Business model of service delivery and msme by Institute for Competitiveness

Business Model of Service Delivery and MSME Analysis of select cases in India

Published by (FICCI – GIZ- SIDBI Project on “Serving MSME Serving India” within the framework of MSME Umbrella Programme; jointly implemented by GIZ and SIDBI) Federation of Chambers of Commerce and Industries (FICCI) Federation House Tansen Marg, New Delhi 110 001 T: +91-011-23487260 (D) F: +91-011-23320714 E: msme@ficci.com W: www.ficci.com

Deutsche Gesellschaft fur Internationale Zusammenarbeit(GIZ) GmbH 3rd Floor, B5/1, Safdarjung Enclave, New Delhi 110029 T: +91 11 49495353 F: +91 11 49495391 E: amit.kumar@giz.de; Stefanie.bauer@giz.de W: www.giz.de Knowledge Partner Institute for Competitiveness, India U – 24 / 8, DLF Phase – 3, Gurgaon – 122 002, Haryana, India. T: +91 124 4068076 F: +91 124 4376676 E: info@competitiveness.in W: www.competitiveness.in Authors Amit Kapoor, Honorary Chairman, Institute for Competitiveness Sandeep Goyal, Fellow, Institute for Competitiveness

Disclaimer: The information presented about different cases has been compiled on the basis of the primary interaction with the senior representatives of the respective organizations as well as published sources. The analysis of case studies have been done to highlight the specific elements of the business models targeting the MSMEs and are presented here to stimulate thinking and enhance learning among different stakeholders on service delivery to MSMEs. The cases are not intended to illustrate either effective or ineffective handling of any business situation. Also, it doesn't constitute a recommendation of any sort or vice-versa." GIZ-SIDBI-FICCI-IFC will not accept any liability whatsoever for any direct or consequential loss howsoever arising from any use of this document or its contents or otherwise arising in connection herewith.

Business Model of Service Delivery and MSME Analysis of select cases in India

Table of Contents List of Abbreviation............................................................................................................................01 1. Executive Summary........................................................................................................................................................03 2. Introduction ......................................................................................................................................................................05 3. Approach, Methodology and Tools .........................................................................................................................07 3.1. Tools for Understanding and Analyzing Business Model ....................................................................08 Case Studies of Service delivery .....................................................................................................09 4. Consortium of Service Providers for Upgradation of Enterprises (CAPSULE).........................................11 4.1. Introduction .........................................................................................................................................................11 4.2. Business Development Solutions for MSMEs-Industry Overview....................................................12 4.3. Industry and Organizational challenges ....................................................................................................13 4.4 Competition ..........................................................................................................................................................13 4.5 Overview - CAPSULE..........................................................................................................................................14 4.6. Strategy View ........................................................................................................................................................15 4.7. Business Model View .........................................................................................................................................16 4.8. How BDS Providers Think About CAPSULE?.............................................................................................18 4.9. Future Action Points...........................................................................................................................................19 4.10. Key Learning ........................................................................................................................................................19 5. Franchise India Holdings Ltd.(FIHL) .........................................................................................................................21 5.1. Introduction...........................................................................................................................................................21 5.2. Online B2B Marketplace ...................................................................................................................................22 5.3. Industry and Organizational Challenges....................................................................................................23 5.4. Competition ..........................................................................................................................................................24 5.5. Overview.................................................................................................................................................................24 5.6. Strategy View ........................................................................................................................................................25 5.7. Business Model View .........................................................................................................................................26 5.8. Future Action Points...........................................................................................................................................28 5.9. Key Learnings........................................................................................................................................................29 6. India Get Your Business Online (GIBO)...................................................................................................................30 6.1 Introduction...........................................................................................................................................................30 6.2. Website Design and Development...............................................................................................................31 6.3. Industry & Organization Challenges ...........................................................................................................32 6.4 Competition ..........................................................................................................................................................32 6.5 Overview.................................................................................................................................................................32 6.6 Strategy View ........................................................................................................................................................33 6.7 Business Model ....................................................................................................................................................34 6.8 Success Stories .....................................................................................................................................................37 6.9 Future Action Points...........................................................................................................................................37 6.10 Key Learnings........................................................................................................................................................37 7. Integrated Association of Micro Small and Medium Enterprises of India (IamSMEofIndia) .............39 7.1. Introduction...........................................................................................................................................................39 7.2. Challenges..............................................................................................................................................................40 7.3 Competition ..........................................................................................................................................................40 7.4 Overview.................................................................................................................................................................40 7.5 Strategy View ........................................................................................................................................................41 7.6 Business Model View .........................................................................................................................................43 7.7 Future Action Points...........................................................................................................................................44 7.8 Key Learning..........................................................................................................................................................44 8. Indiamart............................................................................................................................................................................46 8.1. Introduction...........................................................................................................................................................46 8.2 Online B2B Marketplace ...................................................................................................................................46 8.3 Industry and Organizational Challenges....................................................................................................47 8.4 Competition ..........................................................................................................................................................48

Business Model of Service Delivery and MSME Analysis of select cases in India

8.5 8.6 8.7 8.8 8.9 8.10

Overview ................................................................................................................................................................49 Strategy View ........................................................................................................................................................50 Business Model View .........................................................................................................................................51 Recognitions and Awards ................................................................................................................................54 Future Action Points...........................................................................................................................................54 Key Learnings........................................................................................................................................................54

9. MSME Solutions Centre ...............................................................................................................................................56 9.1. Introduction...........................................................................................................................................................56 9.2. Situation Overview .............................................................................................................................................57 9.3. Industry & Organizational Challenges........................................................................................................57 9.4 Competition ..........................................................................................................................................................58 9.5 Overview ................................................................................................................................................................58 9.6 Strategy View ........................................................................................................................................................59 9.7 Business Model View .........................................................................................................................................61 9.8 Success Stories .....................................................................................................................................................62 9.9 Future Action Points...........................................................................................................................................63 9.10 Key Learning..........................................................................................................................................................63 10. Rajesh Bheda Consulting.............................................................................................................................................64 10.1. Introduction...........................................................................................................................................................64 10.2. Apparel Consulting Industry Overview.......................................................................................................65 10.3. Industry and Organizational Challenges....................................................................................................66 10.4 Competition ..........................................................................................................................................................66 10.5 Overview ................................................................................................................................................................67 10.6 Strategy View ........................................................................................................................................................68 10.7 Business Model View .........................................................................................................................................69 10.8 Future Action Points...........................................................................................................................................71 10.9 Key Learnings........................................................................................................................................................71 11. RedBus ................................................................................................................................................................................73 11.1 Introduction...........................................................................................................................................................73 11.2 Inter-City Bus Travel Industry .........................................................................................................................74 11.3 Industry and Organizational Challenges....................................................................................................75 11.4 Competition ..........................................................................................................................................................76 11.5 Overview - redBus .............................................................................................................................................77 11.6 Strategy View ........................................................................................................................................................78 11.7 Business Model View - redBus.......................................................................................................................80 11.8 Recognitions and Awards ................................................................................................................................85 11.9 Future Action Points...........................................................................................................................................85 11.10 Key Learnings........................................................................................................................................................85 12. San Blue Enterprises Pvt. Ltd.(fibre2fashion) .....................................................................................................87 12.1. Introduction...........................................................................................................................................................87 12.2. Online B2B Marketplace ...................................................................................................................................88 12.3. Industry and Organizational Challenges....................................................................................................89 12.4 Competition ..........................................................................................................................................................89 12.5 Overview ................................................................................................................................................................89 12.6 Strategy View ........................................................................................................................................................90 12.7 Business Model Vie ............................................................................................................................................92 12.8 Recognitions and Awards ................................................................................................................................94 12.9 Future Action Points...........................................................................................................................................94 12.10 Key Learnings........................................................................................................................................................94 13. Findings and Conclusion..............................................................................................................................................96 14. ANNEXES............................................................................................................................................................................97 Annexe1: User Guide for Analytical Framework .................................................................................................99 Annexe II: Analytical Framework ............................................................................................................................105 Annexe III: Reference Questions.............................................................................................................................112

List of Abbreviation S. No.

Full Form

Abb

Amazon Web Services

AWS

Business-to-Business

B2B

Business-to-Consumer

B2C

Business Development Service

BDS

Consortium of Service Providers for Upgradation of Enterprises

Department for International Development

Enterpreneur Development Institute

CAPSULE DFID EDI

Federation of Indian Chambers of Commerce and Industries

FICCI

Franchise India Holdings Ltd.

FIHL

Federation of Indian Micro and Small & Medium Enterprises

Faridabad Small Industries Association

FSIA

Gross Domestic Product

GDP

India Get Your Business Online

Deutsche Gesellschaft fĂźr Internationale Zusammenarbeit, GmbH

Human Resources

Internet and Mobile Association of India

Integrated Association of Micro Small and Medium Enterprises of India

Industries Association of Uttarakhand

Industrial Credit and Investment Corporation of India

FISME

GIBO GIZ HR IAMAI IamSMEofIndia IAU ICICI

Information & Communication Technology

ICT

Institute for competitiveness

IFC

Infrastructure Leasing & Financial Services Ltd

Information Technology

Kreditanstalt FĂźr Wiederaufbau

IL&FS IT KFW

Large Scale Enterprises

Multi National Companies

Memorandum of Understanding

MOUs

Micro, Small and Medium Enterprises

MSME

Micro, Small and Medium Enterprises Developmetn Act

Operational Effectiveness

Online Travel Agencies

LSEs MNCs

MSMED Act OE OTA

Political, Economic, Social, Technological Trends

Public Private Partnerships

PEST PPP

Research & Development

R&D

Rajesh Bheda Consulting

RBC

Return on Investments

ROI

Road Transport Corporation

Small Industries Development Bank of India

SIDBI

RTC

Small and Medium Enterprises

SMEs

Strategic Positioning

Textile and Apparel Outlook South Asia

Technical Textiles and Performance Apparel South Asia

SP TAOSA TTPASA

Business Model of Service Delivery and MSME Analysis of select cases in India

1 Executive Summary

his report analyzes the business model of a selected list of those business

development service (BDS) providers in India, which focused on delivering nonfinancial business development services to the MSMEs in India. The objective of

this report is to identify the key operating principles for the BDS providers in creating selfsustainable and scalable business models focused on the needs of the MSMEs. The general mindset among the BDS providers is that serving the MSMEs is not a viable proposition. First, MSMEs do not have the ability and willingness to pay for the business development services. Second, all the MSMEs can be serviced by providing the standardized offerings irrespective of context. Third, the government should function as a bridge to connect the BDS providers with the MSMEs considering the significant time and capital investments needed for creating market awareness. Fourth, MSMEs is a fragmented market which can only be served either by the government or by the informal service providers. The general mindset of the MSMEs looking for market solutions to their business needs is that availing the business development services is not cost-effective and lacks desired outcomes. First, BDS providers lack the understanding of the specific needs faced by the MSMEs. Secondly, BDS providers can't provide cost-effective solutions to the specific needs of the MSMEs. Thirdly, there is a lack of reliable data-sets regarding the details of BDS providers, which can provide the specific solutions to the particular needs of the MSMEs. Fourthly, the BDS providers do not provide value for money solutions and lack reliability and transparency. Despite these extreme and prevalent mindsets, there have been BDS providers, which have succeeded in identifying the needs of the MSMEs, in building trust based relationships with the MSMEs and in creating a business model having a huge socio-economic outcome for the MSMEs. The majority of these business models being studied are self-sustainable and scalable. Though, many of these business models are not fully replicable but these do bring forth the common key operating principles, which can act as a baseline for other BDS providers to become successful and sustainable while targeting the MSMEs. The term business model represents a description of the value a company offers to one or several segments of customers and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital, in order to generate profitable and sustainable revenues streams1. 1 Osterwalder, A., & Pigneur, Y. (2002). An e-Business Model Ontology for Modeling e-Business. 15th Bled Electronic Commerce Conference, Bled, Slovenia

Business Model of Service Delivery and MSME Analysis of select cases in India

Regarding scope, this study focused on understanding the business models of nine BDS providers targeting the different need segments of the MSMEs. These BDS providers were identified on the basis of the information available in the public domain as well as on the basis of the first-hand experience and field level knowledge of the project partners. The majority of these BDS providers focused on creating a platform (technology or nontechnology) for aggregating the MSMEs and providing them with access to the global market as buyers and sellers. Two of the BDS providers being studied, focused on aggregating the small BDS providers (individuals or organizations) to enable a single point of contact to the MSMEs for getting solutions to their different needs. One of the BDS providers being studied focused on aggregating the needs of the MSMEs to leverage the collective bargaining power for getting the best possible solution from the BDS providers. Another BDS provider studied here focused on enhancing the competitiveness of the MSMEs by offering productivity and quality improvement solutions across the value chain. This reflects that market access; productivity and quality improvements are few of the critical needs of the MSMEs being targeted by the BDS providers. In terms of geographies, the majority of these BDS providers being studied focused on scaling up their operations across India. In terms of offerings, the BDS providers adopted a mixed approach. While, 50% of the BDS providers focused on a niche area like textile, bus travel industry, franchising industry etc., remaining 50% focused on broad based industries and clientele. This reflects that focus on niche offerings / clientele as well as broad base offerings, both approaches can be sustainable and successful depending upon the need specific design and implementation of business model. In terms of learnings and outcomes, the detailed study of nine BDS providers has identified a set of common key operating principles, which have played an important role in the success of the business model of these BDS providers focusing on the MSMEs in India. First, the BDS providers need to focus on making time and money investments on market building and awareness. The MSMEs is a price and value sensitive market, which requires building trust and transparency. Second, the BDS providers need to focus on creating a collaborative ecosystem. This implies that there is a need to build relationship with the different stakeholders like government bodies, industry associations, and technology companies etc. to create last mile connectivity and reach with the MSMEs. Third, the BDS providers need to focus on delivering need based end to end solutions. This implies that there is a need to understand the local context and design the solution accordingly for the MSMEs rather than prescribing the standardized offerings irrespective of the specific need and context of the MSMEs. Fourth, the BDS providers need to focus on scaling up their business model to ensure sustainability and to enhance the socioeconomic impact on the MSMEs. This implies that BDS providers should maintain focus on MSMEs rather than trying to shift priority and focus towards large scale enterprises. The mission and vision of the BDS provider should be having a strong orientation and focus towards the MSMEs. The lack of this orientation leads to the diversion and failure of the BDS providers. Fifth, the BDS providers need to focus on technology and innovation. This implies the importance of leveraging the innovative use of technology for offering costeffective solutions to the MSMEs.

12 Introduction

icro, Small and Medium Enterprises (MSMEs) play a crucial role in the economic and social development of any country. MSMEs constitute more

than 90% of the total enterprises in most of the countries, including India. This

implies the significance of MSMEs in terms of generating employment and contribution in the overall GDP of the country. In accordance with MSMED Act, 2006, MSME is defined across manufacturing and service categories on the basis of investment being done in plant and machinery or equipments2. According to the 4th All-India Census of MSMEs (2006-07)3, India has 26 million (approx.) MSMEs. Around 1.5 million MSMEs are registered and remaining 24.5 million MSMEs are unregistered in India. The 1.5 million registered MSMEs employ around 9 million people and are further categorized as micro (94.94%), small (4.89%) and medium (0.17%). The MSMEs contribute 8% of the country's GDP, 45% of the manufactured output and 40% of the total exports of India4. The MSMEs segment in India is highly heterogeneous in terms of the size of the enterprises, variety of products and services produced and the levels of technology employed. Despite the strategic importance and contribution of the MSME sector in socio-economic dynamics of the Indian economy, MSME sector faces several challenges pertaining to technology obsolescence, high cost of capital, lack of skilled manpower, lack of access to global markets, inadequate infrastructure facilities, regulatory issues, environmental issues etc. There is a need for having a systemic focus and attention towards creating a nurturing ecosystem for ensuring the sustainable competitiveness of MSMEs. The Government of India realizes the importance of the MSMEs and has designed and implemented key strategies at policy level to reflect its faith in the MSMEs. However, MSMEs also require access to an affordable and reliable support system at the strategic and operational levels to manage the respective challenges and constraints. This brings forth the significance of business development service providers, who can understand, evaluate and resolve the different business needs of the MSMEs.

