Mindmaps for Product Startups!

In a product startup you may need to deal with lots of information about your own product features, your market, your competition, your competition’s product features, results of internal brainstorming sessions you may conduct or information about who you can partner with for various aspects of your business.

Mind-maps provide a great way of organizing all the information you gather or generate internally, and create documents or pictures that capture the relationships between them precisely. Most importantly, it can help convey the same concepts to your investors, co-founders, colleagues, employees and partners. It can help you organize mentally for your own use or convey a large amount of information to others in a short amount of time.

Wikipedia’s definition:

A mind map is a diagram used to visually outline information. A mind map is often created around a single word or text, placed in the center, to which associated ideas, words and concepts are added. Major categories radiate from a central node, and lesser categories are sub-branches of larger branches. Categories can represent words, ideas, tasks, or other items related to a central key word or idea.

Typical ways you can use MindMaps in Product Startups:

  • Analysis of the Market: How does the market you are looking at addressing organized? Mobile devices could be tablets, smartphones and feature phones. Tablets could be smaller or larger. Within each you could have iOS and Android Devices. Within Android devices you could have different versions supported by different devices, and so on. All of these branches could be captured effectively in a mind map.
  • Product Ideas Generation – What are all the different product ideas you could consider initially and in an on-going basis. How are they organized with respect to the various products and versions that you are already producing or planning to produce?
  • Generation and Organization of Product Feature Groups and Ideas – Very useful for product managers modeling existing feature groups and features, new features generated and where they might fit in.
  •  Analysis of the Competition: Competition in the market is not always straightforward. Competitors may offer products and services that may be in a related market, overlapping markets or completely unrelated markets. Competitors may be offering a service that may compete with your product. All these nuances can be captured effectively in branches off branches.
  • Analysis of Pricing Models:  If you considering different pricing models – One-time licensing vs Subscriptions, Annual or Monthly, etc., you could capture all the different variations in mind maps.

There might be plenty more uses for mindmaps once you get comfortable with what it does and how it can be used. Some of the Mind Mapping tools come up with ways of annotating each node with additional notes that can pop up once you hover over a node in the mind map with the mouse or a pointer. This can come in handy in naming each node with a short name and including more descriptions in the additional notes.

Mind mapping can come in very handy at the start-up stage even before you have a plan for your business. When you are doing your preliminary research or putting together your business plan later on. Or when you are already operating and your product management takes on a formal function!

There is a huge selection of Open Source and Commercial Mind Mapping Software that you can use – more details here in Wikipedia.

I have had very good luck with the Open Source version of FreeMind. It allows me to create mindmaps in their proprietary format and send them to others who have the same software (.mm format). For others who may not have FreeMind, I export the mind maps to PDF formats and send them alongYou can check out downloading FreeMind available for various Operating Systems and playing with it here.

Here are a few examples of Mind Maps I created using Free Mind. These are PDF versions of two mind maps I created when I read two interesting books sometime ago:

Jennifer Aaker’s Book The DragonFly Effect

Designing Brand Identity – Alina Wheeler

 A Picture is worth a Thousand Words! – Anonymous

 

Bharat Goenka(Tally Solutions) talks to us about the company’s ‘stubborn’ decision to stay focussed on products

Bharat Goenka is the architect of what is arguably India’s most successful business solution — Tally.  Co-Founder and Managing Director of Tally Solutions, Mr. Goenka developed the famous accounting solution under the guidance of his father, the late Sri S S Goenka. Today, the product is the de facto accounting solution for many SMEs and Mr. Goenka serves as an inspiration for many aspiring software product entrepreneurs. In an interview with pn.ispirt.in, Mr. Goenka talks to us about the company’s ‘stubborn’ decision to stay focussed on products, the non-DIY nature of the Indian SME and the necessity for product companies to stay focussed on the product mentality.

Tally is one of India’s most successful product stories, and it definitely appears to have ticked all the right product story boxes: responded to a genuine market need, stayed focused and evolved with the needs of users. Given the benefit of 20:20 hindsight, would you have done anything differently?

The reality is that one doesn’t really learn from the past. We continue to do audacious things, we continue to get some success out of that as well as failure. Over our 25 year history, this has happened multiple times. Multiple times, we have taken a decision and it has gone wrong — but if the circumstance arose again would I take the same decision? In all likelihood, yes — I would have no reason to expect success, but I’d still have the optimism and think just because it went wrong in the past doesn’t mean it also has to go wrong this time. So although I would say it’s unlikely that one would have really done anything different, I can give you an example of a decision not working out for us. In 2004-2005, we changed the price of the software from 22,000 to 4,950 thinking that we would be able to sell software as a commodity. The reality was that for that time, it was difficult to sell software as a commodity in India in the B2B space. And so we suffered, massively. That proved our belief that we couldn’t sell software as a commodity, but it didn’t stop us from trying. We lost almost 50 crores in those one and half – two years, so I would say our single biggest mistake was that.

Tally – or rather Peutronics — was founded in 1986 at a time when much of the Indian software industry’s focus was on services. The decision to remain a product company when the tide seemed to be going the other way couldn’t have been easy – why did you make this decision?

Actually when we started off, virtually every company had a product. Whether it was TCS, Wipro or Mastek — everyone had a business product.  The shift to services took place in the mid-90s, particularly towards the edge of the Y2K environment. We were one of the few stubborn companies who believed that while there was a lot of money to be made in services, we would never be able to address a lot of customers. So the mandate with which my father and I started the company in 1986 was that we were going to change the way millions of people do their business. We were clear that by moving to services, we would never be able to achieve the objective.  We were unclear how long it would take us to get to a million — 25 years later, we are still trying to reach even the  1 million mark. But in 1986 we were clear that we want to be able to touch millions of customers. Therefore we remained focussed on our product line.

So what was that inspiring moment for you? Did you wake up one morning and decide that this was what what you wanted to do — to change the way these millions of customer did their business, or was it a gradual evolution?

In the months before we got the product Tally out, one was into the product mindset but for developing systems related products like compilers and operating systems. So I was preparing myself to do those kind of products. At that time, my father was searching for a business product for our our own small-scale industry business. He examined multiple products, but couldn’t make sense of any of them. He very famously said: “When I’m buying a car I want to be a driver and not a mechanic.” Similarly, he was looking for a product that would help him run his business — not his computer! Every product that he was looking at required him to change the way he thought about his business.   So because I was interested in software, he said these guys can’t do anything can you do something? So I was trying to solve his problem. After six months of development, I would say that it was his inspiration and thinking that formed the idea and belief that the product should be something that the country should also use.

The belief is that Indian SME’s need to be “sold to” – the job that’s conventionally handled by IT resellers who are critical to Tally’s business model. What are your thoughts on the changes that Cloud technology might bring to this scenario, with the whole “self-service” angle coming into play?

India is not a DIY country, and this is unlikely to change in the SME sector.

The way the market works in India is like this : SME’s expect people to come and sell something to them, even if it’s bottled water. You expect it to be delivered, and you expect to pay for it in a different way. In India, SME’s behave identical to the way enterprises behave abroad. Abroad, SME’s behave identical to consumers.  That’s why in most MNCs, you see that the SME and SO/HO market being handled by a common head while the enterprise head is separate, because they need to be sold to. In India — actually, in all developing markets — the SME and the enterprise behave similarly. In the west, the cost arbitrage of selling to a business is so high that the small business has no other option but to behave like a consumer. In developing markets, the cost arbitrage is low enough to send people to do the sales. And therefore, the buyer expects someone to come and do the sales. It is not about whether the visit is required because of the software complexity or the commercial complexity — it is an expected visit.

In your opinion, what are the three most common things that mislead or cause the downfall of Indian product companies today? What advice would you give them to overcome these?

