Capillary in World Economic Forum

Capillary gets featured as a Case Study in the World Economic Forum report on Entrepreneurial Ecosystems around the world. Learn about our growth in India & in Singapore. View the Case Study here. Pasting the text below for easy access:

Overview

Capillary provides easy-to-use, high-ROI cloud software solutions that empower retail businesses to engage intelligently with their customers in real time through mobile, social, online and in-store channels. With a vision to build the first billion-dollar product company out of India and to become a major player in the booming mobile and retail sectors, the company got its start by providing businesses in emerging economies (mainly India and South-East Asia) affordable access to state-of-the-art customer relationship and loyalty management technology. By emphasizing paperless mobile technology, real-time analytics and consumer engagement, marketing life cycle automation and sophisticated, innovative analytics that surpass capabilities of much larger, more expensive and complex customer relationship management (CRM) solutions, Capillary quickly attracted the attention of large global retail brands – and venture capital. Rapid growth has enabled the company to build out a complete, end-to-end software-as-a-service (SaaS) CRM platform, encompassing customer engagement, clienteling, loyalty, big data analytics and social CRM suites. Capillary now serves over 140 major global brands, including Pizza Hut, Puma, Jack Wills, Marks & Spencer, Benetton, Courts, Nike and Nokia, across 10,000+ stores and over 70 million consumer interactions. Clients have attributed up to 10% growth in same-store sales to Capillary’s solutions. Capillary has received numerous awards, including the Gartner 2013 Cool Vendor award and Marketing Magazine’s CRM & Loyalty Silver Agency of the Year Award 2013, and was also named one of Forbes’ 12 Hidden Gems. Capillary is backed by prominent institutional investors Sequoia Capital, Norwest Venture Partners and Qualcomm Ventures.

Timeline/Key Events

Aug 2008
Receives US$ 30,000 seed loan from Entrepreneurship Cell, IIT Kharagpur.

Aug 2009
Wins first client – Indus League (Future Group). Launched Mobile CRM and Loyalty offering.

Sep 2009
Obtains US$ 500,000 in funding from Qualcomm Ventures (QPrize – India Winners & Global Runners Up) and angel investors.

Mar 2010
Launches instant in-store cross & up-selling for retail brands.

Feb 2011
Wins first international client – Store 21 (United Kingdom).

May 2011
Launches Capillary Customer Intelligence, Big Data Analytics & Campaign Manager.

Jan 2012
Launches Capillary Lifecycle Marketer, predictive intelligence-powered customer engagement.

Jul 2012
Launches Capillary Social CRM for better social conversations, engagement and monetization.

Sep 2012
Raises US$16.5 million in series A funding from Sequoia Capital and Norwest Venture Partners.

Dec 2012
Wins coveted awards: 2012 Red Herring Top 100 Global, Forbes’ 12 Hidden Gems and Techcircle’s Top 10 SaaS Companies India.

Jun 2013
Named Gartner 2013 Cool Vendor in India, wins at MarketingMagazine’s Agency of the Year Awards and named one of SiliconIndia’s Top 10 most promising ventures founded by Indians.

Jul 2013
Powers 10,000+ stores for 140+ leading consumer brands, engaging 70 million consumers across 16 countries; 11 offices globally employing staff of 15 different nationalities.

Aug 2013
Launches Capillary Clienteling, store associate task management & customer experience management solutions.

Quotations

Aneesh Reddy is co-founder and CEO of Capillary Technologies. A visionary who believes that advances in technology lead to significant advances in business value and ROI, Reddy works with enterprise consumer businesses to help them put the right communications for the right products into the hands of the right customers at the right time. He is a featured entrepreneur in leading publications such as Forbes, Harvard Business Review and The Economic Times. Reddy is a frequently featured expert at global retail, marketing and technology forums and premier educational institutes such as Wharton and the Indian School of Business. He participates in discussions around entrepreneurship and major technology trends such as cloud, mobile, social and big data. He is also an early-stage investor in various ventures including Tynker, Studypad Inc., ANTfarm and Verious Inc. Reddy holds a Bachelor’s degree in Manufacturing Engineering from the Indian Institute of Technology, Kharagpur (IIT KGP).

Krishna Mehra is co-founder and CTO of Capillary Technologies, where he drives product vision and strategy for the company. As a technology evangelist, Mehra believes that true innovation happens at the confluence of technology and business. At Capillary, he has created powerful products that address large gaps in retail customer engagement and enable hundreds of consumer-facing businesses worldwide to embrace cutting-edge paradigms – including customer engagement technologies based on real-time analytics integrated mobile and social media.

Q1: What was the source of the initial idea, and how did that idea evolve into a viable growing company? How did it change over time?