Source: http://fisme.org.in/document/FinalReport010711.pdf (Last accessed on 1 May 2013) For enterprises engaged in manufacturing or production of goods: (a) a micro enterprise, where the investment in plant and machinery < INR 25 lakhs; (b) a small enterprise, where the investment in plant and machinery > INR 25 lakhs & < INR 5 cr.; (c) a medium enterprise, where the investment in plant and machinery > INR 5 cr. & < INR 10 cr. For enterprises engaged in services: (a) a micro enterprise, where the investment in equipment < INR 10 lakhs; (b) a small enterprise, where the investment in equipment > INR 10 lakhs & < INR 2 cr.; (c) a medium enterprise, where the investment in equipment > INR 2 cr. & < INR 5 cr. 3 Source: http://fisme.org.in/document/FinalReport010711.pdf (Last accessed on 1 May 2013) 4 Source: http://msme.gov.in/AR2008-09-Eng-Chapter-2.pdf (Last accessed on 1 May 2013) 05

Business Model of Service Delivery and MSME Analysis of select cases in India

There are several business models, which have emerged for providing the business development services to MSMEs, both in the public and the private domain, as well as in the form of public private partnerships (PPPs). The term business model represents a description of the value a company offers to one or several segments of customers and the architecture of the firm and its network of partners for creating, marketing and delivering this value and relationship capital, in order to generate profitable and sustainable revenues streams5. However, both the business development service (BDS) providers and MSMEs continue to face business challenges in developing a strong transaction network with each other. At one end, MSMEs lack access to reliable information regarding business development service providers suited to their different business needs. At other end, BDS providers focusing on MSMEs face challenges pertaining to need for time and capital investment for building awareness amongst MSMEs, lack of willingness among MSMEs to invest in technology and processes and lack of paying capacity amongst MSMEs etc. Despite these challenges, there are certain BDS providers, who have designed and implemented inclusive business models, which has a positive socio-economic impact on the MSMEs and the BDS providers themselves. This situation clearly highlights the need for understanding the nuances of business models for the delivery of non-financial services to MSME, which create and deliver value to both the business development service providers and the MSMEs. Against this background, MSME umbrella programme; being jointly implemented by Small Industries Development Bank of India (SIDBI) and German Development Cooperation (GIZ) joined hands with Federation of Indian Chambers of Commerce and Industries (FICCI) to analyze, describe and document the selected business models of non financial service delivery to MSMEs. Institute for competitiveness (IFC) is the knowledge partner of the project. This study is an attempt to build a knowledge repository comprising the case reports on selected list of BDS providers in India. These BDS providers followed unique business models for delivering non-financial business development services to the MSMEs in India. This study will add value to the practitioner community by bringing forth a practical view on what kind of business models can have a positive socio-economic impact in meeting the needs of the MSMEs while being sustainable for the BDS providers in India. The subsequent study is being sub-divided into further Chapters. Chapter 3 elaborates the approach and methodology being adopted for the study. Chapter 4 to 12 highlights the detailed case reports of the interviewed BDS providers. Chapter 13 concludes the study by listing the overall findings and recommendations, which came out from this initiative. Annexure provides details on the User Guide for Analytical Framework and analytic framework being used for understanding and analyzing the BDS providers and Reference Questions in scope of this study.

5 Osterwalder, A., & Pigneur, Y. (2002). An e-Business Model Ontology for Modeling e-Business. 15th Bled Electronic Commerce Conference, Bled, Slovenia

13 Approach, Methodology and Tools

he study is aimed at understanding the business models of the selected list of BDS providers in India, which adopted a differentiated approach for offering need based

solutions to the MSMEs. The process of identifying the BDS providers to be a part

of this study went through lot of iterations. The first approach being adopted, included identification, consolidation, filtering and analysis. As a first step, project started with identification of service providers at cluster /national level and more than 700 service providers were identified and basic data about them was consolidated. During first level of filtering, 143 from an initial list of 700 BDS providers were short-listed and were requested to fill-up a second-stage evaluation survey questionnaire. The intent was to shortlist top 4-5 service providers in different categories on the basis of type of service offerings (marketing, technology, process improvements etc.), areas of operation ( cluster , national, global ) and target segments (MSMEs, large enterprises etc.). The complete response was received from few providers only, which was significantly less than the expected count. The lack of sufficient number of complete responses led to the change in approach for selecting the BDS providers for case studies. The second approach adopted was direct identification of the BDS providers for this study on the basis of the information available in the public domain complemented by the firsthand experience and field level knowledge of the project partners i.e., GIZ, FICCI, IFC and SIDBI. Following is the list of nine BDS providers, who were finalized as a part of this study.

BDS Provider

Year of Inception

Business Model Theme

Website

CAPSULE

2010

Aggregation (BDS Providers)

http://capsuleindia.org

Franchise India Holdings Ltd.

1999

Aggregation (MSMEs)

www.franchiseindia.com

Google India Get Your Business Online

2011

Freemium (IT Enablement of MSMEs)

http://www.indiagetonline.in

IamSMEofIndia

2009

Aggregation (MSMEs)

http://www.iamsmeofindia.com/

Indiamart

1996

Aggregation (MSMEs)

www.indiamart.com

MSME Solutions Centre

2009

Aggregation (Knowledge Experts)

http://www.msmesolutions.org/

Rajesh Bheda Consulting Pvt Ltd.

2006

Customized Process & Quality Improvement Solutions

http://rajeshbheda.com/

redBus

2006

Aggregation (MSMEs)

http://www.redbus.in/

San Blue Enterprises Pvt. Ltd.

2000

Aggregation (MSMEs)

http://www.fibre2fashion.com/

Business Model of Service Delivery and MSME Analysis of select cases in India

The analysis of the above cases has been done through information available from secondary sources followed by personal interaction with management team of the company. The project team developed a detailed analytical framework suitable for conducting the field studies to understand the business model of the selected BDS providers operating in the MSME sector and to document the respective case reports. Few of the cases being selected represent new and emerging business models and therefore don't have sufficient track record of growth and impact data. However, these have been kept in the scope of this study as representatives of emerging business development service delivery models in MSME sector.

3.1. Tools for Understanding and Analyzing Business Model A detailed analytical framework was developed to understand and evaluate the strategic and operational aspects of the business models of service delivery to MSME. This framework comprised three main pillars of evaluation. The first pillar corresponded to the Industry View. This stage involved understanding the macro-environment in general and specific industry environment in particular corresponding to the selected BDS providers. The attractiveness of the industry reflected the competition level and economic performance of the specific BDS providers. The second pillar corresponded to the Company View. This stage involved understanding the context (opportunities and challenges), company, customers and the nature of competition. The third pillar corresponded to the Strategy and Business Model View. The strategy for an organization is broadly defined as a function of unique offerings and competitive advantages whereas the business model is broadly defined as a blue-print for strategy. The uniqueness of the business model lies in the architecture, design and configuration of activities in a manner that leads to sustainable revenue streams. This stage involved understanding the different strategic and operational aspects of the business model including competitive positioning, value offerings; customer segmentation; delivery channels and customer relationships; identification of unique resources and activities; financial performance; role of technology and innovation; collaborations and partnerships. The rationale behind this detailed level analytical framework was to understand the micro, meso and macro aspects of the overall MSME ecosystem comprising different stakeholders including MSMEs, BDS providers, Government bodies and Industry associations and their respective challenges and constraints. Please refer Annexures I, II and III for details on the analytical framework being used for the study.

Case Studies of

Service delivery

Business Model of Service Delivery and MSME Analysis of select cases in India

4 Consortium of Service Providers for Upgradation of Enterprises (CAPSULE) CAPSULE(2010) Founded by: A group of business development service (BDS) providers based in Andhra Pradesh Outreach: India(3+ states) Issue Addressed: Collaborative platform for BDS providers to reach the MSMEs

Business Model: Aggregator via collaborative platform for BDS Providers to reach the MSMEs

Overview Indian MSMEs lacked a platform to gain global market access. There were millions of MSMEs across the country that lacked access to proper channels for availing services for different business needs. On the other hand, there were business development service providers, that lacked capacity to spend time and money on targeting the MSMEs. A group of BDS providers led by Mr. Vijay identified this gap in the industry and launched a collaborative platform named as CAPSULE in 2010. At one end, it aggregated the BDS providers from different streams into a single entity. At other end, this entity provided access to end to end solutions for the different needs of the MSMEs in a reliable and affordable manner.

Actors Offerings: End to End solutions to the MSMEs Revenue Streams: Membership fees, Commissions from business transactions leveraging CAPSULE platform Objective: “To bridge the gap between MSMEs and BDS providers by enabling a collaborative platform for BDS providers to market their service offerings to MSMEs in a cost-effective and affordable manner” Results Outreach: [Year 2012E] Network: 27 members providing different business development services to MSMEs Coverage: 3+ states

Customers: Small & medium scale manufactures, traders & exporters at demand side + Business development service providers at supply side Operational Partners: Trade bodies, Industry Associations, Government bodies, SIDBI, GIZ

Positives 1. Successfully connecting a large number of MSMEs and BDS providers 2. Creating a common platform for market building, promotion and awareness among MSMEs. 3. Potential to scale and expand by offerings and geographies. 4. Operational Support from GIZ and SIDBI during inception. 5. Gaining trust and confidence among the MSMEs as a collaborative entity having capability to provide end to end business solutions.

Challenges 1. Need for expanding the revenue streams to gain sustainability and expansion 2. Build reach and acceptance in remote geographies 3. Expand the number of BDS providers having diverse business skills and willing to pay as members of CAPSULE.

Source: Interview with CAPSULE Team & http://capsuleindia.org

4.1. Introduction The high cost of transaction is one of the key challenges faced by MSMEs, which requires getting access to customized, affordable and reliable business development solutions. However, due to the heterogeneous needs and fragmented aspect of the MSME sector, the overall cost of transaction in acquiring and servicing the MSME clients is very high and acts as a major deterrent for the business development service (BDS) providers. The BDS providers carried the expertise to provide customised and affordable solutions to the different needs of the MSMEs but lacked the capacity to invest time and efforts in targeting MSMEs. So, the challenge was to lower the cost of transaction through creation of proper network and platform, wherein MSMEs and BDS providers could connect with each other at minimal efforts and costs. 11

Business Model of Service Delivery and MSME Analysis of select cases in India

SME finance and development project (implemented jointly by SIDBI, World Bank, KFW, DFID, GTZ) piloted the concept of â&#x20AC;&#x153;consortia of service providersâ&#x20AC;? at one of the project locations in Hyderabad. A group of BDS providers led by Mr. Vijay was supported to launch a collaborative platform named as CAPSULE in 2010. At one end, it aggregated the BDS providers from different streams into a single entity. At other end, this entity provided access to end to end solutions for the different needs of the MSMEs in a reliable and affordable manner.

4.2. Business Development Solutions for MSMEsIndustry Overview The MSMEs play a crucial role in the overall economy of any country. Despite the same, these enterprises operate in underserved conditions with respect to policies, support, infrastructure and availability of cost-effective consulting services. This affects their productivity, quality and ability to compete in global market place. On the other hand, we have many BDS providers willing to target the MSMEs by offering different business development solutions. But, the time and cost required for attracting the MSMEs coupled with low paying capacity of MSMEs leads to accessibility and affordability challenges thereby diverting the focus of BDS providers towards large scale enterprises. This has been changing gradually with the emergence of business models aggregating the BDS providers at different levels â&#x20AC;&#x201C; country, state, industry, city etc. There is enough unmet demand for business development services required by MSMEs but somewhere demand is not getting identified and targeted properly by BDS providers due to need for time and cost investments. Porter's 5 force analysis reflects that the overall BDS provider industry is still at nascent level and struggling to generate enough revenues from MSMEs. This is incidentally not due to lack of demand but due to lack of proper channels for market building and enabling access and affordability. The Threat of Substitutes is medium as any kind of service to MSME has importance, provided the willingness is there to avail the same. However, MSMEs can opt for alternatives like individual local BDS providers, online platforms like IndiaMART and then trade fairs etc. The bargaining power of buyers and suppliers is high. Regarding buyers, the MSMEs need lot of convincing and persuasion to avail the services. This is because MSMEs have limited funds to avail the services and are driven by immediate results. Regarding suppliers, BDS providers require low-cost skilled manpower resources and access to low-cost technology to provide the services. The entry barriers are medium because though anyone can start offering business development services without significant investment but success is determined by building trust and transparency among MSMEs, which requires time and money investments. The inter-organization rivalry is medium due to the availability of large number of MSMEs having different business needs that are looking for business solutions but at the same time having a limited paying capacity. This makes the MSME target segment as an attractive market having huge untapped demand but complicated for BDS providers due to need for creating awareness and acceptance and due to low revenue potential per MSME.

BDS Providers Consortium for MSMEs: Porter’s Five Force Analysis

Barriers to Entry (Medium)

•

• •

Brand Image of existing players who enjoy early mover advantage Huge network effect resulting from integrated pool of suppliers, buyers, technology partners and investors. Trust and transparency matters. Need for time and capital investments in market building

Bargaining power of Customers (High) • • • •

Demand > Supply Low switching costs Multiple online and offline options available. Alternative platforms of trading: Telephone enquiry, online platforms, Print media etc.

Threat of Substitutes (Medium) • •

Inter-Organization Rivalry (Medium)

• •

Online B2B channels like IndiaMART, Sanblue etc. Trade fairs, Trade market/ Hyper marts etc. Individual BDS Providers Large Consulting Organizations

• Different organizations working in different segments • Competition from online platforms and offline individual BDS providers • A lot of potential in terms of demand and supply for every segment, large number of untapped MSMEs

Bargaining power of Suppliers (High) •

Need for skilled resources, capital and technology.

4.3. Industry and Organizational challenges As discussed before, despite the critical role played by MSMEs in overall economy of India, they face several challenges like sub-optimal scale of operation, technological obsolescence, supply chain inefficiencies, increasing domestic and global competition, lack of access to funding, dynamic trends in global manufacturing, uncertain global economic trends etc. On the other hand, BDS providers face challenges pertaining to need for time and capital investment for building awareness amongst MSMEs, shortage of skilled resources, lack of paying capacity amongst MSMEs etc. Mr. Aswin from Husys said, “I've seen a company with a thousand employees where the CEO is apparently fine with things as they are. They say they don't need an HR intervention because their respective heads of operations, finance or marketing manage quite well” So, The MSMEs want immediate returns primarily in the form of increase in revenues or decrease in costs. So, the challenge lies in convincing the need for processes and systems to MSMEs.

4.4 Competition CAPSULE was an initiative undertaken by a group of small BDS providers to gain competitive advantage over individual BDS providers and large consulting organizations by offering a portfolio of end to end services at cost effective pricing to the MSMEs. While the broad portfolio of service offerings enhanced the competitive advantage of CAPSUE as compared to small individual BDS providers providing selective services; the cost effective offerings enhanced the competitive advantage as compared to large consulting service providers. CAPSULE faced potential competition from technology oriented large B2B 13

Business Model of Service Delivery and MSME Analysis of select cases in India

platforms like IndiaMART. However, the focus on personal networking with BDS members and MSMEs by conducting camps, regular meetings etc. helped CAPSULE to differentiate itself from technology focused large BDS providers. To sustain in the future, CAPSULE was evaluating the options for increasing the revenues, offerings and reach across geographies by expanding the group of BDS members.

