you know that you’re a good leader? One answer proposed was “when teams consistently come to you for advice” and you can see the advice worked.
  2. Startup founders need to balance “dictate” and “debate” – two default modes most founders fall within. Build leadership teams that counter and balance their default modes.
  3. As startups scale, founders should scale by metaphorically poking holes (asking the right business, product, or people questions) versus having a tendency to own every key decision
  4. If a founder really wants to go deep into a functional area (e.g. Product or Marketing) when they already have VPs, it helps to explain why the Founder wishes to own a function, take permission and build the personal trust to go back if things don’t work as planned.
  5. In the era of Slack and smart collaboration tools, having a large span of control, e.g. 7-10 direct reports should not be a problem for most startup founders as they scale employees to >100

Rapid global scaling needs clear processes and a robust culture

When startups rapidly scale across the US and India simultaneously, it can sometimes lead to parallel sub-cultures. The group discussed some best practices that help founders scale truly global companies:

  1. Approaches such as Objectives and Key Results (OKRs) are really helpful to institute discipline early on in a startup. Other processes can include having a dedicated person (e.g. Chief of Staff) to just own India-US communication.
  2. Teaching employees to self-evaluate themselves towards personal progress goals is more helpful than traditional performance management practices
  3. On prioritization, there’s a temptation for founders to take on simple tasks they know well, e.g. writing messaging copy. It helps to instead focus on difficult tasks (e.g. Quote to Cash or Demand Generation) that are critical to scaling
  4. Within a culture of transparency & trust, it is still crucial for founders to trust but verify, because the bar of product or company quality ultimately starts and ends there
  5. While founders offer feedback to employees, the shit sandwich (nice things + criticism + nice things) is far less helpful than being curious and just asking lots of specific question
  6. Team and culture “pull” is like product momentum, if you don’t see it or feel it, it means you probably don’t have the right team in place yet. Teams need to really bond with each other across borders and it is critical for the US team to visit the India team (more than just India teams coming to US).

Book references

Some book references were invoked during the roundtable. Here’s a list of the books mentioned

Good to Great, Jim Collins

The Art of Management, Peter Drucker

Zero to One, Peter Thiel

Only the Paranoid Survive, Andy Grove

The Hard think about Hard Things, Ben Horowitz

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India in 2030’s – Impact of India Stack

The year is 2030. India is a developed, happy democracy. With a population of over 1.5 billion, it has become a role model for other nations, both developed and developing, in putting public digital infrastructure to enable paperless, presence-less, frictionless transactions.

The new generation does not know what a government office looks like and has not encountered government bureaucracy. Instead, what they interact with is an omnipresent, government digital infrastructure that delivers services instantly — from anywhere with no paperwork, only with their consent and their privacy protected.

We describe the typical activities of life as it progresses from the view of two generations.

The story

Radha and Rahim live in a remote village in India and are expecting their first child. The government provides financial assistance to the pregnant mother, Radha, for a healthy diet. The financial assistance is transferred to the Aadhaar-linked bank a/c using the Unified Payment Interface (UPI) infrastructure. Radha can use the money and the UPI system to pay for nutrition in a cashless manner at any shop for supplies. Her pregnancy monitoring medical reports are delivered to her Digital Locker electronically. With her active consent. she can share these reports electronically with other doctors or agencies to assist her in the decision-making process during the pregnancy period. Further, Radha can, again with her active consent, share her anonymised pregnancy reports for data analytics, which will in turn promote the understanding of major medical trends in the neighbourhood, region, state and country.

Soon, Radha and Rahim are now blessed with a beautiful girl. They name her Rani.

When Rani is just about a month old, her parents get her an Aadhaar identity. Since the day Rani started understanding concepts like her name, her identity, etc, she also knew she has a unique identity number, called the Aadhaar number. Even before she could walk, Rani had a bank account. So as she grew up, Rani would provide her Aadhaar number as part of her identity at various interaction points. Be it getting a scholarship in school, her education progress reports, her medical reports, her insurance policies, her bank a/c details, and so on, all these documents are conveniently available in here Aadhaar-linked Digital Locker. Rani can conveniently access and share these documents with her active consent.

In Rani’s mind, there isn’t much difference between a bank a/c and an email account. While one holds and transacts with money, the other holds and transacts with emails. For Rani, her Digital Locker account is the only locker she understands, and this is where she can find and keep her documents safe. She never has to worry about maintaining physical documents or their photocopies as the Digital Locker is a hassle-free system.

Rani, Radha and Rahim visit the local medical centre periodically for routine check-ups and immunization. Their medical progress records get digitally stored in their respective Digital Locker accounts. If during the medical interaction, a new doctor wishes to refer to their historical medical record, the same is available to the doctor after s/he gets active consent from the patient.

Back in the days…

Rani once went to the ‘bank branch’ to open a new a/c. This field trip was part of a ‘museum tour’ for her class to understand how banks used to work in the past. When she stepped inside the branch, she was shocked to see old photographs showing how people would carry papers and files of their identity papers, stand in long queues at the counter and submit photocopies to have a bank account opened, in the past.