Reddy: “Capillary was founded during the global economic recession (2008-2009) in the belief it could help emerging economy retailers engage with customers better using CRM technologies comparable in sophistication to those used in more developed economies but made both simpler to use and less expensive through cloud hosting. Unlike many first-time entrepreneurs who wait to validate their million-dollar ideas, we picked two areas – mobile and retail – which were both ‘next big things’ in India at the time. We spoke to many Indian retailers about their critical business problems and identified that even large retail chains had minimal understanding of why customers were not returning to stores to make additional purchases. E-commerce firms have the advantage of knowing their customers well and we wanted to bridge the knowledge gap for traditional bricks and mortar retailers. This turned out to be a game changer for our early-stage customers and was a key growth driver for Capillary.

Two aspects of the company stood out:

We carefully selected angel investors who could add value as the company grew, bringing on board as many as 17 angels over a period of three years, who were all experts in their own fields, including Rajan Anandan, Head of Google India; Venkat Tadanki, CEO of Secova; and Harminder Sahni, MD at Technopark (previously KSA Technopark).

We focused assiduously on both client and investor acquisitions by selling assertively through relationships and demonstrating our ability to win large companies as clients.

As Capillary began delivering amazing results in tough economic conditions, our Indian clients such as Pizza Hut, Puma and so forth began referring us to their counterparts in other markets such as Singapore, Malaysia and the UK, enabling us to scale up globally. The key to Capillary’s success has been our ability to keep delivering new products that increase our customers’ sales revenues and their marketing ROI, and to ensure the continued usefulness of our product suite to customers.”

Mehra: “We started on this journey with a consumer-focused product search and coupon idea. We wanted to do something that combined mobile with retail. Mobile was growing rapidly in India, and retail was beginning to happen. Our first idea was to launch an SMS-, location-based discount search business. However, our early client prospects told us that, while discounts are fine to attract consumers, retailers really wanted more capabilities for understanding, retaining, nurturing and engaging personally with their customers. We shifted our focus drastically, from building technology for consumers to building technology for businesses that would help them to extract more value from consumers using a cloud computing model. Over time there have been many changes to our technology – we have added major product streams, including social, big data and instant engagement.”

Q2: What were the major growth accelerators for your company in the early years of high growth?

Reddy: “Market focus: We started Capillary not with a ‘Big Idea’, but rather with a vision of creating the first billion-dollar SaaS solution company out of India with an extraordinary passion for being leaders in an entrepreneurial ecosystem. That helped us enormously because, instead of fixating on a single idea, we took our direction from market forces and found a unique focus in results achieved with early-stage clients. We were acutely aware of the exponential growth potential in India’s yet-to-be-organized or technology-enabled retail sector. Our vision evolved to accelerating retail growth via personalized and targeted customer engagement.

Availability of clients: Since our value proposition was built on the core problem of driving sales during an economic recession, we were able to quickly convince top Indian retailers such as Pizza Hut, Puma, Madura Garments, Raymond and so forth to come on board as EAA customers. Our ‘land and expand’ strategy – opening accounts with three-month proof-of-concept trials – worked tremendously well. Also, our well connected investors and advisers delivered some of our best long-term customers.

Business model: Within months of launch, our clients were seeing good success with Capillary, which enabled us to build a fairly straightforward business model – a hosted SaaS, pay-as-you-go solution, requiring no upfront investment and placing a minimal burden on resources. A retailer, for example, might agree to pay US$ 300-500 per point of sale per month based on solutions chosen, without any prohibitive hardware or other resource costs. We empower clients to experiment with our platform in a few stores for a three-month pilot engagement and then extend use of the software to more stores and for longer durations, depending on outcomes.

Funding & client references: We received the QPrize recognition from Qualcomm Ventures and US$ 500,000 from angel investors at the right time. This helped us to invest substantially in our initial product offering while the Qualcomm brand association made us a household name. Our international expansion started quite rapidly as domestic clientele referred us to their offshore counterparts. For example, Pizza Hut India led us to Pizza Hut accounts in Singapore, Hong Kong, Thailand and the Middle East; Puma India connected us to Puma businesses in Singapore and Malaysia; Robinsons Singapore got us into their Malaysia business; and Alok Industries in India took us to the UK and helped us to obtain Store Twenty One as our first international client.”

Mehra: “The Capillary team: From the very beginning we focused on building a strong, empowered organization. We deliver exceptionally high-quality work, which differentiates us from our competition and fuels our growth. Most of our early hires were people we knew personally either from previous workplaces or through collaboration in robotics, entrepreneurship and other IIT KGP clubs. Hence, we knew the passionate performers on our team even before we hired them. Today, we employ over 150 highly capable technology, R&D and analytics professionals holding degrees from premier technology and business institutions across India. This has helped us lay an extremely strong foundation for our technology, R&D and analytics functions: a highly capable team, which has expanded without the need for big budgets and through personal connections alone, which has always been our key strength. With almost 400 employees in total, we have virtually zero attrition, especially among staff at the mid-senior level and above. Capillary’s core team has always believed in giving complete freedom to its team members; this keeps our talent engaged and focused on innovating at all times.”