4.5 Overview- CAPSULE Capsule was launched in 2010 by a group of BDS providers operating in Hyderabad It led to the creation of a consortium of business development service providers, who could offer a broad service offerings to the varied needs of the MSMEs at one place like access to funding, energy conservation and environmental services, information technology services, IPR services, international quality standards and services, marketing services, productivity improvement services and resourcing. The company designed a behavior change communication strategy, whereby, it conducted free camps and workshops to promote its capabilities and service offerings to the MSMEs. The 4C analysis below reflects the internal (company) and external (context, competition and customer) view regarding CAPSULE.

CAPSULE - 4 C’s Analysis

Customers •Supply side : BDS Providers •Demand side : MSMEs

Competition

Context • Lack of access to formal market ecosystem for MSMEs due to limited resources and awareness. •Low level of ICT adoption in SME •Lack of formal market ecosystem for BDS providers to target the MSMEs with minimal time and costs • MSMEs accounting for 45% of manufacturing output and 40% of total exports in India • MSMEs accounting for bulk employment of manpower.

• e-commerce players like IndiaMART, Alibaba, India Trade, Google, Sulekha etc. •Physical marketplaces like trade fairs, conferences, hypermarkets etc. •Individual BDS Providers

Company •Collaborative platform presenting pool of BDS providers to MSMEs •Ability to provide end to end solutions to the MSMEs at one place •Ability to refer each other to requirements of MSMEs •Created a network of 27+ BDSS providers and reach across different cities in 3 states of India

4.6 Strategy View The strategy view of Capsule is being evaluated from two perspectives. This includes (1) value chain analysis; (2) and overall strategy framework analysis.

4.6.1. Value Chain Analysis The key primary activities of CAPSULE included (1) building a consortium of BDS providers; (2) listing and categorization of BDS providers; (3) conducting awareness and promotion camps among MSMEs; (4) matching member BDS providers to particular needs of MSME; (5) and generating revenues The key support activities of CAPSULE included focus on (1) Firm Infrastructure; (2) Human Resource Management; (3) and Market Expansion.

CAPSULE – Value Chain Expansion Offerings, geographies Human Resources Internal Sourcing from members for promotion and future strategy for CAPSULE Infrastructure Pool of MDS Providers, Brick N Mortar Setup.

Aggregation •Build a consortium of BDS providers

Listing and Categorization •Website development •Categorization

Promotion •Conduct clinics / workshops / camps

Matching •Match BDS provider with MSMEs specific to needs

Revenues • Generate revenues from membership and business transactions

4.6.2. Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation of Capsule across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics.

Business Model of Service Delivery and MSME Analysis of select cases in India

CAPSULE - Strategy Demystified Segmenting Strategically •Supply side : BDS Providers •Demand side : MSMEs •Offerings: Across the value chain including IT solutions, quality management, process improvement, HR solutions, Online marketing etc.

Leveraging Unique Activities

Exploiting Trade-offs

•Collaborative platform presenting pool of BDS providers to MSMEs •Ability to provide end to end solutions to the MSMEs at one place •Ability to refer each other to requirements of MSMEs

• Maintain focus on MSMEs rather than shifting focus to LSEs as well.

Capitalizing on Industry Dynamics •Lack of access to formal market ecosystem for MSMEs due to limited resources and awareness. •Low level of ICT adoption in SME •Lack of formal market ecosystem for BDS providers to target the MSMEs with minimal time and costs

4.7.Business Model View 4.7.1. Customer Segments CAPSULE defined its customers across two segments. The first segment of customers included small-sized business development service providers operating in and around Hyderabad. By 2012, it had a group of 24+ BDS providers having membership with CAPSULE. The second segment of customers included MSMEs across Hyderabad and other cities in India, who were looking for end to end solutions for their different operational and business needs.

4.7.2.Value Proposition Capsule defined its business as creating an affordable and accessible channel between BDS providers and MSMEs to benefit each other. For MSMEs, this involved access to end to end solutions for their needs at one place. For BDS providers, this involved access to a large pool of MSMEs via common marketing and awareness building platform in the form of CAPSULE. For MSMEs, the value proposition included (1) access to end to end solutions for the various business needs; (2) affordable and reliable offerings; (3) and ability to make a choice among multiple BDS providers registered with CAPSULE. For BDS providers, the value proposition included (1) identification of needs of the MSMEs; (2) dissemination of the identified needs of the MSMEs to the Consortium members; (3) deployment of Business Development Service Providers to the MSMEs; (4) organizing seminars/workshops on various themes; (5) organizing Service provider's Clinics/Exhibitions; (6) development of web portal of service providers; (7) and preparation of directory of service 16

4.7.3. Customer Relationships - Building Trust and Transparency CAPSULE realized very early in their business that the main entry barrier in this business would be the network effect, which would require developing personal contacts alongwith trust and transparency with MSMEs and BDS providers. Regarding MSMEs, the company focused on developing trust based relationship with different MSMEs across different sectors and regions in India. The idea was to promote CAPSULE beyond Andhra Pradesh in other Southern states of India. The initiatives included (1) ensuring quality of service by the registered BDS providers; (2) ensuring affordable pricing for the service offerings; (3) undertaking detailed need based analysis before providing need based solutions; (4) providing same quality of service to all MSMEs irrespective of size; (5) ensuring a provision of end to end service offerings from a consortium of BDS providers thereby saving time, money and efforts for the MSMEs looking for different business development solutions; (6) setting up free promotional camps, where MSMEs learnt about different offerings by BDS providers and could evaluate and choose the best fit. Regarding BDS providers, the company focused on building trust and transparency by (1) providing a common platform for building awareness amongst the MSMEs; (2) enabling equal access for all registered BDS providers to present their potential and capabilities to the MSMEs; (3) sharing best practices among registered BDS providers; (4) promoting referrals and collaborations amongst registered BDS providers; (5) and undertaking market development by building relationship with different MSME industry associations and by conducting MSME-BDS clinics.

4.7.4.Value Network - Collaborations and Partnerships The business model of CAPSULE is mainly dependant on the aggregation of BDS providers on supply side and trust based relationship with industry associations on demand side. Since CAPSULE was still in the stage of infancy and fine-tuning its unique business model, the main focus was on developing a value network comprising a pool of reliable BDS providers providing different service offerings. The belief was that if there was a consortium of reliable BDS providers then it would lead to differentiation and competitive advantage. Also, CAPSULE focused on building collaborations with government bodies, trade bodies and support institutions like SIDBI, GIZ etc. to get necessary support for setting up processes as well as promoting their service offerings amongst the MSMEs.

4.7.5.Technology, Innovation and Learning The competitive differentiation for CAPSULE was embedded in its business model innovation, which brought together the individual and segregated BDS providers on a common platform to offer their capabilities and synergies to the MSMEs in the form of end to end solutions. This unique consortium plugged the accessibility and affordability gaps and challenges both for the BDS providers as well as the MSMEs. Another key aspect of this business model innovation was that it carried lot of promise for scaling up both in terms of offerings as well as across geographies. Once the market awareness and trust was being created by CAPSULE for its offerings among MSMEs in Andhra Pradesh, it focused on building the market across other states in South India by holding MSME-BDS clinics and workshops. 17

Business Model of Service Delivery and MSME Analysis of select cases in India

4.7.6. Pricing Model- Revenues and cost streams: The primary revenue streams included annual membership fees charged to the BDS providers, who registered with CAPSULE. The secondary revenue streams included commission paid by the BDS providers from the revenues earned by them using CAPSULE network. The cost streams included main expenses related to activities like organizing the seminars/workshops, conducting MSME-BDS clinics, developing websites for registered BDS providers, preparation of directory listing for registered service providers etc.

4.8. How BDS Providers Think About CAPSULE?

About BDS Providers

Offerings

What BDS Members said about CAPSULE?

Positive Solutions (P) Ltd. (1999)

IT Solutions including ERP, Website designing, Annual maintenance etc.

"The best part of the capsule is that it resembles the example of a super-specialty hospital. We get anything and everything there. Similarly, we now provide all services. The capsule now takes care of HR, ICT, marketing, finance, IPR and better management.

Husys (2002)

HR Solutions

"Capsule is a good association. We get in touch with other service providers who might need our solutions later on. So, in terms of networking, availing of help in marketing, sales and business development, Capsule is fabulous."

Trust Chem Solutions (2010)

Quality Management "We can say that we came into the limelight only after Solutions for forming Capsule. We are doing good independently as a Pharmaceutical companies team. The forming of the group has strengthened us.."

Kaizen (p) Ltd. (2010)

Productivity and Process Improvements

"...Because of Capsule, cross-referencing is very useful. Networking is very effective through Capsule. GMP people go into the pharmaceutical sector and they find a lot of things. I go where ERP requirements are referred to. This is one of the main advantages we see in Capsule.."

SSP Venture Services (2004)

IT Solutions - websites development and social media marketing

"Capsule is a platform where a wide audience can approach. It provides easy access and is like an Expo. We conduct such expos at many places and many SMEs are interested in visiting to see what benefit they can obtain. When Capsule announces any workshop or activity, many SMEs show interest and walk into our workshops. We inform them about the benefits they are likely to derive. They can choose the services they want from the available service-providers, or they can opt from others too.."

Syscon Solutions (P) Ltd. (1999)

IT Solutions - ERP

"It has helped Sys-Con in different ways. It was a common platform for us to move into organizations. The moment say I'm from Sys-Con and this is my ERP product, they would be thinking this to be more of a sales pitch. Entry therefore, becomes a lot more difficult. Once you say this is Capsule, a neutral platform trying to build knowledge sharing, it becomes easier for SMEs to come to view what different people are doing. It has become a neutral platform to gain the first handshake, which is the most difficult thing. We don't often get to make the decision makers; this has created a good platform to meet them."

4.9. Future Action Points CAPSULE emerged as a unique solution aimed at eliminating the accessibility and affordability challenges faced by both the MSMEs and the BDS providers. It provided a unique collaborative platform for the BDS providers, who were earlier operating individually and struggling in marketing their service offerings to the MSMEs. It provided a reliable and affordable source to the MSMEs to connect and to avail the services offerings for any of their business needs. By 2012, CAPSULE proved itself as a viable and practical business model, which required enhanced focus in the future on expanding its revenue streams for long term sustainability. The key action points identified by the company as a part of its future development agenda involved (1) expanding the pool of registered BDS providers having diverse service offerings for the MSMEs; (2) expanding the reach and network across different states in India; (3) expanding the revenue streams for scaling up CAPSULE; (4) collaborating with government bodies, trade bodies and industry associations to understand the needs of the MSMEs and to identify and develop capacity for different value-added offerings; (5) and leveraging social media to generate more and more awareness and mind-share for CAPSULE.

4.10. Key Learning CAPSULE's business philosophy was driven by the belief in aggregation - creating a pool of BDS providers thereby offering a pool of service offerings to the MSMEs on a common platform. This philosophy of aggregation helped to build a reliable and cost-effective channel for market building and for conducting business transactions between MSMEs and BDS providers. The key learning from CAPSULE are as follows: Focus on building a market ecosystem. There is always a resistance to change or to adopt something new among the MSMEs. One of the reasons is the susceptibility to change. Another reason is the lack of market awareness and paying capacity to afford the changes. On the other hand, BDS providers lack the basic understanding of the market realities at the ground level. This signifies the importance of creating a collaborative platform where buyers-sellers can communicate and transact with each other. CAPSULE aggregated the BDS providers to provide a common platform for undertaking the market awareness and market building initiatives. Build alliances with key stakeholders. To create a collaborative platform and develop trust and reach, there is a need for building relationships and partnerships with BDS providers, MSMEs, trading bodies, government bodies, industry associations and technology companies. CAPSULE created a relationship based network with different industry associations and government bodies to gain access to the MSMEs across different geographies. Focus on need based end to end solutions. The companies need to focus on delivering need based end to end solutions to build credibility with the small scale manufacturers as well as to leverage the time and capital investments over a large customer base. CAPSULE

Business Model of Service Delivery and MSME Analysis of select cases in India

aggregated the BDS providers to provide a single point of contact to the MSMEs for availing end to end service offerings for diverse needs. Scalability is the key. The companies, which target the MSMEs, need to operate on low margins and also need to spend considerable time and money on building market awareness and acceptance. So, achieving scalability either by expanding the offerings or by expanding across geographies is critical for the sustainability of such companies. CAPSULE created a unique business model and planned to scale it by expanding the pool of BDS providers offering different services as well as by expanding across geographies via creation of local chapters / entity of CAPSULE in different states.

5 Franchise India Holdings Ltd.(FIHL) Franchise India Holdings Ltd. (1999 ) Founded by: Mr. GauravMarya Outreach: India(40+ offices across India) Issue Addressed: Enabling accessibility and information symmetry between franchisors and franchisees via online platform, exhibitions etc. Business Model: Aggregator -Broadcaster via technology platform, magazines and Business Opportunity Shows Offerings: Enabling franchisors to reach vast geography with less investment but more profits and provide one stop solution to aspiring entrepreneurs (investors) Revenue Streams: Advertisements and Transaction fees from franchisors and franchisee partnerships via franchise India website, Business opportunity shows, exhibitions, magazines, Franchisee and retail opportunities Objective: To be the mentors of change by embracing and complying with novel Business ideas for fresh business opportunities to incubate and find a befitting unite between potential investors and personal with Franchise and Retail organizations Results Economic: [Year 2012E] Ăź Network: 7000+ franchisors, 300,000+ Investors, 40+ branch offices, 350+ employees, 250+ franchise exhibitions Ăź Revenues: INR 345 million (approx)

Overview The $3.3 billion franchise market in India has the potential to grow to $20 billion by 2020, with an impressive growth rate of approximately 30% per year. Presently, there are 1,200 franchisors in India, of which 25% are of international origin, with U.S. companies the most prevalent. The franchise industry in India is in a very nascent stage and was facing a bridging challenge between big branded in thriving for expansion at minimal investments and emerging entrepreneurs looking for secure start-ups. Franchise India Holdings Limited was in 1999 to target this opportunity of acting as a bridge between franchisors and franchisees

Actors Customers: Franchisors, Franchisees (Investors, Entrepreneurs) Associations: India Franchise Association

Positives 1. End to End franchising solutions for the franchisors and entrepreneurs willing to become franchisees 2. Setting up online B2B platform and holding exhibitions etc. for providing connect and reach between organizations willing to offer franchisees and availing franchisees. 3. Setting up a physical network of 46+ offices to reach more and more people. 4. Collaborations with global organizations willing to enter India. 5. Diversification into consulting and print media.

Challenges 1. Lack of awareness and trust regarding the concept of franchising as an option for business growth among traditional corporate setups. 2. Technology and capital intensive. 3. Competition from other online portals, direct selling channels etc.