In this museum bank branch, she witnessed old cheque leaflets, passbooks and various forms which were used for withdrawing and depositing money in the bank being preserved in glass displays. This was all very strange for Rani because the only physical currency that she had ever seen was in a preserved format at her home. The visit sparked Rani’s curiosity. When she got home that evening, she asked her parents about how her generation’s life differed from theirs.

Rani’s question took Radha and Rahim on a nostalgia trip to the times before 2010, when they struggled to access basic services. They narrated the ordeal they faced, starting from establishing their identity at various government departments for any service delivery, the umpteen number of photocopies of their psuedo-identity papers such as ration card, voter id, etc, that they would need to submit. In addition, since Radha and Rahim were young and would move depending on where they found work, it would be hellish to establish their identity in different cities and towns in the same country. This was so because one state would not recognise an identity document issued by another state.

Life in 2030

Soon, Rani completes her education and is skilled enough to enter the workforce. She shares her credentials with independent agencies, which anonymize her identity and add the data provided by her to the national skill registry. Such a skill registry can assist the government and other agencies to plan for skill development of the nation. Rani shares her credentials from the Digital Locker with her active consent with a prospective employer. This appears seamless now but she recalls her parents’ struggle that in the pre-2010 times, there used to be an entire industry whose job it was to verify credentials submitted by candidates for prospective employers. This so-called industry was so big that scrupulous elements would run scams of procuring fake certificates to enable unqualified job seekers get jobs.

After working for a few years, Rani decides to become an entrepreneur. As an entrepreneur, Rani interacts with various customers and vendors. She uses the UPI framework for seamlessly receiving and making payments across the country instantaneously.

Rahim often jokes about the ease of payments in the current times, describing how difficult it was to send money to his parents in their village. Today, anyone can send money to someone else by simply knowing the person’s mobile or Aadhaar number at near-zero cost and almost instantaneously. But when he was young, he would be charged 5% of the amount to transfer money, and the transfer itself would take upto a week before the money reached his parents.

Rani gets married, she receives her marriage certificate from the government in her Aadhaar-linked Digital Locker electronically. Rani was able to share her marriage certificate electronically with various authorities and agencies to change her name on documents such as her driving license, bank account, passport, etc. This ensured a seamless and hassle-free name change.

With marriage came the onus of investing in life and non-life insurance policies. Being a digital native, Rani acquired these policies using the E-KYC process with UPI framework for payments. These policies were then issued by the insurance companies and directly resided in Rani’s Digital Locker. She can access these policies from any location and at any time. The best part is that she isn’t afraid of losing the paperwork — unlike her mother Radha, who now has a special affinity for the Digital Locker.

Radha had a particularly trying phase in 2005 when a cloud burst in Bombay led to a massive flood in the metropolis. Radha’s ground floor house went under water and she lost all her documents — her identity cards, education certificates, medical reports, insurance policies. She had to run from pillar to post at several agencies and government offices for an entire year after the floods just to obtain a copy of all the washed out documents.

Every time Rani recalls her mother’s tale of ordeal, she feels blessed to be born in the current time.

The safety of the digital locker makes her sleep peacefully without worrying about paper documents, and being able to share these conveniently with consent. The removal of the big payment processing hurdle has ensured that Rani focuses her energy on improving and expanding her business to serve the larger society. Macro data analytic trends helps her plan for what the society needs and be assured that her services will be required in the future.

Conclusion

India Stack is the term given to a bunch of public digital utilities that have been created by the government since 2010. These include:

1) Aadhaar – a biometric-based, unique identity platform, with a facility to authenticate online

2) E-KYC – A service which empowers an Aadhaar-holder to share his/her Know-Your-Customer information electronically with active biometric consent

3) E-Sign – An online electronic signature service, facilitated via E-KYC to digitally sign a document

4) Digital Locker – A mechanism to issue government documents to Aadhaar-holders in electronic format for convenience of storing and sharing when required

5) Unified Payment Interface (UPI) – A payments architecture that enables universal electronic payments that are cashless and promote financial inclusion

In the pre-IndiaStack days, there was much friction in every transaction of routine business. Concepts like data analytics on anonymized records for prediction could not be envisaged. The extensive adoption of IndiaStack makes all these benefits a reality.

Shrikant Karwa

 

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India can’t afford the comforts technology provides. Here’s why

There’s a belief globally that we have a burgeoning middle class in India — and we’re following in the footsteps of China’s massive change from immense poverty to a stable middle class.

But that’s really not the case. There was a very interesting article onScrollsome time back explaining this.

According to the article, “China…saw its middle-income proportion go up from 3% in 2001 to 18% in 2011.” This growth in disposable income, coupled with technology, fueled growth in consumption, most probably with some visibility of profitability for businesses in the country.

In India this hasn’t happened.

“All those stories about India’s burgeoning middle-class have little to do with reality: India is, as it has always been, woefully poor.”

Instead, it seems that the major shift that’s happened is the really really poor are now just poor. And no where close to being determined middle class by any definition. The article does a good job of showing how middle class globally is defined.

Here are a couple of charts showing this move.

We don’t know how fast this low income bracket will start moving into middle income, but my guess is quite slowly. There is a lack of education, lack of opportunities, and lack of incentive for anyone in a position of power to do anything drastic about it. And even if we were motivated, these things take much more time in multi-party democracies like India vs countries like China.

