Month: July 2001

Innovations drive the engine of growth forward, though not all innovations may result in commercial success. Innovation is necessary to get away from the monotony of sameness.

Witness prime-time Indian Television. A year ago, Star TV, lagging behind Zee and Sony, launched a set of new programmes in the 9 pm – 11 pm band: Kaun Banega Crorepati and two daily soaps from Balaji Telefilms (Kahani Ghar Ghar Ki and Kyu Ki Saas Bhi Kabhi Bahu Thi). KBC as a game show was high risk and offering an opportunity to win an unheard amount of prize money (besides, of course, the opportunity to meet with Super Star Amitabh Bachchan). Star backed it with a huge amount of advertising also. The move succeeded and how! It was different from the regular fare viewers in India were used to on TV.

Sticking with TV for another moment, an amazingly simple idea (in the US) has been the VCR-plus. It consists of a remote for the VCR with a series of numbers for each TV programme. The numbers are published in the newspapers along with the TV schedule. To record a programme, you simply type in the number. This makes recording TV programmes a breeze (no fidgeting with the VCR controls). The company (Gemplus) did incredibly well, and leveraged its position to merge with Murdoch’s TV Guide in the US.

A possible successor to the TV programme recording problem now comes in the form of personal recorders from companies like TiVo. They store the programming on disk, so you can watch whenever you want and more interestingly, easily skip over ads.

The result of this innovation: a potential revolution (and disruption) in the economics of the TV industry which relies largely on ad revenues. Says Kevin Werbach in an article on “The Webification of TV”:

My own experience since I got a TiVo is typical of every other subscriber I’ve spoken with. To put it simply, I watch more TV now, but fewer commercials. Furthermore, I have no sense of when and on what channel a program originally aired. Take those usage patterns and extend them to tens of millions of homes–which will happen as the devices and services become more affordable–and broadcast industry economics no longer add up.

Innovation also creates that “Wish I had thought of it” feeling. We have had this sentiment echoed many times when people look at http://www.Samachar.com. It is a simple concept – that of news aggregation on a single page. But when it was launched in 1997, it went against the prevalent notions at that time of (a) short Web pages (b) don’t send people to other people’s sites (c) unique content creation.

Witness also the Instant Messaging revolution wrought about by AOL’s Instant Messenger and ICQ – email has been around for more than 3 decades. What ICQ brought about was the concept of “presence” – so that you can be notified when your buddies are online. Communications made easier!!

What’s common to Napster, Lagaan, Amul’s Rs 20 pizza and Google?

Napster changed the rules of the game and forced the music industry to think about the Internet as a distribution medium. Even though it may or not survive as a company, its legacy will remain. Aamir Khan’s Lagaan, a period film, did many things differently – it was a period film, the shooting was done in a single stretch of 6 months, it featured a cricket match for over an hour, its length was nearly 45 minutes more than the norm of 3 hours for Hindi movies and it even featured English dialogues and a mixed English-Hindi song. Amul’s price point for pizza is remarkable. Google launched a search engine just when everyone thought the game was over; today, it’s the gold standard and expects to reach profitability shortly.

Each is a result of Innovation, of thinking out of the box, of being different. The easy thing to do in business (and in life) is to take the easier approach, of doing what others are doing, of following the standard path.
Being innovative means having a strong belief in what one is doing and of willing to go against the consensus opinion.

Innovation is also about being to able to risks, being entrepreneurial in one’s thinking, of being able to change the rules of the game.

In the challenging times that exist today, it is easy to say No to innovation and to stick to the conventional knitting. While one is trying to please the investors and markets, the simple and seemingly obvious approach is to cut back on new projects and focus on what generates the money in the near-term. Why worry about long-term vision and planning when one is not sure about short-term survival?

It is at times like these that one is truly tested. Yes, the business has to tide over the immediate challenges because otherwise there is no future to look forward to. At the same time, can one think differently – precisely because many others are not? The opportunities of tomorrow do not go away in times of like this; competition does. New doors can only open if one is prepared to close some doors. To borrow a phrase from a CNN program, it is time for Business Unusual.

