Monday, February 21, 2011

How to be a successful Entrepreneur?

I have had successful entrepreneurial stint. Here are few practical insights based on my first hand experience.


Planning is always considered essential but often ignored in the height of either bread-and-butter or urgency of issues at hand. These are inevitable, but planning is not to be ignored. An entrepreneurial venture needs to focus in that order 1) Product / Solution offering 2) Sales 3) Operations and People 4) Finance and 5) Marketing.  

First and foremost mistake is to get embroiled into daily OPERATIONS. Once in a while is fine. Keeping knowledge of operations and not budgeting for an operations guy are two different things. This is the most important factor to fail. Non-availability of his time or he getting tired in daily operations would leave nobody to drive the bigger agenda - business generation.

A) Clearly Defined Horizon - A startup never has the time and enough resources to dilute the attention. Most smaller companies start with an idea or commence with presence in one product or industry and after the consolidation, moves either for horizontal or vertical scaling. Most Indian IT companies when they started, started with one product - body shopping. I know of a friend who started and established a credible product company in travel industry with marquee customers. He knew the industry and Industry him. By virtue of his domain and industry knowledge, his products used to sell by word of mouth with advertisement budget of less than 2% of net profit (and not even turnover).

B) Connected Organization
    B1. Ecosystem helps - Outsourcing is not just for big clients. It can happen when you are just starting too. Create and have knowledge of an eco-system with specialists that can be tapped at will with in-built extra time and price margins. Upfront investment in hiring and keep worrying to provide work to specialist employee is a big headache saved.

    B2. Networked Organization - Many time, customers judge you indirectly as they may not like to judge directly. An enterprise's Microsoft Gold Partnership, Oracle's premium partner, HP-Mercury's premium level etc. sends a message to customer that the organization is trusted by industry's credible names and they can take it easy in their own evaluations and start trusting. All these partnerships also keeps you in top-of-the-mind recall of partner and may get the inquiries generated at them. A friend of mine in Sacromento, California, USA left a highly paid job at Microsoft to commence a startup. He knew the product BizTalk from Microsoft well and knew what it did not have. He made complementary add-ons and largely concentrated his communication to Microsoft, by direct interactions. In 18 months time, he was able to sell his small company ( $2m revenue) at 34 times premium to Microsoft itself. In generating this $2m revenue, 60% of the inquiries used to come from Microsoft only. Connect with trade association is also very useful.

C) Astute Financial Management
    C1. Keep Cost Low - Startups in garages or room at hostel is still a good idea. Customers that we tend to acquire initially usually do not come (B2B space) to entrepreneur office and grand office may not be needed during the trial phase.

    C2. Right Price - Selling products at very high price will deflect customers and selling it cheap will erode the capital for further growth. Pricing has to be right. Networked organization also exposes one to know what is expectated and how competition behaves.


    C3. Cash is King - One single most important reason for startup to fail is to struggle over working capital to pay for operating expenses. If one has planned for a one year of expenses and ensured their availability, promoter can focus on selling and/or making the products, away from every day finance related distractions. Most college graduates have better chance of stiking gold as there is no perennial sword of meeting expenses. Bill gates, Steve Jobs, Karsanbhai Patel are few examples.

But to sum it up, two more things that are important. One, keep publise organization with "I exist" phenomenon. Keep spreading the word about your existence to be in top-of-mind recall, through low cost but positive messages. Second, use mentor services. Mentor could be another friend's organization with whom you can share your issues and discuss openly on reciprocal basis or an individual who can be unbiased. Mentor is different from co-partner and brings in fresh perspective from outside without mired in the daily problems.

Ashish Jain 

Sunday, February 6, 2011

Education - Enabling India as World’s Back-Office

India’s education market is on a high growth trajectory and so are the employment opportunities. With more and more players entering this lucrative field, the job market dynamics are fast-changing.

India is fast emerging as back-office of the world, having caught on the service bus leaving China to play the manufacturing handle. Service economies around the world have been able to command better premium and face less pricing pressure unless it is totally skewed and overtaken by another country. India has that advantage and it has the correct basics in place. Be part of this sunrise industry.