If this is the reality, it’s going to be tougher and tougher for transactional business dealing with consumers (like ecommerce) that make money on delivery/logistics to grow in spite of this long term. Here’s why.

Today, the average take rate (the percentage of each transaction companies make to run their businesses) isn’t sufficient to cover costs related to the transaction. Yet, the take rate as a percentage of the cost of any one item is so high that it’s difficult to imagine most companies being able to increase it. On average companies charge a 10/15% take rate. How realistic is it that any consumer will be willing to pay 25/30/40% extra on top of the cost of an item? Probably not that realistic.

More woes

Photo credit: Lord Enfield

It gets worse. Logistics costs are going up. Believe it or not, ecommerce players have been lucky with overall delivery costs so far. They have spent on everything except their front line. And that’s showing. We’ve seen the repercussions of this at Flipkart already, and things are going to change really fast — starting with delivery staff salaries. So, even increasing take rates (as unrealistic as that sounds) will only help maintain present losses.

Seems like an impossible problem to crack, right? Well, it gets worse because scale doesn’t solve the problem. All these businesses need a substantial offline operational capability. As a result, they get little benefit from growing because they keep needing to add people, delivery centers and other logistics related costs.

And now, to top it off, they’ve been marketing to a middle class that is significantly smaller than was originally imagined. Most people can’t afford as much as online companies need them to — meaning the size of every transaction is only going to get smaller. And since take rates mostly work as a percentage, they’re going to reduce. In fact, it’s very possible that the take rate percentage itself will be under pressure to reduce. And all the while, customer expectations on quality service and delivery will remain the same.

So how do you make up the income? Ad revenue? How realistic is that ad spend in the country will go up any more than marginally anytime soon? How realistic is it that any ancillary revenue streams will make up enough of the short fall? Seems far fetched to me.

It’s actually really unfortunate. There are so many businesses that we truly need in India, but the majority of us can’t afford for them to be as efficient as they are today. How long will this gap in affordability and convenience be funded by private equity? My guess is — not long enough. (But as a consumers, I’m going to enjoy it while it lasts.)

From what I can tell, as bad as the margins are for these businesses, this is the best they will ever be. And that’s scary.

Guest Post by Sid Talwar, Partner at LightBox Ventures

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How IndiaStack can bridge country’s digital divide

IndiaStack can enable the government, the citizens and entrepreneurs to interact with each other through an open digital platform.

At a time when financial technology is changing the face of Indian banking, the government is looking to bridge the digital divide.

The biggest hurdle here is paper-based authentication and approvals. To bridge this gap iSpirt is working with various government agencies to develop IndiaStack.

What is IndiaStack?

IndiaStack is a paperless and cashless service delivery system being conceived by a digital think tank iSpirt. It can enable the government, the citizens and entrepreneurs to interact with each other through an open digital platform. It is the largest application programming interface that is being developed in order to enable 1.2 billion Indians to get access to goods and services digitally.

When was it started?

It was conceived by the government of India in 2012 when they realised, in order to help services reach the last mile of the Indian population, it needed private technology solutions to be built on the Aadhaar database. The project is being pedalled forward by Nandan Nilekani the ex-chief of Unique Identification Database Authority of India, who describes it as the “Whatsapp moment for Indian banking”.

Why is it essential?

The government has been striving for a less cash economy to prevent pilferages and last mile connectivity of financial services. While the Aadhaar database allows users to complete all KYC requirements, there is still a gap in getting approvals because of the need for a signature on paper.

IndiaStack will be able to bridge that gap through its digital lockers which will allow for digital signatures and seamless API (Application programming interface) integration for authentication through eKYC.

How will it be designed?

IndiaStack is conceived as a pyramidal structure based on the Aadhaar database as the base and unified payments interface (UPI) that is being developed by NPCI (National Payments Corporation of India) as the top. The two middle stacks comprise digital signatures and eKYC.

Nilekani has explained that with the help of digital signatures customers will not need to actually sign a paper document, instead it can digitally sign it by using a smartphone. eKYC will also enable the identity of the customer to be determined digitally as well.

How will it be beneficial?

The biggest benefits could be completely digital payments through the UPI infrastructure for a less cash economy. Also, loan approval through eKYC and digital signatures could be done faster in a paperless fashion. Both these steps can bring people without access to digital payments to come within the digital fold.

Republished from ETTech
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A 3-Stage Power Booster for Your SaaS Rocket

When a capsule is launched into space, the initial rocket gets it off the ground. However, that rocket can only get it so high. Eventually it runs out of fuel and the structure needs to drop off. At that time, a second rocket booster ignites and continues to propel the capsule into space.

In the world of startups, getting your company into orbit usually takes a few power boosters to get there. Your initial boost may get you off the ground, but it’s not enough to get into space. Even if you are at a later stage, if you don’t have the right final rocket, you can still crash to the ground before you reach orbit.

iSPIRT offers several activities to help SaaS founders and companies right when they need it. Each of these sessions acts like a multiple-stage power booster to give your company the lift exactly when you need it.

