Establishing a new business unit

Establishing a new business unit

Consim Info Pvt. Ltd. (Consim), Red Herring’s Global 100 Winner, is India’s leading Internet brand with a significant presence in all major verticals like matrimony, jobs, property, automobiles, classifieds, loans and more. And the man behind building this brand, J Murugavel, founder and chief-executive officer, follows three key success quotients in business – constant innovations, creative solutions and deeper customer insights. He entered the online matrimony space through BharatMatrimony in the year 1997 and since then, he has launched new business units within the matrimony vertical and outside of it, like indiaproperty.com and clickjobs.com. The Asian Indian Chamber of Commerce honoured Murugavel as one of the top five Asian Indian businessmen in the U.S. below the age of 35. He was also honoured by the India Today Group as the ‘Business Icon of the Year’. A first generation entrepreneur, Murugavel understands the need for mentorship and training early entrepreneurs to get them started in the right direction. In this classroom session, Murugavel gives our readers lessons on how to establish a new business unit and the different factors one needs to consider before scaling up.

“But we have also had to deny many opportunities that came our way. One must analyse whether it is the right time to get into the area of opportunity that is presented to the organisation and whether it is ready for it.”

What is the right time to establish a new business unit? In your case, matrimony was well set, and you decided to expand into jobs and property classifieds among others. So, when is the right time to think about scaling up?

There is no right time to start a new business unit. You get into it whenever you feel it is the right time. However, it takes commitment and a lot of hard work before the opportunity is identified. And most often, one needs to keep experimenting and put in their best efforts before they succeed.

I got into business because I wanted to do something on my own and make a difference. It took me nearly two and a half years to identify the opportunity – that was in matrimony. BharatMatrimony was our first commercially successful venture. In 2006, when Indian corporate companies started attracting attention from investors, I decided to look at other opportunities. I did not have the maturity then to realise that growth can happen in core business also and need not be in different domains. Job portals were a highly attractive domain then. The success we had in the matrimony business gave us a strong boost of confidence and we wanted to repeat this in jobs as well, though b2b (business to business) was new to us. Our strength was in technology and innovation. When we entered the jobs market in 2006, the matrimony business was well established and it clocked annual revenue of approximately US $ 4 – 5 million. When we launched the jobs portal, our costs were limited to just portal development and a small team. We already had a large user base through BharatMatrimony and it was only a matter of getting users to sign up into the job portal. Once we got our first round of funding in August 2006, the majority of the money went into scaling up the jobs division. We launched the property portal around the same period.

We also came up with some of our most successful ventures like PrivilegeMatrimony and EliteMatrimony, just when the economy was coming out of a rough patch in 2008. In fact, PrivilegeMatrimony and EliteMatrimony helped us ride the storm successfully and dominate the matrimony market. The varied profiles of people on the Internet, even amongst our registered users, made me realise that there was a market for these ventures.

If you look at history, some of the greatest companies like Procter & Gamble, Disney, General Electric and McDonald’s were started during a recession or depression. Clever entrepreneurs spot opportunities in tough times as well as good times. They seize opportunities — that is what makes them entrepreneurs. Getting into properties was the logical thing to do after matrimony. I am proud of the fact that we help people make the two most critical decisions of their lives: marriage and homes. Why homes? After marriage, every happy couple likes to move into their own home.

Lesson: There is no right time to start a new business unit. It takes commitment and multiple experiments before identifying something that will work.

Once you decided to expand, how did you shortlist the various opportunities? At Consim, how did you identify the right opportunity?

To identify the right opportunity, one needs customer insight and a great understanding of the market. An entrepreneur should not shy away from experimenting to succeed.

At Consim, we were able to identify and exploit several opportunities in matrimony including Privilege Matrimony, Elite Matrimony, Community Matrimony, Matrimony Gifts, and International Matrimony. We also diversified beyond matrimony. Our premise was, marriage is a recession proof business, but every time we get a customer for the matrimony site, it is not a long term relationship. So, we decided to expand into other classifieds which included jobs, property and auto. Our foray into real estate was very successful and today, IndiaProperty is a leader in the online property space. But some of our other expansions were not so successful, for instance, jobs. In this case, the issue was not with the idea (it had a good business model), it was the execution. We needed money and the right resources to execute. When we got the second round of funding in 2008, one-and-a-half years after the first round of funding, there was a slowdown in the industry. And by the end of 2008, the overall ecosystem changed. The top layer in the jobs market was not growing. So, we naturally decided to pump money in to our core businesses – matrimony and property. Had we invested sufficient money into jobs, it would have done better.