According to the 2009 Global Education Digest published by UNESCO’s Institute for Statistics, since 2000 an additional 51.7 million new tertiary students have enrolled around the world and 2.8 million students currently study outside their home country. Gross Enrolment Ratio (GER) in US and Europe is 70%, it is 11% in South and West Asia and 6% in Africa. It shows immense potential in developing countries and especially in India with huge and growing population. Out of 1.1 billion Indian people, 672 (60%) million people are in the working age group of 15 to 64 years. This is highest in the world. India will see sharp decline in the dependency ratio over the next 30 years. Govt. has planned budget of 6% of GDP for education in the aggregate planning. Ministry of education has cut a task for itself to l Facilitate 3 times increase in enrolment in
higher education (14 million to 40 million by 2020) l 150-160 million youth base who opt for Vocational Education l In India, 14 world class (Infrastructure and faculty) universities are being setup with coverage including innovation, IP and public-IP.

Right to primary free and compulsory education act is already operative, facilitating government support to education in remote areas. Central government alone will not be able to do much. It will have to be supplemented with State governments and private sector. These are years of IT revolution that is unfolding in India for education.. Here is a quick bite on the opportunities.

Opportunities
  • National Acedemic Depository Bill 2010 will facilitate electronic database of academic awards and it will be mandatory on academic institutions to lodge all degree, diploma and mark sheets there 
  • Scheme by central government for setting up model Degree College in 374 educationally backward districts where GER for higher education is less than national GER. Under which assistance is provided upto Rs. 2.67 crore with maximum of one-third share, increasing to 50% (Rs. 4 crore) under special category states
  • Under Central government funded scheme “National Mission on Education through ICT”, setting up VPN and broadband with 1Gbps connectivity is provided for institutions of higher learning and centers of excellence 
  • Right of Children to Free and Compulsory Education Act 2009 opens up opportunities for entrepreneurs to provide systems for admission, attendance and completion of elementary education in schools that conform to specified norms and standards 
  • 100,000 students from India go to USA either because of better facilities there or due to better brand. Sooner or later these universities are likely to come to India and opportunity exist to collaborate with them to provide them digital content, pedagogy tools, psychological research inputs to Indian conditions, facilities or others
  • Education as a means in spreading the message and catalyzing for corrective action for global warming and climate change 
  • Concept of cross border education through e-learning, open educational resources and mobile technologies 
Government intentions augur well so far. Kapil Sibal has been on record recently to have put important  legislature in place. Bills under parliament approval are
  • Mandatory accreditation of all higher educational institutions
  • Regulate the entry and operation of foreign educational institutions in India
  • Establishment of National Education Finance Corporation, a special purpose bank which will finance the banks and universities directly for the education loan to the students
Central government is working in close association with banks to revolutionize the education funding, an important element in the whole eco-system. It is offering to facilitate education loans at 4% interest rates with
methods than are likely to revolutionize the sector (See separate bar for full information). Taste this:
  • Banks to get re-finance from NEFC, a special purpose bank setup with budgetary provisions
  • Loan applications to be forwarded from the institute to the banks
  • Co-branding degree / diplomas with Bank and Institute to make it obligatory on employers to inform bank while employing the students
  • Banks will have lien on the salary from employers and thus repayment of loans 
  • Students get higher education without lack of funds at reduced interest rates to come in the mainstream
Sector is getting too attractive and inviting many small to big players alike. EduComp is revolutionizing the classes of tomorrow, tutoring is going virtual and studies teacher-less. Competition is bound to grow and so are the challenges. Some imminent challenges are:
  • New methods to respond to emerging societal demands
  • Diversify and enhance revenue streams
  • Improve and demonstrate quality
  • Control costs
  • Compete with new providers at the global level
  • Capitalize on the emerging technologies
God favors who decides his own fate. Make calculated risks and if at all one needs to plunge in this sector, time is now.

Ashish Jain

Thursday, February 3, 2011

Leading International Business - Locally

KFC entered India with Beef and Pork products, without realizing the potential retaliation from the local market. The result, it had to close shop for nearly two years. Future Group with Kishore Bayani as its first generation entrepreneur setup 80 people core team in Bangalore which visits stores, observes customers, meets them, engage with them and alike to gather what he considers core facts for his retail strategy. When Big Bazaar was started, the floors were neat and clean akin to large malls. Customers were reluctant with missing market buzz of shopping. Big Bazaar swiftly adopted the change to succeed, based on the facts gathered through their market insights. Is it business knowledge or cultural knowledge? I would attribute it to knowledge of local culture (India) as same factors may not work in another country just the same way even if other business parameters are kept similar.

