An Old Order Changeth

It was early 2002. We were all in the office cafeteria, sitting across a television set that was tuned to a business news channel. Mr. Narayana Murthy was on a show, speaking of how India should claim its rightful place as a leader in economic growth. He exhorted young engineers to go out and build the best factories, world class bridges across rivers and achieve feats that will serve India’s cause of creating world class infrastructure. “In that case”, scrowled one of our colleagues, “his company should be the first to stop hiring civil engineers by the truckloads and make them support T-SQL code”. I was merely weeks into my career as an IT Consultant and that was, in a way, a mug of cold water to wake up my senses. The line and this incident has stayed with me ever since

A couple of years back I stayed a few days at the Infosys campus at Mysore (my apologies if I overtly use Infosys as a bellwether in my article. This is for a couple of reasons. One, for better or for worse, Infosys IS the bellwether of this industry. Two, this is one company I know a little bit having engaged with them on a few initiatives. I should make it clear that what applies to Infosys applies to other IT Services firms in the country for all of them have me-too business models at the core). Now back to Mysore. After one is done putting one’s lower jaw back firmly in contact with the upper after taking a round in the campus, dotted with a gothic structured training institute, a full sized cricket stadium, shopping mall, movie theaters, auditorium and a fantastic restaurant, it becomes clear that this is where mint fresh Infosycians are moulded to belong. This elaborate finishing school makes the young graduates learn skills that are valuable to Infosys (a cynic friend once said this is where the engineers are “finished”, complementing the words with a horizontal movement of the index finger across the throat). These are not skills of building roads that dry quickly and last several monsoons. Neither are the cohorts taught the basics of building next generation telephone networks that can reach rural India quicker than the traditional ones. They are not challenged to think of solutions to provide clean drinking water to citizens of this country. In all likelihood they are taught how to write T-SQL code

Once I was asked to take a basics of finance or some such session for a bunch of engineers – fresh from campus and working with our firm. I finished up the session early and asked the bunch of young kids ask me any question they’d wish. One young boy asked how quickly after the training is over would they ship him for a project to the US. Now ours was a product company and I thought the youngster was better served building products in Bangalore than supporting some UNIX server in Boston. When I asked about his motivation to go on a project there was uncontrolled laughter in the class. “Sir, meter chalu”, shouted a voice from the backrows. I understood. The fifty odd US Dollar of per-diem he would receive from the assignment was much more valuable to him than building the next generation software product in Bangalore. A friend of mine took up mechanical engineering even when his IIT entrace test rank allowed him to take up Electrical, which in my days had a higher pecking order. It was, he reasoned, because he had made up his mind at twelve years of age. Their khatara fiat car had broken down on the road, his father and he were pushing it out to a side and the entire road honked their displeasure. “I wanted to make cars that won’t put their owners in that spot”, he said sealing the issue of his choice with finality. Sadly, they do not make them like that anymore

That is why when last week Infosys announced a shrinkage (shrinkage, yes, from a company that in early 2000 was valued at a market implied yearly growth rate of 25%) of US Dollar revenue by 1.1%, I was happy (full disclosure: I do not hold Infosys stock but I am an investor in TCS, which announced a mere 3.4% increase of US Dollar revenues the same day). I was happy because this trend, if continued for a decent time in the future will decrease the relative attractiveness of IT Services as employment for young engineers. Companies like Infosys, Wipro and TCS will continue to make money from existing projects that are mostly into maintenance – something that will not be attractive for a large talent base. The network effect also should nicely kick in the dual impact of less attractive salaries and even less attractive work content permeating through student networks. This I hope – and at this point we can just hope – turns the needle in a direction that it ought to point for a country that is in serious need of infrastructure execution and sustainable innovation across the board

Infosys (and again, I use this company as a mere example) has minted several millionaires from its laudatory generous stock participation schemes. The wealth effect created by the IT Services companies certainly deserves praise. One can only hope that the now dwindling fortunes of IT Services companies serve as a reminder to these individuals who wish to risk a part of this wealth in entrepreneurial ventures – a reminder to not mimic services as a business model and focus on breakthrough innovation in the software engineering space. It has been oft repeated that India needs a vibrant start-up ecosystem – where there are thousands of ideas starting up, of which a few hundred survive and from within that mere handful comes the next Twitter or the next Facebook. May that be the other side – the sunnier side – of the dark clouds that currently hover over the Indian IT services industry. May the smart engineer coming out of school make a conscious choice – and no longer an irrational choice – of responding to his true calling than submitting to mediocrity for a few dollars more

