NASSCOM EMERGE Community Catalyst for Growth of Emerging & Start-Up companies

Suresh-- good to start a chapter on success stories....another one on failures and dillemma is also worth, as most members want to share pains and learn if others share at least part of pains to get insight of creating mitigation/remedy

Coming to offerings with differentiation, it is obvious, no individual or institution should start a IT service co unless there is a clear peer reviewed docs/process/commitment as below: 

1. Business case docs- what to offer, build and deliver, which territory/market in which value proposition-what differentiators...( many start with dreams, some peer /social pressure, father in law sposnoring, Income tax relief pipeline, overseas contacts, cousine in US corp circle..)

2. Review mechanism - idea and doc is not enough-- we need to get them  reviewed or benchmarked periodically, with peer benchmarking...with documented minutes for further periodic review

Any IT cos ( service or product selling co) with less than 50% annual growth in SME sector is in trouble. In first 3 years it must attain at least 100% GROWTH to justify if its ideas are great and valid, with market edge.....otherwise worth putting drastic mitigation models in place 

Two more factors which, in my opinion, impede growth of emerging companies to one of the big boys are:

1. Limited or non-scalable futuristic vision in the top management (basically about which direction the ship should sail towards)

2. Limited or non-scalable execution capability of the line managers and the engineers (in emerging companies the org structure is typically engineer -> line manager -> top management)

One possible solution lies in acquiring external expertise (in form of part-time consultants or full-time employees or a combination of both). Another way forward is to consciously adopt industry frameworks and establish systems in place to build a scalable model.

Dear Hemant- both the factors cited are again basically due to lack of purpose, goal, differentiators and management bandwidth. IT cos are meant for making surplus, not for trials and training and admin tasks. If we can not make revenue growth of 30% MIN EVERY YEAR  in csh, cos should be wound up.

Point 1- futuristic vision is always there but as a dream with no actinable roadmap-- external consultants is the only way

Point 2- non scalable excution capability- part of bandwidth /maturity proble- again an external conultant is a possible way. Without excution capability, co should not be started unless goal is to get trained at investors cost.

Adopting industry frameworks for a SME, yet to mature is dangerous as that will eat up all funds and time. Systems must of course be in place to have minimum standards, ground rules, documented tracking, metrics generation. Absolute ruthless delivery capability must be there on dely head/PMs, otherwise get it outsourced from 3rd party vendor.

To add another dimension to your thinking – purely from a marketing stand point. I dont think it is te absence of a differentiator, but the inability of many companies, including some of the very large ones where I have worked, to communicate what they are in a manner that makes sense to the customer. Most of the time we articulate our vision, mission, values and differentiators in an inwardly focused manner that means nothing to the customer (they are looking for stuff like lower cost, better efficiency, fewer defects, higher ROI…)

The second issue is scalability – emerging companies often think the way larger companies think. One of the CEOs I worked with used to say if you are a #2 in grass court play and play with the #1 in grass courts, you will lose 8 out of ten times. You need to change the playing field – let’s say clay courts – suddenly you find that the other guy is only as good or bad as you are. We need to look at innovation, playing niche, think new hiring pools, new customer segments…

makes sense?

let me know yoyr views:)

Vinod,

I can fully appreciate the INWARD focused way of communicating to the market that happens with most entrepreneurs.  Entrepreneurs care for SELF, when compared to other people, that is exactly why they have taken their career in their hands instead of working for someone. It is those people who come OUT of the INWARD focused thinking and start communicating in terms of what the market needs, achieve success. I agree with you 100% on this.

Coming to the point I raised on differenciated offering. Let us take CAR as a product. If you are making yet another CAR, think about the challenge you would have, to communicate the message to the prospects. Instead let us say, we make car for differently-abled-people. The differenciation is so clear at the bottom, every thing you do on top sounds relatively easily. Better example still is TATA's Nano - which most people think as cheap car. But to me, NANO is a 1st class example of the understanding and execution of BLUE OCEAN strategy by targeting middle class 2-wheeler users. This is an unfulfilled need. It is just that the price point has to be appropriate to the target market, to make the unfulfilled need a reality. Cheap price is a means to an end. As I mentioned in the begining of this thread, any company, product or services, should have a unique offering that full fills a set of people's needs (market) that is VASTLY not being addressed. From there everything else is comparatively easy.