Most SaaS companies need these three rocket boosters to achieve orbit:

  • Stage 1: Product Tear Down
  • Stage 2: Getting to $100K MRR (i.e. approx $1M ARR )
  • Stage 3: Hyper Growth – Firing all cylinders

In the product tear down session, founders get critical feedback. This is not for the weak hearted.😜

Stage 1: Product Tear Down

In this session, we help validate

  1. The core problem you are addressing
  2. Your differentiated solution to that problem
  3. How customers might discover you
  4. The consistency of your website and overall offering (audience, problem, position, price, credibility, etc.)
  5. Freemium vs free trial, simplicity to signup, signup friction
  6. The ‘shortest path to WOW’ that is appropriate for your product

The product tear down session is run by Shekhar Kirani, Venture Partner from Accel Partners, Suresh Sambandam, CEO of KiSSFLOW, and Bharath Balasubramanian, UX Architect from FreshDesk.

Here’s a bit about each of these sessions. While the principles will apply to any business, it applies much more aptly to SaaS software companies

Stage 2: Getting to $100K MRR

Your Stage 1 rocket should be enough to get you off the ground and achieve a good height with your initial set of customers. Now you have a working hypothesis that puts you in pursuit of the right product-market fit.

Your Stage 2 session kicks in when you’ve found the product-market fit to systematically grow the business. For companies at this stage, we moderate Playbook Roundtable sessions. This slide deck should give you a broad idea of what we discuss with the playbook participants.

Stage 3: Hyper Growth – Firing All Cylinders

Companies that have crossed $1M ARR are selected to attend this session. A typical SaaS company doesn’t have enough resources to pursue a lot of initiatives. Often there is a big disconnect between what founders want to pursue in S&M viz-a-viz what they should focus on to get to the first $1M as quick as possible. Therefore, Stage 2 centers around a focused set of must-do initiatives, rather than spray-and-pray on many initiatives. You might notice that many topics in Sales & Marketing are missing or discouraged in the slide deck. That is by design.

Stage 3 is extremely important because even though you’ve cleared thousands of miles, you still aren’t in orbit yet and need the final power booster to get there. For Stage 3, we bring you none other than the SaaS Superstar, Girish, Founder & CEO of FreshDesk, to share how to take your $1M SaaS company into a $5m enterprise.

If your SaaS startup is sitting on the ground or about to make a nose dive, don’t miss out in getting these booster shots to launch yourself into a grand orbit.

Oh, we also do a big gala event called SaaSx once in 6 months in Chennai, where we bring together all the SaaS founders in one place. The last three editions (SaaSx1, SaaSx2, and SaaSx3) have been blockbuster hits. And if you are in Bangalore, you can join the big crowd attending the SaaSx sessions on ‘SaaSy Bus’.

If you are a member of a SaaS founding team, you should definitely join the SaaS Insider Group and be up to date with SaaS news in the country and across the globe. Last but not the least, Avinash Raghava, Fellow at iSPIRT is the common thread among all these orchestrated activities for SaaS from iSPIRT. He is passionate about helping SaaS founders and none of this would be possible without him.

P.S. iSPIRT harnessed the collective knowledge of SaaS founders into a structured document called the Jump Start Guide for Desk Marketing and Selling. Check this out without fail.

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The power of a question

A few days ago, while I was discussing a rather critical business solution with one of my colleagues, I noticed that there was a strange circularity to our conversation. I kept trying to convince him of the importance of deploying such a solution,but I seemed to fail at eliciting a sense of urgency or enthusiasm from him, even though he did not disagree with me.

It might have been slight vexation on my part when I decided to break the impasse with the question, “So, what’s stopping us from doing this?”

It was then that I discovered that he had concerns about how to go about the task while I was focusing the conversation on why the job mattered.

The communication fog was lifted. We had identified the roadblock.

We often assume that the best way to communicate anything — an idea, a challenge, a solution — is to perfect the art of explaining it to the listener to provide clarity.

However, we tend to overlook the possibility that the questions we are trying to answer are sometimes not the ones that exist in the others’ minds. This could render our efforts at providing clarity, completely irrelevant.

What might be another effective way to communicate, then?

Perhaps, asking questions?

Knowing the answers will help you in school. Knowing how to question will get you through life– Journalist and speaker Warren Berger — ‘A more beautiful Question.’

It turns out that I am not alone in my quest for questions.

A few months ago, the practice of brainstorming gained a fraught reputation, when technology pioneer and author of the book, “How To Fly A Horse”, Kevin Ashton kicked up a storm with his blog post provocatively titled “Why You Shouldn’t Bother Having Brainstorming Meetings”.

Brainstorming, of course, is a highly popular practice; as he noted, it’s the “go-to approach” for all types of organizations. A typical brainstorming session gathers groups of people to focus on collecting original, creative ideas on a set topic. But this apparently benign approach, Ashton goes on to argue, actually gives rise to ideas that are anything but original. That’s because the focus is on churning out answers.

But what if brainstorms were designed to generate questions, not just ideas for answers? It’s an approach that’s garnering support among many advocates around the world.

The latest champion of this approach is Matthew E. May, author of the book, “Winning the Brain Game”. His book describes a question-generation process called “frame-storming,” which uses questions to help in framing the challenge at hand. Several people have found it to be more efficient than traditional brainstorming in sparking fresh thinking in some situations.

What if we use questions as a method to drive home the thought behind an idea, to help the listener generate answers, instead of to generate questions?

