SMBs in India: Can it scale up?

Off late I am able to witness three different types of markets for various products and services. Apart from Enterprise markets and Consumer markets which existed till 2000, there is new and emerging ‘Small-And-Medium-Business (SMB)’ in growing economies like India and China. The Sensex Bull Run which existed till a month back was mainly driven by these SMBs which come under ‘Mid-cap’ and ‘Small-cap’ stocks. I believe India’s future growth will mainly depend on these SMBs.

I was brought up in north-western part of Tamilnadu, India which is known for its enterprising people and industries thanks to visionary Entrepreneurs and excellent educational institutions. This north western part consists of places like Coimbatore, Tirupur, Salem, Erode and Karur. Coming to numbers Coimbatore district alone exports whopping 10,000 Crores (Around 2500 million USD) outside India and big names like ‘Wal-Mart’ uses materials exported from this area. A PriceWaterHouseCoopers – CII (Confederate of Indian Industry) study puts it’s revenue potential from IT/ITES sector at a mind boggling $1Billion. Having used the textile and mechanical products from my childhood which is made in these areas, I can very well say they are extremely good in quality and low in cost. Also this example is just a portion of the north-western part of Tamilnadu. I can very well say there are lots and lots places exist in India which has got similar potential. But the challenge is ‘Can it scale up?’

Being a techie, I feel technology Industry need to play a major role in ‘enabling’ these SMBs to scale to the world class. Excellent software products in supply chain management, e-commerce, online payment system, networking areas are very much essential. But when I looked at the statistics in the Asia-Pacific (APAC) region in 2005, Indian SMBs have contributed only 10% of the total spending for IT which is pretty disappointing. This should go up and this is extremely vital for India’s economic growth.

Today morning I was reading this ‘Network-On-Wheels’ (NOW) initiative by Cisco. Apart from USA and Canada, it is launched only in India to tap the SMB market. This is really good news indeed. From my personal experience I can say the SMB Entrepreneurs in north-west Tamilnadu lack the exposure and they are not fully aware of IT. By launching programs like NOW both IT and SMBs will benefit a lot. Still lot of potential needs to be unleashed and I am keeping my fingers crossed!

Lessons from Ireland

The latest news is: “Apple computers shutdown their operations in Bangalore“.Even though the reasons for the shutdown it not very clear the message from the western world is very clear “You cannot bet only on your cost effectiveness for long term”. This news takes back me to back to 2003 to one of the excellent speeches I have heard so far. It was by one of the top executives of my organization.Eventhough I am not remembering exact words what he spoke on that day following I could clearly remember the summary. Here it is:

“In 1970s and 1980s Ireland was one of major the hub for computer manufacturing. In 1988, no fewer than seventeen computer vendors from different parts of the world ran assembly facilities in Ireland. Because of this unprecedented boom, costs went up and during 1990s companies started shutting down their operations in Ireland. But Ireland folks re-invented themselves the started building software firms in Ireland. Today these software firms stands as ‘Centers for excellence’ and most of the mainframe patents come from Ireland today. Indian software firms need to learn from this example instead of going through the difficult phase. Unless or otherwise India builds up a strong technical community which stands for technology leadership, knowledge creation and intellectual capital it is doing to be challenging times for India in the future”

By reading thro’ the ‘Hardware Factories Turn Into Software Shops’ article from Enterprise Ireland website I think there is a lot to learn from them and get prepared before it hits.

Corporate Mergers – A true test for an individual’s adaptability

Andrew S Grove (Ex-CEO of Intel corporation) in his book ‘Only the paranoid survive’ talks about an important term ‘Strategic Inflection Points (SIP)’.An SIP is nothing but a point in time in which the company needs to change very much and that SIP determines the success or failure of the company. Change in company strategy in terms of the service that company offers, corporate mergers, change in the company positioning can be examples of SIPs. For the past 3 years, the company that I am working for gone through a corporate merger and it’s been tremendous experience for me. I am not going to take the names of the companies because I believe learning’s are important than company names. I would any day bet on my learning’s rather than the company.

From the organization’s standpoint mergers are very crucial for their existence. Inventions like Internet, power of PC computing and advanced technologies are re-writing the meaning of the word ‘competition’. In order to keep ahead of the competition and to stay in the business, corporations needs to change and merger is one of the ways to change. By mergers these organizations demonstrate their ‘Adaptive Enterprise’ behavior to their customers, shareholders and their competitors. The new, merged organization suddenly feels ‘young’ and takes up their competitors more aggressively.