I think it would boil down to one — which is to be clear about which business you’re in. Most people believe they are in the business of making money. Okay, even I am in the business of making money but my point is this: you can never be in the business of making money, you have to be in a business — money is an outcome of that. To explain it better, imagine that you are a software developer who wants to start your own product company. Capital costs are not very high — a single computer will cost about 20k, and assuming you develop the skill, it will some months to develop a software, and you’ll get your software out. You might put together an infrastructure, sales people etc and you’ll put up a monthly expenditure of about 25 – 30k. You start seeking customers — you  find me. You sell me your product for say 10k. In all likelihood, I bought your product because I like your software development style and perhaps your product solved two or three problems I had — but I still have twenty more. Now because I like your software development style, I’ll ask you to do more work for me. I might ask you to expand the product features, solve some HR problem that I have which this software doesn’t solve and I’m willing to pay you for it.

Your first ten customers will give you so much work, you won’t have time to go out and find your next 100. Or even if you find your next 100, they will give you so much work that you won’t be able to look for your next 1000.

So ultimately, you will still continue to successfully make money, but you will never be able to create a successful product company. This is the single trap that I see almost all product companies fall into today. They all make money, and that’s why they’re still in the business but they stop eyeing the fact that they were supposed to be in the product business and not the services business. Now imagine taking a strategic decision like this in the early days when there was no competition in the market– today you can take a decision to change over night. But in the early days, while we did do services for companies (if someone asked you to do something extra, you did do it) we refused to take a single penny for any services that we did. That forced us to focus on selling new licenses. Otherwise once you’re able to get money from services, there’s no requirement to sell new licenses!

In your opinion, what’s the reason behind Tally’s popularity? At the risk of being politically incorrect, is it because of its “accessibility” due to piracy? Or is it largely because it’s simple and user-friendly?

Pirated software doesn’t become popular — popular software gets pirated. We strongly believe in one thing: if my software is not valuable to you, your money is not valuable to me. So customers are able to see tangible value in our software after they’ve paid for it, and therefore they tell their friends to also buy our software. Word of mouth has been the principle pivot of popularity, and we’ve told people on a number of occasions that if our software has not been of value to them, we would return their money. Even after three years, people have returned and we have returned their money. In 25 years, this has happened nine times to us. But fundamentally, if our software doesn’t work for them, their money doesn’t work for us.

We see a lot of product start-ups coming up in both the enterprise and consumer space. What would be your advice to start-ups — where do you think they are lacking, and how should they go about correcting these issues?

I would ask them this: are they solving the problem for someone else vs are they solving the problem for themselves? If they are unable to be the most prolific users of their own solutions, they will find it difficult to put it elsewhere. It’s the problem of architects, right? The architect is building for you — so they build and go away, but you have to live in the mess. I think as a company we had the privilege of this insight from my father. My most famous depiction of his words was in this context: in the early days, I had asked me a question against a certain context and when I was trying to explain to him that it was very difficult to solve the problem in that manner in software, which was why it was done in a particular way he asked me “Are you writing programs to make the life of the programmer easier or the life of the user easier?”. The general tendency I have seen is that very few start-ups are willing to take the challenge of solving the complexity of the product themselves so that they give simplicity to the end-customer — and this is a fundamental requirement of the product.

The second problem that I find with product start-ups in the country is that most people design the software as if they are going to be present when the software is going to be used. It makes great sense for them to explain to someone how to use it, but if you want to be a software product company you have to design a product that can be used when you are not there. So, from a technical viewpoint fundamentally I would say that it is about being able to sit back and reflect upon these issues that impact your design. From a operational viewpoint, from day one you have to design as if you are not selling. It’s easy for you to design a product and for you to go sell it, because you’ll design your sales processes which are centered around your ability to sell. And this ability, because of your intimate knowledge of the product, will always be higher than someone else. So be able to design sales and service processes that are not operated by you will truly bring the product into the product category

Top 10 mistakes Product Entrepreneurs Make

Inspired from Pallav Nadhani’s interview – this infographic is meant for all those entrepreneurs who dream of building a global product.  From delegating to hiring a sales team and to putting an end to customizing products – these tips are invaluable. Pallav, you rock! and thanks for sharing these precious jewels of entrepreneurship! 

7 Critical Things to Understand about Venture Capital for Product Start-ups

If I had a Rupee every time I heard the words “If only Venture Capitalists were more active in building the Indian Product Eco-system….”, I would be a rich man!

I am guessing that this is because of a lot of mis-conceptions about Venture Capital and how they play in the product space, in India as well as elsewhere. As a Software Product entrepreneur, you owe it to yourself to understand VC money in all its complexity to make wise decisions about whether it is even suitable for you, and if it is,  how to get it, and if you get it, what are you in for?

It is impossible to capture all of the complexity of Venture Capital in a single article but here are seven basics every software product company in India should be aware of:

  1. Understanding exactly what business Venture Capitalists are in – They are not in the technology advancement business, not in the entrepreneur eco-system business but in the money multiplying business! They have bosses too – people who have given them money to invest expecting at least 10 to 20 times back! Unlike a bank that loans money to low-risk, low-reward businesses, VCs are expected to invest in high risk, high reward businesses. They can afford to take losses on 5 to 10 startups to make a 100 times return on that one big block buster – an Instagram, a facebook or Google!. Many startups return them 5 to 10 times the money and across all startups with other failures, they will be successful if they return 20% per annum over 10 years.  After the Dot com bust, many VC firms returned less money than was invested and Of course, they are out of business also! You get an idea of why VCs are looking for that big block buster company! So you will be wasting your time and theirs, if your startup does not promise that kind of growth quickly!
  2. Understanding Exit Strategies for you and them –  If you are planning to build a software product company, grow slowly over 10 to 20 years and have a leisurely IPO, Venture Capital may not be suitable for you. VCs need to return the money their investors have given them – usually in a 10 year time frame. So they really have a clock they are working against. Exits through acquisition by a larger company or through an Initial Public Offering (IPO) is how they get the money they have invested out. So if this does not suit your plans, VC money is not for you.
  3. Understanding what can increase your valuation periodically– VCs like to bring on other VCs to share the risks in the companies they invest in. They also would like to see the valuation of their investments rise rapidly so that the acquisition price or the IPO price is justified when that event is reached. Valuation is a notional concept (just what someone else is willing to invest their money for) till it hits the acquisition event or IPO when it becomes validated by the general marketplace (till then it is done by the private VC marketplace). Growth metrics usually provide the justification for the increase in valuations.
  4. Understanding how Market Adoption Rates and Penetration Help you get there – If your startup is dependent upon the 4% smartphone adoption rate in India as opposed to the 56% adoption rate in the US, you can get an idea of how fast your key metrics will grow to make your case for the first or the next round of VC money. It does not mean you are in a bad business. It just means that your business may not be a good candidate for VC money! If your business is already making money, then that needs to reflect this rapid growth or at least the promise. If you are following a freemium model or you are postponing the question of monetization for a later date but are focused on building membership, visitors and engagement, your metrics need to show this hockey stick growth. It is not because VCs have an illogical liking for hockey stick growth rates – those are the ones they can show the next group of VCs or others that want to invest in subsequent rounds and ask for a higher valuation! I wrote about this topic in my previous article – Develop and Pray is Bad Planning in Product Startups!
  5. Understanding what Riding the Tiger means –  When you watch Flipkart raise more money and doing all kinds of acquisitions, what you are seeing is catching the tiger by the tail, getting on it, and riding it! You don’t have an option of getting off, since the tiger will eat you if you do! Once you raise venture money, you need to plan for rapid growth and riding the tiger. Don’t even look for venture money if this kind of company building is not for you.
  6. Understanding that Venture Money is not the only way to build a Software Product Company – If you have a secret sauce in your product that no one else can copy in their product easily and you have a five to ten year advantage, you can afford to build your company at a slower pace, taking one or two rounds of angel investor money, keeping expenses low and ploughing back initial profits into building the company organically! Unfortunately it is less likely in the consumer space that you have Intellectual Property that cannot be copied easily than in the enterprise space. Also if you are successful in the consumer space, just for building out your infrastructure you may need to raise large amounts of money – usually that’s venture capital. You might have seen this portrayed in the movie The Social Network with what happened to facebook in its initial years.
  7. Go Big or Go Home if you plan on taking Venture Money – Unlike Services Companies, software product companies depend upon rapidly establishing a large market share in an emerging space. In almost every market, consumer or enterprise, you will see one or two large players splitting almost 70% of the market between them and a couple of other players splitting the rest.  The bright side of this is that there is so much innovation possible in the software product space that you can always define a new marketplace and become a leader in it! But for that you need to show rapid growth in revenue, members, visitors and active engagement. So it’s Go Big or Go Home!