Guiding people into answers through relevant questions surrounding a topic may seem counter-intuitive. It is more natural to try and get people to see the answers when we have them worked out. However, this question-based approach can lead to greater clarity than the usual method of having them ask questions for improved clarity.

It also helps to remember that a question triggers our brains to start serving up answers, almost on autopilot. The answers almost always reinforce the assumptions behind the questions.

Naturally, at this point how the question is formulated assumes paramount significance. A question could spark random divergence from the actual problem by introducing more assumptions, or could become a harbinger for radical solutions or ideas by shattering existing assumptions. Either way, the design of a question definitely begs a lot of attention.

For ages, questions have been at the heart of innovations in science, philosophy, medicine — why not extend the power of the question as a tool for sharpening and deepening communication?

About the Author

Shivku is usually found cracking PJs in the office and disrupting people from doing their job. A self-proclaimed foodie, he is the best person to get the local food scene advice from, irrespective of where you aretravelling to. This blog originally appeared on Medium.

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An Alternate View Of The Future

Just over 12 years ago, I sat on the sofa outside my office in Infosys, and explained to Tom Friedman about how the playing field was getting levelled through technology. This inspired him to write ‘The World is Flat,’ an international bestseller that sold millions of copies and captured the zeitgeist of the era.

It was an era where technology and political change brought everyone closer. The Dissolution of the Soviet Union in Dec, 1995 was presaged by the fall of the Berlin Wall on the 9th of Nov, 1989. And, the Berlin Wall incident was set in motion by the invasion of the communist Grenada in Oct, 1983. Grenada’s regime change marked the beginning of the end of the Soviet empire. The design of the containerized ‘box’ laid the foundation for global trade in goods and the massive investment in telecommunication capacity and undersea cables as part of the ’dotcom’ boom and bust, laid the foundation for global trade in services.

In this context, last Friday’s Brexit is a momentous development. It marks the turning point in the Wests’ 35 years of globalization. It is truly a ‘Grenada’ moment, but in the opposite direction.

Over the next few years, the West will slowly turn back on immigration, outsourcing and economic integration. This will have major consequences for everybody in the world. India will have to focus on its own domestic market and not on exports.  Automation and Chinese overcapacity will hit manufacturing, and growth will come in services. Employment and entrepreneurship will happen through platforms that aggregate – farmers, retailers, truckers and vendors. This will result in the formalization of the economy in a big way, as finally the benefit of being in the system thanks to affordable and reliable credit will be higher than staying out. India has the potential of many years of high growth as millions of Indians join the organized society. India Stack will be a key enabler for this to happen!

We have been thinking a lot about this scenario at iSPIRT. This presentation (pasted below) captures our view of such a future. Hope you enjoy it!

You can also catch my talk on the future of India in the age of technological disruption at Think Next 2016 in Bangalore (video pasted below the presentation here).

 

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Vijay Mallya’s Domino Effect: The Real-World Consequences of Late Payments

vijay mallya

(Originally posted here)

Vijay Mallya, the Chairman of United Breweries, exited the country on March 2nd 2016 – defaulting on loans worth Rs.9000 crores to 17 banks. The media storm which subsequently rained down upon the Mallya name would befit the crime, if it wasn’t painting an incomplete picture.

 

Given the frenzy and the weight of the government apparatchiks brought down to bear on the Mallya brand, it wouldn’t be remiss for the layperson to assume that Vijay Mallya is the heftiest loan defaulter of all time. At roughly $1.5 billion worth of money owed, his figures would make Donald Trump proud.

 

Yet, as verified by papers released by the RBI, Kingfisher Airlines was Top 5 at best. Indeed, if Newslaundry’s independent verification is to be trusted, Mallya was at best Top 10 on the list of India’s largest defaulters.

 

So, Why Should I Care?

We can practically hear you screaming this question. You’re sick of hearing about Mallya, and how one big corporateur didn’t pay an ungodly sum of money to another bunch of fat banks.

 

But, as Hummingbill has been trying to educate you, the damage done by late payments never ends there.

 

Take the example of one Manmohan Singh, a crop farmer in Uttar Pradesh. In December 2015, when he arrived at the Nand branch of the Bank of Baroda to operate his two accounts (total balance: Rs.5200) and pay his monthly crop loan installment, his accounts had been frozen as per the directions of the Mumbai Head Office – because he was listed as a “guarantor” to a loan to one Vijay Mallya.

 

This farmer, whose wife was undergoing treatment for a brain tumor, had to sell his crops at a fraction of their value for cash, while the bank sorted out this “technical error”. He eventually had to pay 12% interest on late payment to the crop loan, also taking on board the mark against his credit history for no fault of his own.

 

Sounds like a freak isolated incident, doesn’t it? Well, it was freaky, but by no means was it the only one.

 

Enter Subhash R Gupta and Subhash Ramdulare Gupta, both of Mumbai – one a security guard living in a Slum Redevelopment Authority building in Vile Parle, the other a vegetable hawker near Khar station. Both these men were identified as “guarantors” to Vijay Mallya, and had their meager assets and FDs frozen until further notice by the Bank of Baroda.

