Aamir Khan’s dialogue in the movie ‘3 Idiots’ is simply inspiring. He says, “Just go after excellence, success will automatically follow”. Agree? Yes. But not so easy to implement. For Sachin Tendulkar, scoring a double-hundred in one-day cricket is the outcome of pursuing excellence. His dedication and hard work behind the scenes, the ability to manage problems and more importantly, the passion and commitment to deliver went a long way.
But, to be an entrepreneur, your commitment to pursue excellence is only the beginning. If you want to turn into an entrepreneur, you need an idea. The ‘excellence’ has to be channeled in the right direction to translate your idea into an offering that really fills a gap. Ratan Tata did just that with his Tata Nano. Spotting an opportunity, he made a car that was most affordable for the mass middle class population of India.
The CEO of the startup has to understand cash flow. Of course, for the more complicated accounting processes, external auditors and CFOs are available. But a grasp on cash flow, and the ability to plan out future cash flows is critical,” says Alok Mittal.
Our domestic market of over a billion people presents an opportunity for entrepreneurs to come out with products and services to cater to an economy which is all set to become the fifth largest consumer economy in the world by 2025, according to a Mckinsey research report.
But, India, in spite of all the growth, is drowned in a myriad of problems. Our education system has a long way to go, roads and infrastructure offer a lot of scope for improvement and farming, which still is the occupation of the over fifty percent of our population, is inefficient and subsidies driven. The Internet, media and mobile sectors are still ripe for innovation. There are several other problems that are not easily visible. Fortunately for us, all these problems are solvable. And spotting an opportunity, early enough, amidst these issues is the first step an entrepreneur takes. Ability to come up with the right solution soon follows. As Mahesh Murthy, the founder and CEO at Pinstorm (digital advertising agency) and partner at Seedfund, a venture capital firm rightly says, “If you have a really good solution to a problem, go start a business”.
A great idea, though, is only the beginning of the journey. Prototyping the idea, acquiring the early customers, hiring the right people and taking the product or service to large number of customers is vital. In this story, we put together some guidelines that will help you through your entrepreneurial journey.
Guideline one: Customer Value Proposition
The Indian Premier League (IPL) is a great example of delivering value to the consumer. India, as a cricket crazy nation, is always ready for more cricket. The game itself was modified, cheerleaders and entertainers were roped in, a business model was derived and today in less than three years, it is a phenomenon. Sponsors and advertisers are willing to pay the big bucks. Viewership is at its peak. In short, the IPL is a great example of identifying a gap and delivering a commercially viable product to fill that space. Alok Mittal, Partner at Cannan Partners says, “Getting the customer value proposition right is the key for any venture. It’s not easy, especially in the early stages but getting the features of your product right and making the right sales pitch are key factors”. Murthy simply adds, “Just think for yourself, will my offering excite the customer?”
Getting the right customers at the beginning can make your growing stages less painful. “If you have a product for the banking industry and a premier bank, for example ICICI Bank, is among your first few customers, it definitely makes a huge difference,” opines Murthy. Spending your energy on getting your product right and identifying, clinching and retaining your early stage customers are some factors that a budding entrepreneur must have in his guide book.
You have a great product. What next? You need to get your pricing absolutely right. Pricing can be a tricky challenge when you are starting up. Is it going to be cost-driven? Or is it going to be value-driven? Mittal says, “Clarity on pricing is important. For consumer products, there is more flexibility. The price can be changed after sometime. For enterprise products, one needs to be a little more careful. But overall, if the customer sees value, the product or service will work”.
Guideline two: People, the lifeline of your organization
The people in your organization form the heart of your company. Google, Infosys and Facebook are all firms that had great ideas. They had some of the smartest people in the world at the helm of things. But the single factor that made a difference in their journey, when compared to their peers, is hiring and retaining top-notch talent.
Human Resources (HR) as a function cannot be ignored and it deserves its place on par with the product, strategy and financial teams. Each of these companies had their own innovative strategies to hire, train and retain people. Google innovated with the 20 per cent free time concept, where every employee in the organization could spend one day a week working on his own ‘pet project’. Infosys’ new hires went through a training program that trained mechanical engineers to be software specialists. Once these companies had the spending power, they ensured their office complexes were loaded with facilities that employees loved. The strategies adopted were different, but the end goal was to hire the best people and keep them happy.