Q3: What role did key aspects of the entrepreneurial ecosystem surrounding your company play in the growth of your company?

Mehra: “The tactical shift in operations: We started the company in Kolkata, a Tier 2 city in India that was in the early stages of becoming an IT destination. We quickly realized, however, that Bangalore – India’s Tier 1 IT hub city – would provide a better ecosystem in which to build our company. Indeed, moving to Bangalore turned out to be an important strategic move for our company since it gave us access to the right investors and advisers. It was in Bangalore that we learned of Qualcomm’s Q prize at an open coffee club and later went on to win the prize, providing a major boost for our nascent company. We also made connections with Qualcomm Ventures, which later invested in Capillary.

Availability of talent: India has one of the strongest technology talent pools in the world, and since Bangalore is home to most of the country’s R&D centres, there was an abundance of talent available to help build our product suite. We built a strong technology and R&D team by acquiring top talent from noted companies such as IBM, Microsoft, Oracle, Salesforce, Dunhumby, Fair Isaac, Box.net, Infor and Dell, while also attracting fresh talent from the world famous IIT and IIM educational institutions.”

Reddy: “The Great Recession: 2008 was quite an eventful year for Capillary. Just as Lehman Brothers was filing for bankruptcy, we were busy procuring a US$ 30,000 loan from our alma mater IIT KGP to start our company. The recession came as an unexpected boon for us – we did not have to pay premium wages to attract outstanding talent and we got great discounts on major upfront investments. We were also able to position our solutions as a good recession strategy: increase share of wallet, sell more high-margin items, cross- and up-sell more assertively, identify and win back lapsed customers, convert new customers to repeat business and so forth. We had a winning value proposition amidst difficult economic conditions.

Largest series A round: With all we had going for us, Capillary was able to raise the largest series A funding for Indian product start-ups (US$ 16.5 million) from leading institutional investors Sequoia Capital, Norwest Venture Partners and Qualcomm Ventures. These firms provide great advisory services and have helped our leadership team to acquire amazing confidence, to build ambitious growth plans for international geographies and to fund accelerated product development.

Moving HQ to Singapore: Singapore is becoming the Silicon Valley of Asia; start-ups are popping up all over, attracting substantial investment wealth. Investors, shareholders and entrepreneurs are all realizing Singapore’s advantages, experiencing fast growth and gaining entry to Asia’s untapped developing market economies. Favourable regulations and extensive government support for start-ups made Singapore a very attractive choice for our new corporate HQ location in early 2012.”

Q4: What key aspects of the entrepreneurial ecosystem surrounding your company that were absent (or existed only in a weak form) created the greatest challenges for growing your company? Please describe and discuss how you met/were impacted by these gaps in the ecosystem and their resultant challenges?

Reddy: “In 2008, India and the rest of the world were experiencing economic recession – not a very encouraging environment in which to start a business. However, we saw this as an opportunity rather than a hurdle. We bootstrapped for the first three years and functioned with very little funding because the investors were cooperating and customers were willing to pay. In the early years, one of India’s largest venture capital firms wanted to invest in Capillary, but they also wanted to change our business model to focus on consumers. Our core team believed firmly in our vision and the direction in which Capillary was moving. We turned down the investment offer and, despite limited funding, grew rapidly over a very short time span by sticking to our focus areas.

Another prohibiting factor was friends and family and the societal mindset in general. The start-up scene in India was very young; most people were willing to work only for large corporations that offered stable careers with job security, which made it difficult early on to attract the right people. Even when our top candidates were convinced to join Capillary, peer and family pressures to settle down and avoid risks caused many to back away from the opportunities we offered. The solution we found was to nurture talent rather than acquire it. Instead of focusing on job descriptions, we focused on people, which led to outstanding early results. Now, as we scale up, we are bringing on board senior leaders across all departments to drive the next phase of growth for Capillary. We intend to invest significantly in the professional and personal development of the people who work for us.”

Mehra: “In the early stages, we faced a lot of infrastructure and regulatory challenges as is the case for most entrepreneurs. But our focus on cloud technology helped us to grow easily and to offer substantial value to customers, while also maintaining great operating margins. But we did spend a lot of our time doing things that were not adding value, as we were part of the first wave of young first-time entrepreneurs in a country still bound by legacy corporate environments and no successful history of product technology companies.”

Q5: At what stage did you invest significant resources seeking to grow your company internationally/beyond your domestic country or region? What factors were pivotal in deciding when to seek growth internationally and where to seek that growth?

Mehra: “After successfully rolling out our solutions for Indian clients, stabilizing our client base and increasingly carving out niche leadership positions domestically, we decided to investigate neighbouring markets. We observed that retailers in regions such as South-East Asia, the Middle East and Western Europe were facing similar problems and using solutions and technologies that were far behind best in class. We knew our solutions could help these businesses and were able to make strong business cases around potential revenue opportunities. Early successes in international markets inspired us to dramatically accelerate our offshore market explorations.”