Having said that mergers are very difficult process to go through at an individual level. According to me mergers are a true test for an individual’s adaptability. I have gone through many ‘sleepless-nights’, ‘perpetual-chaotic-work-days’ and ‘frustrating debates’. That too when you belong to the smaller entity of the merger it’s even more difficult because most likely all the better things of the smaller company will go off the suddenly the ‘big-company’ culture will set in. I am sure lot of B-Schools and management gurus have done numerous case studies on this topic and according to my experience merger happens in multiple phases.

The first phase (Formalities phase) during which all initial formalities happens. Leaders of both organizations give press release and start ‘selling’ the merger to their employees by giving all sorts of ‘management fads’. During this time an un-usual excitement builds among employees and huge amount of uncertainty prevails. The second phase (Re-org phase) in when the organization structure of the new entity gets announced and most of the top management in the smaller portion of the merging entity quits and they are followed by them a set of ‘Chelas’ followed by one more re-org. According to me this must happen because there cannot be two sailors for the same ship. After the second re-org a new set of leaders come from nowhere and they start talking totally a ‘different-corporate-language’. At this point no one knows what is happening in the top level management and where this is all leading to. The ‘perpetual-chaotic-workdays’ becomes a part of life for low level employees.

During the third-phase (Policy phase) all new policies gets announced and it really really hits hard on people. All the better and employee friendly policies get chopped off, people start leaving in bulk and a huge change happens in the eco-system. Changes in email ID, Internet speed, hiring methods, support functions, salary structure, promotion policies, approval process takes place and the ‘big-company’ culture sets in. This is the thick of the merger and shows the awful face of the merger. This is followed by the fouth-phase (Settling-In) in which the new system slowly gets set in. The company’s face is changed now and employees are in a different world. The company starts moving in the newly defined direction with new set of leaders and policies.

After the merger now I am clearly able to see three groups of people. The first group is ‘Early quitters’ which consists of 20% of the company population who leave immediately after the merger because they don’t have a role to play in the new organization or because of their ego. The second group is ‘Majority cribbers’ which consists of 65% of the population. These are the people who are still not able to adapt or digest the fact that the merger has happened. They still keep talking about their ‘Good-old-days’ and ‘Once-up-on-a-time’ stories. Change is very hard for them and they still feel that the old small company culture will come. I feel very sorry for these people because that will not even happen in dreams. The third group is ‘Real adaptors’ which consists of remaining 15% of the population. These are the people who accept that the company has really changed and start playing their game according to the new rules. They are still performing and working as hard as they were. The only person who comes to their mind is their ‘Customer’ and they are passionate about satisfying customers and giving their best from the heart.

In my experience I have seen Early quitters, Majority cribbers and Real adaptors and I believe it is really dangerous to be in the Majority cribbers group. It sucks an individual’s positive energy and it leads to nowhere with respect to their careers. It’s always better to adapt or quit. From my personal point of view it’s been an excellent learning experience and proves the following evolution theory once again:

“It is not the strongest of the species that survives, Nor the most intelligent that survives. It is the one that is the most adaptable to change”

Managers in IT Industry : What do they really ‘Manage’?

Long time back I forwarded this picture to group of my friends group and it tickled an interesting discussion among us. If you see the picture there are lot of ‘managers’ are surrounding an engineer or a worker managers are simply watching and the engineer (people like me) are doing the hard work. This throws up an interesting question ‘What do these managers really manage?’

According to my experience there are two types of manager roles that are existing in the hi-tech industry as of now:

1. Delivery managers: These managers are basically a techie and moved to management ladder because of experience in software engineering and responsible for software engineering deliverables guy mainly operates within the ‘software life cycle’ starting from requirements gathering,design,coding,testing,release.

2. Business managers: Basically come from MBA background and manages any one of the non-engineering areas like HR,Finance/Biz development,Strategy of the company. As far as IT industry in India is concerned there is more need for #1 than #2 because in India we do more of ‘Engineering’ nature of the work (Coding/Testing/Support). This is also because of the first generation ‘services’ companies (Infy, Wipro, etc..) whose business model requires more delivery managers than business managers. In the recent past I spoke to some of my friends who have done their MBA and they say they would preferably will choose option#2. They get into the consultant role and grow in the business ladder if we look in a global viewpoint, take companies in US/UK where they do product definition, market research, partner management, sales etc. requires more of MBA managers. In India we cannnot do such things at this point of time because we don’t have a huge domestic market.