Suresh

I agree. Lack of differentiation (or vision) is a big stumbling block for the thousands of me-toos. However, equally crucial is execution. Many entrepreneurs with great ideas fail for lack of execution, while others with undifferentiated offerings/strategy do well simply by executing better than others.

Good Day Gentlemen,

I would not like to term this factor I would like to mention as the foremost or root cause, but maybe one that seems to have been significantly ignored.

I have pioneered and in due-course changed the fortunes of two startups in my career. One was a bleeding edge Technology Startup and the other a vanilla Offshoring organisation in the IT sector. There were no dearth of plans nor motivation nor awareness of differentiators or the "blue ocean" for both these organizations.

But in the true lines of most smaller organizations these days, the necessity to survive, meet expenditures and above all the fear of a possible failure contained the confidence of these organizations to execute these plans. Both of them were more open with the idea of accepting and executing business as it came around, whatever that may be as long as it brought revenue and in the course doing all kinds of things which were never planned for and in due course sidelining the orginal plans as a kind of side business executed whenever there was free time or resource. The "One fine day" kept being postponed endlessly. They just didnt have the balls to look at it in the eye and take it up or even commit to resources and timelines, but never admitted to the same nevertheless and there are always a billion albeit valid reasons.

To transform these companies, I had to think "out-of-the-box" to bring an end to this senseless "Rat-Race". In my personal opinion such a "rat race" robs companies of the confidence, motivation, commitment and resources to execute those truly innovative or novel plans for which these organisations were born in the first place and is a perfect insurance to always keep them "small".

Sandeep,

You have put the nail on the dot by stating in yr 3rd para as below

1. Small cos have necessity to surivive, meet expenses as first goal

2. They accept/excute  business as it came around, (which were never planned for and in due course sidelining the orginal plans as a kind of side business executed whenever there was free time or resource.)

3. The "One fine day" kept being postponed endlessly (but never admitted to the same nevertheless and there are always a billion albeit valid reasons.)

 This is exactly what I have been sharing frequently in blog as well as this space with other friends. Without sorting out such traits, SMEs can never come out of the box. Point is lack of THOUGHT LEADERSHIP, without which neither the IT co should have been started, nor funded further. Coming to the half hearted purpose of starting and funding the IT SME, best way is 'out of box' approch; which is not yet shared by you but of course essential and critical.

Pl add yr points to another subject I had started some time back on same space-- "Business pains of Indian SMEs" -- look back in the listings... and let us expand this sharing box...great

Dear Rajendra,

I did not state the "out-of-the-box" approaches simply because it varies from organisation to organisation. But ofcourse the idea is always the same, to break the rat-race.

In the former orgnanisation I chose a techno-centric approach wherin we aimed at products, to fill specific voids, which we could do in the short-term and which were on the way to the "big" one in order to  earn revenue and pay for future development. Secondly, we aggressively hunted for projects which used the technologies and incorporated similar architecture to the "big" one, sometimes executing them at semi commercial rates. This matured the team and the knowledgebase in those technologies at third party expense. This also gave us the flexibility to evaluate and understand the possibilities and pit falls of the architectures that we had planned for. In short, we chose to get there slowly but surely and never compromising with the plan nor the necessity to survive..

In the second, it was a much different different approach which was aimed at maximising revenues by diversification and leveraging existing competencies and using the additional resources to develop a team which was focussed on the main plans. This team executed projects and exercises aimed at building expertise, knowledge and clientbase in the avenues aligned along the main track. The idea was to shift "one-by-one" the entire team from those umpteen non-focussed jobs to the "main" team.

An approach which worked at one place need not work at another. It differs from organisation to organisation. My point is that what is required is flexibility, fresh thought and an inward drive to push for the light at the end of the tunnel to conquer this rat-race. The solution to the "rat-race" lies in the manner of the "rat-race" itself and the sooner it is deciphered, the easier it is to break-free as the lesser it becomes engraved into the identity of the organisation itself.