Within India, too, the ability to collapse geography opens up other opportunities. Distance Education is one of them. The gap between our (few) best educational institutions and the rest is large. Education depends to a significant extent on the quality of the teacher. We can take our best teachers and “virtually” make them available to students everywhere in the country. This could be in the form of video recordings which are broadcast and a live audio hook-up for interactions. The base technology is no different from that being used today by Indians in the US to communicate through the Internet with their families in India.

For enterprises, it now becomes possible to link-up offices, factories and distribution centres in remote locations. This becomes the foundation of building the Real-Time Enterprise, where information is available across the value chain irrespective of location. Given the challenges of transportation and managing logistics in India, information availability can make a big difference in helping companies reduce inventory costs. Better communications will also make companies focus more on what they do best, and outsource the rest, leading to the creation of specialist companies which use the Internet at the core of their operations.

India will also see in the next few years the emergence of more franchised operations of brands. We are already seeing this in the restaurants business with McDonalds, Domino’s, Pizza Hut and Pizza Corner opening up dozens of outlets across the country. To franchise a concept, there are two primary requirements: the ability to make the operations into a replicable process, and connectivity to send and receive information rapidly. This franchising trend will be far more noticeable in India’s second-tier cities.

As we look at the changes in our personal lives and how technology embeds different facets of it, we need to look at how these changes can be leveraged in business. Take a look at the younger generation growing up in a connected world, one where the distance of separation is only a single click. The magnitude of interactions has perhaps gone up by a factor of 10 in the last decade, and yet this generation is completely at ease. This new generation with technology embedded in its DNA holds India’s greatest hope in the coming years.

The ability to communicate easily with little incremental cost has also increased the interactions we have. A decade ago, it would have been difficult keeping up with the hundreds of people that are now there in our address books. Mailing lists also ensure that we can belong to various special interest communities. It does not matter where people are, or in which time zone they are – communications is near-real-time with most of them.

This trend will get accelerated in the future with the availability of always-on wireless data devices. We are already seeing the first signs of this in the popularity of SMS (Short Message Service) on cellphones. The cellphone is a personal device which is with us all the time. The next generation of cellphones will integrate better with the Internet, creating services that are location-aware (where we are), time-aware and personalised.

Mobile data access in developing and emerging technologies is driven by a fundamental need for basic communication services while that need isn’t as urgent in developed countries, according to a report by Telecompetition, Inc.

“Developing and emerging economies are highly motivated to build an infrastructure as quickly as possible,” stated Eileen Healy, president of Telecompetition. “Adequate communications infrastructure is widely recognized as a key success factor for emerging economies. Mobile networks can often be built more quickly than a traditional wireline infrastructure, and the new IP-based mobile technologies will provide a more cost-effective way for developing countries to expand both voice and data communications.”

In essence, wireless data capabilities make the Net-ready phone an affordable data terminal in poor countries, the report says.

The compression of time and distance can open up many opportunities. We have seen the Indian software industry use the 9-12 hour time zone difference with the US to its advantage (“we work while you sleep”). A similar trend is now starting to happen with call/contact centres based in India. Communications technologies bridge distances and open up opportunities for Remote Services out of India. This is perhaps India’s single largest opportunity to boost exports and earn foreign exchange in the next decade.

The impact of the change led by the revolution in communications and attitudes in developing countries like India is dramatic. One has only to think of life a decade ago and compare it with today. Can we imagine a world without email, cellphones or TV channels?

The Internet powers the Change Engine. Writes Frances Cairncross in “The Death of Distance 2.0: How the Communications Revolution Is Changing Our Lives”:

The Internet is, in one sense, merely an enormously efficient way to transport digital data around the world. In another, it is a laboratory for communications in the future.