Reddy: “After our series A funding round, we decided to invest significantly in international markets. For some of the early markets into which we ventured, for example the United Arab Emirates and the UK, it took a long time to deliver results and cost our company millions. Investing in those markets was a very bold move for us, but we stood by our decision and, by the time Capillary started operations in Singapore, our international businesses had begun generating significant revenues and looked extremely promising. In the early stages, much of our R&D investment went to preparing our products for global markets. We started slowly receiving proactive inquires from international accounts and understood there was a strong market for our products globally. Our first few international clients came as references from existing successful clients in India. Those early experiences gave us the confidence to quickly scale offshore operations.

Q6: What were the biggest challenges in building growth internationally? How did you meet or adapt to those challenges?

Mehra: “We initially found it difficult to build sales presence in international markets. For a specialized industry like ours, it is essential to attract sales talent that can build the company’s brand with their existing know-how and business networks, and are passionate about how entrepreneurial workplaces thrive. Since we were looking at three large potential markets – South-East Asia, Western Europe and the United States – we had to be careful not to spread our resources too thinly. What has worked well for us is the three markets approach – every year we decide to open three new territories. First we stabilize the territories, put our teams in place and acquire at least five early-stage clients rapidly, and, in parallel, invest aggressively in the three markets we opened the previous year and that have now stabilized. Markets like Singapore, the United Kingdom and United States are showing great results for us with such a focused expansion.”

Reddy: “One of the biggest challenges Capillary faced was a lack of brand awareness outside India, which made it difficult to generate new business leads. And while our Indian clients helped us move to international locations through word of mouth, this was not a model for fast growth. We solved the problem by creating an inside sales team for lead generation and a powerful outbound sales team operating out of India. While we had always used a push sales format in India, we found this did not work well in western countries. We realised western retailers were looking for more consultative approaches. We also found a large market gap; there were plenty of very expensive CRM solutions aimed at the Walmarts and Tescos of the world, but far fewer serving lower enterprise and mid-market retailers. We positioned our Intelligent Customer EngagementTM suite, which combines CRM, big data analytics and campaign automation, to serve these neglected markets in a cost-effective, value-driven manner.

Another obstacle was hesitancy among large retail brands to work with a very young, seemingly inexperienced team. We overcame this hesitancy with a highly effective ‘land and expand’ approach, initiating engagements via small, high-ROI pilot projects to prove the efficacy of our products and to close increasingly large deals with world-famous brands. Over time, as we have worked with more than 140 retail brands around the world, we have developed deep retail trade expertise and extensive intellectual property, which has become a unique selling proposition for us with larger accounts.”

Q7: What major role, if any, did key aspects of the ecosystem in the country (or countries) you first sought international growth either promote or impede your ability to grow in those international markets?

Reddy: “Expanding to international markets had a great impact on how our company functioned and made decisions. As a young start-up, we followed the Jugaad (frugal) innovation style, making short-term fixes under tight deadlines driven primarily by clients’ whims and priorities. That made it difficult for us to stay focused on our long-term product development vision and may have cost us some growth. As we became more internationally driven, we had to drastically change our development and service delivery style, aligning with our longer-term business strategy and making a strong commitment to long-term planning, effective project management and reflective decision-making – taking time but delivering high-quality work by agreed dates.

Our international expansion has also enabled us to bring on board industry veterans from the CRM, analytics and consumer loyalty domains, a group of experts to which we did not have access in our domestic market and who have made our corporate portfolio quite strong. Now we have the right capacity to tackle large accounts and win massive deals all around the world.”

Q8: Seeking international growth often has both high moments and dark (low) moments. Briefly describe one high moment and one dark (low) moment in seeking international growth.

Reddy: “High moment: The highest moment for us, so far, was winning our first international client, Store Twenty One in the UK. It was an important milestone in our history and we look upon the accomplishment with great pride. It had a dramatic impact on the way we run our company and completely transformed our long-term business plans. What followed Store Twenty One was a series of early international wins. I still remember one of the deals we won, which was at five times the market pricing and one of our first engagements in a new region and taught us a great deal about how to compete with established competitors without compromising on price. Today, we are not less expensive than contemporary competitors but we do deliver much greater value, faster and with less effort.

Low moment: We have experienced great learning on our journey into international markets. For example, sales cycle times were much longer than we had expected in early UAE and UK market ventures. We spent millions and waited months for decisions to be made. It took time for us to figure out that we needed a combination of stable lead generation, steady filling and strong management of our opportunity pipelines and dedicated brand building to establish our credibility in new markets. Patience and how to make decisive, smart manoeuvres in complex sales processes are two things we have learned along the way.”

capillary

Retail Store Systems 101

I gave a talk recently at the Groupon office in Palo Alto, on “Retail from the Other Side: Learning from Working with POS Systems”, and wanted to share the slides for the same.