Now given the situation in India, what does it really takes it to ‘manage’ and become a successful delivery manager? After talking to many people I could come to three major factors:

1. Strong interest and inclination towards technology: Most of the delivery managers in India fail in this point itself as they stop reading or learning about the technology trends and happenings in the market as soon as they become managers. This also makes them ‘ignorant’ of what an engineer reporting to him does. This is why there I am able to see much of ‘Anti-manager’ feelings among the engineering community.

2. Business Acumen: In delivery management this factor is also very important and need to understand the ‘Big-picture’.This makes the delivery managers to think about the business angle of the product or service that the company is offering.If any delivery manager is good in this he shoud be able to answer to the question ‘What is your customer’s customer want?’

3. People Management: Last but not the least. This is *THE* important factor. I have seen managers who are not good in technical and business stuff but they do wonders because they are good in managing people. They know the art of ‘getting things done’.

Finally coming to the picture above, it depicts when any manager fails to have any of the three factors that I have mentioned. They simply know ‘Something is happening’ but fail to make any impact to the company or the people. They become more of what I call as ‘Operational’ managers (Naam-ke-wasthe doing some PPTs, tracking excel sheets, giving FUTTAs) which is *NOT* management at all.

The sunrise in the East – Will it be a good finish?

Aeron a 33 year old, north-western American left me in a total shock when he asked me ‘Hey Jay! I saw in the TV that Indian stock market is crashing. Is it so ?’.Of course this is the last question you expect from Aeron a car driver who drops and picks me from my work place. He hardly has a college degree and he knows about Indian stock market crash.Whats happening around me? Inside my mind a sudden statement came up ‘The sunrise in the east’.

My mind was wandering on some of the events that has happened in the past one and a half months. The receptionist in my office enters my country name as ‘India’ without even asking me, The April edition of Newsweek a famous US magazine has got the cover story ‘The new India’. Every day in Wall-Street-Journal, the financial newspaper of the US has at least one column about China. Yes! I am experiencing it personally! The eastern part of the world is indeed raising. I also did some more reading and pondering with myself and started writing this blog.

Both economies are growing at a very fast phase around 7-8% and China is pretty ahead in the GDP numbers. Apart from the GDP growth China has built up an excellent infrastructure and excellent systems in place and preparing for the future growth. Whereas in India in spite of opening up the economy 15 years back the government system is pathetic and infrastructure is still of ‘Third world’ class.Basic problems like poverty, education and healthcare still remains far distant dream for rural Indians and words like ‘e-Governance’and ‘IT for common man’ are remaining as buzzwords and noting in concrete. What is the point in talking about Economic growth without improving quality of life of people ? 30 million Indians earn less than one dollar a day and 60 million of them earn less than two dollar a day.

Having said that recent protests against reservation by ‘Youth for equality’ and formation of
‘Lok paritran’ party gives some ray of hope. From the business week article I also got the following information:

“India has nearly 500 million people under age 19 and higher fertility rates. By mid-century, India is expected to have 1.6 billion people — and 220 million more workers than China. That could be a source for instability, but a great advantage for growth if the government can provide education and opportunity for India’s masses”

So the youth of the country is going to be the deciding factor. By reforming
governance, providing good education and generating employment for 220 million workers Indian can demonstrate its true potential and will be able to give what I call it as ‘Good finish’.Otherwise this will be another generation with ‘lost dreams’

‘Ji Huzur!’ to ‘Whats up dude?’