“There has never been a commercial technology like this in the history of the world, whereby from the minute you adopt it, it forces you to think and act globally,” says Robert Hormats, deputy chairman of Goldman Sachs International. Developing countries will enjoy new freedoms: a way around overpriced international telephone and postal services, for instance, and a short-cut to information that may not be available locally, such as scientific articles and uncensored local news.

Once it has true global reach, the Internet may become the main platform for international contact. It provides a shop window in which a company can display its wares to a world market. It offers a chance for people from different countries to swap information and ideas. It provides the means for people who are cut off from the world by censors and oppressive governments to tell their stories. No other innovation has ever had quite such earth-shrinking potential.

The Internet will be integrated into other products. It will be part of the telephone service, part of the way a television works, part of a games console. It will connect things and people and animals and companies. People will stop thinking of the Internet as a separate entity and be aware only of the services it delivers, not of the network itself.

The next decade holds forth an amazing array of opportunities as communications occupies centre-stage and location becomes irrelevant. Just as India used its time-zone difference with the US and Europe to provide round-the-clock software development and maintenance, we must think about the new opportunities being provided by the concomitant change being brought by communications and attitudes. The world is full of conversations, choices and information. Yet, the one constant which cannot change and which will always be limited is Time.

6. Instant Messaging
Real-time, nearly-free communications is changing habits. Instant Messaging has a unique quality — that of “presence”, being able to tell us when our buddies and business partners are online. I remember when I was in the US a decade ago communicating with family and friends back in India meant writing letters punctuated with short phone calls. Today, letter-writing is a forgotten art, as a combination of email, Instant Messaging, NetMeeting and VoIP have bridged distances to the extent of having daily conversations – in text, voice or video.

7. Air Travel
While air travel has been around for decades, what strikes you most about the last few years is the improvement in its quality. Private airlines like Jet and Sahara have forced Indian Airlines to improve. Punctuality is more the norm than an exception in travel nowadays. While air travel is still expensive, one is starting to see the impact of competition as multiple fare options are starting to make their appearances. Travelling by air is no longer the “once-in-a-lifetime” experience as it once was as the perceived value of time increases.

8. Outward-looking India
In 1991, India was still quite isolated. The first phase of reforms opened up the economy and the minds of people. Suddenly, India was part of a global economy. This has made Indians look outward – for technology, for ideas, for business. It has also made international companies look at India – as a marketplace. The success of Indians in software has also helped enhance the international image not just of India but also its people.

9. People Dispersion
Partly driven by the boom in software services (reversed a little off late), Indians are spread out across the world more then ever before. Indians are also travelling more than before. This dispersion of people (in transit or temporarily) increases the need for communications as families get distributed and businesses search for newer global opportunities.

10. Rising Aspirations
Perhaps, the biggest change has been in the mindset of people in India – for a better life. Salaries are rising rapidly. TV and the print media constantly deliver images of a better life. The Indian middle-class may not be the 200 million once envisioned by planners, but neither is it too small to be ignored. The roads have all kinds of cars, shops have a variety of brands. Choice – from among the best brands – is now available in India.

India has had its fair share of challenges in the last decade. Yet, inspite of the drawbacks, the overall mood is definitely one of optimism and opportunity. Ideas and entrepreneurship, technology and consumerism go hand-in-hand. Underlying this is the silent revolution being brought about by the mix of computing, communications and software. The distance which once separated India from the world is now being bridged.

Life has changed a lot in India in the past decade. Perhaps the biggest changes have been due to the compression of time and space – “the death of distance”. The speed of communications, the velocity of life, the frequency of interactions – all have gone up. At the heart of this has been the increasing penetration of technology and the opening up of the Indian economy. This week’s columns considers these changes, their impact going ahead and the opportunities. First, a look at the changes.

1. Television
It is hard to imagine that a decade ago India had barely a handful of channels. Today, the real-time menu brings to us cricket matches played anywhere in the world, international stock market ups and downs, and even summits. Debates are played out by politicians in drawing rooms, financial results are announced first on TV, and Presidents have journalists for breakfast (while being watched by millions). 24-hour television has arrived in India.

