Category: Entrepreneurship

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Entrepreneurship

Marketing Vs. Sales

Sales

Marketing is a long term investment. You determine the way you want people to perceive you, craft communications to that effect and find the best way to reach the customers. You try to ensure that people can understand your philosophy and gravitate towards you. Marketing creates long term value for the company and if done right creates re-collection. It is about making an emotional connect that can last over a long period.

By comparison, Sales is a short term activity. Sales is about here and now. It is about bringing in the revenue. You seek out the customers, create a lead pool, introduce the product or service to them and then sell to them. Sales is very transactional and each subsequent purchase requires direct engagement with the customer to drive purchase. 

When was the last time you saw an Amul ad? Or for that matter Parachute Coconut Oil? I am sure many of us who are a product of the last century would even remember the jingle that Maggi used.

The brand-building that was undertaken by these companies over the years continues to serve them in terms of bringing them business. The marketing was powerful and has been delivering revenue to these companies. This is not meant to discount the distribution and many other functions that need to have performed remarkably well to deliver the results. 

Marketing is powerful. And can deliver long-lasting value to a business if it is done right and makes the right connect with the customer. Typically, marketing is undertaken by B2C companies and Sales is the tool for B2B companies. 

Exporting this analogy to the digital world

Booking.com became a reservation juggernaut by riding the Google advertising engine. They make sure that they pop up at the top of the page which in turn drives purchases and the growth of the business. Have you ever heard anyone suggest Booking.com as the site to visit for a booking requirement? I have not.

By comparison, Airbnb has driven its growth on the back of the focus on SEO and at the same time, they also invested heavily on branding and marketing. The PR and the buzz around the brand have been huge. 

Fast forward 10 years and one of the biggest problems that Booking.com is faced with, is not COVID, it is what they call ‘Google Tax’. The company continue to be dependent on each lead that is driven by Google to them. This translates into a certain amount of money being paid to Google for each booking. While that figure does not hurt for a small company, it is very painful for an organisation at scale. 

Airbnb was wildly unprofitable for a long time but as they reach profitability, every new customer that comes to the company is not as expensive as the early customers of the company. Their brand drives people to them instead of specific sales activity.

More to the point, paying Google or Facebook is akin to sales activity. Startups should start focusing on certain marketing and brand-building as well. Far too many startups are dependent on running these ads to drive sales of their products and services and over time it becomes difficult to wean off them. It becomes easier to lean more and more on these two companies to drive more customers, who will drive revenue; rather than taking the effort to communicate with the customer. 

In the very early days, revenue is important and by extension, sales is a critical activity (even for B2C). But at the same time thinking actively about Marketing and establishing a position is important for the long term health of the company.

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General Thinking Entrepreneurship

2016 : FoodTech :: 2020 : EduTech

Edu

In 2016, there was an explosion of food-tech startups. These were not really food-tech. Frankly, there has never been much food-tech in India. What was deemed food-tech was just food delivery startups. It also happened to be a time when more and more wealthy Indians were getting involved in investing. Having seen Flipkart come from nowhere and make Billions had fired up the imagination of many!

There were a few issues.

Most of the “food-tech” companies were cloud kitchens that delivered, with an app slapped-on. Even worse, they were providing an undifferentiated product. Still, further, they were often priced below cost because “customer acquisition”. Everyone has to eat and if the food delivered home is going to cost less than cooking people are bound to buy. Investors were also focused only on the user base. The trouble is when you lose money on every single transaction scaling fast means only one thing – losing more money.

Eventually, dozens of them went out of business and many of the wealthy who had just entered the “Angel Investor” pool swore never to invest again. 

The rise of the education

Now you hear EduTech all around. The reason – all of the educational institutions have been shut down due to the current pandemic and this has disrupted the rhythm of educational institutions which are a well-oiled machine. 

Institutions run an intake and graduation cycle. Students cannot join when they please. But with no clarity on when the pandemic might end this cycle is being tested.

Around the world, almost none of the parents finance their children’s education so their children learn. Here in India, children are sent to educational institutions with one express purpose – getting a job. Have you ever heard anyone discuss how good any professor at any college is before deciding to join? In the United States, they go to college so that they may have a lot of rich friends – Network.