Source: Interview with Mr. Gaurav Marya & www.franchiseindia.com

5.1.Introduction The franchising industry in India has been successful in building the Indian mind-set for accepting new franchising models, identifying a good franchise and creating a brand to attract more franchise and reach the right match. Today branded companies find the franchising approach as the best opportunity to expand their presence and increase their volumes across the country and globe with minimal investments of time and costs. Similarly, emerging entrepreneurs looking to enter the business find franchising a better option to start a low risk start-up. But bridging the gap between the franchisor and franchisee in terms of loyalty, licensing, technology and copyrights is a challenge due to an asymmetry of information and lack of awareness, reliability and trust. Franchise India Holdings Limited (FIHL) entered the industry in 1999 and used this challenge as a business opportunity. They acted as the medium for companies to find the best franchisee and vice-versa. 21

Business Model of Service Delivery and MSME Analysis of select cases in India

By 2013, Franchise India Holdings Limited became Asia's largest integrated franchise solution company having 46+ offices across India. It acted as a bridge by setting up one of the largest B2B platform between hundreds of organizations willing to offer franchising and willing to take up franchising by enabling an appropriate match between franchisors and franchisees. FIHL is credited with transforming the business landscape in India by expanding the franchising concept, thereby transforming the lives of thousands of MSMEs, who entered the franchising industry.

5.2.Online B2B Marketplace The Porter's five force analysis below reflects the high attractiveness of the online franchising industry. The barriers to entry in this industry are high. Though anyone can enter the industry due to the low operational cost but due to high competition within the industry, sustenance is very difficult. In addition, chances of imitation of strategy are relatively high. The bargaining power of the customers is high because there are online as well as offline options like print, media, trade fairs etc. available. Threat of substitutes is medium. There are several substitutes available in the industry which can put the entire model in a risky situation. Moreover, the accessibility of alternate modes of doing business and inclination of people towards private jobs are other reasons. The suppliers, involved in online B2B marketplaces depend on the intermediaries to interact with perspective clients. Hence, their bargaining power is low in this case. But the industry heavily relies on technology as well as loyalty and trust, thus giving high bargaining power to experienced suppliers. Inter-organizational rivalry is medium. The industry is highly segmented and most of the players are operating in different segments. A lot of potential is available in terms of demand and supply in each segment. There is a very small overlap between the segments, which makes the rivalry pretty moderate.

Franchising Industry: Porterâ&#x20AC;&#x2122;s Five Force Analysis

Threat of Substitutes (Medium)

Barriers to Entry (High) 1. 2.

4. 5.

Need for technology intensive network Brand Image of existing players who enjoy early mover advantage Huge network effect resulting from integrated pool of suppliers, buyers, technology partners and investors. Trust and transparency matters. High operational complexity. Bargaining power of Customers (High)

1. 2. 3.

Low switching costs Multiple online options for obtaining the franchise. Website can be used to obtain data and relation with franchisor can be established directly. Repeat customers are practically NIL as all licenses are mostly renewable.

Inter-Organization Rivalry (Medium) 1. 2.

Huge demand and supply availability. Competitive advantage lies in relationship with branded companies . Strategy is not copyrighted, any company can follow anyoneâ&#x20AC;&#x2122;s strategy. No high technology involved in maintaining a website and/or information security.

2. 3.

Alternative platforms for communication available like, print and digital media, social networking sites like LinkedIn & Facebook Quality of substitutes vary Increasing job growth in private sector diluting many entrepreneurs. Bargaining power of Suppliers (Low / High)

Low: Branded companies mostly look for a good franchise as expanding on their own can be cost intensive. High: Low switching cost and equally competent players are available in the market. High: Loyalty & Trust. For conducting business expos, huge cost is required

5.3.Industry and Organizational Challenges When FIHL entered the franchising industry in India in 1999, the franchise industry was in a nascent stage with the dominant mindset of the organizations oriented towards setting up their own distribution centers across the regions. There had been many companies who created a known brand and had a proven business model but lacked the capacity to expand due to need for time and money investments. Also these companies did not have the expertise in operating as large organizations. This was affecting the competitiveness of these organizations. On the other hand, there were many small scale organizations or individuals, who wanted to put their investments on some small scale business venture having a reliable return on investments. FIHL identified this opportunity and created a B2B platform to connect the demand (franchisors) and supply (franchisees) Mr. Marya commented, "We understood the gap and decided to create a platform where franchisors and franchisees can connect with each other and establish a win-win relationship." FIHL faced its own sets of challenges in making this model a success. The first organizational challenge was to build social acceptance, which required walking the fine line between acquiring the clients, who had successful business model and wanted to expand their business through franchise model on one end and bringing the investors/entrepreneurs to become a franchisees on other end. The second challenge was convincing the investors/entrepreneurs to visit their exhibition and become a franchisee. The third challenge was the need for time, technology and capital investments in creating a strong B2B technology platform as well as in building market awareness. 23

Business Model of Service Delivery and MSME Analysis of select cases in India

5.4.Competition FIHL derived its competitive advantage from various factors. These included (1) the scale and reach; (2) trust and transparency with suppliers and loyal customers; (3) capability in aggregating a large number of franchisees in different categories on the technology platform; (4) capability in understanding the Indian franchise market; (5) capability in managing the operational complexity of franchisee management; (6) and enabling broad range of opportunities by complementing online B2B platform with trade fairs and franchise magazines FIHL maintained the majority share of the online B2B marketplace for franchising industry due to its first mover advantage as well as strong focus on continuous customer service excellence derived from product, process and business model innovations. This is, despite facing the competition from (1) traditional belief of old corporate houses looking for direct expansion; (2) new entrants in franchising industry; (3) direct engagement of franchises by franchisors via other media like print, television etc.; (4) direct online selling channels in certain industries like Flipkart, Makemytrip, IndiaMart etc.

5.5.Overview FIHL became Asia's leading integrated franchising solution company having absolute authority on providing franchising, licensing, retailing, real estate and marketing solutions to different organizations looking at India market. It specialized in offering end-to-end solutions via their services under feasibility study, business strategy, system development, brand development, brand communication, public relations, advertisement & marketing and recruitment services. Since its inception in 2003, Franchise India Exhibitions benefited 5 lakhs+ business investors with 250+ business opportunity shows held across India and abroad. During the year of 2012, FIHL conducted exhibitions, which reached 1.5 lakhs+ potential entrepreneurs looking for setting up franchises and assisted 850+ companies in setting up their franchising network across India. FIHL exhibitions followed a philosophy of being franchise-focused & investor-centric. The 4C analysis below reflects the internal (company) and external (context, competition, and customer) view regarding Franchise India Holdings Ltd.

Franchise India Holdings Ltd. - 4 C’s Analysis Customers • Demand side – Franchisors •Supply side – 1st generation entrepreneurs

Competition

Context • Increase in demand for franchisee with increase in emerging first generation entrepreneurs and branded companies looking for expansion with less investments. • The desire of the national and international brands to expand in the Indian market •Fragmented franchise industry • Lack of centralized technology for demand-supply transparency

• Branded companies expanding on their own using the online platform/sites such as LinkedIn & Facebook etc. •Aggressive entrepreneur’s directly approaching franchisors •Other similar franchising companies like franchiseworld.net, franchisebazar.com •Direct sales channel online.

Company •Asia’s largest integrated franchise and retail solution company • Providing end to end solutions on Franchising, Licensing, Retailing, Real estate and Marketing •FY-12 : 40+ branch offices, 100+ sectors, 350+ employees, 250+ franchiseexhibitions, 7000+ franchisors, 300000+ Investors (Entrepreneurs)

5.6.Strategy View The strategy view is being evaluated from two perspectives. This includes (1) value chain analysis; (2) strategy framework analysis

5.6.1.Value Chain Analysis The Value Chain Analysis brings forth the key primary activities as (1) maintaining supplier's database; (2) listing and categorization; (3) manage query and buy-sell transactions; (4) delivery & payments; (5) and franchisee rights. The key support activities include (1) focus on product, process and model innovation; (2) targeting and collaborating with the different segments; (3) and setting up technology infrastructure and regional offices. Franchise India Holdings Ltd.-Value Chain Innovation Product, Process and Business Model Innovations

Benchmarking & Metrics Performance benchmarking and metrics

Infrastructure Technology Infrastructure, Regional offices

Maintain suppliers database •Listing the available franchisee opportunities in the portal •Aggregating franchisors in the events and exhibitions

Listing and Categorization •Franchisors are offered packages with different service option •Branding and marketing opportunity

Manage Transactions •Buy Sell Transactions •Query Handling •Meet investors directly in events to explore the available options

Delivery

•Entrepreneur are given guidance regarding the ROI, viability, market analysis of the various franchisors

Franchisee rights •Finalization of deal and preparation of licensing and copyright documents

Business Model of Service Delivery and MSME Analysis of select cases in India

5.6.2. Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation of Franchise India across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics. Franchise India Holdings Ltd.- Strategy Demystified

Segmenting Strategically •Demand side – Franchisors •Supply side – 1st generation entrepreneurs (Entrepreneurs mostly Post graduates, graduates with work experience in MNCs.20-40 years, living in Tier-I, Tier-II and Tier-III cities and who are internet & technology savvy)

Leveraging Unique Activities

Exploiting Trade-offs

•Online B2B platform combined with exhibitions and physical network of 46+ offices across India. •Ensuring customer service excellence. • Building trust and transparency. • Diversification into consulting, print media etc. •Clientele includes global MNCs

• Focused on franchising needs of the Industry rather than diversifying into other areas.

Capitalizing on Industry Dynamics • Fragmented franchise industry. • Lack of centralized technology for demand-supply transparency. • $3.3 billion franchise market in India by 2013. • Lack of franchise laws and policies to regulate the business. • Emerging first generation entrepreneurs

5.7.Business Model View The company followed a freemium (free + premium) business model, whereby it offered certain services for free to the customers and charged a registration fee for offering premium services. It created an ecosystem for transforming ideas to businesses. A regular customer engagement was maintained in the business through franchisee events, magazines and specialized business events such as India Saloon congress, India real estate business to target the segmented customers. In addition, to reach out to a wider group and engage them, the prospective franchisee buyers were given membership, emails, telephone calls and SMS. As a result, the company managed to set up a large network with the franchisors across the globe and in providing diversified business options, specific consultancy and one stop solution to all the business needs of the people. They created a popular model to identify, foster and commercialize innovative business startups ideas and to meet the demands of today's dynamic entrepreneurial arena.

5.7.1.Customer Segments FIHL defined its customers across two segments. The first segment included the corporate that were looking for expansion across India. The second segment included the investors and small scale entrepreneurs or individuals, who were looking for reliable business opportunities by associating themselves with high growth businesses. These customers 26

were primarily first generation small -scale entrepreneurs or individuals looking for a foothold in setting up an enterprise.

5.7.2.Value Proposition FIHL defined its business as enabling access to reliable, transparent and categorized business franchising options for both of its customer segments. The value proposition offered by the company included different offerings for different customer segments. For the business franchisor, the value proposition included (1) market expansion across India; (2) growth in revenues by receiving franchisee's fee and royalty payments; (3) consulting on business strategy; (4) enabling business model innovation as per market context and company objectives; (5) and brand building through countrywide exhibition and business opportunity shows. For investors and entrepreneurs, the value proposition included (1) availability of different franchising options in their cities; (2) access to low risk and high return opportunities; (3) access to consulting and business development; (4) and enabling win-win contracts and relationships with franchisors.

5.7.3.Customer Relationships - Building Trust and Transparency FIHL realized very early in their business that the main entry barrier in this business would be the network effect, which would require an ecosystem of trust and transparency with their franchisors, entrepreneurs and investors. The key component of FIHL business model included the B2B platform, which acted as a bridge between supply and demand. Regarding demand side, it focused on developing trust based relationship with different franchisors by providing them direct interaction with probable investors and entrepreneurs. The company took multiple initiatives for building trust and transparency with the franchisors. These included (1) setting up 46+ offices across India; (2) providing consultancy on market potential and strategy; (3) providing a platform for gaining visibility via exhibitions; (4) standard commission rates; (5) and enabling direct interaction with probable investors and entrepreneurs. Regarding supply side, it focused on developing trust based relationships with different investors and entrepreneurs by undertaking multiple steps like (1) access to information pertaining to franchisors, industry prospects, growth potential etc.; (2) online and offline facilities; (3) flexible search options to get information ROI, viability, terms of agreement, franchisee periods (4) direct interaction with franchisors; (5) customer service excellence; (6) and access to exhibitions across multiple geographies.

5.7.4.Value Network - Collaborations and Partnerships FIHL realized the critical role of geographical reach and brand image in attracting the customers as potential franchisors and franchisees, The company focused a lot of time and energy on building a B2B platform, holding exhibitions across different regions of India thereby ensuring a wide network of franchisors, investors and entrepreneurs. By 2012, the company conducted 250+ exhibitions across India. Also, FIHL expanded itself across different industries rather than focusing on specific industries. By 2012, it built an 27

Business Model of Service Delivery and MSME Analysis of select cases in India

expertise in offering end to end franchising solutions across 5000+ business opportunities across different sectors. Thirdly, the company expanded its clientele including global MNCs. The notable collaboration being with Southbank Institute of Technology, one of Australia's leading vocation training organisations, linked to the Queensland Government. This was a significant step to establish a pan India vocational training business to service the growing needs for qualified staff in the retail and hair and beauty industry in India.

5.7.5.Technology and Innovation FIHL realized the importance of technology as the core of the success of its business model. Regarding Technology, it focused on maintaining a strong technology platform having user-friendly interface and having capability to process millions of transactions conducted between thousands of franchisors and franchisees. Regarding Innovation, FIHL focused on continuous improvements across the product, process and business model. First, the company supplemented the reach of its B2B platform by conducting exhibitions across India, which acted as a personal connect for franchisors and franchisees. Secondly, it developed its capability in offering end to end franchising solutions including feasibility study, business strategy, system development, brand development, brand communication, public relations, advertisement & marketing and recruitment services. Thirdly, it expanded its business expertise across 5000+ business opportunities across different industries. Fourthly, it strengthened its capability and brand image by diversifying into publication of magazines like Franchising World. Fifthly, it launched 'Franmatch', a new retail and franchise solution platform catering to NRIs who were willing to invest in Franchise & Retail Businesses in India. Mr. Marya commented, "Franmatch has been started with the key potential markets in the state of Gujarat, Vadodara and Ahmedabad with an aim to provide a common platform to investors and entrepreneurs to participate, discuss and explore business development. We are always looking at similar solutions for different needs of franchisors and franchisees."

5.7.6.Pricing Model - Revenues and Costs Streams FIHL created multiple revenue streams, which proved the strength and novelty of its business model. These included income from (1) rental spaces offered at exhibitions and business opportunity shows; (2) sales of magazines; (3) advertisements on its websites; (4) commission and royalty fees charged to the franchisors and franchisees; (5) and consulting fees etc. Regarding costs, the company incurred substantial costs in maintaining the infrastructure comprising technology platform, 40+ offices and a team of 350+ employees.

5.8.Future Action Points Franchisee India established itself as the pioneer in the Indian franchising industry. By 2012, it became Asia's largest integrated franchise solution company having capabilities and expertise in offering end to end solutions including franchising, licensing, retailing,

real estate and marketing. The company diversified into consulting, awareness building by launching magazines and holding exhibitions. The key action points identified by the company for the future included (1) undertaking market penetration by enhancing capabilities about different industries and diversifying into more industries; (2) expanding the consulting division into offering diversified consulting services; (3) implementing the Ru-Ban (Rural Urban) business model to cater to the requirements of the rural population; (4) diversifying into promoting the factory's secondary product and by-products, thereby capturing the market segment that consumes these products; (5) introducing Franchisee Biz models for women both married and single, especially in the Beauty, preschool & playschool, Gym & Fitness Center and Home based sector; (6) and enhancing the role of analytics to study the franchising revenue and growth patterns.