Venture Capital is a vast subject with nuanced differences with every VC company, country or company they typically invest in. For the software product entrepreneur there are some common basics that can help them understand how they all operate in general, whether you are a good candidate for VC money and if you are, what is expected once you take it! At worst, if VC money is not for you, it will force you to do better planning. How will you sustain your company and grow, even if it is at a slower place that you are comfortable with? Have you thought about all of this?

An Investment in knowledge pays the best interest – Benjamin Franklin

Three Podcast Links Worth Checking Out

I was listening to the podcast – Happiness. Todd Kashdan, Eric Lambin, Eva Hoffman. 22 Dec 2012.  Some ideas from the podcast:

  • Learn to be curious. When we are curious, we like to explore, discover things. Exploration helps us grow, evolve.
  • Happiness depends on the ability to tolerate pain ( it never occurred to me to link happiness to pain)
  • Invest in relations – having a sense of connection with other human beings increases happiness
  • Happiness is related to the way you experience time
  • Happiness is also related to the way you experience experience

While listening to the podcast, I heard two other links mentioned, which are worth investigating.

I hope you enjoy these podcasts as much as I do. Did you find others, you like? Please share them.

Re-positioning and Re-imaging India

Over the last year or so, the image of India, like the Indian Test team, has taken a beating. The halcyon days of India Shining, of India Everywhere and the world’s “fastest growing free market economy” are now over; the brand-builders and spin-masters are not able to conjure up the magic of old. Instead, we have the picture of a struggling economy, just chugging along at barely over 5% a year; simmering social unrest fuelled by a hugely inequitous society; scam-a-day revealations of corruption; a divisive polity and – certainly till recently – an indecisive leadership. Many feel that if BRIC is the new power-house of the global economy, the “I” in it should now mean Indonesia, not India.

Yet, any attempt to write-off India may be, as Mark Twain said about false reports of his demise “The report of my death was an exaggeration”. After all, the fundamental underlying factors driving the India economy have not changed: demographics, a huge domestic market, an extensive education system with a sufficient topping of high quality, a thrifty and hard-working population, and a strong institutional base. However, converting these potential advantages to real economic benefit requires appropriate action.

The gains of a proportionately large young population, the “demographic dividend”, can be reaped only if they are imparted sufficient education and trained in skills that the economy needs. While recent years have seen a major thrust on education – through both the Right to Education at the school level and a huge expansion at the university level – and an ambitious skills development programme, their results depend on efficient implementation. It will not be easy to simultaneously achieve the goals of expansion, equity and excellence. The veneer of a few institutions producing high-quality professionals will no longer be sufficient, especially in an evolving, globally-competitive market for goods, services and ideas. We will need to be flexible and innovative not only in content and pedagogy, but also in the administration and structures of the education system.

The advantages of a large domestic market are currently reduced by regulations and structural barriers, inhibiting the free and easy movement of goods across the country. These include barriers to movement of agricultural commodities, octroi, and too many and inefficient toll collection points, causing unnecessary harassment and delays. Poor infrastructure slows movement. The introduction of GST – much delayed, already – will certainly ease the numerous tax-related obstacles and provide a big boost to the economy. Similarly, changes in the APMC regulations, and better management and use of technology at toll collection points on highways, can lower costs in the movement of goods.

India’s institutional base – a strong and fair legal framework and an independent judiciary, in particular – have long been projected as major strengths and a comparative advantage. In addition to the Election Commission, independent regulators, including SEBI and RBI, are much respected around the world. All these contribute to business confidence, especially amongst foreign companies and investors. However, the gains of many years have been endangered by retrospective tax laws, cancellation of contracts/licenses which had been entered into within existing laws, and perceptions of government pressure on regulators. Institutions and their credibility are built over decades; destroying them is, unfortunately, much faster and easier. Government needs to tread with caution to sustain and build on the respect that our institutions command overseas.

Globalisation has been driven not only by trade and investment, but equally through bonds of religion and ideology, which – aided by new communication technologies – transcend national boundaries. The battles of today are for the hearts and minds of people rather than territory. In a world where wars between countries have become rare, “soft power” has become far more important. While recognizing the importance of the economic dimension, the image of India needs to go beyond that. India’s unique advantages lie, in fact, in other areas.

India has substantial soft power assets: its rich culture – including films, music, yoga and spirituality – cuisines, historical heritage and natural beauty. These are a powerful magnet for people around the world. Of late, the country is also recognized as a hub for innovation. In the developing world – and, often, elsewhere too – its democracy and electoral process is highly regarded. A large number of countries admire India’s higher education system, despite its many flaws, and the top institutions are held in awe even in the developed world.

Leveraging these advantages can position India strongly in the mind-space of the global community. This, however, demands strong and pro-active action by both, government and industry. Image building without substance is like a soufflé: hot air will hold it up, but it will soon collapse. Therefore, in each area, concrete steps on the ground are necessary. In education, for example, the high drop-out rates and very poor quality at school level need to be quickly remedied. Higher education calls for major reform. In addition, a large scheme of scholarships (say, 5000 a year) for foreign students for study in top universities and professional institutions will engender much goodwill and be an investment for the future (foreign students develop a special relationship with the country; Suu Kyi is but one example). Similarly, promoting Indian cinema, music and tourism abroad can lead to great benefits. An independent global TV channel – aimed at viewers beyond the Indian diaspora –  which sees world events through Indian eyes can be another contributor.

It is time to re-image India, going beyond the purely economic. A private-public partnership, like the Brand India Fund, could be the best means. Such re-positioning will certainly provide business and economic advantages, but will also give India a greater share of voice resulting in geo-strategic benefits.

Develop and Pray is Bad Planning in Product Startups!

Total Addressable Market, Technology and Market Adoption Rates are crucial for Product Startups! Ignoring them early on will only cause immense heart ache down the road for you, your family, your company, your employees and their families!

It’s all well and good to follow your “passion” and do your startup purely for your passion. It will be a great hobby and extracurricular activity. You can still build a lifestyle product startup, with revenues and profits growing slowly, addressing the global marketplace or the Indian marketplace at a pace you like as long as you are NOT trying to raise investor money, angel or VC!

But if you are a product startup that believes in rapid growth, would be in the market for Angel or VC money, this is very important! I will write in a follow-on blog entry about that connection in more detail. In this one, more about the basics!

With the popularity of FlipKart and other e-commerce sites, you may be thinking that Indian e-commerce sites make for great e-commerce startups. After all, you see Indians signing on to the web in droves, right? You think that it will be easy for you to raise money for your e-commerce startup, correct?

You may want to read this recent report , Analysis of VC Funding in the Indian E-Commerce Space.  This report predicts that the funding scene for e-commerce sites in India will be drying up soon and it will be very difficult to raise money for such ventures!