 

Now, how could this happen? As it turns out, these three men were mis-identified as Manmohan Singh Kapur and Subhash R. Gupte, both Directors on the board of the defunct Kingfisher Airlines. And, as FirstPost’s investigation concluded, this wasn’t a simple “technical error affecting a single man” as the nation’s headlines had been screaming, but an abject lack of even the most basic fact checks.

 

But This Isn’t A Late Payment Fallout

And that’s where we disagree. It is by discounting financial, administrative and other real-world impacts of late payments such as these that we, as entrepreneurs, have escalated the late payment culture in India to its current catastrophic levels.

 

I mean, 98% of businesses in India trade on credit, and 97% of them were paid late by clients in 2015.

 

A report by IFC estimated that the debt gap in Indian businesses is roughly Rs.2.93 trillion. With 1 in every 2 B2B invoices paid late in India, do you really believe that there haven’t been a myriad of negative impacts on the economy and life of the country?

 

The case of these three men just happened to be the most visible fallout in the media from the Vijay Mallya case. Yet, the impact of financial mismanagement which led to KFA’s downfall hardly stops with them.

 

As the CEO of a mid-sized business, which frequently provides services to the aviation and hospitality industry, confided in us on the condition of anonymity – the folding of Kingfisher Airlines took with it several tens of lakhs worth of overdue Accounts Receivables.

 

KFA being one of his largest clients, with a staggering payment accrual for services already rendered, it took his business a long time to recover and return to a partially stable footing.

 

As Business Standard also notes, the end of Kingfisher Airlines left a string of “creditors, suppliers and employees with unpaid dues.”

 

Over 50% of Indian B2B SMBs state that they are paid late by clients because of liquidity issues, and over 50% of unrecoverable B2B receivables occur because of clients going bankrupt. So how many bankrupt and unpaid companies do you think an entity as large as Kingfisher Airlines left in its wake, and among the web of its own supply chain?

 

But one of the most heart-wrenching effects of Mallya’s personal little chain reaction on the Indian business industry was depicted in this letterpublished in the Economic Times by former KFA employees. It portrayed the pain of his former KFA workforce and suppliers watching Mallya party on yachts and receive business accolades from Indian and foreign institutions alike, all the while maintaining that he didn’t have money to pay them.

 

And now, they have to silently sit and watch as this man takes on the role of a maligned businessman, thanks to the gross inefficiencies of the system which attempted to bring him to heel.

 

But Nothing Can Be Done Against Big Clients Like Vijay Mallya

Exactly. And therein lies the fundamental imbalance in the Indian business environment. Despite our constant efforts to educate visitors and readers of best payment practices to protect your business from late payments, a large client who willfully defaults suffers no consequences.

 

As Doing Business found out, pushing for contractually owed payments would cost a supplier 3 years in court and over 40% of the claim value, which is ridiculously ineffective as a protection measure.

 

Moreover, the unspoken rules of business in the supply chain also prevents unpaid suppliers from publicly ratting out their non-paying clients, or else they fear losing future business with other prospective companies who like to play fast and loose with payment terms.

 

Which is why we at Hummingbill have launched a Change.org petition to address this state of affairs. Simply put, we need every suffering business on our side. Join the fight.

 

In the meanwhile, if your organization suffers from overdue accounts receivables, try Hummingbill. All core features free, and experience our premium features during the 14 day free trial.

change.org late payment petition hummingbill campaign accounts receivables overdue non payment clients court case finance minister prime minister india business b2b smb
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1 Critical Analytics Mistake

Why some well funded/big companies miss business targets?

Companies tend to focus 80% of their analytics effort on analysing “Historic Indicators” versus identifying “Leading Indicators” to grow business.

This is biggest mistake I see wrt how some companies leverage Analytics.

3 Examples of how Analytics Numbers should be used:

  1. Spot Contrarian Points: Usually, consumer businesses experience low sales in January after Christmas in December. But I experienced a scenario where January revenue was more than that in December. February sales were even better than January. This defied all historic trends. Analytics diligence gave us some surprising leading indicators that helped grow business.
  2. Customer Buying Trend: To help increase sales, instead of focusing on just why last quarter revenue growth is below expectations, identify leading trends on what customers are likely to buy and how industry cyclicals may impact buying behaviour in future quarters.
  3. Product Innovation: Extrapolate and derive key leading indicators that dictate how your product or service should evolve for sustenance and growth. Kodak missed the digital indicator, Blackberry misread smartphone/Android leading signs and Google missed the Social indicator.

Bottomline: 80% focus on leading analytical indicators and 20% on historic ones… instead of the other way round will substantially increase your chances of meeting business targets.

Guest blog post by Palash Jain, Investor at inFeedo, 

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Why We Started A Change.org Petition Fighting India’s Late Payment Culture

 

(Our petition against India’s late payment culture can be found here)

The Late Payment Problem

We’re going to keep this short. Now that 97% of Indian SMBs were reportedly paid late in 2015, the late payment culture in our business environment has gotten out of hand.

Today, India officially carries the longest average payment delays in the Asia Pacific for B2B SMB invoices, 51% of which are always paid late.

The system currently in place is flawed, and heavily skewed in favor of the largest buyers on the market. The judicial system is over-burdened. It consequently delivers justice far too late to save businesses whose money is trapped in clients’ accounts.