5.9.Key Learnings FIHL's business philosophy included focus on the niche market The key learning are as follows: Finding a niche (value proposition) & Develop a market ecosystem - The companies, who have the ability to identify the niche and capability to invest time and resources on market development have been found successful over a longer period of time. FIHL identified a niche area in 1999 and went against the trends to create a self-sustainable and high growth business model in the franchising industry. Focus on individuals needs and not wants - The small scale entrepreneurs in India are always looking for reliable solutions to their needs. FIHL ensured the customer service excellence by creating a portfolio of service offerings which fulfilled the needs of its customers by one way or another. Focus on technology and innovation - Technology plays a crucial role in enabling access to a large network of customers. FIHL realized the significance of the same and started its business venture by setting up a B2B platform and subsequently diversifying into other areas like print media, consulting, exhibitions etc. Build alliances with key stakeholders - Collaboration and partnerships are the key aspects of gaining competitive advantage and sustainability for any business today. The ability of the organization to identify the potential partners and establish a win-win relationship with those partners ensures its success in dynamic business environment today. Scalability is the key-The companies need to focus on scale to spread the market development costs on large volumes of low-margin clientele. So, achieving scalability either by expanding the offerings or by expanding across geographies is critical for the sustainability of such companies. Franchise India focused on expanding its reach across increasing number of franchisors and franchisees by setting up a network of branch offices across India.

Business Model of Service Delivery and MSME Analysis of select cases in India

6 India Get Your Business Online (GIBO) Google India Get Your Business Online(2011) Outreach: India (250,000+ MSMEs) Issue Addressed: Enable the online presence to ensure global reach and presence.

Business Model: Freemium Model to get the MSMEs online Offerings: To enable small businesses in India to establish their presence online and providing them the necessary tools, tips and resources to succeed online. Revenue Streams: Free offerings for first year followed by annual fees in subsequent years. Objective: “To bridge the promotion & information asymmetry gaps between MSMEs and online customers by bringing the MSMEs online”

Overview The small businesses are vital in their contribution to India’s socio-economic development. The nation’s small businesses account for 95% of the industrial units in the country and are the second largest employers of human resources. Almost 45% of the total exports from India are dependent on small businesses. Although the majority of consumers look online for local products and services, small businesses neither have a website nor any online presence. This makes them invisible to many potential customers. India Get Your Business Online (GIBO) was setup in 2011 with the objective of bringing MSMEs online by providing them with a free website and online tools so that they can run their businesses efficiently.

Actors Customers: MSMEs Strategic Partners: ICICI Bank, FISME (Federation of Indian Micro and Small & Medium Enterprises) Technology Partners: Google, HostGator (Website Hosting)

Positives 1. Powered by collaboration of leading technology and strategic players like Google, HostGator, FISME and ICICI 2. Strong expertise in technology 3. Access to a network of millions of MSMEs via FISME 4. Free value offering for the 1st year to attract more and more MSMEs to get online 5. Initiative backed by strong support team for guiding the MSMEs to get online.

Challenges Results [Year 2012E] Outreach: 0.25 million+ MSMEs (Target to reach 0.5 million+ MSMEs by 2014)

1. Lack of awareness and tendency of resistance among MSMEs towards technology adoption. 2. Need for market building and awareness, which requires significant time and capital investment. 3. Lack of willingness among MSMEs to pay for adoption of IT technology.

Source: Interview with Mr. Madhukar Srivastava (Head, SMB) & http://www.indiagetonline.in

6.1 Introduction Today, although the majority of consumers look online for local products and services, most small businesses in India neither have a website nor have any online presence. This makes them invisible to many potential customers. Get India Business Online (GIBO) was setup in 2011 by Google with an objective of bringing the MSMEs online to gain global access and visibility. Mr. Srivastava (Head, SMB Marketing) commented, "This whole program is part of our initiative called GXPO; 'X' being the country initiative. For the US, it would be "Get American Business Online", for Thailand, "Get Thailand Business Online" and so on. India was the 19th country to have bought this program; there have been six or seven countries after India as well. The whole idea is to get SMEs to go online. It's a similar format everywhere." GIBO focused a significant amount of time and capital in market development and awareness among the MSMEs to get themselves online. By the end of 2012, GIBO 30

managed to bring 1.5 lakhs+ MSMEs online. It followed a unique 'freemium' business model, wherein it provided the MSMEs with a free website design, operation and support for the first year and if they felt satisfied then asking them to pay then nominal annual charges for subsequent years.

6.2.Website Design and Development The Porter's 5 force analysis reflects a competitive yet opportunity oriented market for website development companies, especially those focusing on MSMEs due to high entry barriers and medium inter-organizational rivalry. It also reflects the challenges pertaining to bargaining power of suppliers, buyers and availability of substitutes. The barriers to entry into this industry are high. Though anyone can launch a website development enterprise with minimal investment at the start, there is a challenge in creating a differentiation from other competitors. Also, there are challenges pertaining to retention of skilled resources as well as building trust and transparency with the customers. The bargaining power of the customers is high due to the presence of large number of website developers as well as availability of online B2B platforms for trading and marketing. The Threat of substitutes is moderate. There are various substitutes available like physical marketplaces such as trade fairs, hyper marts etc., or telephonic mediums (E.g.: JustDial). Though these substitutes are available, the increasing popularity and acceptance of the internet tones down the threat of these substitutes. The bargaining power of suppliers, especially the skilled resources is high. To keep pace with changing technologies and growing volumes of customers, website development companies require ongoing adoption of emerging technologies, thereby creating a dependency on technology providers. The Inter-organizational rivalry is medium. The demand potential is high due to the high growth of internet adoption and increasing awareness about the benefits of getting online. Online Business (Website Development): Porterâ&#x20AC;&#x2122;s Five Forces Analysis

3. 4. 5.

Barriers to Entry (High) Brand Image of existing players who enjoy early mover advantage Huge network effect resulting from relationship with technology providers and market network. Trust and transparency matters. High operational complexity Retention of skilled resources.

Threat of Substitutes (Medium) 1.

2. Inter-Organization Rivalry (Medium) 1. 2.

1. 2.

3. 4. 5.

Bargaining power of Customers (High) Low switching costs Lack of awareness and technology reliability for MSMEs Comfort with traditional means of doing business Presence of large number of website developers. Presence of alternate platforms for market promotions like print media, telephone calls, mailers, online platforms like IndiaMART, Sanblue etc.

High demand ensuing business opportunity for all competitors. Huge future potential due to decreasing cost of technology adoption Market in growing stage

Alternative platforms like print media, telephone calls, mailers, direct selling, online platforms like IndiaMART, Sanblue etc Alternate channels: Trade fairs, Trade market/ Hyper marts etc.

Bargaining power of Suppliers (High) 1. High: Need for skilled resources. 2. High: Need for access to emerging website development and hosting technologies.

Business Model of Service Delivery and MSME Analysis of select cases in India

6.3.Industry & Organization Challenges The key challenge for the MSMEs in India was the lack of access to low-cost marketing channel to connect with the millions of buyers and suppliers within and outside India. Although the majority of consumers looked online for local products and services, small businesses neither had a website nor any online presence. This made them invisible to many potential customers. Google in partnership with HostGator, FISME (Federation of Indian Micro and Small & Medium Enterprises) and ICICI setup GIBO in 2011 aimed at bridging this market accessibility gap for the millions of MSMEs. However, it faced lot of challenges in attracting the MSMEs towards having their own website. Firstly, MSMEs were resistant to technology adoption and did not have confidence on getting cost-effective and timely after-sales support. GIBO minimized this challenge by investing significant time and capital in building market awareness by launching comprehensive market promotions and education initiatives. Secondly, MSMEs did not see the direct benefit in adopting technology and did not want to spend their money on website development without gaining immediate returns. GIBO minimized this challenge by offering a free website for the first year. Thirdly, there was scarcity of reliable data sets regarding MSMEs. How to identify and reach 30 million+ MSMEs operating in India? GIBO minimized this challenge by collaborating with industry associations via FISME. Mr. Srivastava commented, "The biggest challenge is connecting to the 30 million SMEs out there. It is a big challenge because primarily, they're offline. They don't get emails; they're not browsing the Net themselves; in fact, they don't even have access to the Internet. Even if the second generation has, it's not very well connected with the business itself. That continues to be our challenge."

6.4. Competition GIBO derived its competitive advantage from the strong collaboration among Google, HostGator, FISME and ICICI. Google and HostGator ensured the availability of technology expertise. FISME and ICICI ensured the access to large MSME network and industry associations. The competitors included (1) individual website development companies; (2) alternative platforms like print media, tele-calls, mailers, direct selling, online platforms like IndiaMART, Sanblue etc.; (3) and alternative channels like trade fairs, hypermart etc.

6.5. Overview During 2011, Google launched an initiative to offer free website, domain and hosting services to small & medium businesses in India. The initiative was named as India Get Your Business Online. India was identified as a 19th country, where Google launched this initiative of bringing the MSMEs online to enable online access and presence across the world. Google set up a target of bringing 0.5 million+ MSMEs online by 2014. The 4C analysis below reflects the internal (company) and external (context, competition, and customer) view regarding GIBO.

India Get Your Business Online (GIBO) - 4C Analysis Customers • MSMEs • Industry Associations • Government Bodies

Competition

Context

• Website development companies • Alternative platforms like print media, telephone calls, mailers, direct selling, online platforms like IndiaMART, Sanblue etc • Alternate channels: Trade fairs, Trade market/ Hyper marts etc.

• Lack of formal market ecosystem for suppliers connectivity with global buyers • MSMEs accounting for 45% of manufacturing output and 40% of total exports in India • MSMEs accounting for bulk employment of manpower.

Company • Started in 2011 as an initiative by Google in partnership with HostGator and backed by FISME and ICICI • Strong expertise in technology

6.6.Strategy View The strategy view of GIBO is being evaluated from two perspectives. This includes value chain analysis and strategy framework analysis.

6.6.1.Value Chain The Value Chain Analysis brings forth the key primary activities as (1) market promotion; (2) market awareness; (3) website creation; (4) technology support; (5) and conversion into paying customers. The key support activities include (1) focus on technology platform; (2) engagement of human resources for promotion and support; (3) and building collaborations and partnerships

India Get Your Business Online (GIBO) – Value Chain Technology Platform Server, Tools and Processes for Website creation

Human Resources Market building and Support

Networking and Partnerships Technology , Industry Federations , Funding

Promotion •Launch promotion activities to attract the MSMEs

Awareness •Build market awareness by demonstrations and education programs targeted at the MSMEs

Creation •Facilitate website creation to interested customers

Support •Providing technical support during and after website creation

Conversion •Convert the MSMEs to paid customers after 1st year.

Business Model of Service Delivery and MSME Analysis of select cases in India

6.6.2.Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation of GIBO across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics. India Get Your Business Online (GIBO) - Strategy Demystified Segmenting Strategically • MSMEs • Industry Associations • Government Bodies

Leveraging Unique Activities

Exploiting Trade-offs

• Powered by collaboration of leading technology and strategic players like Google, HostGator, FISME and ICICI • Strong expertise in technology • Access to a network of millions of MSMEs via FISME • Free value offering for the 1st year to attract more and more MSMEs to get online • Initiative backed by strong support team for guiding the MSMEs to get online.

• Focused on market building by attracting more and more MSMEs by offering free creation and maintenance of website and hostname for first year rather than generating revenues from 1st day itself.

Capitalizing on Industry Dynamics • Lack of formal market ecosystem for suppliers connectivity with global buyers • MSMEs accounting for 45% of manufacturing output and 40% of total exports in India • MSMEs accounting for bulk employment of manpower.

6.7.Business Model The company followed a Freemium (free + premium) business model, whereby it offered the complete website development kit (hostname, web hosting and website creation templates) for free to the MSMEs for the 1st year and charged a nominal annual fees, if they wanted to continue in subsequent years. This approach helped GIBO to create an online database of large number of MSMEs and gave an opportunity to the MSMEs to evaluate the cost benefits of getting online before paying for the same. Once the MSME felt happy and found value in having their website on GIBO platform, they had the option to get converted into a paying customer from second year onwards.

6.7.1.Customer Segments GIBO defined its core customers as the MSMEs operating across India. It aimed to target 0.5 million+ MSMEs by 2014. To target the core customer segment comprising MSMEs, GIBO looked at creating relationships with trade bodies; industry associations; government bodies like FISME etc. to reach the MSMEs across India and build awareness and acceptance.

6.7.2.Value Proposition GIBO defined its business around the key objective of bringing about the market transformation by enabling 0.5 million+ MSMEs to get online. GIBO differentiated itself from the competition by offering a unique value proposition comprising (1) free package comprising domain name, website design, website hosting and support for first year; (2) technology expertise of Google and HostGator; (3) nominal annual fees for the MSMEs willing to continue in 2nd year; (4) reliable technical support; (5) and a platform to gain global visibility and to gain access the global market. The key aspect of the value proposition was the incentive to the MSMEs to try the value offering first for free and then pay later if MSMEs found the value addition. This was something, which was not offered by any competitor in the market. Mr. Srivastava commented, "What is the offer? It is free hosting, a free domain and a free support for 365 days. There are free e-mails attached to his domain and a coupon of Rs.2500, if he wants to advertise. What is the value? A domain and hosting is fairly co-advertised, but at the same time, it is a spend of at least Rs.2,000 to Rs.3,000 a year. That is the basic cost of this. For designing a website, someone would charge you at least Rs.10000. You can build one yourself, or call the call centre and get them to build a three- or four-page website for you."

6.7.3.Customer Relationships GIBO realized the significance of trust and transparency in attracting the MSMEs. So, it decided to invest time and capital in building market awareness and acceptance before generating revenues. It designed a behavior change communication strategy which focused on (1) building a network with government bodies like FISME, trade bodies, industry associations; (2) and undertaking promotions via print media, conferences, hoardings, radio, partners like ICICI and word-of-mouth publicity. The networking with different trade and government bodies as well as industry associations enabled GIBO to build trust and gain access to the MSMEs located across India. The market promotions on the other hand, enabled GIBO to build awareness among the MSMEs. Mr. Srivastava commented, "We've done print, magazines, and radio; also put in some hoardings across the place on a couple of occasions, one for Chandni Chowk and one for another activity. Our launch event also generated a huge amount of volume. We continue to do a combination of online and offline as well." From the operational reliability perspective, GIBO ensured customer service excellence by enabling access to 24*7 technical support from the experts on any issues pertaining to website design, creation, maintenance etc.

6.7.4.Value Networks - Collaborations and Partnerships According to GIBO, the two key challenges pertaining to MSME market was the resistance for change among MSMEs and need for push factor to build trust and transparency. GIBO addressed both these challenges by creating a network of partners aimed at customer service excellence, building market awareness and creating trust. Keeping these aspects in consideration, GIBO was setup having strong collaboration among Google, HostGator, FISME and ICICI. Google and HostGator ensured the availability of technology expertise leading to customer service excellence. FISME and ICICI ensured the access to large MSME

Business Model of Service Delivery and MSME Analysis of select cases in India

network and industry associations resulting in focused orientation towards creating trust and market awareness. Mr. Srivastava commented, "We have the ICICI Bank partnering with us for telling their customers about the benefits of being online."

6.7.5.Technology, Innovation and Learning GIBO focused on enabling a strong mix of technology and innovations to create its presence among the MSMEs in India. Regarding Technology, GIBO ensured the availability of a strong technology platform backed by Google and HostGator. This was complemented by the availability of 24*7 support and maintenance team having a pool of skilled resources. Regarding Innovations, GIBO identified the key challenges pertaining to MSMEs as customer segment and designed its business innovation strategy accordingly. First, GIBO designed a behavior change communication program to build market awareness regarding the business benefits of getting online. Secondly, GIBO entered into partnerships with entities like ICICI and FISME to gain information about the MSMEs as well as accessibility and reach to the MSMEs. Thirdly, it created a unique value proposition comprising domain name, website design, hosting and maintenance, which was offered free of cost to the MSMEs for the first year. This helped to pull the MSMEs and build a scale at a faster pace.