Retail Systems are a complex bunch. If retail is all about detail, their systems are all about variety, and the variety that I have seen in retail systems over the last few years is mind boggling. If you want to build anything for these systems, you have to take into account the store layout and architecture, whether they are on a POS system, a regular PC, or a thin client, or even on a virtualized environment like Citrix. You have to deal with antiquated system configurations, low memory, challenging connectivity issues.

Perhaps some of the biggest challenges are human related – in adoption and training – retail being a very geographically distributed operation, it becomes very difficult to retrain and ensure the associates are best positioned to use complex systems, but in a simple and efficient manner. You have to deal with language issues, remote connectivity, and busy store hours.

No wonder building store system, and building for store systems is not for the faint hearted.

Pluses and Minuses

Facebook Vs Google, Round 2

The whole world seems to be going gaga over the new kid on the block, Google’s Facebook Killer, Google+. I have tried it, since I hardly every like verdicts (they sound good in retrospect, but most people eat their own words when they don’t go right), I would just share some thoughts.

Overall, Google has delivered a kickass product. It’s a great bit of engineering. For the first time in its life, Google seems to have come out of its engineering style product development and has delivered something that is quite well polished. There are hardly any kinks, the product has been thought through well, including deep integration across all google services. It’s even gone ahead and published Google+ like themes for Gmail and Gcalendar. It takes a lot to introduce a new product across all your properties (the top bar in Gmail, Google Search etc.) on day one, and I commend Google on its confidence. And its welcome change from half dash efforts earlier (Buzz, and Orkut while well done was abandoned).

At the same time, however, the product lacks any irresistible feature that will make me switch. The usual: wall/stream, notifications, @/+ etc. have been added. Circle’s is great UI but not something facebook won’t have in two weeks. Sparks and Hangout are cool, but not at the core of social networking. I don’t think I will ever have the time or inclination to “hangout” on the web with friends, unless its work. And if its work, I would rather keep out of Google+. Sparks is something that I have still not understood, and it seems something Google News should have added.

Moving the Social Web is a Mountain. I don’t imagine people suddenly switching to the new kid on the block. There are pictures, friends and family on facebook which people wouldn’t switch on day one, and I doubt given the way facebook is so deeply integrated in most people’s lives (its the first website I open after email), I doubt making the switch will be that easy. I also don’t expect my mom, my dad and so many other people to just jump on Google+, also because of its (slightly) geeky interface.

Getting rid of baggage is also a good thing.  That said, I do want a place where my new social life is better mirrored. Facebook seems to have so much baggage now – people I may not even interact with, that having a place where I can interact with a fewer people is actually better. I have heard horror stories of people meeting you after years and still knowing what you are upto (and you knowing nothing about them!). In a world where your friendships become limited to what you know from your facebook newsfeeds, having a new place to locate new content is a welcome change. I also want a place where I can interact with people with whom I share some interests and keep it distinct from the rest of the world.

Is Google trying too many things? An obvious question comes to mind. Google is planning to fight Facebook & Twitter in social, Groupon in local offers, Microsoft in enterprise and search, and everybody else in Silicon Valley somewhere or the other. Suddenly, the company that started with “Don’t be Evil” has enemies all over and is fighting all fronts.

Competition is good for Facebook. I think its going to keep it on its toes as it has suddenly in the last few months become the monopoly on your social connections. It needs to think of quite a few things – helping us keep our friends graph better organized, surfacing new and better content (I hate the spam on facebook!), and figuring out ways to become more pervasive (are we going to see facebook browser toolbars soon?).

Bad news for Twitter. The one to lose out the most may just be Twitter. What works for twitter is the one way friendship that geeks love, and celebrities take recluse in. If Google is able to capture these well (circles is in some way one way relationship – the friend connection in G+ is quite complex), it will mean people won’t mind moving to it. In this three way world of Twitter/Facebook/Google, it will be Twitter which has the least stickiness, most spam, and no way of monetizing. The dollars twitter would have hoped to get, would now get split even more. If twitter has to stay afloat, it will definitely need to start thinking quickly.

Apple’s Vision of the Cloud and why its flawed

Apple's iCloud Service

Yesterday, Apple announced its new iCloud service along with a lot of improvements to the Max OS X and iOS 5, and while I did like what I saw, there are a number of reasons I may not use it.