I have personal experience chasing the Indian Enterprise marketplace with our software products and services some time ago and it wasn’t very good. We might have been a bit early for the Indian enterprise market but with the recent weaknesses in the Indian economy, IT companies in the doldrums, I don’t think that the situation has changed too much.

When you have invested years and years of your time, effort, passion and money in a startup company, you tend to put on rose colored glasses and look at only information that seems to confirm your hypothesis that your company will be successful no matter what is happening in the market you are addressing!

You tend to discount facts that don’t fit with your ideas and dismiss them offhand. Bad Idea!

Total addressable markets and adoption rates are absolutely crucial in predicting your own success in the market you are addressing.

For example, take a look at this latest analysis of global mobile and web trends by the famous venture capital firm, KPCB.

Whether your product addresses the global or the Indian market place, statistics like the ones provided in the above presentation will help you get a dispassionate, realistic, and useful handle on what’s really happening in the marketplace, in spite of what you think is happening or wish were happening!

Even with these kinds of statistics, you may need to adjust for personal knowledge you have of the marketplace. For example, if you think that 900 million mobile connections are reported for the Indian market, does it mean 900 million people? How about people who have multiple SIM cards and connections? How about people who obtained prepaid connections from multiple service providers, using some and not using others?

That gives you an idea of  how to arrive at the Total Addressable Market. If your product addresses the Indian Small and Medium sized businesses, do you have statistics on how many of these are there? SMBs of various sizes?

Technology Adoption rates are a very crucial thing you want to pay attention to. Just seeing all of your friends buying smartphones in your urban area in India is not a good indication of Indian Smartphone adoption rates! The Mary Meeker presentation above shows that the Chinese smartphone adoption rate is 24%, Canada’s is even higher than the US and the Indian one is a paltry 4%.  Let’s assume that even if this statistics is wrong by a factor of 4, 16% instead of 4%. Is it still enough for you to address the Indian smartphone market with your product? It is hard enough to sell apps for smartphones. Is your plan for revenues realistic when your app is addressing a slower growing market and may be competing for attention in app stores with more than half a million apps?  Now does the picture change for you when you tweak your product to address markets other than the Indian one? Is that large enough for comfort? Of course, you also need to plan for how to get to the other markets (sales and marketing efforts)  if you are targeting them also?

Last, but not least, you may all be familiar with the Market Adoption Lifecycle and Gartner’s Hype Cycle, Geoffrey Moore’s Crossing the Chasm problem.

Briefly back in 1962, a group of researchers proposed the Market Adoption Lifecycle with any new technology being dependent upon Innovators and Early Adopters being the earliest to try some new technology or product followed by early majority. Late majority and laggards will complete the adoption and by the time they come on board, the next wave of innovation is on.

Geoffrey Moore proposed that unless the product or technology is very useful and the price is right, a chasm will prevent the early majority users from adopting it.

Gartner’s Hype Cycle extends this with further modifications and extensions.

The implication here is that of the total addressable market, you are going to have a smaller percentage adopting and using your product. Consumers or enterprises, is that large enough for you to grow as you predict in your business plan?

The bottom line is if your individual beliefs are based on anecdotal evidence (All my friends have an iPhone or all my friends shop on Flipkart), as product startups, you owe it to yourself to collect statistics, facts and combine them with your own intuition about where things are going!

If you wait till all facts are known with certainty, it may be too late. There may be many competitors in the market and market may be mature already.

The key is taking Informed Bets with your startups. It is never too late to do this analysis. You can pivot from your existing products to ones that actually make sense with a larger addressable market and observable technology and market adoption rates!

I would not underestimate the battle between the heart and the head when it comes to your product startup. The head will always intuit you with the real picture. Your heart will mislead you, simply because you have invested your ego, time, money and passion in something that you know is not in a fast growing market!

How do i know this? Been there, done that! Made mistakes that were very painful!

You owe it to yourself, your family, your employees and their families to combine facts with your own gut instinct about where a market is headed and how your product line up can ride that wave!

Is your plan realistic? After all, you will be spending your next 2 to 5 years with your product startup.

Forget the hype! For your own sake, you need to have a clear idea of the addressable market, a good sense of  your early adopters, what they are looking for, and whether the adoption rates are going in the right direction, even if they are currently small!  Are they accelerating? These are the facts you need to check out and be comfortable with, for your own set of products.

The hype machine would have moved on to the next big one. You will left holding your own bucket.

Develop and Pray is a bad plan!

Reality is merely an illusion, albeit a very persistent one – Albert Einstein.

The little Spark with great promise – Inaugural #PNMeetup on Pricing for Enterprise Sales

When a bunch (around 45-50, I didn’t keep the count) of Product enthusiasts – with experience accumulating into decades – gather at a single place to share their learning on specific topic in a compact & well-moderated session of 2 hours, it’s worth every bit. That’s how I felt coming out of the inaugural session of #PNMeetup – Pricing for Enterprise Sales: Specific & Important Topic, Quality Participation, Richness of Experiences, and Quality Conversations.

The location, Hauz Khas Village in New Delhi, carries a constant buzz and energy. Very apt for a meet-up like this. Kunzum Travel Café (Thanks for being a great host for the event!), should be happy because participants used up every nook & corner of the place. Many of us had to settle down on the carpet with no more sitting or standing space left! Of course, the snacks & coffee was great too. But, that’s not what everyone coming in was specifically looking for (especially since the last 500 yards got harder to make with the traffic and parking situation ;-)).

We were looking for some great (practical, experience based, relevant) conversations and takeaways on Pricing. And, there was plenty of it, coming from speakers as well as from the participants. As much as is possible in 2 hours of time, that is, also thanks to some great moderating & counter-questioning by Arvind Jha during speaker sessions, and Rajat Garg & Vivek Agarwal in the un-conference session.

Tushar Bhatia, Founder of Saigun Technologies, set the tone for Enterprise Products Pricing by sharing his experiences on Pricing Strategies and Sales tactics. Tushar emphasized that Pricing is not a linear decision, but a complex process and subject to assessment from multiple parameters. He also differentiated the Pricing Strategy from Sales Process. Pricing, as per him (in the context set of Business Planning, Scalability, Consistency, Standardization, and a reflection of the Value Proposition) is a guide at broader level, while on sales tactics front, one should be willing to consider the customer & geographic circumstances as well. The decision matrix for Pricing decisions typically is pretty complex, and a product undergoes multiple iterations of pricing models

Pricing for Enterprise Sales
Pricing for Enterprise Sales – Tushar

before arriving at the sweet spot. However, various types of customers may need to be assessed in their own contexts when deciding on a deal pricing, especially in the traditional Enterprise Sales scenario.

Tushar also emphasized that the Enterprise Licensing deals should consider not only the product pricing, but also the other costs (such as, hardware) and provisions (such as, for Product Support). The considerations on TCO are critical, because the customers assess the products, not only functionally, but also very critically from an operational viability perspective in longer term. Tushar also laid out few questions that need to be answered while deciding the pricing model. The detailed presentation from Tushar on “Pricing for Enterprise Sales” can be found here.

The discussion, then, veered towards the product pricing strategies in areas such as Telcos, serving also as a cue for Tarun Anand (CTO & Co-founder at Semusi) to pitch in and provide his perspective. He shared his experiences in working with the big Telcos on working out product strategies and pricing models. They tried out various pricing models, in partnership with Telcos especially, and had mixed results over time before arriving at something that seemed to work. However, pricing remains a volatile when dealing with the larger partners and in more complex ecosystems, such as Telcos.