6.7.6.Pricing Model - Revenue and Cost Streams Google in partnership with HostGator launched the GIBO initiative from three perspectives. First, this enabled Google and HostGator to generate huge amount of brand building for themselves amongst the government bodies, industry associations and individual enterprises in India. Secondly, Google expected growth in its advertising revenues by getting more and more enterprises (MSMEs) online. Thirdly, Google and HostGator expected the revenues being generated from 2nd year onwards from the MSMEs getting online on GIBO platform. Regarding costs, this initiative required significant time and capital investments from Google and HostGator in the initial three years since 2011. This aspect made it really challenging for any other organization to replicate the same and compete with Google and HostGator in India.

6.8.Success Stories MSME Name

Website

Result

Vijashivi International (New Delhi)

www.vijashiviinternational.in

A garment exporter business that found a new world to showcase the talent and work they bring to the table by getting a website up and running, using indiagetonline.in

Khosla Printers (Ghaziabad, UP)

http://www.khoslaprinters.in/

An online presence for a printing business in North India, that is helping them reach new customers across the country.

Tech Zone (Thane, Mumbai)

http://www.mytechzoneonline.in/

Going online was the best thing for an electronic business in Mumbai. A website helped him reach new customers across the country.

Aryan Dream Holidays (Ahmedabad, Gujarat)

http://www.aryantravelsahmedabad.in/

Aryan Dream Holidays created a website and opened its business to the world with indiagetonline.in

Excellent Driving School (Thanjavur, Tamil Nadu)

http://www.excellentdrivingschool.in/

A driving school that found a new way to connect with new and existing customers by getting a website up and running, using indiagetonline.in

Sea View Palace (Thiruvanathapuram, Kerala)

http://www.seaviewpalace.in/

An online presence for a hotel business in Kerala, that is helping them reach more customers across the country.

Sorge Medisys (Dombivli, Maharashtra)

http://www.sorge.in/

An online presence was the right thing for a medical equipment business. Now, they've opened their business to the world.

http://www.defogit.in/ Defog It (Yamunanagar, Haryana)

Defog It created a website and opened its business to the world with indiagetonline.in

Orange Chutney (Greater Kailash 2, New Delhi)

http://www.orangechutney.in/

Going online was the best thing for a designer jewellery business in New Delhi. The website is helping her business grow faster

Architecture Entrance (Shakti Nagar, New Delhi)

http://www.architectureentrance.in/

An online presence for a training centre for architecture entrance exams in New Delhi that is helping it reach new customers across the country.

6.9.Future Action Points The key action points identified by GIBO as a part of its future development agenda included (1) focus on getting 0.5 million+ MSMEs online by 2014; (2) leveraging the scale of MSMEs on GIBO platform to generate advertising revenues; (3) and enhancing the brand image of Google and HostGator amongst government bodies, industry associations and individual entrepreneurs.

6.10.Key Learnings The key learnings from GIBO are as follows: Focus on building market awareness - The companies that have the ability to identify the specific need of the target segment and capability to invest time and resources on market development, have been found successful over a longer period of time. Focus on individual needs and customer acceptance - The small scale entrepreneurs in India are always looking for reliable solutions to their needs and thereby have in-built resistance in adopting the new market solutions unless and until those solutions confirm 37

Business Model of Service Delivery and MSME Analysis of select cases in India

the value addition to the bottom-line. GIBO realized this and offered the website solution for free in the 1st year to enable the MSMEs to evaluate the benefits before adopting the same. Focus on technology and innovation - The innovative use of technology plays a crucial role in providing a cost-effective solution to address the market access challenges of the MSMEs. GIBO offered an end to end website hosting and support platform to attract MSMEs. Build alliances with key stakeholders - Collaboration and partnerships are the key aspects of gaining competitive advantage and sustainability for any business today. The ability of the organization to identify the potential partners and establish a win-win relationship with those partners ensures its success in dynamic business environment today. Focus on Scalability. The companies targeting the MSMEs need to operate on low margins and also need to spend considerable time and money on building market awareness and acceptance. So, achieving scalability either by expanding the offerings or by expanding across geographies is critical for the sustainability of such companies. Google GIBO setup a goal of getting 0.5 million MSMEs online by 2014.

7 Integrated Association of Micro Small and Medium Enterprises of India (IamSMEofIndia) IamSMEofIndia (2009) Founded by: Faridabad Small Industries Association (FSIA) Outreach: India Issue Addressed: Aggregation of demands of MSMEs to seek best deals from service providers. Business Model: Demand level Aggregation Offerings: Need based solutions related to finance, insurance, credit, resourcing, mentoring, legal assistance etc.

Overview FSIA setup IamSMEofIndia in 2009 as a Special Purpose Vehicle to conduct commercial activities aimed at providing business solutions to the needs of the MSMEs within and outside of Faridabad region. The aim of the organization was to identify the projects on the basis of the problems faced by the members (MSMEs) and to identify the best possible solution for the same for all the organizations facing the same. The idea was to centralize the common and non-core activities of MSMEs like procurement, technology upgradation, financing, insurance etc. This saved the time and energy for the MSMEs to focus on core activities as well as saved capital by getting the best deals at minimal costs.

Actors

Revenue Streams: Memberships, Fees from banks etc.

Customers: MSMEs Operational Partners: Banks, Insurance Companies, Government bodies like SIDBI, Universities, Training Centers etc.

Objective: â&#x20AC;&#x153;To enable access to diverse services offerings for the MSMEs â&#x20AC;?

Positives 1. Aggregated the demands of the MSMEs to leverage the collective bargaining power. 2. Self sustainable with revenues from memberships and fees from banks etc. 3. Potential to scale and expand by offerings.

Challenges 1. Gain the confidence of regional MSME associations, which considered IamSMEofIndia as a competitor. 2. Expand across geographies within India. 3. Create a pool of leaders to lead different projects and offices across different regions in India.

Source: Interview with IamSMEofIndia Management Team & http://www.iamsmeofindia.com/

7.1.Introduction There are very limited platforms in existence, which can enable the access and exchange of information and best practices to individual MSMEs in a cost-effective manner. This results in lack of access to formal market ecosystem for getting business development solutions for their different needs ranging from procurement of raw materials, servicing support, financing and administration, sourcing of skilled manpower, access to global markets for selling their products and services, technology upgradation etc. This was the premise for setting up IamSMEofIndia in 2009 as an independent organization by Faridabad Small Industries Association (FSIA).

Business Model of Service Delivery and MSME Analysis of select cases in India

Business Development Services for MSMEs - Situation Overview The MSMEs in Faridabad (Haryana) lacked access to a reliable and affordable platform, which could address the different business and information needs. Mr. Rajive Chawla, President, FSIA, identified this challenge and decided to setup an organizational entity, which could address this challenge of the MSMEs in Faridabad. He commented, "â&#x20AC;Śless than one percent of MSMEs in India are associated with any kind of association. 99 percent of MSMEs are not members of any association, nor integrated with anything. Nothing in the world can bring the right information to their doorsteps, as they're simply not members. How will they come to know of benefits unless they join?"

7.2.Challenges The key challenges faced by the MSMEs involved lack of focus, lack of information, lack of proper guidance and lack of collective bargaining power. At the end of the day, if they were unable to overcome these difficulties, they had no other option but to close down. Most of the MSMEs were operating individually and spending their time and energy on similar issues, which could have been avoided by having a collaborative platform to deal with such issues. Mr Rajive commented, "Why should a small SME waste time in procurement? Why should a small industry pay a purchase manager instead of having one purchase department collectively, which can source the right things? This is something entrepreneurs have to do for themselves. I believe that if one gets to know of a cheap source, one should introduce the same to others. If I know of any good source, I shall recommend the same to others. No single person therefore, runs the show. That is why it is not easy, though it is happening."

7.3. Competition FSIA setup IamSMEofIndia to provide a common platform for the MSMEs to leverage the collective bargaining power for availing the best service offerings and best deals in a cost effective manner. This was a unique solution to a unique problem faced by the MSMEs in India. Considering the uniqueness of this setup, there was no direct competition for IamSMEofIndia. There was indirect competition from individual BDS providers; large BDS companies and online portals like IndiaMART, Sanblue etc. However, most of these competitors focused on delivering individual solutions to the specific needs of the MSMEs. , IamSMEofIndia differentiated itself from the competition by bundling the common issues of the MSMEs and identifying the best deals from different companies.

7.4. Overview FSIA setup IamSMEofIndia in 2009 as a Special Purpose Vehicle to conduct commercial activities aimed at providing business solutions to the needs of the MSMEs within and outside of Faridabad region. The objective was to create a self-sustainable organization

having its own cost and revenue streams, separate pool of members willing to subscribe to different service offerings and organization having the flexibility to operate across India without getting bounded by Faridabad tag. The starting aim of the organization was to identify the projects on the basis of the problems faced by the members (MSMEs) and to identify the best possible solution for the same for all the organizations facing the same. The idea was to centralize the common and non-core activities of MSMEs like procurement, technology upgradation, financing, insurance etc. This saved the time and energy for the MSMEs to focus on core activities as well as saved capital by getting the best deals at minimal costs. The 4C analysis below reflects the internal (company) and external (context, competition and customer) view.

IamSMEofIndia - 4 C’s Analysis Customers •MSMEs

Context

Competition • Online portals like IndiaMART, Sanblue etc. •Large BDS Providers •Individual BDS Providers

•Lac k of access to affordable and reliable solutions to the business needs of MSMEs •Lack of integration among MSMEs and their associations to centralize the business problems and seek a uniform solution for different problem types

Company •Setup by FSIA in 2009 •Aggregated the needs of MSMEs to leverage the volumes in seeking the best possible deals for MSMEs •Expanded the services and reach across different regions in India •Created a network of 1000+ paid MSMEs by 2012-13

7.5.Strategy View The strategy view is being evaluated from two perspectives. This includes (1) value chain analysis; (2) and overall strategy framework analysis.

7.5.1.Value Chain Analysis The key primary activities included (1) expanding memberships; (2) projects identification; (3) identifying and evaluating possible alternatives; (4) finalizing the BDS provider for specific problems; (5) and resolving the issue. The key support activities included focus on (1) market building; (2) human resource management (project leaders); (3) and networking and infrastructure. 41

Business Model of Service Delivery and MSME Analysis of select cases in India

IamSMEofIndia – Value Chain Market Building Choice of Offerings, Promotion, Awareness Human Resources Project leaders, Support staff Network and Infrastructure Office Setup, Tie-up with different organizations like banks, insurance companies, training organizations etc. Aggregation •Build a pool of MSMEs

Listing and Categorization

Evaluation

Assign •Identify the best deals / solutions for the needs identified

•Invite the different deals for the different needs of member MSMEs

•List and categorize needs of MSMEs

Resolution •Provide solution to the MSMEs

7.5.2.Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics.

IamSMEofIndia - Strategy Demystified Segmenting Strategically •Demand side : MSMEs •Offerings: Across the value chain including energy audits; financing; insurance; bulk deals at low prices; technology upgradation; legal assistance; mentoring and advisory services; innovation cluster setup for auto components industries; skill building programs etc.

Leveraging Unique Activities

Exploiting Trade-offs

•Demand led aggregation by combining the needs of MSMEs to leverage the volumes in seeking the best possible deals for MSMEs •Partnerships with different stakeholders like banks, insurance companies, universities, government bodies, private companies etc.

• Maintain focus on MSMEs rather than shifting focus to LSEs as well.

Capitalizing on Industry Dynamics •Lac k of access to affordable and reliable solutions to the business needs of MSMEs • Lack of integration among MSMEs and their associations to centralize the business problems and seek a uniform solution for different problem types

7.6.Business Model View 7.6.1. Customer Segments The customer segment included MSMEs across Faridabad, Sonepat and other cities in India, who were looking for end to end solutions for their different operational and business needs.

7.6.2. Value Proposition IamSMEofIndia defined its business proposition as providing affordable access to solutions for different problems faced by the MSMEs. The value proposition included access to (1) energy audits; (2) financing; (3) insurance; (4) bulk deals at low prices; (5) technology upgradation; (6) legal assistance; (7) mentoring and advisory services; (8) innovation cluster setup for auto components industries; (9) skill building programs; (10) and resourcing of skilled resources etc.

7.6.3.Customer Relationships - Building Trust and Transparency IamSMEofIndia realized the need to build market awareness as well as to generate wordof-mouth publicity for increasing the pool of registered MSMEs. The first aspect of customer relationship was focus on market building and expansion. This required an increasing pool of MSMEs as members. It followed a systemic communication and behavior change process to attract more and more MSMEs. The belief was that there would be better deals from different companies if the memberships count was more. It sent e-mailers to spread awareness about the services being offered. Then it invited the MSMEs to presentations and workshops to understand the benefits. Gradually, MSMEs realized the utility of service offerings and took up the membership of IamSMEofIndia. The second aspect of customer relationship was focus on providing the best value deals and services pertaining to specific issues faced by MSMEs. All the service offerings of IamSMEofIndia emerged from the real problems faced by the MSMEs like enabling access to insurance, credit for exports, finance, bulk procurement, skilled resources, taxation and audits, best practices etc. This helped to show the real value add to MSMEs by addressing their context specific problems. The third aspect of customer relationship was setting up regional offices closer to the MSMEs, wherever the membership exceeded 50 MSMEs. This ensured a context specific evaluation and priority for the issues being faced by local MSMEs.

7.6.4. Value Network - Collaborations and Partnerships The business model of IamSMEofIndia was driven by the focus on consolidating (aggregating) the common business problems faced by MSMEs and then taking them up as individual projects where the best possible solutions were identified for each of these problems and implemented across the MSMEs. This helped the MSMEs in getting the best deal for their business issues while concentrating on their respective core business activities. The numbers of MSMEs registered with IamSMEofIndia helped it to leverage the collective bargaining power and to build a collaborative network with different market entities as banks, insurance companies, IT companies, government bodies, trade bodies, training institutions etc. 43

Business Model of Service Delivery and MSME Analysis of select cases in India

7.6.5.Technology, Innovation and Learning The competitive advantage for IamSMEofIndia was embedded in its business model innovation. It conceptualized the unique business model, which was driven by aggregation of the common business needs of the pool of MSMEs to leverage the bargaining power for getting the best possible deal from the solution providers. The uniqueness was embedded in the whole business idea of consolidating the MSMEs even for their business issues and seeking the best possible solution for the same. Another key aspect of this business model innovation was it had tremendous scope for scaling up by offerings as well as by geographies. IamSMEofIndia fine tuned its business model in the initial 4 years of existence since 2009 and was looking to scale it up by opening branches across different regions in India and by expanding the scope of offering via collaboration with different service providers.

7.6.6. Pricing Model - Revenues and Cost Streams: The main sources of revenue for IamSMEofIndia included annual membership fees and commission for credit facilitation from banks etc. IamSMEofIndia was very clear to ensure the self-sustainability of its business venture right from the first day of inception. Thereby, it maintained lot of focus on getting MSMEs on board, irrespective of location. The key objective of IamSMEofIndia was to remain self-sustainable while serving the needs of the MSMEs rather than securing large profits. The major cost streams for the IamSMEofIndia included expenses related to (1) conducting workshops; (2) setting up offices across geographies; (3) support staff; (4) and promotion and market building activities.