Raman Roy, the founder and CEO of Quatrro BPO solutions and widely recognised as the father of India’s outsourcing industry opines, “According to me, setting up the team is the single most important aspect of building an organization. While we were hiring for Spectramind, my previous venture, I actually had to convince my early-stage employees that salaries will be paid on time. We showed them fixed deposit receipts in the name of Spectramind”. He adds that, though, at times it seemed like an impossible task, the belief that it could be done kept them going.
As Spectramind’s client-base grew, they needed more and more people. “We had clients who loved what we did. But the biggest challenge I have faced till date has been on the hiring front. At one point of time, we were hiring about 2500 people a month at Spectramind”. That was more than a hundred people a day. There were people from varied cultural and educational backgrounds, and Roy’s job just wasn’t done after the hiring process. Spectramind built tools to evaluate resumes, planned out second round interviews and conducted several training programs. “We had to think through many ideas to make hiring work. It just wasn’t one magic wand, we did several things to get our hiring right,” says a satisfied Roy.
Guideline three: Scaling Up
We come across many small business owners in our daily lives, be it our neighbourhood grocery store or a small website design service provider. Most of them are bootstrapped and more often than not, the owners have little or no intention to scale up and expand. They are satisfied with the profits on their current investment. But that’s not the end of the journey, is it? Market expansion, and entry into new geographies, launching new products and services take the businesses to the next level of growth. Murthy feels, “The first step towards scaling up is to understand what the customer wants.” Amazon.com started off with books. Then customers wanted music. “So, they started selling music. Listening to the customer is the key,” he adds.
Do not be a control freak when you are scaling up your business. Get the right team to do this job. And more importantly, delegate authority and responsibility to this team at the right time. “One of the biggest fallacies I have seen is that entrepreneurs want to do everything themselves. You need people in HR, people in finance, people in quality, and you have to co-rely on each other,” shares Roy.
As the organization grows, newer people come in and the structure of the organization changes. “When you are three people everyone does everything. At twenty-seven people you probably need HR. At eighty-one people, middle management comes in. At say two hundred and fifty people we have two levels of management,” says Murthy. “You need to grow like a pyramid, and the infrastructure, systems and procedures should be in place to get the work done.”
Guideline four: Understanding cash
The most important aspect while running a business is to understand the economics of doing it. And a clear grasp over the financials is extremely important for an entrepreneur. Agreeing Mittal says, “The CEO has to understand cash flow. Of course, for the more complicated accounting processes, external auditors and CFOs are available. But a grasp on cash flow, and the ability to plan out future cash flows is critical.”
Fund-raising and capital allocation are important pieces of the puzzle while scaling up a business. While the amount of funds you would require depends on your plans, the source of this fund totally depends on the company and its dynamics. But no doubt, analysing the advantages of debt versus equity is best left to an expert. As the owner of your business, your focus has to be on identifying this expert.
A great product, managed by some of the smartest product managers will still fail if the right amount of capital is not allocated to it. In the early stages this can be managed with external experts, but as your startup grows, the financial management function cannot be ignored.
Guideline five: Leadership and Winning
Experts define leadership as “the ability to make decisions with incomplete information, while continuing to inspire the people who work under them.” It’s difficult to pin point the single most important attribute of a good leader. It cannot be mistaken for individual brilliance. Sachin Tendulkar, a batting genius, couldn’t figure out the art of leadership. Leading by example is only part of the equation. Much like understanding your customers, understanding the employee is critical. Some of the greatest leaders we know, from Mahatma Gandhi to Jack Welch, were able to ‘win’ because they saw what was coming early enough, and more importantly were able to explain their vision with utmost clarity to the people who worked under them.
Making money is not a side effect but an integral part of being a successful entrepreneur. Your shareholders have to be rewarded and generating long-term cash flow and growth must be the ultimate aim of your entrepreneurial journey. These five strategic ideas we have gathered are meant to guide you in the right direction. But, remember, once you’re in the deep, it’s your ability to make the quick on-the-spot decision that will make or break your business venture.
Surely, you are going to get a lot of flak for quitting that safe job at a large company and turning entrepreneur. That’s why Aamir Khan was called an ‘Idiot’ in the movie ‘3 Idiots’. But it is these very individuals who ‘win’ simply because they have that single-minded focus towards chasing ‘excellence’.