Bharat Matrimony has been successful in market segmentation. We segmented our target markets to launch path breaking services. We believe each segment is unique and requires a fresh approach. For instance, Privilege Matrimony is the first personalised matchmaking service for busy professionals, who do not have the time to search for their partner and prefer to hire an expert to find suitable matches. Elite Matrimony is a premium matrimony service to help affluent and successful people, including celebrities and the upper crust of society, find their life partners. Going beyond matrimony, we launched Matrimony Gifts this year as a one-stop destination for wedding gifting needs.

But we have also had to deny many opportunities that came our way. One must analyse whether it is the right time to get into the area of opportunity that is presented to the organisation and whether it is ready for it. We had an opportunity to start complete marriage services. This business involved a lot of logistics and coordination. We decided not to venture into this area as one needs to rely on resources that are typically not dependable. As an entrepreneur, I would like to have complete control over the situation and have the confidence of delivering to the expectations of our customers, which I did not have in this venture. We did not want to risk losing the trust that our brand name has in the market. But we may get into certain aspects of this business in the future.

Lesson: You need deep customer insights and understanding of the market. Do not shy away from experimenting. Learn to say no.

Consim could have bought a small Internet company and have scaled that up? Any specific reasons why you did not do that? How should entrepreneurs approach the organic vs. acquisition-driven growth dilemma?

It depends on the company, its situation and the industry it operates in. At Consim, we are building the capability and management strengths/bandwidth to grow aggressively. So far, we have grown organically and we have found enough opportunities to grow this way. Access to new technology, rapid increase and broadening of the client base, and increase in market share are some of the advantages of the mergers and acquisition strategy. However, sometimes acquisitions of big companies can be costly and it may take a long time to integrate the acquired companies into existing operations. Two big examples of failed acquisitions in recent years are Daimler-Benz’s purchase of Chrysler and Quaker Oats’ purchase of Snapple. If not done right, acquisitions can prove very costly.

Finally, it all boils down to your business acumen and the company. Our strength has been in growing through innovations and innovative products. Our business has been built and sustained through innovations. However, as we progress, we may look at acquisitions in the future, but that would be in our core areas and not in the non-core businesses.

Lesson: Consim’s strength has been in growing through innovations and innovative products. Instead of following someone else’s path to growth, identify your strengths and thereby identify a path that works for you.

How do you get your organisation ready to establish a new business unit? How does one deal with the different variables like funding, hiring people etc. while establishing a business unit? And how does one ensure no mistakes are made?

Once we decide to get into a new business, we hire the right person to head it and the team to support him or her. What we look for in the business head is not someone with domain expertise or an Internet background, but someone who can lead a unit with the right attitude and leadership capability, and the past track record helps us judge this. We also look at their ability to learn and adapt, and how he/she can fit into the culture of the organisation. Another important aspect is his/her capability to scale up the business.

We also work on milestones to cross. Funding will be based on opportunities. We may first enter a particular market and then scale up according to the market realities. Mistakes do happen. But we try to learn from those mistakes and move ahead. We may also experiment with the product before we come up with the right one and scale up.

Lesson: While establishing a new business unit, it is important to identify the person who can lead the unit and take it closer to its goal.

Once you start a new business unit, do you feel slow growth and experimentation are important in the early phase of a new business unit? Or do you prefer a big-bang approach?

Our approach has been to introduce a product in a limited market, identify opportunities, learn and scale up rapidly. There are organisations that have the bandwidth and money to aim for a big-bang, pan-India impact. Reliance, for instance, may aim for an ambitious pan-India start. We would like to experiment on a smaller scale, learn from the experience and then go all out. For instance, we started our retail venture in 2007 and expanded it to 100 outlets across India with a combination of self-owned and franchised outlets. We did not know how to manage franchisees and things went wrong. We closed most outlets by 2009. We then decided to re-launch it in early 2010 by testing only the Tamil Nadu market with 15 to 20 outlets. Once we fine tuned our model with respect to revenues, strategy to get users, service, standardisation and profitability, we went pan-India and today have 130 outlets. And by end of next year, we hope to have 250 to 300 outlets.

Lesson : Introduce a product in a limited market, identify opportunities, learn and then scale up rapidly.

How is top-management time divided between the current/established business unit and the new business unit?

There is no fixed formula. I spend around 90 per cent of my time on matrimony, where my work is more hands-on. I spend the remaining time on the property business, where my role is more strategic in nature.

There has to be a balance between short-term goals and long-term objectives. As a CEO, I have to balance my time between the two and ensure that the company moves forward as per plans. Too much focus on short-term goals can cloud long-term plans and vice-versa. The key word is balance.

Lesson: There has to be a balance between short-term goals and long-term objectives.

Poornima Kavlekar has been associated with The Smart CEO since the time of launch and is the Consulting Editor of the magazine. She has been writing for almost 20 years on a cross section of topics including stocks and personal finance and now, on entrepreneurship and growth enterprises. She is a trained Yoga Teacher, an avid endurance Cyclist and a Veena player.