7.7. Future Action Points The key action points identified by the company as a part of its future development agenda involved (1) expanding the pool of registered MSMEs; (2) expanding the presence across different regions in India like Amritsar, Indore, Jaipur etc and broad like Bangladesh; (3) enhancing the revenue streams and service offerings; (4) and providing consulting to other countries like Bangladesh on adoption of similar business model for enabling services to MSMEs.

7.8. Key Learning IamSMEofIndia's business philosophy was driven by the belief in aggregation on the demand side by consolidating the needs of MSMEs and then leveraging the bargaining power based upon aggregation to get the best possible deal for the MSMEs. This philosophy of aggregating the demands of MSMEs helped to build a reliable and costeffective channel for providing business solutions to the MSMEs in a cost-effective and affordable manner. The key learnings are as follows: Focus on building a market ecosystem. There is always a resistance to change or to adopt something new among the MSMEs. One of the reasons is the susceptibility to 44

change. Another reason is the lack of market awareness and paying capacity to afford the changes. On the other hand, BDS providers lack the basic understanding of the market realities at the ground level. This signifies the importance of creating a platform or ecosystem, which can undertake systemic measures to build the confidence of MSMEs towards seeking cost-effective market solutions for their business needs. Devise Local Solutions for Local Problems. MSMEs in different regions face different problems, which require context specific solutions by local BDS providers. So, the practical approach for serving the MSMEs is to identify the context specific solution providers, who can understand the context and provide a need based solution. IamSMEofIndia identified the specific needs of MSMEs, grouped the common need as a separate project and sought the best available market solution for the specific need of a group of MSMEs. Build alliances with key stakeholders. To create a collaborative platform and develop trust and reach, there is a need for building relationships and partnerships with BDS providers, MSMEs, trading bodies, government bodies, industry associations and technology companies. Aggregation is the key. The individual MSMEs as well as the individual service providers lack time and capital investments to reach and transact with each other. The other issue pertains to lack of trust and transparency. The best solution lies in aggregating the demand side as well as the supply side. This helps to economize by spreading out the time and capital investments in reaching each other as well as helps in building credibility for each other. IamSMEofIndia aggregated the MSMEs to leverage their collective bargaining power in getting the best solutions for their common needs. Focus on Scalability. The ability and capacity to scale across geographies helps the BDS providers in becoming sustainable at low margins. IamSMEofIndia focused on achieving scale by expanding its focus on different needs of the MSMEs and by expanding its presence across different regions in India including Amritsar, Indore, and Jaipur etc.

Business Model of Service Delivery and MSME Analysis of select cases in India

8 Indiamart Indiamart(1996) Founded by: Dinesh Agarwal Outreach: India (100+ cities) Issue Addressed: Enable the MSMEs global reach and access using online market platform. Business Model: Freemium model comprising free and premium services for MSMEs. Offerings: Enabling small & medium size businesses generate business leads, establish their credibility and use business information (finance, news, trade shows, tenders) for their business promotion. Revenue Streams: Service charges for creating websites, microsites and catalogs for MSMEs; Four types of paid services: 1) Cataloguing service/ subscription 2)Premium Listing 3) Pay-buy lead 4) Advertising Objective: “To generate profitable returns for the customers through high quality business promotion services & solutions that enhance revenues and are cost effective at the same time.” Awards: Red Herring 100 Asia Awards 2008, Second Runner-up at Emerging India Awards 2008, Amity Corporate Excellence Award 2008, "BIG" Award from Britannicaindia.com. Results Economic: [Year 2012E] Network: 1.2 million+ suppliers, 6.5 million+ buyers, 60+ offices, 4500 +employees. Revenues: INR 1.2 billion (approx) Coverage: 1 million+ registered companies

Overview During the mid-90s, Indian MSMEs lacked a platform to gain global market access. There were millions of MSMEs across the country that lacked proper channels to reach the global customers . Indiamart identified this gap in the industry and launched an online platform to provide visibility and to connect the MSMEs with their customers irrespective of the location and geography. During early 2000s, IndiaMART gained the majority market share of the industry targeting MSMEs.

Actors Customers: Small & medium scale manufactures, traders & exporters Funding Partners: Intel capital, Bennett, Coleman & Co. Ltd, Technology Partners: Google

Positives 1. Online B2B platform connecting a large number of MSMEs and their customers. 2. Ensuring market awareness and promotions for the MSMEs though advertisements and online listing. 3. Ensuring market expansion for MSMEs by business consulting. 4. Strong technology platform using latest technologies like Google apps, cloud computing etc. to offer the best services to the customers.

Challenges 1. Lack of awareness and resistance among the MSMEs regarding the adoption of Internet based platform. 2. Lack of availability of reliable data sets about the MSMEs 3. Technology and Capital Intensive

Source: Interview with Indiamart Management (Jan 21, 2011) & www.indiamart.com

8.1 Introduction The Business-to-Business (B2B) transactions account for a small proportion in India's growing E-Commerce market. However, it has become critical for the MSMEs to leverage the ecommerce platform to gain a global visibility and market presence. This phenomenon provides them exposure as well as a large base of audience to cater to. Indiamart is one such B2B technology platform, which was setup by Mr. Dinesh Agarwal in 1996 to enable the MSMEs to get engaged in a virtual market place and get connected to the world. The key benefits for MSMEs included global reach and connectivity with suppliers and buyers; online access to market leads and prospecting; market learning and online collaborations.

8.2 Online B2B Marketplace The diffusion of internet and telecommunication technology and decreasing costs of adoption has led to the growth of BDS providers setting up of online technology

platforms to enable global reach and accessibility for the MSMEs. The Porter's 5 force analysis reflects medium potential for online B2B platforms focusing on MSMEs due to high entry barriers and medium inter-organizational rivalry. It also reflects the challenges pertaining to bargaining power of suppliers, buyers and availability of substitutes. The barriers to entry into this industry are high. Though anyone can adopt the technology to come up with their own website but building a wide network and gaining faith of the customers is very capital intensive and time consuming. The bargaining power of the customers is high, as the customers can conveniently switch to other websites or even other platforms like telecommunication or physical marketplaces. Threat of substitutes is moderate. There are various substitutes available like physical marketplaces such as trade fairs, hyper marts etc., or telephonic mediums (E.g.: JustDial). Though these substitutes are available, the increasing popularity and acceptance of the internet tones down the threat of these substitutes. The bargaining power of suppliers, especially the technology providers and investors is high. To keep pace with changing technologies and growing volumes of customers, online B2B platforms require ongoing investment thereby creating a dependency on technology providers and investors. The Inter-organizational rivalry is medium. The industry is highly segmented with BDS providers operating across need segments of the MSMEs using offline or online approach.

Online B2B Marketplace: Porter’s Five Force Analysis Barriers to Entry (High) • •

•

• •

Need for technology intensive network Brand Image of existing players who enjoy early mover advantage Huge network effect resulting from integrated pool of suppliers, buyers, technology partners and investors. Need for creating awareness, trust and transparency. High operational complexity.

Threat of Substitutes (Medium) •

• Inter-Organization Rivalry (Medium)

• •

Bargaining power of Customers (High) • • •

•

Demand > Supply Low switching costs Multiple online options for trading platforms like Alibaba, Trade India Alternative platforms of trading: Telephone enquiry, Printed media etc.

•

Different organizations working in different segments Main Competitors: Sulekha, Trade India, Just dial Services, Alibaba International, Google A lot of potential in terms of demand and supply for every segment, large number of untapped MSMEs

Alternative platforms of trading: Telecommunication (just Dial), Printed media(Yellow Pages) etc. Alternate channels: Trade fairs, Trade market/ Hyper marts etc.

Bargaining power of Suppliers (Low / High) •

•

Low: Suppliers depend on intermediaries for interacting with their perspective clients/ customers High: Technology intensive. So, dependency on technology suppliers High: Investors. Need for capital is high for market building. So, dependency on investors/ venture capitalists.

8.3 Industry and Organizational Challenges When Indiamart entered the market in 1996, the Indian MSMEs were facing challenges regarding market access and awareness. The key challenge was the lack of access to lowcost marketing channel to connect with the millions of buyers and suppliers within and outside India. The existing process for doing the exports was expensive, tedious, time 47

Business Model of Service Delivery and MSME Analysis of select cases in India

consuming and inefficient. This required reaching the global suppliers through respective embassies and ministries, which used to take several months thereby leading to huge time and capital investments. Indiamart brought about an industry transformation by setting up an online ecommerce platform thereby bringing about a drastic reduction in time and capital investments. Mr Dinesh Agarwal said, "ICT (Information and Communication Technology) brings with it a bundle of opportunities to grow for SMEs. There is an urgent need to connect SMEs with ICT since it enhances competitiveness and improves their efficiency and productivity. It assists small and medium-sized businesses to streamline business functions such as marketing, HR, finance, sales and operations" Indiamart faced many challenges during its business life-cycle. The key challenge that came up during the 1990s was the low internet penetration and low adoption rate of internet technology by small enterprises in India. Mr. Agarwal says, "Forget about Internet and e-mail, those days, even telephone connections weren't as readily available. In fact, it took me six months to get a telephone connection for my business. People liked the idea that there directory would be prepared at almost free of cost and be posted across the Internet, but if some buyer wanted to contact them, they wouldn't be ready. Prospective buyers used to contact suppliers here in India through the Internet, to which, we replied by fax and post. Initially, we wrote hundreds of letters, which grew to thousands and then tens of thousands." The next challenge for Indiamart was the lack of availability of reliable data sets regarding the MSMEs operating in India. How many MSMEs across different parts of India? How many MSMEs were registered? There were partial details available in segregated mode across different government records, but that was outdated and lacked consolidation. By 2012, Indiamart created a comprehensive database of 1.2 million MSMEs by doing extensive ground work, which had further scope for enhancements.

8.4 Competition Indiamart derived its competitive advantage from various factors. These included (1) first mover advantage; (2) scale, reach and reliability of technology platform; (3) trust and transparency; (4) and aggregation of a large pool of MSMEs registered as suppliers and buyers. It faced competition from e-commerce players like JustDial, Alibaba as well as from traditional marketplaces like trade fairs, hyper marts etc. However, the first mover advantage, focus on customer service excellence and the growing acceptance of the internet minimized the impact of the competition. Regarding e-commerce competitors, Indiamart looked at Alibaba, Trade India, Google and Sulekha as indirect competitors, which were operating in different segments. Indiamart created a unique buyer-seller ecosystem on its e-commerce platform, which transformed the orientation from export-import transactions to domestic buy-sell transactions for the majority of its members. This gave competitive advantage to Indiamart as it created a 2way transaction based ecosystem wherein the suppliers also turned into buyers and viceversa. For example, a coat manufacturer also found suppliers for buttons, thread and plastic online. 48

Mr. Dinesh said, "The key competitive differentiation we have tried to implement over the last two years is that we have also begun doing the reverse. We are gradually creating a buyers' marketplace too, not just a suppliers' one".

8.5 Overview Indiamart created an online platform, which enabled the global market reach and access for the MSMEs. It bridged the accessibility gap between the MSMEs and global buyers by creating an online B2B platform. During the initial years after inception, it focused on market building by acting as a connection between off-line customers and off-line MSMEs. It collected the queries from different customers by different means like phone, fax etc and forwarded the same to the MSMEs in its database, free of cost. This developed a positive relationship with the MSMEs, who did not have any alternative access to the global marketplace. The subsequent launch of the global platform or the e-hub helped the customers and the MSMEs to connect with each other online to interact, negotiate and conduct actual transactions. Gradually, as the market acceptance and transactions started increasing, it expanded its value offerings by including an extensive range of value-added products and services across various industries and verticals, including apparel & fashion accessories, auto components & spare parts, medical pharmaceuticals & scientific equipments, home decor, gifts & crafts, engineering & industrial products etc. The company generated revenues by charging a registration fee for offering premium services. The 4C analysis below reflects the internal (company) and external (context, competition, and customer) view regarding Indiamart. IndiaMART - 4 C’s Analysis Customers • Supply side – MSMEs as exporters, manufacturers and service providers •Demand side – MSMEs and Large Buyers

Competition

Context • Lack of formal market ecosystem for suppliers connectivity with global buyers • MSMEs accounting for 45% of manufacturing output and 40% of total exports in India globe. • MSMEs accounting for bulk employment of manpower.

(IndiaMART ability to aggregate the MSME suppliers and capability in managing operational complexity ensured a virtual monopoly in the competitive space in directory listing in India ) • e-commerce players like Alibaba, India Trade, Google, Sulekha etc. • Physical marketplaces like trade fairs, conferences, hypermarkets etc.

Company • India’s largest online B2B marketplace connecting global buyers with suppliers • Offers business directories, online product catalogs, buy-sell offers, industry specific marketplaces, printed media and trade shows participation • Enables online platform where suppliers, mostly SMEs, register themselves and do business transactions • FY-12 : 1.2 million suppliers ,6.5 million buyers, 2800 employees , 60+ offices ,investors include Intel Capital and Bennett, Coleman & Co. Ltd.

Business Model of Service Delivery and MSME Analysis of select cases in India

8.6 Strategy View The strategy view of Indiamart.com is being evaluated from two perspectives. This includes value chain analysis and strategy framework analysis.

8.6.1.Value Chain Analysis The Value Chain Analysis for Indiamart brings forth the key primary activities as (1) maintaining database of suppliers; (2) directory listing and categorization; (3) manage queries and buy-sell transactions; (4) delivery & payments; (5) and suppliers rating. The key support activities include (1) focus on product, process and business model innovation; (2) setting up technology and operational benchmarks; (3) and setting up infrastructure (technology and physical setup). IndiaMART – Value Chain Innovation Product, Process and Business Model Innovations Benchmarking & Metrics Performance benchmarking and metrics Infrastructure Technology Infrastructure, Branches Setup. Maintain Suppliers database •Build a list of suppliers across free and premium memberships

Listing and Categorization •Directory Listing •Categorization

Manage Transactions •Buy Sell Transactions •Query Handling

Delivery •Manage payments and deliveries.

Quality Ratings •Quality ratings for the suppliers

8.6.2.Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation of Indiamart.com across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics.

India Mart-Strategy Demystified Segmenting Strategically •Supply side : Bulk suppliers / MSME / SME / Manufacturers / Exporters •Demand side : Bulk buyers and OEM •Targeting small and medium business size enterprises and use of online portals

Leveraging Unique Activities

Exploiting Trade-offs

•Technology platform (like call-centre and Google apps) to bridge the demand-supply discrepancy due to information asymmetry. •Ensuring customer service excellence. •Trust based relationship with registered MSMEs. •Wide network of sales and Marketing offices across India. •Capabilities in supplier ratings and analytics

• Maintain focus on MSMEs rather than diverting towards large scale enterprises. • Maintain focus on India as a target market rather than diverting focus across the globe.

Capitalizing on Industry Dynamics •Lack of access to formal market ecosystem for MSMEs due to limited resources and awareness. •Increasing awareness and adoption of IT technologies

8.7 Business Model View The company followed a Freemium (free + premium) business model, whereby it offered certain services for free to the MSMEs and charged a registration fee for offering premium services. This approach helped to build awareness and acceptance among the MSMEs, especially those who were not willing to avail the fee-based service offerings without seeing the results. The free registration on Indiamart website enabled the MSMEs to get an online presence and access to global market. Once the MSME felt happy and found value in having a presence on Indiamart platform, they had the option to upgrade themselves into a paid membership, which entitled them an access to premium services like priority listing, trusted seal rating, design of web catalogues. Indiamart also introduced a pay per lead model, which provided the flexibility to the MSMEs to choose the relevant business lead at Indiamart website by paying a nominal amount and followup the same.