In Tarun’s experience, one needs to ascertain that the partners in the ecosystem are ready to take your product to the market if that is the expectation. It is also important to ensure that the pricing terms & conditions are clear, and you are able to hold the customers as well as partners accountable in the operational limits as much as you can. After all, you want to focus on running the business and do not want complications of financial & legal nature. In the context of Pricing and products strategy, in areas such as VAS, as per Tarun, one needs to be very careful. “VAS is dead” in his words! 🙂

Tarun also emphasized “there are takers for product at ANY price point”. One need to clearly understand whom one wants to target, and also understand that it’s not only a question of moving the pricing point up & down in inverse proportionality with the volume of customer base. There are various triggers for the pricing, one of which is the “premium value perception”, and also the fact that once you move into a market with a particular price point, increasing it later on is almost impossible without hurting your customer base and overall strategy.

App Pricing Tactics
App Pricing Tactics – Prashant

The heat in the Mobile Apps makes the App Pricing a very sought after topic, and that’s where Prashant Singh (Co-founder at Signals) came in and provided a good framework for the high level App pricing approach. There are two clear distinct possibilities – Free & Paid. Complete Free, as per Prashant, directly leads to an Ad based model for revenue that shouldn’t be a preferred model as such for most app developers. In fact the question is not whether to go Free or Paid. Question is when is the user ready for monetization. “You hit when the iron is hot, as simple as that”, Prashant says.

Prashant provided a high level framework to judge which approach should be adopted by the App Developers, based on the two parameters: “App Life Span” and “Time to Realization of Value”. Based on a combination of the two, one can decide on the high level strategy (Portfolio/Platform/Utility/Device Embedding/Brand Apps…) and Pricing model (Advertisement, Paid, Transaction based, Freemium, Development level, and so on). Check out this presentation – App Pricing Tactics for more details.

One key point that drew interest was around the Price Point for App at the launch time. Contrary to the normal belief, Prashant says, one needs to launch the app at a price point that is higher than the Median price point for the App store. That provides the App Store an incentive to showcase the App, and it is important since App Stores control the downloads more than the “content” or “quality”, at least until critical mass. Growth Curve of the app can be maintained around Median and depending on the value prop of the App, the baseline pricing can be used at sustenance phase. Another strong point of view from Prashant came around the Advertisement model, which as per him is the last to be considered. And if Ad model is considered, his advice is to “not” let the control away – “Always have your server in loop”.

While all the content and discussion, and few laughs in between, served well to our appetites, snacks were served amidst a quick “Unconference” session moderated by Rajat and Vivek. We discussed and debated on some great points. I’m finding it harder to capture every bit here and I don’t want to be partial to only what I remember right now! I hope that if you attended and are reading this, you would be able to add your takeaways in comments section! 🙂

Overall, I had a great time. The highlight of the session, for me at least, was the richness of experience and passion for products. And I met some really cool folks! Many of us hung out until later in the night and continued the conversations, which is a great sign. A small impetus can go a long way, and I’m very excited that Avinash has triggered this spark that all of us as a community have to fuel into a passionate ecosystem around products. Great initiative, ProductNation! Looking forward to the next edition on Jan 19th 2013!

PS 1: And, there was a cake-cutting for Avinash on his Birthday! Great gesture!

PS 2: Some Tweets from the session!

#PNMeetup – Delhi (15 December 2012) Pricing for Enterprise Sales

The event was kicked off by Arvind Jha starting out with a round of introductions. It was quickly realised that the community was well represented and people coming from Noida, Gurgaon and Delhi was heart warming to see. Arvind then went on to describe how diversity is important when you are running a business. Different regions, different customers and hence different pricing make it a much complex environment. It is in this scenario that choosing a good pricing model becomes important in accordance to your business model and scaling needs. Arvind then went on to invite Tushar from Saigun Technologies to share his thoughts and take the meet forward.

Tushar started out speaking on the relevancy or the need of pricing. The context here was clearly set when he announced that the discussion here is setting up ideas on enterprise pricing which is a whole different ball game as compared to consumer pricing. Factors like evaluation of potential customers, kind of money received from them, directing sales teams, consistency and setting a value to the offering brings in the need of pricing. He then went on to speak on the various challenges in enterprise pricing such as long decision cycles, decision matrix complexity and competition, no matter how good or new the idea is can never be neglected. A great example he shared was the case of Saigun’s HR product which is different to an HR manager and to a CEO. An HR manager would see it as tool which would reduce his work and a CEO would see it as an investment and in turn happily show a few pink slips to some of his HR managers. Tushar also spoke lengths and breadths on total cost of ownership of the product as well as the brand image when setting up your price. A cost is not just determined by the development cost but the service associated with it, the tenure of such a service is an important consideration. One cannot afford to give service away free. Brand becomes important in case when you have an established player in the market already. A SAP can price its product at 2 million but it is fairly practical to say that only SAP can. This is because of the trust and recognition it has built for all these years it has been in existence.

Tushar then spoke on the key parameters to a pricing strategy. Geographic focus and segregation of the offering based upon location always helps. The inclination of the pricing strategy to the company’s overall business strategy is another parameter one should look at. The case of virgin market and mature market were discussed to great detail by all participants. Tushar also shared that apart from his experiences the book written by Nagel on Strategy and Tactics of Pricing has helped him a lot. By this time the crowd appeared to really appreciate the thoughts of Tushar and his experiences. He then concluded with a short brief on the need to do discounting and how discounting eventually becomes a strategic view more than just being operational. He was applauded by all and then Arvind invited Tarun Anand from Semusi to take center-stage and share his thoughts on selling to enterprise customers, in his case, telecommunication service providers or telcos.

Tarun started off with his encounter with an Indian telco. His product offering took off on Nokia’s platform and with Middle-East customers. The product was well received and this is when Tarun decided to launch it in India too. The subsequent agreement with an India telco major pushed the product to India. However, moving forward it became clearer when the telco abruptly changed requirements and priced the product to almost 1/5th of its competition. There were cases of non-payments and violation of contract agreements with the telco as well. The rationale given here was that the product is new and there are not many takers for it. But when Tarun checked, the product had sufficient number of users as well as sufficient number of dropouts. It is here when it becomes important to choose a suitable pricing model, the two he suggested were full user pricing (FUP) and promotion pricing. In this case, eventually he rebranded his product and sold it through the app store which gave him a much better insight to the actual customers of his product.

After Tarun it was Prashant from Signals who was invited to take center stage. Tushar started describing pricing techniques for an app store. The question of whether the product should be transactional priced, free, in-app pricing or ad-based was put forth by him. The even bigger question that needs an answer first is to go free or to go paid for your product. This question really gets answered by a research on ‘when the user is actually ready to be monetised’. Tushar then went to describe the price decision matrix which was split across quadrants of short life span, long life span and instant realisation, realisation after a period of time. Games, Social network apps, Dropbox and VAS were examples spread across these quadrants. So the eventual decision is to place your product in one such category and accordingly accept the price model that comes with it. Another very critical talk by Tushar was on choosing a price point, the baseline (99 cents), the maxima ($1.20) or the median (between 99 cents and $1.20) for your product or app. If one goes by baseline, then the app store owner has no incentive to give your app the preference in his listing even if you have greater number of downloads. So he suggested that it is always good to keep your product priced at maxima and then slowly move towards baseline pricing depending upon the realisation value of the product. Tushar concluded his talk by adding some avoidance measures when choosing an advertisement based model.

It clocked 5:30 PM and refreshments followed in the form of tea and samosas along with flowering of ideas by everyone in regards to the overall feedback on the initiative and the format of the initiative, ways it should be carried out in the future. Finally everyone joined in to celebrate Avinash birthday and cut a cake which was the most pleasant surprise of the day. Sign of great things to come from this emerging community of product leaders.

Post Contributed by Charles Cherian

Why they’re not giving feedback to your idea

Ideas used to be a dime a dozen. Now they’re a dime a million. 

Ideas have a short life. But you need to get some kinda feedback on your idea. It makes all the difference doesn’t it? Here are 3 reasons your idea isn’t getting validated feedback. There’s a clue in #3 that you should try and tell me if it worked for you.