2. Computer
What was a tool mainly for businesses is now finding its place in Indian homes. Spurred by reducing costs (down to about Rs 30,000), the computer is becoming a key purchase as parents invest in their children, and companies realise they cannot stay without it. The computer now becomes the gateway to a new world of knowledge and discovery.

3. Email
Email is rapidly becoming the primary business communications method. It is faster and cheaper than everything else.

The result is a shortening of the time between interactions leading to a faster exchange of messages.
It is also possible to send messages to many more people simultaneously. Thus, the number of messages each one receives is increasing. Email also allows for many more conversations to be ongoing at the same time with people all over the world.

4. Internet
This August will see the completion of six years of commercial Internet access in India. Even though the number of users may still only be in the region of 5-6 million, the sprouting cybercafes and Internet community centers across India have made access in the reach of many more millions. The Web has also put information access in the hands of anyone with an Internet connection: be it the latest research in scientific journals or live cricket scores.

5. Cellphone
Four million users and counting. WLL, GSM or whatever – the wireless revolution in India is finally starting to happen, and is not just limited to urban India. The shrill ring of the cellphone is now escapable – be it in trains, movie theatres or meetings. SMS is only now starting to pick up in India. Roaming ensures reachability nearly everywhere. For the caller, time zones matter little. Think back to a decade ago when one had to wait months to get a phone connection: today, not only will the local phone companies give a wireline in hours if not days, one can even pick up a pre-paid cellphone in minutes.

Many entrepreneurs today want to build businesses to target the Western markets. Nothing wrong with that. That is where all the money seemingly is. But in doing so, we must not forget the market in our backyard. India is growing and changing fast, creating with it a rich set of opportunities for the ones who can see them.

The current set of entrepreneurs in India have been fed with the success stories of Infosys and Satyam in India, and Hotmail and Exodus in the US. The US is a bigger, much bigger market than India. It is also a richer market. It is the El Dorado for India. That is where we see the emergence of an entire set of companies, sponsored and encouraged by the Venture Capitalists (VCs), to target the US market through software services and IT-enabled centres.

The problem that I have with this “pure-international” model is that companies tend to ignore the domestic markets. Without a strong local market, it is not going to possible to build a healthy, enduring IT industry over the long-term. This is where investments need to be made, especially by the entrepreneurs and VC community. India by itself may not be a big market today, but we all need to work together to ensure that the market grows.

For startups, the domestic market can help build a “bread-and-butter” revenue stream. It is a market which is closer to them. Sitting in India and hoping to target the US (and other Western) markets is non-trivial and in fact very expensive requiring a strong base in those countries. An initial focus at providing solutions and services to the local market can help in creating a customer and reference base, which is so important for new companies. There are today enough Indian companies which are as technologically savvy as the best in the world which can serve as the early prospects.

The problem for many VCs of course is that targeting Indian companies does not require large amounts of capital. VC funds sitting on tens of millions of dollars cannot justify making small-scale investments. Yet, that’s perhaps what many companies need – not tens of crores (as many of the recent investments are happening), but a smaller fraction of that. This will help them get early customers, prove the concept and improvise, before they target the rest of the world. It is important to learn to swim in a smaller pool before jumping in the big pool to compete with the best of swimmers.

8. Forget the stock markets – they are irrelevant

In today’s world, the stock markets, especially Nasdaq, have a big bearing on attitudes towards technology. TV Channels like CNBC and financial websites provide near instantaneous and round-the-clock coverage of what is happening. In times like these when the markets are down, there is doom and gloom around. It is easy to get swayed listening to what people are saying. Yet, what they are talking about is the near-term and the challenges their businesses face. For a startup, it is important not to get swayed or overly concerned about what is happening on the stock markets. The markets only come into play when one wants to sell some stock, which is only a distant possibility. The focus should be on thinking about the impact of technology on businesses, and how consumers lives or enterprise processes can be better.