First, what I liked:

  1. I like Apple’s vision of the cloud, as against Google’s. I don’t think the cloud is going to replace our rich applications. Having used both cloud as well as native rich apps – rich apps are here to stay the cloud will make them stronger. They are a lot easier to use, documents look a lot better and they are far more handy. A browser based app may be present as a fallback option when you don’t have anything handy but that’s far from becoming the default.
  2. I like Apple’s cloud being a personal cloud rather than complicating with as a “family cloud” or “friends cloud”where everything automatically gets shared with everybody. I think that just befuddles the hell out of things and these have never taken off.
  3. The iCloud makes the cloud wire-free. You no longer need to connect your PC / iPhone / iPad and sync all of them. Just importing pictures from a camera is such a big chore usually and Apple’s a master at cutting out chores.
  4. The iTunes Match service is a killer. Of course, I still wonder how they managed to negotiate out such a deal with the music publishers but the fact that they did, and hid all the junk under the carpet is very commendable.
And now, what I don’t like:
  1. Apple’s Cloud is closed. It essentially locks me in to Apple’s technology. As a person, I like to keep trying out new things – I use a
    PC, an iPad and a Blackberry and I am usually happier to navigate diversity, and the iCloud service means that I either need to change my habits or look for alternatives (Hey you dropbox, instapaper, remember the milk – you still have a future!). I would like to write a document on my PC – read it on my iPad, edit it there and use it on the go with my Blackberry. With Apple’s iCloud, my world would begin and end with Apple, which is a compromise I am unwilling to make.
  2. Apple iCloud doesn’t give me any integration options. There doesn’t seem to be a way for app developers to retrieve stuff from the cloud onto other platforms. This is precisely why I don’t use Google’s Buzz but I use facebook or twitter – because they are everywhere!
  3. I still can’t get over MS Office. I have not really found an alternative that can make me switch – openoffice, google office, pages – and I really wonder if I will be able to use anything else for sometime to come.
  4. iTunes doesn’t support enough regional content, and I hardly buy any music from there as a result. There’s a whole world out there beyond what we see – and I wouldn’t want to close my ears to it. Also, I would want my content to be available on my non Apple devices. And they may not be as good today, but I wouldn’t want to rule out innovation.
  5. Apple doesn’t give me a fallback web based interface for accessing my cloud stuff – a lot of times, I end up checking my mail from others computers since I travel a lot and find myself in places where Wifi is locked and I don’t have a data plan on my iPad/phone. I want at least some way to check things out.
I guess, I just like way too much diversity and I will continue to use all the other services that I used earlier – and use the iCloud only for things which don’t lock me in.

The Maruti Story

by R.C. Bhargava

Maruti is one of the few (perhaps only) shining example of a public sector companies in India to have achieved global competitiveness and made it big, giving the leading private companies a run for their money, and its story has to make for very interesting reading. What was the vision behind starting a car company in India? Why did they chose Suzuki as a partner? How did they navigate the red tape that ails most of Indian industry? How did they build a leader in quality, changed the rules of the game to make auto manufacturing customer centric?

Who better to tell this story than R.C. Bhargava, the man who built Maruti during its formative years and is still associated with it as its Chairman. In a very intruiguing account spread over two-and-a-half decades, Bhargava describes how Maruti was conceived, nursed, nurtured, grown and built into a giant of our industry.

What makes the story very interesting is the light it sheds on the changing face of Indian industry, since Maruti as a company owed its origin to the Emergency, nationalization, the license raj and saw through the changing economic climate of the country. The anecdotes of the author show how the company and the economy as a whole transformed, and gives us a view into times completely alien to our young existence.

I have read a number of books by the giants of the Auto industry – My Years with General Motors by Alfred Sloan, Lee Iacocca’s auto-biography, and I can actually identify with many of the things Bhargava describes as a result – the focus on quality, worker relations, dealer relations, focus on marketing and model development, emphasis on servicing – all of which were unknown to Indian industry at the time, and the way Bhargava describes how each of them were envisioned, and implemented, shows their foresight, strength of will and commitment.

Apart from that, Bhargava also describes some unique problems of being an Indian company – that too a PSU – where accountability and responsibility is a big issue. While we blame PSUs and the Government of demonstrating red tape and acting slow, the book also gives the lay reader an idea of why its so – most managers and civil servants will rather follow protocol and ensure that their decisions are always above board and measure up to the right standards of probity since the downside of being caught in a political storm is very high. Bhargava himself describes a number of CBI enquiries and charges of corruption being levied by him by political opponents who wanted to settle an old score. It’s only justified that in all of these cases, the individual manager would want decisions to be taken in such a manner that responsibility is shared and nobody can be “blamed” for any particular decision later. The fact that the Maruti management was able to cut through this red tape and still build a company of its stature is remarkable (of coursing, having Suzuki as a JV partner and blaming tough decisions on them is an important aspect of it).