What’s more is that the entire idea of justice by law in business is a debunked protection. Smaller businesses almost never take non-paying clients to court because they fear losing out on future contracts. They would rather suffer through the impact of being paid 90 to 120 days late, while their salaries go unpaid or they miss out on larger opportunities to thrive.

This isn’t guesswork either. Not only has this been verified to us in our hundreds of interactions with Indian CFOs and CEOs, but a commission established to study the impact of the EU directive against late payment found that 60% of European small businesses never even consider a legal battle as an option because they don’t want to spoil working relationships.

And why would hard-working Indian businesses, which prefer compromising to build strong working relationships with clients, be any different?

Our Motivation

As supporters of the business reforms espoused by our esteemed Prime Minister, Shri Narendra Modi, we believe that unorthodox action begets change. And yet, the late payment protections for businesses in India have stagnated in the same state for the last twenty years.

The last committee set up in 2014-15 to study further updates required on the MSMED Act – which provides these legal protections to SMBs – did not even consider the necessity for better options. This was despite the comprehensive database of studies measuring the horrendous effects of late payments on the Indian business environment.

Instead, they directly skipped over the issue of late payment protections, and jumped to the question of “How can we provide more access to loans for these companies?” And all we ask is, why? While access to credit is vital for businesses in any growth economy, late payment is the root of significant troubles in the world. It causes bankruptcy and unemployment, and increases barriers to survival in the business world. It also has a significant impact on inflation since businesses up and down the supply chain mark up prices to survive late payments from their clients.

As a single factor, trade credit is indispensable because it allows companies to keep running operations even during temporary working capital shortfalls. But when it extends to the point where clients refuse to pay their suppliers intentionally, as was the case with 38% of Indian SMBs paid late last year, it needs to be addressed.

A late payment culture which forces sellers and suppliers to simply accept it as an unaddressable pain is the equivalent of a cancerous tumor. It creates chaos, and no one can entirely predict which sections of the body it will hit next if left unchecked.

And this tumor isn’t very difficult to target either. Rather that It’s grown this large from a lack of trying than a lack of successful solutions. While we sit and attempt to convince you of the horrific effects of this problem, the UK government has now passed legislation mandating all large companies to release the details of their payment practices twice a year.

This means that SMBs and startups dealing with larger companies will now be able to check beforehand what the average payment term for their prospective client actually is even before signing them on.

Singlehandedly, this increased visibility has become the best prospective protection against large businesses which exploit their financial influence on their supply chain. Now, with the reputation of their leadership on the line, larger companies have lesser incentive to hoard cash while not paying suppliers.

Even though this may not be immediately possible in India’s current business and political environment, our motivation is to bring about similar unorthodox solutions to protect the average Indian business.

What We Want

What we want is simple – for you to sign the petition, and support us by sharing it among your professional and personal circles. This is no longer a problem which affects business alone, but is also a big contributor to why life in India is getting significantly more expensive year on year.

Next, we want the government to approve another sitting committee which will accept input and feedback from the private sector for meaningful practical solutions rather than laws which look good on paper.

Instead of adding more courts alone, which will be overwhelmed just as soon by India’s burgeoning case burdens, we are pushing for the establishment of a first line of defense. We want for policy to allow for out-of-court protections which can be enforced in straightforward non-payment cases, thus clearing the line in courts for more complicated business disputes.

To this end, as some of the most prolific activists pushing for more awareness of the phenomenon of late payment in India, Hummingbill intends to release a policy white-paper for the Indian government as well in the coming month.

Keep an eye on this space for more updates on this exciting journey. Now that we can depend on your support, click here to read and sign the petition.

But, before you leave, what policy recommendations would you put forth from experience, which could help fight the late payment culture in India? Leave your answers in the comments section below.

change.org

 

 

 

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Building Ecosystems, Not Just Products

When you analyze successful consumer and small business products, they succeed as a part of eco-systems and not just stand-alone products.

Consumers and small businesses don’t buy products, the engage in an ecosystem. Facebook is an ecosystem. It is a network of users, groups, businesses and advertisers. Email is an ecosystem, smartphones are an ecosystem, even computers are an ecosystem.

This is a very important question for people who are building technology products. What ecosystem do you belong to?

An ecosystem is a closed group of users or apps with a large number of connections. Once you identify your ecosystem, it is easy to find if your app has a demand. It is also easy to promote your app in an ecosystem, and crossing the chasm from early adopters to mature users is much easier.

Photo: Abhishek Singh

But this only works if you are not looking to be a dominant player in an ecosystem. For example, if you want to make a Facebook app and not a new Facebook.

If you are working on a product that will be the dominating part of an ecosystem, then you have to build your ecosystem. For example if you are planning to disrupt the ecosystem of a popular accounting application like Tally, you have to build a new ecosystem that has all the elements of the Tally ecosystem.

This is worth saying again, you have to build an ecosystem and not just a product.

It is easy to see why Tally is so popular. Accountants know it already. There are training institutes all over the country that teach Tally. There is a ready pool of people you can hire who already know Tally. It has a wide number of “partners” that can help you setup and configure Tally and there are a wide number of plugins available for Tally.

So if a new business has to select an accounting system in India, it is most likely Tally. For the United States, its probably Quickbooks and so on.

So how do you build your own ecosystem?