The schooling system we have is a result of a compact between the industrialists and the politicians. To supply trained labour for the industries. In India, this same compact translates into engineering colleges that produce engineers who can’t engineer anything! They can join IT firms for paltry pay.

How is an app going to live up to this? Substandard engineers – sure. Jobs?

Investors are again making a misplaced bet. The question that they should be asking themselves is what ‘piece of paper’ will guarantee a job in the future? Can they bend policies to their will? 

Byjus although highly valued; is still a conduit to get into IIT or IIM. They started with CAT classes. Their popularity is because kids who study with their assistance have a better chance of getting into those hallowed institutions; implying job placement.

Byjus probably should purchase an HR company and commence placement. In the words of techies, they will then have a full-stack! 

Where is education moving to and where will it end in the next 5 years? Will the industry stop demanding degrees? This is not just about a few startups, but the industry as a whole? 

Will they be willing to hire those with certifications from private organisations? 

How will the politicians (college owners) who have hundreds of millions to be lost in revenue react to this? 

These are but, some of the questions that investors have to be asking themselves while going gung-ho on Edu-tech.

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Entrepreneurship

Building for Change

One of the themes that everyone is required to contend with today is change. Change is inevitable and necessary in these times. Radical changes are being forced upon us and the world is adapting rather quickly to these changes. 

Humans hate change!

Change in itself is not something that we take to, naturally. Humans tend to push back to change. It is our natural reaction to it. 

Having said that, we have been subjected to rapid changes. The second world war was the starting point.

Aviation, automobiles, television, food processing and several others. There have been consistent changed hurled at us and we have changed ourselves to adjust to those changes. Each of these has changed our lives in meaningful and irreversible ways. These are important and critical to our comfort and our productivity. Also, they have spawned several new businesses that would not have been possible before their introduction.

Think about it, 10 years ago you could not have imagined pulling out a slab of glass from your pocket and summoning a cab. Today you cannot imagine a world without it.

Over the years, there are several changes that the world has seen. Over the past 3 decades, the world has been in a paradigm of accelerated change. The only difference with the current situation is that this change is being thrust upon us rather than chosen by us. 

Startups are created and thrive at the cutting edge of change. If you look at the graph above, each jump was accompanied by pioneering companies that took advantage of that change. The last time such a change was brought upon us was when the smartphone was unleashed. Back in 2007, the world was a much different place. Since then, smartphones have not spared any business. From retail to transportation; from supply chain to finance; everyone had to bow to the power of the smartphone and the cloud.

The wave swept the world in a matter of 7 years and everything changed forever. So much so that the next world war will not be fought on a battlefield but the internet.

The current pandemic is unprecedented in our lifetimes. Also, it is taking place at a time when we have the ability and the technology to make changes at unforeseen speed. This is the time to get on the next curve.

Smartphones reached maturity (~80% market penetration) in a matter of 7 years. The revolution that this situation is going to unleash will reach maturity in a matter of 3 or 4 years. There will be winners who will emerge from this and their fortunes will turn in a very short period. 

To illustrate this – Temple Run was a company founded by a couple who operated out of their bedroom. The game was launched in 2011. In 2014, the company had over a Billion downloads and generating Millions in revenue. Not bad for 3 people. There was never a game, before 2011 or thereafter that has been this successful in such a short time and with so little resources.

The current situation can give birth to equivalent businesses in certain industries ripe for change. Any thoughts on what those changes are going to be? Most would say video-conferencing. But no.

The industries that are currently at the throes for radical change and whose future no-one knows are Real Estate, Travel and Tourism, Automobile, Education and Healthcare, amongst others. Each industry is broken in their unique way. The pandemic has broken them. They are going to be altered radically by the changes that this pandemic is unleashing. 

Instead of going ahead and building on business models which existed 5 years ago; the questions entrepreneurs should be asking is which business models would be thriving in 5 years? Where will this settle?

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Entrepreneurship

Ignorance and Absence

Ignorance is often the starting point for all of us

I have the good fortune of meeting and speaking to hundreds, sometimes thousands of entrepreneurs each month. In all of these conversations as a mentor to be able to help them, I ask them what they are doing. Every so often I come across an aspiring entrepreneur who would refuse to share their idea. Having been engaged in this business for the last 8 years, the only thing I feel is amusement. 