Some key take aways for me were:

  1. Having a lofty vision and very high ideals to begin with are very important to build a sense of purpose amongst the team
  2. Having a shoulder from which to shoot from – and people who are above the circle of responsibility which enables justification of key decisions and pushing them through
  3. Communicating the right ideals of all stakeholders, and leading by example (uniforms in Maruti are still followed; I had even heard one of my classmates from IIT complain about it!)
  4. Managing bureaucracy, relationships, governments, partners can be extremely tricky and once again one has to be strong up front
  5. No compromises on quality

One grudge I have against the authors is that there are so many anecdotes that some of them are not as well covered – perhaps the editor could have given some direction on pacing the book well. Similarly, the book seems to sag in places and its easy to lose interest.

For anybody who really wants to understand the evolution of Indian industry, this is a great resource.

Digital Media Outlook Report 2009

Found this report by Siddharth Rao of Webchutney on TalkingTails. Very interesting to note that the largest advertisers in the offline world are only testing waters online right now – and the real online spend hasn’t really started. Most people are (still!) confused about what advertising online means and how it impacts their business – perhaps because the trickle effects of a banner AD are very small – when you conduct a TV/Print campaign people come into the stores and talk about it,, and the sales show a substantial positive impact of the campaign and the information about this goes up the organization hierarchy.

The same doesn’t happen in case of banner ads, and impact on revenues of a single ad/campaign is quite small and most marketing managers are unable to estimate how its affecting footfalls into its brick and mortar stores.

I believe a more effective means of tracking customers trickling into stores after an online campaign would definitely make a positive difference. Hopefully, with the advent and ubiquitous spreading of mobile phones, we’ll start seeing a difference in the Outlook Reports of 2011 and 2012!

[Suggest you click on the Menu (bottom-left) and read in full screen]

Clay Shirky’s predictions about the future of Mass Media

Just found this article on The Guardian site. Clay Shirky’s a professor at NYU and a scholar of Mass Media and the effect internet trends would have on them. Worth a read — I agree with some of his predictions (and presumptuously adding some of my own):

  1. Newspaper’s will diverge into 2 classes – magazines such as Economist which will exist for the people willing to pay for high quality coverage, and mass coverage of all possible news on the internet that will be available free and paid for by advertising dollars. Communities such as Twitter might help surfacing the right news.
  2. Niche newspapers and magazines will only exist online — the distribution costs for anything that doesn’t have economies of scale are not justified.
  3. TV will also change dramatically – The current state of the industry is that content is tightly controlled by the Channels, and hence to maintain quality, studios invest a lot of money (at least in India). We will see a lot of rise of amateur content, but only so much, since professionals will soon (and have, if I am not wrong) start publishing on YouTube and the like. However, the sudden loosening of the grip on distribution (since there are no longer any channels), will mean the quality of the content will change. Video distribution will be controlled far more by social networking sites (a la Facebook) than are blog posts.
  4. Books will be relatively less affected, at least until we hit a e-book reader that really rocks! My guess, though is devices like Kindle will improve a lot in the next decade or so, and might affect book sales greatly. Print-on-Demand will grow, but I am still not aware of how much it costs to print just one copy, so I am not in a position to comment. A large part of the cost if the cost of distribution, PoD will really succeed if the following equation is satisfied (since you will still pick up books at a store):

cost_of_traditional_book + cost_of_distribution_to_store > cost_of_printing_just_one_copy

The full article can be found here.

What is a *FREE* customer worth?

I always wonder if companies should pursue community building with lots of users, or a few paid users. While both have their advantage, it is a question that can be better answered on a case-to-case basis. Many factors might affect the strategy a company might want to employ – funding levels (do you have money to invest through a franchise building phase?), maturity of the market (how many other players are there?), state of the product (is your product extremely well-defined, or are you tuning it still?), but I found this feature story by Sunil Gupta and Carl Mela that brings to the fore a new dimension and one I had not been able to quantify — indirect network effects — when you acquire a free customer, over time they might start buying from you, or attract other customers.

Gupta and Mela point out these free customers are extremely important for many businesses — from a shopping mall where they build up aspirational value and buy products later, or gaming consoles where it drives more developers and a wider eco-system leading to a higher monetization. They explain these in light of an online auctions house — where more buyers lead to more sellers and higher lifetime earnings even though the buyers don’t actually pay a fee. What’s really interesting about the report is that they have quantified these indirect network effects, explain how a penetrative pricing (low initially, and higher later) leads to higher lifetime earnings since it broadens the base.

Also reminds me of when I was talking to a manager in Shoppers Stop sometime back, and he told me that everybody walking into his store is a potential customer — they might not buy anything now, but the fact that they walked in shows that they are interested in buying something, and will come back and buy. Which is also true of brands targeting youth — they don’t have a lot of immediate spending power, but very high lifetime earnings, and so you are better off getting them hooked onto your products.

There is also a more detailed research report that I wish to delve into, and if you want to read the full feature, just search intelligently]

[Via OCC Bangalore mailing list]

Why is FDI out of US more profitable than FDI into the US?