1. You are verbose. Don’t write like diarrhea. Do this – send a single 140 Character tweet to the world about your product’s chief USP. Did someone respond? You get the picture? 

Your idea doesn’t reach the target audience if you’re writing more than 300 words. However, that’s not to say that you can’t draw your audience into a 3-5 min unsolicited engagement through the audio visual format. 

2. You are irrelevant. The person you’re asking feedback from has no relevance to what you’re asking. She doesn’t understand it, doesn’t care about it, and has no time to appreciate why its important for you. 

Your idea doesn’t reach the target audience if you’re talking bananas to a penguin. Penguins don’t eat banana. In all probability, they don’t even know what a banana is. 
 
3. You are being selfish. Don’t ask before you have something to offer in return. My permission is my property. Don’t try to take that from me. So don’t spam me unless you’re offering some free money. (And I will not click on your AD – just send the money in cash please.)

This Validated feedback that I glorify will be amazingly well received by your marketing function. This time, DO trust a marketer – go get that feedback.

12 learnings from the launch of Institute of Product Leadership – Bschool for software techies in India

Seems only apt to summarize our 12 learning’s on 12-12-12

#1 – ‘Kitna detee hai’ ?

Maruti car runs a campaign in India around “keetna deti hai” (means in local language – how much mileage will i get in?). The first question on the applicant’s mind was – post program will I get a better pay or shift into a company of my dreams. Very few (23% of them to be precise) reported that learning is more important to them than placement assistance.

My take – People seem to forget that getting inside is easier than staying & growing inside. On the bright side its good that we have companies willingly wanting to hire the first batch immediately on graduation.

#2 – “Code Centric to Customer Centric”

The idea of transitioning from being technology centric to customer centric does seem to resonate the most with individual participants who cited “Project Management to Product Management” as the #1 desired transformation – to be able to understand the customer and the business context of what they are already doing.

My take – Business programs can only be valuable if they accelerate that transformation. Knowledge dissemination cant be the driver!

#3 – “Badge is important”

The idea of getting a diploma or a degree is rather important as a take away from the program. Brand is clearly important.. Interestingly enough compared to “Guaranteed Career Path” this was voted lower though.

My take – With liberal badge printing machines in the country most hiring managers see through it and at best use as a filtering criteria.It is even less valuable for senior R&D professionals

#4 – “Have you done this before?”

Surprisingly (at least to us) companies who wanted to nominate people to the program asked this question more often than the participant themselves. Companies (both senior HR/L&D & Engineering leaders) as well as participants appreciated the fact that the curriculum is relevant and faculty is world class but the risk appetite for companies seemed to be lower than participants who pledged nominations for the “next” batch!

My take – first movers almost always benefit. That’s why the early bird gets the worm. The program’s pilot batch will have the best foot forward to establish a brand and move the offering to higher price points for next batch.

#5 – “Better seat at the table”

Most R&D leaders showed frustration around why they were not able to add value with their global partners and wanted to equip themselves with the right knowledge and immersions to be able to have a better seat at the table and enjoy broader responsibilities.

My take – unless people make an effort to understand the productizing process all those frustrations will continue to rise. Intent and ability to help are two different things!

#6 – “I don’t want to become a Product Manager”

Interestingly enough not all senior R&D managers (64%) wanted to learn the “business” & “customer” context to become a Product Manager, instead they wanted to differentiate themselves and build a better career path on the Product Engineering Leadership track with the role models being cited as CTO and Head of R&D.

My take – Product Management as a process should be everybody’s business to understand, playing the role of a real Product Manager not so much as it’s a harder role to play than one thinks!

#7 – Its better if its hard to get in

The moment they heard that only 20% of applicants will be selected to the program the value of the program went up by a factor of 2 (Price to Value Analysis)

#8 – Relevance of MBA to their Product Leadership Growth

Majority of the Product Professionals who had done their MBA from Top B-schools cite around 21% of the subjects/topics being relevant to them in their current role. 35% of them believe that the degree gave them the necessary break/promotion/new role.

My take – General Purpose MBAs (even from top B schools) are great for people who don’t know what they want in life and hence want to get the exposure to HR, Finance, Operations, Marketing etc. Institute’s Board have actually factored this in and designed the curriculum to map to industry’s expectations.

#9 – Influence Building skills are missing

Across 5 categories of the curriculum, leadership skills were rated 3rd most desired after Customer Connect & Insights and User Experience & Product Innovation. Within leadership skills leading by influence was ranked higher than other soft skills like negotiation, presentation, cross culture communication and conflict resolution.

My take – One’s Influentiality Index (II) is actually the biggest propeller for career path acceleration, functional skills for an average R&D product professional is actually fairly high.

#10 – Relevance is good but I want my exec education to be personal

Relevance of the program resonated overwhelmingly with the target audience but most also desired personal mentoring 1:1 with industry execs and a personalized leadership development plan with necessary psychometric assessments. Interestingly 92% have never gone through such personalized assessment at their company.

My take – I wish I had done assessments like MBTI, DISC, Product Leadership Influentiality Index (PLII) etc to really know my gaps and build a plan to bridge them faster as opposed to rely on accidental growth.

#11 – Free money – take it or not take it?

Several industry reports suggest that 26% of educational tuition reimbursement budgets goes underutilized with global R&D centers in India. Most (97%) desired to get tuition reimbursement from their company to pay for the program, however it dropped to 52% the moment it was disclosed that only self sponsored candidates will be offered placement assistance.

My take – With retention being the driver for some companies to sponsor education this is bound to happen..

#12 – Scaling Startups vs Large Companies

Management teams from both groups desire better product leaders (91% – Agree + Strongly Agree) however their approach of solving is starkly different. Global R&D Centers want a longer program (underlying theme being retention) vs Scaling Startups want a menu of courses to select from.

Would love to hear your thoughts – especially if you are a product professional wanting to accelerate your career path with atleast 8 years of experience or part of the exec management team who wants to develop strong product leaders in the India R&D center! More info at www.productleadership.in

7 Simple Rules of Networking for Product Startup Companies

Networking is not an extracurricular activity when you are building a product startup company!

It is one of the most important things that could enable you to line up angel investor, venture or expansion capital for your startup! It can help you recruit excellent people to your startup and excellent people are absolutely essential, especially in the initial years! It can help you identify potential companies you can partner with, acquire when you are expanding or be acquired by one, if you so desire.

Attending conferences should be as much about learning something new about technologies, other companies, your industry and development approaches as it is about Networking! If anything, done properly, you can get more out of Networking than you can from these other things.

So, how do you do it right? Here are 7 simple rules that have worked for me very well in my entrepreneurial activities that past two decades or so! Why seven, and not ten, or five? I think these capture what worked for me most!