Its really amazing the kind amazing to see various work cultures existing in India and more interesting thing is they all exist in the same period of time.To give a clear idea image the following three scenes:

Scene 1: Government office, Erode, Tamilnadu
The government officer gets out of the car, a peon goes and opens his door. He is wearing a white color dress and says ‘Vanakkam Aiya’ (Ji Huzur) and bows his head towards his superior.He carries his suit case and leaves his superior at his room and stands behind him as a salve.Here the work culture is of ’17th century’ (British style)

Scene 2: Manufacturing firm, Chennnai
All employees come on time and made to work very hard. They hardly sit and work.They call their superious ‘Sir’ but no bowing head.Here the work culture is of ’18th century’ (Industrial revolution style)

Scene 3: Sofware firm, Bangalore
Engineer walks in jean and T-shirt and watches his manager is walking in the floor.This 25 year old guy says ‘Whats up dude? Did you see Sensex is taking 250 points today?’ and the manager replies ‘Yep! All my Mid-caps are screwed’. Here is the work culture of 20th Century (Knowledge worker)

Based on my experience and talking to some of my friends we cannot see all these scenes happening in any country other than India.The question goes ‘Why only in India?’.To explain let us take the example of two majort styles of work culture in the world.

  • Macro Management: This is introduced mainly by Americans. This is basically formed based on ‘Managing by objective’ where the organization and the employee believe and trust each other and they work in an informal,free environment. This is derived from the american society’s principle ‘Independence and Freedom’
  • Micro management: This is introduced mainly by Japanese’s. This is created after the second world war when Japan was bombed. They wanted to build a country and wanted to work very hard.Since that era belonged to manufacturing they introduced tight and strict work culture.The result you can see ‘Made in Japan’ eveywhere today.

In the above mentioned theories you can see each style adopted a ‘Theme’ and designed the management principles based on their ‘society’ and ‘culture’. That’s the main reason irrespective of the styles both methods are successful in their own countries. If you try viceversa it will fail miserably cut to India. We are no-where in this case.None of the above mentioned scenes and the work culture prevailing them belong to ours.We derive pre-independence work culture from ‘British’,post-independence work culture from ‘Japan’ and post-reforms work culture from ‘America’. At the same time because of our so called ‘flexibility’ and ‘adaptability’ all these scenes exist together and ‘somehow’ it works.And that’s the very reason you cannot see ‘Made in India’ products anywhere.

Why we have been so adaptable? Which particular work culture will suite us? Can we design a work culture of our own and practice in all the scenes mentioned above? If it can be designed what will be the ‘theme’? These are the questions that are lingering in my mind and I am in the process of finding an answer. I am half way through will post a separate blog for the same.

Books – My first love

I have fallen in deep love with books particularly in the past three and a half years. Had a discussion with one of my friends on book reading and posting that here..

My mother normally quotes “Books are windows to the world of wisdom”.In the past 3.5 years I have been reading ‘religiously’ almost on a daily basis I don’t read any particular day I feel something is missing in my life thinking how much amount of impact books reading makes in any individualism you put in simple mathematics, assume that anyone reads 6 pages a day for 3.5 years (365*3.5*6) it works out to be 7665pages.Even if you remember 10% of the knowledge and implement it is 766pages.What it actually means is, books provide you knowledge by which can intuitively predict the future eliminates the fact that you should have ‘experience’ to do anything in life you closely observable can make lot of sense out of what other elders sebaceous you gained a knowledge at a young age by reading they gained by their life time you are able to gain it from books. I also see in a globalization,knowledge world it is very important to readout’s happening in the world gives you a ‘connected’ feeling see most of the successful people that I know of are passionate about reading and they are virtuous readers irrespective of their busy life.

Also I have personally seen some of merely-life role models have this habit of reading. In order to keep the reading habit going I have tried and formed the following habit and it works out wonderful.

  • Make book buying as a regular activity like you buy grocery book shops frequently helps to keep updated with latest books.
  • Read the “books review” section in famous magazines would help to get a review of books.
  • When special occasions (Like b’day,anniversary etc..) give and takebooks as gifts. I always ask my mother to buy me books on my b’days forthe past two years instead of dress or money. This keeps the ballrolling.
  • When you are reading the books try to change topics between twosuccessive books.My cycle is Business–>Philosophy–>Investing–>Technial–>Some comedy book and thenback to business book.This will help you not to get bored with same kindof books.
  • Start maintaining a learning log (I am maintaining one) in which you cannote down some ‘top-learnings’ from a particular book and keeprefreshing it as and when time permits.- Finally we are in the ‘Information Age’ where knowledge is power andbooks are very good source of providing knowledge.

Products from India: Myth or Reality ?