I understand your point. What is your advice for starts ups and SMEs eventually for self scrutiny and improvments. Different approach for each case study does not seem to be OK as general advice to community.....

How does one co know that they are not in rat race, as human elements ( ego and self survival) puts on  blinkers to any hunam person or team ....How do we break free....

As you indicated, awareness is key. If at any point in time, you cannot honestly describe your company and its key objectives and vision in one simple sentance - whichever manner it might be structured- and feel comfortable that this was infact what you had intended it to be in the long run, you can smell trouble right there. The differentiators and Value Propositions should be evident in that one simple sentance.

Ego and Survival are key influencers but you can cheat anyone but yourself. As you repeat the sentance you will see precisely where the pitfalls and issues are.

How do we break free?

Breaking free is a constant attempt to rephrase that sentance. You cannot get to that sentance you want or you dreamed of, today. But you have to change the qualifiers and scope slowly but surely and finally get there.

1. It is important that you know what you are or rather what you are doing: thats what the first exercise attempts to make you do.

2. Then its important to understand where you want to go. Thats what the comparison with your true objectives will yield.

3. And then you have to seek the path by constantly attempting to move closer and closer to your true objectives.

Depending upon how well you can abstract the situation and perform the first two steps, the duration and the number of iterations of the third steps depends. Methods work differently for different people. It works for me. For someone else, it might seem silly and an adaptation of the same may be more effective. But the rules remain the same.

" Until you know where you are and where you want to go, Stand. Stand like the mountain. And once you know, move. Move like the wind."

Friends

My belief is that any emerging company needs to have a defensible value proposition that differentiates it from the crowd. You could choose to innovate through your product, your process or your business model but at the end of it if you still look like a "poor man's Infy" the world is not going to line up at your door

Ganesh

Dear Ganesh,

That was a good attempt at wrapping up that point long dragged around.

Hi Rajendra,

A fantastic point. Yes, you need uniqueness. But many people think "generating a unique idea" is a very difficult job. I have tried to simplify it here:

http://www.abhishekrungta.com/manufacturing-ideas/60/

Enjoy this article.

Abhishek

I have read the discussions with interest. It seems to me that we are accepting the proposition -  "Undifferentiated Offering, is the TOP most issue that prevents companies from making it big" too easily.

In my experiences, while many startups may fail or fail-to-scale with a "Me Too" products or "better-mouse-traps", there are many examples of success as well. The basis for success with a "Me Too" product, I believe comes from the "disruptive" nature of the product. If it serves under-served customers or meets the basic needs of existing customers at a radical price point; AND scales quickly to meet the advanced needs - a "Mee Too" product will give an established incumbent a run for their business. Of course this is from Innovators' Dilemma/Solution.

I would offer some other TOP candidates to consider: Too early for its time; Too complicated to use; Too many things to Too many people; Too much money () - look at the DOT COM burn rates and successes versus the Google founders burger treat on raising the $100k; among others

The other argument in the proposition seems to suggest that if you do have a Differentiated Offering - one can make it big easily. That seems like fertile ground for another debate

Best,

You are right. Both ways are valid approaches.

With 'Me Too', we can target unexplored segment indeed. get few orders. But when you start looking for profits, scaling up in value generation, growth etc, your demand on the customer will bring in resistance on the simple count that what is so big about your co or offerings. Why should I pay more ????

With differentiated offerings, you fight for value difference, what extra client benefits, which he can not enjoy from other competitors. After baby bathing, nursery classes, when your delivery team is trained and ready for take off, when your delivery and sales team wants extra increments, extra benefits, then you get into an adolescent age, when you as CxO start finding reasons on why should you pay more to your staff--what is that extra they bring....that leads to next obvious question Industry is suffering -- what differentiation do we offer to market????

Choice is ours-- if we are in infancy stage or waiting to take off ..Both are winners until cash flow hurts...Money is not made by ME TOO....approach...