  1. Understanding that Networking is Establishing Long Term Relationships – You may be in a hurry to line up angel or venture capital for your own company. But that does not mean that you network only with angel investors or venture capital folks. Networking is all about establishing long term relationships with people over multiple jobs, companies and startups. Done patiently over a long term, you will have enough Business Cards, LinkedIn contacts and Facebook friends you can call your business network. You would know who’s best for what. Today’s Entrepreneur, Competitor or Partner may be tomorrow’s Angel Investor. You never know.
  2. Networking is as much about Giving as it is Receiving – I have seen amateur networkers stop their conversation with you suddenly when they realize that you cannot help their immediate situation. Just remember that networking is just as much about you giving something – sharing your knowledge, your experiences, your contacts, as it is about receiving. So take the first step yourself – introduce somebody else to someone you just met. Forward links to information that could be useful for them. Then you have the standing to request something back from them. Even with busy Angel Investors and Venture Capitalists, if they are not interested in your company and product, introduce someone else that you think may be a better fit for the kinds of companies they are currently interested in. It’s not always one way.
  3. Always Have your Pitches Ready and Convey Your Excitement – Always have your 30 second,  2 min and 5 minute pitches practiced, and ready with you all the time when you network. When someone asks you what you and your company does, they are not asking you about your product features or Java, Python, your love of Macs and your hatred of Microsoft. They are asking you about the problem your company is attempting to solve and why you have an exciting, new approach to it.  It needs to be so simple that a non-technical person can easily understand it and relate to it. If they cannot relate to it, you are in the wrong location or forum for networking. Most importantly, you need to convey your enthusiasm and excitement about what you are doing. It helps if it is a mission, not one, or a set of products!
  4. Always Follow-up with Email and Use the Subject Line Wisely – In your networking interaction (with Angel Investors or Venture Capitalists, you may have gotten 30 seconds to introduce you and your company after a session in a conference) you may have exchanged contact information or business cards with a promise to follow up. While following up on email, use the subject line wisely. They may not remember you from Adam! They may have met 100 people just like you. Remind them of your name, company and where you met them. Have a phrase for what your company does, like “Autocall – Summoning Autos in Chennai using your App!” or something like that. Be precise about what you wanted. If you just wanted to establish contact, just say so and that you were pleased to meet him/her and will follow up later.
  5. Don’t Burn Bridges – Information Technology is a small, small world. Even those that are flung globally.  When discussing your opinions, there’s hardly any point in making strong assertions in a networking situation, even if you feel strongly about something. You never know who you will be running into as a potential investor or partner down the road. Good question to ask before expressing a strong opinion about anything – business, politics or religion- ask yourselves the question – What do I gain by saying something?
  6. Learn eagerly about what the other person does People always may not remember you but they will always remember how you made them feel. When networking, the other person’s interests are just as important as yours. Ask questions about the state of their industry, their opinions about trends. Ask them about their companies and their products. It may uncover something useful, may be not immediately but down the road somewhere!
  7. Use Social Media to Expand your Professional Network – Unlike even a decade ago, so many new avenues for expanding your professional network are available – LinkedIn, facebook, Google Plus, Twitter, etc. Just make sure that your Personal and Professional channels are kept separate. Having company pages, twitter accounts and facebook pages for companies and products is one way to do this properly. In general, be aware of what you post or express even in your personal channels. Anybody can search for them and find what you post there anyway.

Networking is an Art. It is very valuable for a company to do this as early as possible, especially in Product Startup companies. Done right, it can be very useful for a long time, over multiple companies, jobs and startups!

I like to define networking as cultivating mutually beneficial, give-and-take, win-win relationships… The end result may be to develop a large and diverse group of people who will gladly and continually refer a lot of business to us, while we do the same for them. –Bob Burg

Who is your customer?

Get this right and you have taken the first step towards success in your software product venture, whether on the web or on-premise.
As a corollary, if this is not clear, then no matter how sophisticated your product is, it will always be a struggle.

As many entrepreneurs are aware, the success of a product depends on the product itself, the pricing, the promotion and the physical distribution as defined by the 4 P’s.

Even in this era where pricing is irrelevant given the Free or Freemium business models, one needs to spend money to get signups or visitors and that will be wasted if the target customer profile is not defined properly.

In a software product business, getting the customer profile right is the key even to start because the specifications would depend on the type of customer.  The design and the development would follow.

Let me illustrate this with an example.
A friend of mine asked me to help market his POS Retail Software Product that he had already developed.  To better understand his product and strategy, I asked him a single question “Who is your customer?”  He looked at me as if I was an alien and said “Obviously a retail business!!”

Undeterred by his tone, I asked a follow-up question, “What kind of retail?” and by this time he was convinced that talking to me was useless.  Just to humour me, he said “Any kind of retail shop will benefit from my software”. And there started the “Spanish inquisition”.

Me: “So the neighbourhood grocery store as well as big bazaar can use it? A shop selling Bengal sweets as well as Bata? All of them fall under the category of Retail”

And then he saw the point and the implications of lack of clarity on:  

The Product itself:

  • The scope:  The small grocery shop may need at best just the billing and the receivables whereas the chain might want to network it’s branches and would like to know the traffic pattern to have the right number of staff to meet the demand.
  • Hardware requirements: A small shop may do with an assembled PC and a strip printer whereas the big ones may want POS Terminals with scanners.
  • Security: Just a simple login would suffice for a small shop while elaborate security levels need to be defined for a large outfit with clearly defined responsibilities

The Price:

  • The shop owner might be willing to spend a small amount for the PC, printer and the software and he may not give too much credence to the software.  You cannot charge him a few lakhs for the software alone.
  • In the case of a large chain, the price point must be much higher given the need for metrics, security, deployment at different locations, training, hand-holding etc.

The Promotion

  • If it is for the small shops then one case use mailers or approach a set of similar shops in an area to generate interest.  One can also use local newspapers to create some awareness.
  • To catch the eye of the chains, one must advertise in industry journals, magazines and perhaps take stalls at industry events

Physical Distribution

  • For the retail shop, a one-one approach using the salesperson may perhaps work best.
  • For the large chains, one has to go with the hardware vendors or system integrators or retail IT consultants (I hope such a specialty exists given the explosion of retail in our country)

I know that this distinction is very simplistic but I have chosen it to give an idea. Having seen the importance of defining the target customer, we will look at some parameters to do it effectively, in the next post

Does India provide a supportive environment for getting value out of innovation?

When we talk about supporting innovation in India, the first things that come to mind are the availability of capital and people with the right skills. But, the efforts and risks involved in innovation don’t make sense unless inventors and firms can get value out of their innovative activity.

When will innovation make money for inventors? That depends on issues like: Are users willing to try out new products and services? Do the capital markets place a premium on companies that are more innovative? Can an inventor protect his innovation from being copied by others, i.e., can he be sure that he (and he alone) will be able to capture the value from the innovation he creates? The right hand side of the framework below captures these “demand-side” factors.

In this article, I will focus on the last question – the issue of value appropriation – and ask a broad question: Does India provide a supportive environment for appropriating value from Innovation?

Appropriating Value from Innovation

To answer this question, I will investigate whether the Indian system for protecting intellectual property provides an effective mechanism for protecting inventor rights. Please remember that there is an exchange relationship at the bottom of the intellectual property system: the State gives an inventor a limited time monopoly to exploit her idea in return for the inventor sharing her knowledge or idea with society. So, a good intellectual property system has to balance the needs of both inventors and society at large.

Of course, I must add that from a firm-strategy perspective, appropriating value does not depend on intellectual property alone. As the graphic below (adapted from VK Narayanan’s book Managing Technology and Innovation for Competitive Advantage) shows, a firm’s ability to appropriate value from innovation also depends on its product market actions as well as its ability to innovate continuously and stay ahead of competitors. But, the intellectual property environment, and IP strategies followed by the firm form an important third prong, and these are the focus of this post.

A Historical Perspective

Independent India started off with a fairly strong intellectual property protection system. This should not surprise us because this was intended to protect the rights of British inventors under the colonial regime. However, there was growing disquiet about this system in the first two decades after independence, particularly in the area of pharmaceuticals where strong patent protection was seen as enabling multinational drug companies to extract monopoly profits from a poor country. As is well known, this culminated in our making important amendments to the Patents Act including removal of provisions to patent new molecules, and providing relatively short periods of patent protection in all cases. The new legislation – the Indian Patents Act of 1970 – is commonly credited with the growth of India’s generic pharmaceutical industry (based on an ability to create new processes for known drugs and scale them up effectively) and some of the lowest priced drugs in the world.