Mihir Desai of Harvard Business School says that portfolio investments into the US have been far more profitable than direct FDI investments. Inbound FDI into the US has averaged a return of 4.3% while outbound FDI from the US into other countries is about 12.1%. At the same time Wall Street went up more than any other markets in the world. Why is it so? Mainly because US companies traditionally invest in more controlled markets and have the advantage of getting cheaper cash and a better product and marketing portfolio (as a result of the controlled markets), while at the same time MNCs investing into the US have no such advantage of low-hanging fruit. [original article]

Why is it so difficult to make money as a direct investor in the
United States? Indeed, much of the rhetoric on investing environments
argues that the major destinations for U.S. outbound FDI—the developed
markets of Europe and Japan and the emerging markets of China and
India—are filled with capital controls and ownership restrictions. How
can the United States as a destination end up being so much less
attractive despite the relative absence of this usual litany of
investment obstacles?

Part of the answer may lie precisely in how these obstacles tilt the
playing field between local firms and multinational firms. In a series
of papers, [HBS associate professor] C. Fritz Foley, [University of
Michigan professor] James R. Hines Jr., and I have shown that distorted
environments are precisely where multinational firms have an advantage
relative to local firms. In countries with weak capital markets and
burdensome regulatory regimes, multinational firms can use their
internal capital and product markets to access global resources while
local firms can’t. In effect, these distorted environments burden local
firms, create opportunities for institutional arbitrage for
multinational firms, and can lead to a successful set of foreign
activities for multinational firms.

The United States, in contrast, creates few such opportunities for
low-hanging fruit for foreign multinational firms relative to local
firms. As such, the conditions that may underpin the profitable
experience of U.S. firms as they expand abroad are not there for
foreign firms investing in the United States. More generally, the
presence of highly competitive local firms in the United States
undercuts efforts by foreign multinationals that don’t have truly
differentiated capabilities. Simply replicating strategies that were
successful at home is likely to be insufficient in the United States.

Small Car, Giant Leap

image Ratan Tata really pulled it off. Half a decade back, he had said that he wanted to give India a small car that would be within reach of the millions of Indians who have to make do with two-wheelers, and last week in the Auto Expo, he delivered on his promise. And in what style — the whole world sits up an takes notice! The media’s been abuzz with the grand success that Tata has pulled off, to the dismay of all nay-sayers who believed that the car who found a thousand and one ways to make fun of the whole concept.

Even after the car came out, people have been debating why we need to clog our roads further, how RK Pachauri’s heart would miss a beat, and Sunita Narain would get a shiver down her spine, and Chidambaram due to the oil import bill. While I agree that such a cheap car is such a disruptive thing that the whole way we think about roads, infrastructure, and gas imports needs a rehash. (This really came out of a discussion on the Blogaloreans mailing list:) I would say that in the midst of all the praise and criticism, we miss a few important points.

Firstly, the car is not made just for the cities. The whole problem of parking and traffic vanishes as soon as you move outside the city’s center. The upshot for the rest of the country is far too high to just write off the car. Personally to me, preventing less privileged people from having the luxury of cars when the more affluent income groups easily swift around is a rather elitist point of view. To quote form WorldChanging:

Which leads us to the inescapable fact that a Tata Nano in Chennai is, from the biosphere’s perspective, similar to a Toyota Corolla in Vancouver.

Even within the cities, the traffic argument fails to pass muster when you consider that traffic and other problems would occur anyway — Nano or no nano — and all the new car has done is to accelerate the process. We would have to come up with more innovative means of handling the growing traffic on our roads anyway (taxing vehicles in the Central Business District like in London is one idea) and improve the mass transport system (like in Kolkata and Delhi). The government and the Municipal Corporations need to be more proactive both in legislation and regulation.

I am personally of the view that a car should be used as a means of last mile connectivity and local transport, and I like the concept of driving to the nearest Metro station, park your car there and go to work using the Metro. IMHO, this is the model that can scale in the long run. Obviously, another important use of a car is the drive through the highway, where the safety of a car is far more reassuring than a bike or a scooter.

Autos and cabs would be another thing that would benefit greatly from this development, and if we think about what causes the most madness on the roads (autorickshaws, bikes and the like) we would be better having single-sized four wheel vehicles, which have no option but to stick to the lane discipline.

image There are other fallouts as well, the chest thumping we can now do in a major manufacturing conference is only one of these. The world is sitting up and taking notice of India’s design and engineering prowess, and I am sure the outsourcing companies have already started giving higher revenue projections. The Tata car has almost become a barometer in some circles, and its making its competitors re-think their strategy. It’s already got them new enemies — Bajaj was so worried that he announced his own car! And the ramifications are not limited to the automobile segment alone! The new car revolution might just take the country by a storm just like the mobile revolution, and change our fundamental assumptions about a host of things.

All said and done, to me the biggest advantage of this new development is that Indians will have another thing to boast about — when they promised and delivered. It will add a new spring to their step, and inshallah, help our country forward over the coming years.

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