Arvind,

I thought this thread is closed after Ganesh Natrajan replied. . But really good to see that we are pouring our opinions/thoughts. Let us keep going.

When I started this thread I have carefully worded it. I have mentioned OFFERING, not PRODUCT. My 2 cents of understanding: A product or service when taken to a specific target market and it is a different offering. My understanding of the market: People who have common set of problems and reference each other directly or in-directly in-spite of being competitors. For example, when P&G, Unilever implements SAP for ERP, then other FMCG companies follow suit.

Another example, I referred to in my 2nd post to this thread was NANO. CAR is a me-too product, but NANO is not yet another car. Neither is a cheap car as it is flashed in the media. It is addressed to a completely new segment of people for which TATA has to create a production and supply chain infrastructure from the scratch. The product specification is so specific to the market it automatically becomes a 'differenciated offering'. Price becomes part of the specification based on what the market can bear. As it stands today nobody can compete with NANO.

Net-Net, I am with you. I was looking at the website of your company Movico. I used to wonder looking at YouTube if someone can come up with the video archieve of all the great interviews that happen on news & business TV Channels like 247 or CNN-IBN. I and probably most of us in this community, don't get to watch them when it is telecast. When someone addresses that problem, if it is not addressed already, then that becomes a differenciated offering. The product specification will change automatically to match the needs of the market and making it unique and very different.

Suresh

Raja, I am not saying "dont differentiate". I agree with Suresh that differentiated offering is the main reason to start a new company. Logically then, all emerging companies have a differentiated offering - or it least should have. Yet, many emerging companies dont make it BIG. So is "differentiated offering" really the TOP issue to make it big? 

Suresh, in your first note you were thinking of three fundamental reasons why EMERG-ing companies fail to make big. This dicussion seemed to have locked into the  "Undifferentiated Offering" being the TOP most issue angle. What would be the other two issues in your mind?

Best,

Aravind,

Two points:

1. I am opinionated, towards undifferenciated offering, at this point, as to what is the TOP issue, however, very open to change my point of view.
2. I do agree that need to come up with other things 
   

On point 2, I am having trouble. In my mind, every other issue that I can think of is somehow connected deeply with the 'undifferenciated offering'. Let me pose some questions. Few weeks ago, we had a steering committe type meeting amoung the business leaders in the Chennai Emerging Companies Forum (CEO & Head of Companies).  We did a brainstroming session and used the 1/3 + 1 approach to identify the top challanges for emerging companies. They are:

• Sales & Marketing
• Finance & Fund Raising
  
• Securing Leadership Talent
• Creating / Planning & Managing HYPER growth
• Forming a CEO Club in Chennai

Based on the above, if I sit back and think:

1. How would I approach the market with an undifferenciated offering?
   
2. What would I tell my investors during fund raising?
3. What would I present to leaders as to why they should join my company?

Thanks,
Suresh

Everyone, I'm late to the party here, but the conversation is arresting nonetheless!

To go back to Suresh's original issue, about emerging companies making it big, and then looking at his last comment about the three issues in his mind now, here is my 2c.

First, I tend to agree that undifferentiated offerings are not a no-no. But investors tend to believe that a defensible differentiation is critical to success - at least in the initial years. VCs take big risks, so a defensible proposition is critical at that stage. But as markets grow, multiple products vie for mind-space, so differentiations move from being truly disruptive to being truly well-branded. In the former case, the customer is buying because you do something better than anyone else; in the latter, because s/he BELIEVES you do. Of course, all this is not sacrosanct, but by and large, products and services tend to evolve (if that's the word) in this manner.

Second, given that markets move in this manner, as an entrepreneur/investor/employee, I need to pick the battles I want to fight. If I enjoy the "rush" of building something new, I look for an emerging space to build/invest/work in. If building something big is what I am after, I look for a space that's more "mature". The challenges are different at either end of the spectrum and so, so are the skills needed.

Therein, I think, lies the most important reason for emerging companies failing to grow - the inability to make the transition from a feisty start-up to a larger, more "inclusive" company.

End 2c!