By the 1990s, many things had changed. Globalization was the order of the day, and India had climbed on the globalization bandwagon. International talks were on to provide a supportive environment for global trade. These talks expanded in scope to incorporate intellectual property protection. In 1995, India signed up for the GATT treaty and promised to put in place stronger intellectual property laws by January 1, 2005. India kept its promise, though not everyone is happy about this! But, the timing was right – by 2005, many Indian companies were taking innovation more seriously, and were therefore looking for stronger intellectual property protection for their inventions.

Where do we stand today?

Information

While the law changed, the procedural aspects of patenting have taken time to catch up. One of the important characteristics of a good patent system is easy availability of information about what patents have been issued. For several years this was a major bottleneck in India with such information not available online, and available only through a set of CDs compiled by TIFAC in Delhi. Even now, though there is an online database, it is nowhere as powerful or as comprehensive as the US PTO’s website. I would have thought that with all our software and IT prowess we should have been able to build something better than what the US PTO offers but…

Procedures and Process

Another important procedural issue is the speed with which the Patent Office considers applications, and the quality of the examination process. The importance of this dimension was recognized some years ago and a drive to hire and train patent examiners was launched. But, I saw a recent advertisement of the Controller General of Patents, Designs & Trademarks calling for applications for trademark examiner positions in which they are offering a consolidated salary of Rs. 25,000 per month to people with a degree in law and 3 years experience. I am sure it will be a challenge to get well qualified people at that level of compensation.

In an alternate effort to speed up the process, there was a proposal to involve the CSIR in preliminary screening and evaluation. But this was objected to by many as the CSIR itself is an active player in the intellectual property space and is, in fact, the Indian entity with the largest number of US patents.

While it’s difficult to judge the quality of patent examination, what we do know is that after an initial spurt in the speed of examination and grants, the process has slowed down again at a time when the number of applications is on the increase. Mint newspaper carried a useful graphic recently summarizing the challenge:

The Law Itself

As far as I can make out, there has been reasonably widespread acceptance of the amendments to the Patents Act made in 2004, 2005 and 2006 except for a couple of issues. The first issue is the now infamous Section 3 (d) that seeks to prevent evergreening by pharmaceutical companies by requiring a major inventive step as reflected in enhanced therapeutic value for a molecule to be awarded a patent. This has been a contentious issue almost since Day 1 of the new patents legislation, and a series of refused / cancelled patents to big name pharmaceutical companies has shown that the law has bite.

The second issue has been the issue of compulsory licensing. On March 9, 2012, the Controller General of Patents issued the first post – 2005 compulsory licence to Natco Pharma to manufacture its equivalent of Bayer’s Nexavar, a drug for treatment of kidney cancer. This has raised a hornet’s nest, as it has raised contentious issues like (1) what is a reasonable price for a drug? (2) what constitutes “working” a patent? and (3) what is the appropriate royalty to be paid to the inventor company in the event of compulsory licensing?

It’s fascinating to note that most of the controversies regarding the new patent law in India have centered around the pharmaceutical space. Globally, the big debates on intellectual property in recent times have been in the smart phone space involving companies like Apple, Samsung, and Google (Motorola Mobility). It’s almost as though we live on two separate planets! I suppose the reason for this is that India is still not a big market for high end smartphones and therefore the patent and design wars of this industry have not spilt over into India. But this is also another indication that India has failed to find a place at the high table of the most active innovation domains (see my earlier post on the areas in which India has the most active researchers).

In our obsession with the healthcare domain, we might be missing out on developments in other sectors that call for changes in our intellectual property protection laws. A new generation of software product companies is emerging from India (see my recent article in Outlook Business), and large companies like TCS and Infosys are embracing products and platforms in their quest for “non-linear” growth. But we continue to deny software products patent protection and limit their intellectual property protection to the Copyrights Act.

Awards & Enforcement

Consistent with their position in other matters, Indian courts tend to be conservative in penalties and awards for intellectual property violations unlike the multi-million dollar (or even multi-billion dollar) awards of American courts. In a way that’s good because it prevents intellectual property from becoming a separate game of corporate strategy. But the flip side of this is that there is the distinct possibility that an inventor may not receive adequate compensation for infringement of his intellectual property rights.

This become particularly critical in the case of the small inventor who anyway fights a David vs Goliath battle if the infringer is a large company with the ability to exploit all the procedural opportunities for delay available in the Indian legal system. In fact, if I were an inventor in India that would be my main fear – I may be able to obtain a patent and other forms of intellectual property protection, but will I be able to enforce my patent rights in a meaningful and timely way? Even in the US, the inventor of the intermittent windshield wiper, Robert Kearns had to struggle for years in his battle with large US auto companies (see the graphic below); I shudder to think what would happen to an equivalent inventor in India!

As we go forward, there will also be a need to ensure greater consistency in judicial decisions in the intellectual property domain. Without any disrespect meant to our honourable judges, I can see that in some of the recent judgements they have struggled to cope with the technicalities involved. Not too far in the future, when we have a critical mass of intellectual property cases, it will help to have a single court at the appellate level as has been done in the US.

Conclusion

In the 1950s and 1960s, we saw companies like Xerox and Pilkington Glass that established monopolies in their respective industries based on technologies which had strong patent protection. Today, the pace of innovation in most industries has hastened to the extent that companies need to innovate continually to derive maximum benefit from their innovations. But, intellectual property rights continue to provide the first-level protection for innovator companies.

As India develops a modern industrial economy, and more companies depend on innovation for their competitive advantage, our need to provide an appropriate level of legal support to enable innovative companies to capture the benefit of their innovations will grow. In this, our priority should be on improving IPR-related information flows, better processes and procedures, and enforceability, and on shifting our attention beyond the healthcare industry.

Original article can also be accessed here(from Juggad to Systematic Innovation).

Microsoft Accelerator Research on Starts and Closures in Indian tech startups

We are planning to release research findings every month week as part of our startup support program at the Microsoft Accelerator in India. There are about 50 different topics that we are curious about and are consistently doing research to find out ways to help our accelerator companies perform market research, target early adopters and focus on getting more customer traction.

This series is part of our accelerator database on engagement with startups, investors, mentors & entrepreneurship. Last week we did a report on Smartphone usage in India.

This week our focus is on the rate of companies starting and closing in the technology product space. Over the last few years Microsoft has been tracking new companies as part of its Bizspark program. Besides this we have access to several databases from multiple sources which has allowed us to consolidate all these into a single system to track startup activity. While we currently track over 73 different elements including founders, starts, closures, funding, etc. our focus is on trying to find patterns that can give us more clues to remove the roadblocks that reduce entrepreneurial failure early in the system.

We track over 6200+ entities – which includes services companies with a “product” they are building and also many viable side-projects, where the founder is generating some traction or revenue and 3900+ companies that are solely focused on building products (includes SaaS, eCommerce, traditional software, consumer Internet, etc.) in India.

On average there are about 450+ starts annually over the last 3 years, which has grown dramatically thanks to eCommerce.

While Bangalore has the most number of technology product startups overall, at neary 40%, Delhi/NCR came a close second in 2011, only to return to normalcy in 2012.

In terms of closure, 26% of companies still close within a year of them starting (either the founders giving up and moving on, or the company going dormant).

The biggest issue for closure (given that nearly 80%+ of all companies are bootstrapped) is collecting money from customers who have committed to paying for their usage of the product.

While not being able to raise funds is really #1, that seems to be a generic reason enough and a motherhood-and-apple-pie situation.

Unlike the valley (anecdotal information alone) most failed entrepreneurs dont go on to start another company or join a startup, but instead go to work at a much larger company (over 60%). Most reasons given were because of loans to payoff or pressure from parents (surprisingly not from any others).

Our recommendations are for new entrepreneurs to have a “cushion” of nearly 18 months in funds in their personal capacity before they delve into a new venture as opposed to 6 months.

We also recommend asking new customers for an advance in payment as part of the Proof of Concept instead of payment after the fact to aid in managing cash-flow more effectively.