9. The First Mistake can be the Last

Running a startup is a “life-and-death” business. An entrepreneur is perhaps no more than two or three mistakes away from business death. This makes it very important to weigh decisions carefully when they are made. Some decisions, especially in the choice of customers, need to be balanced so as to meet near-term needs with the desire to build a long-term business. For example, an important customer might demand significant product customisation. While there is no doubt that this would be of great short-term value, if it impacts the company so as to take away all its key development resources, then care must be taken before committing to the customisation. In these cases, there is no right or wrong answer: every scenario is different. These are the kinds of decisions which an entrepreneur has to make constantly, and especially in the early stages, every decision has the prospect of being the fatal one.

10. Read-Think-Write

Once the initial thinking and planning has been done, it does not mean that the process must stop. The cycle of Reading-Thinking-Writing must be continuous one. This is the source of new inspiration and new ideas. It also serves to evolve the business in the right direction, not something which is frozen in time at the start of the business. The time investment for this read-think-write cycle has to be made by the entrepreneur; it is not something which can be delegated. No one else has the same frame of reference as the entrepreneur. It is important to keep imbibing new knowledge to continually revisit and make modifications to the map and therefore the ensuing strategy. The Internet offers access to the best of content resources – it is for the entrepreneur to make the time investment. Reading needs to be combined with Thinking to see how things may need to be done differently, or how the future is evolving. Writing helps in putting things in perspective, and in sharing one’s thoughts with a group of people for further inputs.

11. Faith in God

Above all, one needs Faith in God. There are many times an entrepreneur will feel that all doors are closed and there is no escape from the difficult situation one finds oneself in. It is at times like these that God shows the way – it is for us to see it.

4. Need to Stay Alive long enough to aim for Gold

No business is a 100-metre sprint. To win the marathon, entrepreneurs need to ensure first that they can last the distance. To keep running, it is important to survive. What is needed is that once the space has been defined, it is important to “jump in” and keep swimming. Opportunities will become visible when one is looking for them. The longer one survives, the greater the chances of longer-term success. There is an important lesson to be learnt from the dotcom bust in the past 2 years: while everyone realized the opportunity that lay ahead as Internet penetration and usage increases, most went in for a “big bang” approach in the near-term and spent a lot of money in the process. Those who preserved the cash now realize that there is much less competition to contend with as others have simply burnt out.

5. An entrepreneur’s greatest strength is Passion

Entrepreneurs are dream-sellers. They have a vision of how tomorrow can be different and better, something which is not so obvious to others. In doing so, they have to convince non-believers and nay-sayers. They have to build a team and get customers, battling odds at every stage. In doing so, perhaps their greatest asset is the “infectious enthusiasm”, their passion for what tomorrow can be. This is where the ability to have a clear vision and tell the story – with conviction — becomes very important.

6. Be prepared to fail – and learn; Experiment and Explore

Failure comes with the territory. Failure is more likely than success. An entrepreneur will face more down-days than up-days. What is important in this is to keep learning. Embedding learnability in oneself and one’s people is what will set apart the winners. To fail and learn means one has to take risks, one has to experiment and explore. It is only through this iterative process that the good ideas will bubble up. There is nothing like “The Next Big Thing”. These phrases might sound great for a marketing campaign, but as an entrepreneur, the next big thing is more likely to be a series of innovations, small incremental changes.

7. When building, don’t think of exit; Build to Keep

Too often, entrepreneurs think of exit strategies (IPOs and MAs) even as the business is being built. This is the wrong approach. Build a business to keep, to manage forever. The business has to be something which makes you wake up every morning with excitement. One has to feel that the business can provide that joy – only then should one consider starting up. Exit Strategies and Wealth Creation are incidental and not controllable by the entrepreneur. The business must be like your baby – one that you will raise and nurture.