For quiet some time I was thinking of what does it take to build companies out of India I am passionate about this I thought about this and observed some of the happenings around me and I found the following:

Questions in my mind:

1. To get a feel of what does it take to build a company in India.
2. To get a feeling about how to attract domestic customers ?
3. To know more about what sort of products that sell in domestic markets?
4. All these days we have been doing good amount of ‘Services’ work from India. What about products? What does it take to build a another ‘Product building’ Infosys from India ?
5. What does it take to create a eco-system by which we can attract India’s best talent and create shared wealth.
6. Contribute back to the society from the wealth we generate out of the business.

Here is what I found:

From the product angle:

1. The consumer market in India has got a very limited purchasing power. Whatever we see in cities like Bangalore is a very few % of the population. If you go to a place like my native place Erode even today people think to buy anything say Rs.100. So the only way to do anything in India is to do in it in ‘Scale’. A typical example I would say the model what Reliance does in India. Especially if you take how they grow in the mobile space, they laid a fibre optic cable throughout India and then gave connection at a very less cost. In order to operate in a such a huge scale you need very high amount of money to initially invest in. If you price it high and try to go to the rural or semi-urban Indian he is less likely to buy the product.

2. Whereas if we see in the West, especially in the US people have got huge amount of purchasing power and they don’t mind taking it in loan/dept. HP sells 45% of its digital cameras in Christmas time in the US. We can’t even think of doing such things in domestic market in India.

3. One of the companies which tried out this ‘Build-inside-sell-inside’ is Texas Networks. They build optical fiber routers which is used in Indian railways website, BSNL etc. Event’s they reached their ‘Break-even’ couple of years back, because of the less margin (Say in order of 5 croers) they are not able to make such a huge impact in the society in terms of wealth creation and employment creation.

4. According to me the best thing is ‘Build-inside-sell-everywhere’ model. We can very well ‘build’ a product in India with our engineering capabilities but the problem comes when we come to the ‘selling’ part. Now in order to sell the product we need someone sitting in the west or in very fast moving markets like Japan, Singapore who can ‘Define’ what needs to be done and do product promotion, marketing, sales etc.

From the services angle:

1. Yes. Services still a easily doable business in India. I am not talking about the typical “Bug” fixing services like what we do in Indian services companies but something what is called as ‘Component ownership model’ based services.

2. For example you can operate in a small segment of a product life-cycle and attach value added services along with that. For example companies like Sundaram fasteners, TVS group are doing the similar kind of work where they completely design a ‘Component’ right from definition, R & D, Engineering and then they sell that to Japanese automobile manufactures. Also Mindtree consulting has designed a small chip which will get into mobile phones. We can do such things which are pretty niche and have a pretty good potential instead of trying to build a whole car or mobile phone.

3. This kind of services will generate lot of employment (Because of the services nature) and also requires less capital to start with.

Now going forward:

Based on my experiences following are the ingredients which we require in order to build any business in India.

1. Raise our aspirations: This is the first and foremost important factor that is required. If we always have the ‘Slavery’ mentality we are never going to get anywhere. We should believe that we can build something on our own and raise our aspirations beyond Individuals. I think the email exchanges what we have itself shows we are there.

2. Access to venture capital: In order to start any company in a ‘big’ way we require idlest 4-5 Million dollars in India. I know couple of people running their company in Bangalore who are of our age finding very difficult to get funds because they lack ‘Expertise & Experience’ in their domain. Eventhough you have a very good idea with you, even in the west people have become very conservative to fund the company after the DOTCOM bubble. SO when we are good in both then funds will start flowing in. I always keep couple of companies as my role-models:

a. Mindtree consulting: This is started by all ‘senior management’ (Ashok Soota & co) people in Wipro. All these people worked in Wipro for 15 years and they came out and got the funding and built what I call as “Second generation services company” from India.
b. ITTIAM system: This is started again by “senior management” (Srini Rajam & co) from TI India. Their aim is to buid another TI from India. Again these people have spent 15+ years in TI Bangalore they they understand marketing to operations.
3. Like minded team: I don’t have to say anything more in this regard 🙂

Final note:

A famous poet in Tamil (Bharathiyar) wrote the following lines during our fight for Independece:

“Aggni kunjondru kanden Adhai kandadhum katrinil kondithai vaithen Vendhu thanindhadhu kaadu Kazhal verathil appendrum kunjendrum undo”

Which means “All that requires to put a whole forst into fire is a small spark. DO WE HAVE THAT SPARK IN US? “

I am back

After almost an year I am back to writing blogs. This time I am determined to continue blogging on my favorite areas.