Post Script: The very often quoted line to poetically herald change is the one I have used in the title of this post. Lord Tennyson’s words that followed the line, as uttered by the moribund King Arthur but much less frequently quoted in literary circles, would have made a great sub-header too – “lest one good custom should corrupt the world”

Flipkart 2.0: Reinventing the Online Retailer

Looked from a different perspective, it could well be a gangster movie script. There’s a territory waiting to be conquered and a couple of  youngsters, both in their mid twenties, take disproportionate amounts of risk to attack the turf. Their success – after the normal period of struggle – quickly attracts wannabes who start their own gigs. Each trying to outdo the other in tactics. Wars (not the kind where they pull out guns before you could say “Corleone”) break out – pricing, products, promotions, pampering – name it and they get fought over.

In a way that’s the story of Flipkart so far – India’s pioneer in online retail. The first entrant is clearly standing at crossroads though, weighing options of pivoting its business. Which way should it go such that it builds a sustainable advantage over incumbents as well as those who harbor ambitions of getting into this market later?

I write my thoughts on this for Startupcentral. Read on…

Google’s Entered Your Business

There was an expectant silence around the room. The projector was flickering a website on the white screen. There were about ten senior executives of the company around a long table and one of them was standing – obviously the guy doing the presentation. Cookies and Diet Coke were laid out but no one seemed interested in them. The occasion was not one to be taken lightly. Google had just entered our business

The time was the summer of 2006 and Google had announced Google Finance a few weeks back, thus bringing the engineering and search giant right in the middle of the market data and investment analytics business. The feeling in our company – a strong incumbent in that market – was that of curiosity mixed with generous amounts of concern. “Anyone who is not Google should be afraid of Google”, a voice in the room said. But then what does a search company has to bring in market data and investment analytics? A lot debate ensued as did a lot of predictive analysis but at the end of it all I had my first taste of the question I were to later find quite omnipresent when discussing business strategy – “what if Google enters your business?”

In my experience of speaking with startups in Bangalore, I am told it is not uncommon to be asked this question by investors – especially if your business happens to be technology led. Thus I think a bit of analysis is perfectly in order to understand what it has meant as Google’s reputation to disrupt existing businesses and markets

Firstly, the moment Google enters your business go buy the cheapest champagne around (remember you are a startup) and celebrate. Google’s trespassing your business validates your market, business idea as well as the future potential of the industry you wish to play in. Congratulate yourself that you were able to think of this business – perhaps with zero resources – earlier than Bain and Mckinsey spending giant corporation was. One thing that Google (or for that matter any subsequent entrant) will never be able to will have to work hard to surmount is your first mover’s advantage (but remember, fast seconds often win)

After the initial bout of anxiety has passed, get your team together to think what does Google bring to the table in your business. Now remember that Google has awesome technologists working for them (fed with gourmet food as opposed to your pizzas) so it has engineering firepower much beyond yours. But then engineering may not be your “business”. And outside of two core businesses – search and advertisement – Google really has not been a handsdown success. Take even more heart if your business has social elements to it because Google just does not get social

But also take this opportunity to look inwards and answer (yes, once again) what your business is about. Peel the layers back until you arrive at a simple sentence describing your business that even your grandmother will understand. Reduce complexity and find your hedgehog as soon as you can. One big reason why Google has struggled in making inroads into different businesses is because it has spread itself very thin. As Om Malik explains in this article, Google wants to fight Facebook, Amazon, Microsoft, Yelp, Apple, Square – everyone – and draws parallel of dire consequences that otherwise brilliant generals had to face in their careers pursuing similar multi-front strategies in warfare

All businesses must build deep moats around themselves. These could be of different types but without a moat, businesses are vulnerable. Small businesses are even more vulnerable in this aspect. Examine your moat – and if you notice yours does not exist or isn’t deep enough, rectify the situation on a priority. Remember how once Flipkart was the darling business in India’s ecommerce? Today there are half a dozen other ecommerce ventures that do what Flipkart also did to “differentiate” itself – cash-on-delivery, low (some say lower than Flipkart) prices, deep catalog and great customer service. Flipkart had moats but they weren’t deep enough

So here’s the deal – Google (I have been using Google as bit of a metaphor. It could mean any other heavyweight as well) entering your business is a great thing. Businesses are never built around cowering down to new entrants. Remember however that new entrants sometimes can be looking at your business much differently than you have been all along