First, its important to identify the problem you are trying to solve. An ecosystem has at least an order-of-magnitude higher scope than just a product. Second, its extremely hard, time-consuming and resource intensive.

An ecosystem has so many parts that it is crazy to understand just the scope of it.

  1. The Product itself: With the features, user interface, technology stack etc.
  2. Ways to use the product: installers, cloud, virtual machines, docker, vagrant.
  3. Users: Potential users, trial users, paid users, free users, young users, old users, business owners, managers, system administrators.
  4. Contributors: Translators, enthusiasts, evangelists, helpers.
  5. Developers: Core team, bug reporters, third party developers, customization specialists etc.
  6. Service Providers: Consultants, developers, trainers, testers.
  7. Training resources: Videos, manuals, forum, articles.
  8. Developer Tools: Collaboration, continuous integration, platforms, libraries, documentation, videos etc.
  9. Promotion Tools: Website, blogs, case studies, social media accounts, advertising, PR.
  10. New user on-boarding: Domain specific features, defaults, setup.
  11. Localization: Translations, accounting, statutory rules, service regulation.
  12. Roadmap: Feature requests, technology shifts, strategy.
  13. Maintenance tools: Monitoring, releases, upgrades, deployment.
  14. Communication: Support, Email, Forum, Chat.
  15. Events: Demos, meet-ups, conferences, talks.

When you start thinking about all these factors, it is almost impossible to think and come up with a plan. You have chunk each factor one at a time and try and make some progress. This may seem hard, but there is no other way of doing it.

Core Values

I think to build an ecosystem, you must have a deep motivation on why your ecosystem is better than the existing one and why various stakeholders will switch from their ecosystem to yours.

Merely a better product will not do. Dvorak is a better keyboard layout than QWERTY, but the costs of unlearning QWERTY to Dvorak are very high, hence users and manufacturers are all locked in to the QWERTY ecosystem. The product and or ecosystem has to offer a lot more for users to switch and they must be complete.

Dvorak Keyboard Layout (photo: TypeMatrix)

Products are hard enough. If you are clear on your core values and stick to them, and have loads of patience, only then you should attempt to build ecosystems. Otherwise, its better to work within another ecosystem.

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Who said that the customer is a king?

Lesson one in succeeding at customer management: don’t treat them all alike.

Whosoever said that the customer is a king, didn’t tell us which customer! And until you know which customer deserves your very best, you’re not likely to have a very effective customer management strategy. In this post, I want to share a framework which will allow you to understand how to holistically look at your customers and then decide where to start with managing your customers better.

But why is this even important? Well, it is. The competitive pressure that most of the organizations face today has compelled them to find ways to identify customers who deserve to be king and then treat them like one! There is a strong rationale to do so: most of the organizations report that less than 1/3rd of their customer base drives more than 2/3rd of their revenues. This number varies depending upon industries; for instance, a telecom operator may report less variation in per customer revenue contribution than a B2B software development company. This variation simply depends upon the upside potential of customer engagement. Remember, huge variations in a company’s customer engagement dynamics present attractive opportunities for (niche) competitors. Therefore, companies with higher upside customer potential need to have their ‘royal strategy’ ready soon before their king departs to rule elsewhere.

Now, there are two challenges: A) how to identify king customers B) how to design a royal treatment. Though there are numerous ways one can approach this issue, the framework I propose simultaneously takes into consideration the acquisition strategy and CRM strategy of an organization. The argument is, “if a company is not attracting the high potential customers (kings) in first place, no matter what CRM strategy (royal treatment) it pursues, it will never succeed”.

Housekeeping notes:

1) Acquisition decisions reflect in the profile of target customers, acquisition channel, and messaging / advertising strategy. The success of these decisions will reflect in the type of customers you attract. Before putting customer segments to either right customer or wrong customer type, take some time to identify any common patterns / characteristics / predictors of your most desirable customers.

2) CRM decisions broadly cover product selection, buying experience, incentives, personalization, and post-sales support. You succeed if your customers find your overall value proposition exciting on an ongoing basis! Before putting your customer in different buckets of value proposition, consider a combination of quantitative / qualitative factors which show how invested a customer is in this relationship. E.g.: Avg. Order Value, Number of Orders, Recency, Net Promoter Score (NPS), etc.

3) CLV (Customer Lifetime Value) is the sum total of expected profits from a customer. Companies should try to find CLV of each customer or small (but serviceable) customer segments, rather than identifying all the customers with one CLV.

4) King Customer is the one who has demonstrated either the potential (requisite characteristics) or the actual behavior (spend + mutual fit) to be your most desirable customer.

Segmenting an organization’s customers strictly across a 2X2 framework may not be that easy or even necessary. But if you look at a range of options on the spectrum of wrong customer to right customer or low value proposition to high value proposition, you’d be able to identify the levers you need to start playing with.

Key take away for a winning customer management strategy: you definitely want more of your customers in the top-right segment. These are the customers you have always wanted to attract, and now, all that you need to do is to keep these people constantly engaged with high value proposition.

I will even argue that an organization should look beyond Pareto’s Principle of 80-20. Why not have 80% of such customers who contribute the most to your revenue? I don’t think there is a reason for us to cap our kings at just 20%… Let everyone be a king, let it be an ultimate democracy!