In over 90% of the cases where someone has refused to share what they are doing; when they do share it, it turns out to be quite anticlimactic. In these situations what turns out to be the case quite often is that the entrepreneur/founder has assumed that they have knowledge that evades mankind. There is also a degree of arrogance in that they assume they have the capability for an insight that 7 Billion others do not. 

When the ‘secret’ is finally spelt out rarely has it been that I was left at a loss for words. No that would be lying – sometimes I have been – because of the naivety of the entrepreneur.

Often my answer tends to be – Is this not just like [startup name] OR I heard something similar a few weeks ago at [another city]. 

Similar ideas evolve at the same time because the challenges and the tools available are similar. 

In August 2010, armed with 2 Million dollars of his own money, Vijay Shekhar Sharma launched a subsidiary called Paytm. The same month, 2500 Kms south of Gurgaon another team started a company called Freecharge. The destinies of these companies were different not because of the idea but the execution. If you had asked Vijay in August 2010, he would have certainly said he had a once in a generation idea that nobody has had and vice versa. 

It was not that there was an absence of another startup doing the same thing. It was the ignorance of another company doing the same thing.

This does not apply only to startup ideas but also to business strategies, marketing decisions and market behaviour. Just because you have not seen it happen does not mean that it does not happen at all. Most of us have not seen anyone buy a 10 Lac rupee wallet but someone is selling a wallet at that price or maybe even more.

Do not let your ignorance seduce you into assuming the absence of a fact.

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Entrepreneurship

Culture – Strategy – Action

Culture Eat Strategy for Breakfast

Everybody wants to be successful. Each of us who start a venture or join an organisation or pursue a cause; we want to see success. What does success mean? In most organisation whatever is seen as a success; results in progress, esteem, greater opportunities and more income.

Since each organisation has its metrics of success, it all comes back to who defines it. Every organisation has a success story. The success story talks about how the organisation came to be what it is. For some, it was because the founders saw opportunities where none other saw any. For some, it is the large accounts that the company/founders were able to bring in. And for others still, it is the story of making the customer happy no matter what the costs were. The narrative of how success was found differ for different organisations.

Culture helps define these metrics of success.

Whether or not you specify this in your HR policies, it becomes the things that team members aspire for. It is the way success gets defined in an organisation.

Bill Gates sold an Operating System that he had not even made – to IBM. He spent the next 2 months coding the OS that he had promised. This is part of the lore of Microsoft. If you look at the success of the company in the past and its rejuvenation today it has always been a company that sells to other enterprises. Even though the mobile shift passed the company by, they could do little because the internal culture was not to focus on consumers.

One of the biggest misunderstandings is that culture leads to success. The truth is – Success leads to culture. Success creates the narrative which creates the culture. Great organisations control this narrative very well. Their stories are powerful and alter how their employees see them.

This phrase ‘Culture eats strategy for breakfast’ was first mentioned by Marc Andreessen, the founder of Netscape and now a successful venture capitalist. You cannot hire a new CEO and expect them to make a strategy presentation which will change the direction of the company. It has to begin by changing culture which is the product of changing the success story within the company.

Think narrative before you think strategy.


Action eats policy for lunch

Often time, companies also feel the need to change the way things are operating within. If a behaviour has to be altered, policies are put in place to act otherwise. How the leadership acts and the actions that are taken matter far more than a hundred-page policy that any consulting team can put together to explain how things should be. 

Action is seen, it is felt and is far more real to the people within an organisation that reams of policies. Action is now, its consequences are also now. There is nothing more powerful than that.

When startups grow and founders want discipline, most often they will put together 10s of pages of policies and expect things to change overnight. Act on it. Live it yourselves everyday first before expecting others to follow the same. Action will speak louder than any document would.

Figure out the narrative within the organisation and act. This will solve most of the issues within the organisation.

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Entrepreneurship

What makes a great story?

I had written a blog on the kinds of stories that every startup needs to have. So what makes for a great story? I am going to share some thoughts on what makes for great stories. The objective of a great story is to be viral and drive greater discovery. Whether that is amongst the investors or customers. The more that people hear about you, the more good things happen for you.