Knowledge of local culture, therefore, is as much important as knowledge of business itself. This is hygiene factor, without which, chances of failures increases leaps and bounds. Leaders are expected to have this market knowledge before launching their country strategy. In an International environment, mistakes are costly, not only from financial perspective but also from the damage to the brand.

Insights here are not intended to be exhaustive, but are catalyst to generate interest and help through few guiding rules. Some insights work on the region while others work on the country.

The first exposure is to communicate in International markets. Americans and British like to crack jokes and involve humor with business while French, German, Dutch and Japanese would not mix the two, till they have become ‘friends’. It is strict ‘No’ to discuss politics, religion, family, children, and salary with Americans and Brits. Safest bet is to discuss local sports like baseball, basketball in US and Soccer in Europe apart from Weather. French likes to discuss art, wine, travel experiences and sports. It is kind of ritual in Latin America to discuss health issues in great details. French do not like to get a smile from passer by, just the opposite of Brits. It is compulsory not to discuss family and criticize king / queen in Islamic countries, else…you know best. Italy does not take discussion on Mafia, taxes and politics easily. In Australia and NZ, avoid discussion on politics, racism, labor issues, kangaroo population and highly of NZ in Australia and vice versa.

Australian, Brits, French, Canadian and Americans use chit-chat to familiarize fast. China and Hong Kong uses chit-chat just to discuss the travel experience but swiftly moves to elaborate conversation on even personal topics like family, Income etc. People in Middle East and India like to engage in conversation for a long duration. Eye contact is positive in US and Europe unlike Asian and Latin American, as it is seen as attentiveness, alertness, self confidence, truthfulness and respect. Japanese, Koreans and many Asian countries find stare quite uncomfortable, to the extent of doubting and not agreeing. Accent is very important to Brits and is able to find out educational background from the accent. Standard English were found in supervisory positions more often than were persons who speak with pronounced accent. Americans like to speak slower. In Middle East, Italy, Germany and Taiwan, they associate volume with strength and sincerity and thus speak loudly. Japanese prefer to speak and hear softly.

One of the most authoritative work as a project was carried out by Geert Hofstede (www.geert-hofstede.com) on cultural dimensions. Geert analyzed a large data base of employee values scores collected by IBM between 1967 and 1973 covering more than 70 countries, updated in 2001 with scores for 74 countries / regions.

Hofstede developed a model that identifies five primary Dimensions to assist in differentiating cultures: Power Distance - PDI, Individualism - IDV, Masculinity - MAS, and Uncertainty Avoidance – UAI and Long-Term Orientation – LTO. Values of some countries are mentioned here.
Country
PDI
IDV
MAS
UAI
LTO
Arab World
80
38
52
68

Australia
36
90
61
51
31
Belgium
65
75
54
94

Canada
39
80
52
48
23
China
80
20
66
30
118
India
77
48
56
40
61
France
68
71
43
86

Germany
35
67
66
65
31
Italy
50
76
70
75

Japan
54
46
95
92
80
Mexico
81
30
69
82

Netherlands
38
80
14
53
44
New Zealand
22
79
58
49
30
Pakistan
55
14
50
70

United Kingdom
35
89
66
35
25
United States
40
91
62
46
29

Power Distance Index (PDI) - Society's level of inequality is endorsed by the followers as much as by the leaders. Higher the number means higher the inequality.
Individualism (IDV) – This is opposite to collectivism - in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families. Higher the number, lower the collectivism bond.
Masculinity (MAS) – Distribution of roles between genders. Masculine assertiveness over feminine shows higher number.
Uncertainty Avoidance Index (UAI) – Factor to show society's tolerance for uncertainty and ambiguity. Laws and rules are stick for uncertainly avoidance in high scoring countries / regions. People in uncertainty avoiding countries are more emotional. The opposite type, uncertainty accepting cultures are more tolerant of opinions different from theirs. Long-Term Orientation (LTO) - It can be said to deal with Virtue regardless of Truth. Values associated with Long Term Orientation are thrift and perseverance; values associated with Short Term Orientation are respect for tradition and fulfilling social obligations.

Knowing cultural diversity and its impact on business is any leader’s dream. HSBC aptly characterized it in its punch line “Think Global, Act Local”. Leadership can only be better by avoiding traps KFC found itself in.