Stories that go viral have a few necessary characteristics. Here are the characteristics of a viral story:

Simplicity – A viral story is simple and can be passed onto others quite easily. Simplicity is also important for it to be easily remembered and repeated. If your listener is not able to remember the story then they would never tell the story to another person. So you need to take effort to ensure that your story is as simple as possible.

Unfalsifiability – Good stories are hard to disprove. This what provide them with an air of authenticity. If your story has timelines that do not add up or seem improbable then not too many people are going to want to share it.

Conviction – The extend to which you are certain is the extent to which someone else is certain. Your conviction and certainty in how you narrate the story will play a huge role in the certainty with which I tell another.

Contagiousness – For a story to be shared it has to appeal to a broad audience. This does not mean that the story has to be about many or align with their views. It means that the story has to elicit a very fundamental human emotional response. That response can be love, hope, hatred or disgust depending on what your story is trying to convey but it should universally elicit the same response. To be spreadable, a story needs to be contagious—something people feel deeply compelled to share and that applies equally to many people.

Incentives – The incentive to the person telling the story can be purely in the form of amazement that they can attract from the listener or the knowledge that they seem to have. If they can add value for the listener by enabling them to benefit in some way by knowing it, its a cherry on the cake. For instance, do you know this company – Airbnb – They make it possible for you to stay at other people apartments that are lying empty, it can bring down your travel bill so much!

So do you think that your story has all of these aspects right?

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Entrepreneurship

Stories every startup needs

In every organisation, there is folklore or stories that shape the culture of the company. These stories are very powerful because they remain with the organisation for a long time. Stories are remembered and they are self-propagating. Further, they have great power in shaping how future employees think about the organisation and the steps that they take when faced with challenges. The more authentic and real these stories are, the more power they have. Although having said that almost every founder embellishes their stories. Don’t stray too much.

Founding Story

Quite self-explanatory, the founding story is about how the venture came about. What was the motivation or the push that got the venture started? Most businesses are created to address a problem and founding stories usually talk about how the founder discovered the problem. As a foundational story, this is by far the most important story for any organisation. It makes customers identify with you. It makes the early employees align with the mission. It also makes the broader community understand your goals and why you set out on this path. 

I have come across founders, who just started a venture because they were good at something. Not because they found a problem or were specifically looking to solve something. For such founder, my advice would be to take some time and think about your customers and the problems that they face. How is your being good at something helping them overcome their problem? This will be central to your initial growth.  

First Success Story

Your first customer, your first delivery, your first success is always special and it sets the tone within the organisation for what it means to be successful. As Ben Thompson noted in his blog

Culture does not beget success, it is the success that begets culture.

Bill Gates sold an Operating System that he had not built, did not know if he would be able to build or not, to IBM. He then came back and almost killed himself to deliver an operating system that came to be known as MS-DOS. It is the story of this success that drives what is expected of employees within Microsoft. How they can excel and distinguish themselves. 

Similarly how you got your first customer. What drew them to you. What made your product the best choice for them are all parts of the narrative. This tells people within the organisation what the organisation stands for. 

Customer Stories

The proof of the pudding is in eating it or at least hearing from those who have. If you are solving a problem, it should create an impact and it should change lives. The story of a customer who is living this change is one of the most powerful stories for the organisation internally as well as externally. When I think of powerful customer stories, I am often reminded of a short film Apple put together for WWDC 2012. (It is about 5 minutes but well worth it)

Customer stories need to be collected and nurtured over time. You need to be on a lookout for such stories. Hotel chains such as Marriott also do a great job of collecting and showcasing them. In the long run, they are very powerful and a true differentiator. 

Stories are a great investment for any organisation. Nobody will remember your revenues and gross margins, they will all remember a good story. Further, they will share the story with others, which helps your business grow. So work on your narrative, work on your stories, collect them and nurture them.

With the lockdown and time on hand, why don’t you start working on your stories?

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Entrepreneurship General Thinking

Travel Business – will it ever be the same again?

I have always enjoyed travel and have visited quite a few nations and cities in my life. Not only that, but I have also myself been involved in the travel business and so it is close to my heart. 

A vast majority of my travels have been for work and this is possibly reflective of most travel undertaken. A vacation is taken once or twice a year at most. 

Thousands of flights are taken every day just to conduct meetings that last a few hours. With the restriction that is now being placed upon people, there is a need to avoid this travel and undertake the meeting over phone call / Online / Telepresence etc. This has meant that those who were probably, not incapable, but apprehensive of conducting meetings online are now being forced to do the same. I think a whole host of people are going to discover the comfort of online calls as well as economic gains of doing the same. It avoids the time and cost of the commute. It also ensures that you can optimise the way your time is utilised. Where you would have had one really important meeting in a day for which you travelled all the way to another city, you could instead have several.

Travel Industry need to ponder

How many people would get back to the old ways once things get normalised? Would business travel come back to the same level? What would this mean for the travel business?

I feel that for better or for worse, travel business would need to re-align itself to this new normal. It is good for the environment as well if people travel a lot less. It puts a lesser strain on the resources needed as well. But can it have other effects as well?

  • How many planes would get sold in the next 5 years?
  • What effect will this have on car sales in the coming years?
  • What does it mean for services like Uber which transport people from place to place?

These are some of the thoughts that come to mind when I think about the pain the travel industry is undergoing right now. What is it going to mean for the long term?

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Entrepreneurship General Thinking

The right kind of friction

Slide a muslin cloth past wet hands. 

If your hand is too wet, the cloth gets wet as well and would let your hand easily slide past. 

If your hand is dry then the cloth will easily slide past as well.

But… If your hand is just a little wet, there is enough friction to have the cloth stuck to the hand.

Every relationship requires friction. If there is too much friction it is a problem and if there is too little friction it gets boring. Just right amount keeps everyone interested.

You will see this with movies also, too many plot twists and you lose interest, too little and it is limp, you need just right amount. 

Think if you are an app, too many notifications and too much happening, I just can’t keep up and I leave it. Too little and I think it going to be the same thing what is the point in revisiting. You need to find just enough.

How do you create this tension between your business and your customer? Where they neither care too much nor too little, just enough to keep them coming back. Finding this balance is the key to building a successful enterprise.

What intrigues your customer/user? What makes them sit up and take notice? What causes them to think or even feel some discomfort? 

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Entrepreneurship

Competition

Mentoring startups gives one a ring-side view of the way entrepreneurs think.

I have often been in a situation where an aspiring entrepreneur wants to pitch me their idea and hear what I wish to think about it. Travelling across the country and meeting thousands of entrepreneurs also means that I hear more than my fair share of ideas.

Often I come across situations where somebody comes around to pitch an idea, and my immediate response is ‘There is someone does something similar’ or ‘Is this not the same as XYZ?’

What typically happens at this point is this ‘aspiring entrepreneur’ will go back and research the hell out of this supposed competitor and read everything written about them. If this supposed similar company is doing well they get all bent out of shape that there is a strong incumbent and if they are struggling, read about all of their struggles and get depressed!

When you are starting a venture, you need not worry about a competitor, or someone doing something similar. If at all anything, you need to be worried about the absence of competition. If a real opportunity exists, why is nobody else seeing it?

You need to avoid being flustered by competition because:

You need to focus on your own strengths and find the best way to showcase that strength. Also, there is more than one way to do a thing or solve a problem. You need to focus and make sure you are solving it.

The market is large. In a country like India, there is always enough market to go around amongst several competitors. Can you think of any industry where there is only one player? This also means that there is enough diversity and nuance in the market for the problem to be solved in different ways and see adoption.

If you are introducing a new concept, you want many people popularizing the idea rather than you alone. Orange County, Coorg spent crores in advertising popularizing the idea of vacationing in Coorg. No sooner was the location recognized, hundreds of players moved in. It would have been nice to have had some competition in the early days.

The best way to learn is from watching others make mistakes. The other way to learn is to make those mistakes yourself. Having competition is the cheapest way to learn.

If there is no competition in the market even real or is this all a figment of your imagination?

Finally, I would like to leave you with this thought – Google was not the first search engine, neither did they enter a market without competition. Facebook was not the first social network, neither did they enter a market without competition. iPhone was not the first smartphone, neither did they enter a market without competition.

SpaceX is not the first private rocket maker and their competitors where all governments!

Embrace competition and seek it out. Watch them carefully. Ultimately your success or failure is down to your execution.