8.7.1. Customer Segments Indiamart defined its customer across two segments. The first segment of customers included suppliers comprising MSMEs as exporters, manufacturers and service providers. The second segment of customers included bulk buyers, who were looking for a platform to compare and connect with different suppliers for different types of products and services. By 2012, the company created a network of 1.2 million+ suppliers serving the needs of 6.5 million+ buyers across 20000+ product categories. The buy-sell platform created a third type of unique overlapping customer segment, which acted as both a buyer and a seller. This comprised 25% of the total suppliers registered with Indiamart.

Business Model of Service Delivery and MSME Analysis of select cases in India

The increasing number of members availing the Indiamart platform generated word of mouth publicity and created economies of scale from the large volume of transactions conducted online between MSMEs as buyers and suppliers.

8.7.2.Value Proposition Indiamart defined its business around the key objective of more buyers, more suppliers and more business. The rationale behind this objective was that the creation of a technology platform as a virtual marketplace would lead to growth in business by bridging the connectivity and accessibility barriers between small-scale suppliers in India and global buyers. For suppliers, the value proposition included (1) increase in revenues by having access to global buyers; (2) and access to information on competitive market trends For buyers, the value proposition included (1) access to a network of suppliers offering diverse product/service offerings; (2) access to feedback and rating of suppliers; (3) and ease of evaluation and transactions.

8.7.3.Customer Relationships - Building Trust and Transparency Since its inception, the key objective of Indiamart was to work closely with SME's and bring them online so that they could increase their revenues by gaining access to the global market via online platform. The company developed trust and transparent relationship with the MSMEs registered as suppliers by introducing host of services aimed at increasing the visibility and market access for the MSME suppliers. These included (1) launch of 'Dynamic Catalogue', a comprehensive online marketing program that provided enhanced enquiry generation, detailed overview for the paid suppliers including the quick virtual tour of product range and infrastructure; (2) listing the paid suppliers as 'Star Supplier', thereby leading to priority positioning and promotion via social media; (3) and listing the quality suppliers as 'Leading Supplier', thereby ensuring high visibility to their products and connect with buyers. Regarding MSMEs registered as buyers, the company developed trust and transparency by ensuring the trust rating of suppliers. It also offered a business verification service that checked supplier's records of existence, credibility and trustworthiness for the benefit of the buyers. This gave Indiamart an edge over other competitors.

8.7.4.Value Network - Collaborations and Partnerships Indiamart realized the criticality of technology and investments in scaling their business and thereby built strong partnerships with technology companies and venture capitalists. Regarding technology related collaborations, Indiamart moved to Google-Apps technology and setup a cloud computing platform. Regarding funding, Indiamart attracted investments from Intel Capital and Bennett, Coleman & Company Ltd. The company also raised the loans from private equity investors including Bessemer Venture Partners and Warburg Pincus.

8.7.5.Technology, Innovation and Learning Indiamart realized the importance of field learning and evolving technologies to undertake continuous product, process and business model innovations. Regarding Technology, Indiamart moved to Google Apps for Business as the primary messaging and collaboration suite. This enabled a real-time interface among 4000+ employees located across 75+ offices in India. The company did setup a cloud-based messaging and collaboration platform to connect its employees, customers and business partners across various offices and cities for enhanced productivity and better decision making. All these technology related decisions helped to build a better technology infrastructure aimed at serving millions of transactions in one go with maximum efficiency and lowest costs. Regarding Innovation, Indiamart focused on continuous improvements across different facets of business. First, the company started with dynamic catalogue concept wherein a registered supplier provided a catalogue listing down all the product range and services offered. This helped the prospective buyer to evaluate the available product options. The various benefits and features of a dynamic catalogue included editable features like company profile, infrastructure etc and product image zoom-ups from anywhere. The dynamic catalogue added value by providing downloadable company brochures. These catalogues gave a 360 degree visibility through PDF / PPT / Video. The catalogue also provided options of quick virtual tour of the product range to all the prospective buyers. These measures enhanced credibility of the company and resulted in more business enquiries. Secondly, the company came up with a concept of trustseal wherein it collaborated with CRISIL to verify the documentation to establish the credibility of the registered suppliers. The certification provided credibility to the suppliers on one hand and trust and transparency to the buyers on the other hand. Thirdly, the company launched the Maximiser offering, which provided maximum features and maximum value to the suppliers. Each leading supplier has a small virtual tour of its office.

8.7.6.Pricing Model - Revenues and Costs Streams The primary revenue streams included income from offering value added services to the customers. This included (1) cataloguing services - cataloguing subscription; (2) premium listing; (3) pay-buy lead; (4) and advertising. The cataloguing services accounted for 70% of the total revenues for the company. The secondary revenue streams included subscription fees and listing fees. The tertiary revenue stream included income from advertising and fees for providing links to other sites. Summing up, the company generated revenues through multiple sources which included the development of online business catalogues, B2B auctions, web-based advertising, co-branded promotions and marketing campaigns and from the development of e-business and e-commerce solutions for its clients. Apart from these paid services, Indiamart offered several free services like an online business directory, which catered to 450+ categories of products and services.

Business Model of Service Delivery and MSME Analysis of select cases in India

8.8.Recognitions and Awards

8.9 Future Action Points Indiamart reached a pioneering stage and became India's largest online B2B marketplace. The online B2B platform connected MSMEs (buyers and suppliers) through business directories, online product catalogs, buy-sell offers, industry specific marketplaces, printed media and trade shows participation. The future action plan of Indiamart included focus on increasing revenues by attracting more and more MSMEs as well as converting existing MSMEs into paid members. The key action points identified by Indiamart as a part of its future development agenda included (1) focus on educating and bringing increasing number of MSMEs on Indiamart website; (2) enhancing the service offerings to add value to the MSMEs suppliers and the buyers; (3) integrating the mobile based technology for buyer-seller transactions; (4) increasing the conversion rate of free members into paid members; (5) and enhancing the role of analytics to study buyer purchase patterns and guide the MSME suppliers accordingly.

8.10 Key Learnings Indiamart's business philosophy included focus on operational efficiency, innovation and customer orientation. This enabled Indiamart to create a viable buyer-seller market ecosystem wherein the suppliers also turned into buyers and vice-versa. The key learning from Indiamart.com are as follows: 54

Focus on the niche & Develop a market ecosystem - The companies, which have the ability to identify the niche and capability to invest time and resources on market development, have been found successful over a longer period of time. During 1996, Indiamart identified a niche area of creating an online B2B market platform for the MSMEs to conduct the buy-sell transactions and is thereby credited with bringing about an industry transformation. Focus on technology and innovation. The companies need to focus on innovative use of ever growing technologies such as internet, World Wide Web and smart mobile applications, which can help business grow by leaps and bounds. The online B2B marketplace of Indiamart brought a paradigm shift in sourcing, delivery and distribution of products and services. Build alliances with key stakeholders. Collaborations and partnerships are important for the competitiveness and sustainability of any business. Companies can leverage its resources by engaging in strategic alliances with other firms. Indiamart achieved significant results through its alliance with technology firms like Google and use of Google Apps for its primary messaging and collaboration suite. Also, partnerships with venture capital firms like Intel Capital and Bennett, Coleman & Co. Ltd. provided the needed capital to build the technology platform and the e-based marketplace for buyers and suppliers. Focus on individual needs. Consumer always looks for solutions to their need and not to the want. The need varies with each consumer. The companies that are able to design their value proposition, which can fulfill the individual needs and give a choice to the consumer have better chances of market acceptance. Indiamart offered multiple service offerings to the suppliers as well as trust based relationship to the buyers. Scalability is the key. The companies need to focus on scale to spread the market development costs on large volumes of low-margin clientele. Indiamart focused on expanding its reach to increasing number of MSMEs by setting up branch offices across different regions in India.

Business Model of Service Delivery and MSME Analysis of select cases in India

9 MSME Solutions Centre MSME Solutions Centre(2009) Founded by: Industries Association of Uttarakhand (IAU) Outreach: India (1 State) Issue Addressed: Customized need based service offerings to MSMEs in Uttarakhand Business Model: Aggregation of retired experts to deliver business development services to MSMEs Offerings: Business solutions to MSMEs, Entrepreneurship trainings Revenue Streams: Funded by IAU Objective: â&#x20AC;&#x153;To bridge the demand-supply gap of experts for MSMEs in the state of Uttarakhandâ&#x20AC;?

Overview During 2012, there were 24,000+ registered MSME units in Uttarakhand. The number was decreasing continuously. The key reasons identified for the same was the lack of access to formal market ecosystem for getting business development solutions for their different needs ranging from procurement of raw materials, servicing support, financing and administration, sourcing of skilled manpower, access to global markets for selling their products and services, technology upgradation etc. On the other hand, there have been many business development service (BDS) providers operating across India and providing the services and solutions required by MSMEs. However, those BDS providers lacked the sensitivity to deliver affordable and reliable customized need based solutions to MSMEs based in Uttarakhand. Industries Association of Uttarakhand (IAU) understood the challenge faced by the MSMEs in Uttarakhand and decided to setup MSME Solutions Centre in 2009 with the support of multi-donor SME Financing and Development project (SIDBI, DFID, World Bank, KFW, GTZ). The company focused on engaging the retired experts settled in Uttarakhand for providing solutions to the business needs of the local MSMEs.

Actors Customers: MSMEs operating in Uttarakhand Partners: IAU, SIDBI, DFID, World Bank, KFW, GTZ, Universities, Retired Experts

Positives 1. Created a pool of retired experts for providing solutions to MSMEs 2. Operational and Funding Support from IAU, SIDBI and DFID 3. Potential to scale and expand by offerings to reach 24000 MSMEs. 4. Low cost business model due to engagement of retired experts at no cost.

Challenges 1. Need for commercialization approach to become self-sustainable 2. Expand the reach to 24000 MSMEs based in Uttarakhand. 3. Expand the pool of retired experts and reorient their skills.

Source: Interview with MSME Solutions Centre Team & http://www.msmesolutions.org

9.1.Introduction During 2012, there were 24,000+ registered MSME units in Uttarakhand. The number was decreasing continuously. The key reasons identified for the same was the lack of access to formal market ecosystem for getting business development solutions for their different needs ranging from procurement of raw materials, servicing support, financing and administration, sourcing of skilled manpower, access to global markets for selling their products and services, technology upgradation etc. On the other hand, there had been many business development solution providers operating in the market providing the services and solutions required by MSMEs. However, most of these BDS providers had been operating in major towns and cities and lacked the understanding of the local context to be able to provide optimal and affordable solutions.. Industries Association of Uttarakhand (IAU) understood the challenge faced by the MSMEs in Uttarakhand and setup MSME Solutions Centre in 2009 with the support of multi-donor SME Financing and 56

Development project (SIDBI, DFID, World Bank, KFW and GTZ). To minimize the cost of delivering solutions to the MSMEs, the company focused on engaging the retired experts settled in Uttarakhand for providing solutions to the business needs of the local MSMEs.

9.2. Situation Overview The MSMEs play a crucial role in the overall economy of any country world-wide. The key reason is attributed the numbers and employment potential of these enterprises. Despite the same, these enterprises operate in underserved conditions with respect to policies, support, infrastructure and availability of cost-effective consulting services. This affects their productivity, quality and ability to compete in global market place. The similar problems were being faced by the MSMEs in Uttarakhand, which were noticed by Mr. Pankaj Gupta, President, MSME Solutions Centre. He commented, "In Uttarakhand, we have over 24,000 registered MSME units. Over a period of time, the Association felt the number was decreasing instead of increasing. When we talked to people here about this, we came to know that MSMEs were struggling with obsolete technology and financial problems. These MSMEs were looking for mentors and guides who could basically help them. They were looking for consultants who could suggest ways forward to them. But they weren't able to get their problems addressed." Regarding BDS providers, Mr. Pankaj Gupta further commented, "there were BDS service providers in the big metros of Delhi, Mumbai, Bangalore, etc., who weren't willing to come to this place. Some were ready to come here only if offered hefty fees, which the MSME sector was unable to afford."

9.3.Industry & Organizational Challenges The number of MSMEs operating in Uttarakhand was decreasing due to competitive disadvantage resulting from obsolete technology and lack of access to business development services for different business issues. Most of these entrepreneurs were first generation having little knowledge or resources available for resolving the difficulties faced by them. They lacked awareness and access to systemic ecosystem of solution providers, who could understand their problems and could provide the optimal solutions. They faced several challenges like sub-optimal scale of operation, technological obsolescence, supply chain inefficiencies, increasing domestic and global competition, lack of access to funding, dynamic trends in global manufacturing, uncertain global economic trends etc. Mr. Pankaj commented, "These MSMEs were looking for mentors and guides who could basically help them. They were looking for consultants who could suggest ways forward to them. But they weren't able to get their problems addressed. This was the biggest challenge the MSME sector faced." Another important challenge faced by these MSMEs was the need for reorientation of MSMEs via systemic training and skill-building programmes to understand and comply with the ongoing changes in environmental regulations, tax legislations, income tax etc. 57

Business Model of Service Delivery and MSME Analysis of select cases in India

9.4 Competition IAU setup MSME Solutions Centre by devising a unique solution of channelizing the talent pool of retired experts in devising expert solutions for the specific needs of MSMEs in Uttarakhand. These retired experts gained tremendous knowledge on different subjects / issues while working with different government bodies or educational institutions. Considering the uniqueness of this setup and focus limited to MSMEs operating in Uttarakhand, there was no competition for MSME Solutions Centre. In fact, MSME Solutions Centre was being setup only because there was a lack of availability of BDS providers, who could provide cost effective and context specific solutions to the issues faced by MSMEs in Uttarakhand.

9.5 Overview IAU setup MSME Solutions Centre in 2009 with the support of multi-donor SME Financing and Development project (SIDBI, DFID, World Bank, KFW, GTZ). The main objective was to create a cost-effective local platform, which could address the business related issues of MSMEs registered in Uttarakhand. To address the issues of MSMEs, the company devised a unique solution by creating a pool of retired experts, who were living in Uttarakhand and carried expertise across different areas like skill building, technology improvement, productivity improvement, waste reduction, power efficiency, quality systems improvement, market linkages, taxation, labour, finance etc. Mr. Pankaj commented, "â&#x20AC;Śthe state of Uttarakhand has many people who're retired, senior citizens and those who've taken VRS. Offices of many PSUs and central government departments are located in this region; there are about a hundred central and state government department departments here. There are people with technical, financial, management and other knowledge who want to give something back to society. They have been looking for a platform to come together and associate with the stakeholders, which they lacked till now. The best part of it was that they were prepared to do it at either a very low cost or no cost at all, looking only to their expenses being taken care of. They aren't looking to make profit out this endeavour." The 4C analysis below reflects the internal (company) and external (context, competition and customer) view.

MSME Solutions Centre - 4 C’s Analysis Customers •MSMEs operating in Uttarakhand

Competition

Context

• Large BDS Providers operating outside Uttarakhand • Individual BDS providers • Online B2B platforms like IndiaMART

•Lac k of access to affordable and reliable BDS providers, who understand the context and can provide solutions specific to local issues. •24000+ MSMEs operating in Uttarakhand, which was decreasing due to lack of access to services for financial and technology issues.

Company • Setup by IAU with support from SIDBI and DFID • Created a pool of retired experts for providing solutions to the issues faced by local MSMEs in Uttarakhand • Created a low cost setup / business model for providing services to MSMEs.

9.6.Strategy View The strategy view is being evaluated from two perspectives. This includes (1) value chain analysis; (2) and overall strategy framework analysis.

9.6.1.Value Chain Analysis The key primary activities of MSME Solutions Centre included (1) building a pool of retired experts fitting the needs of MSMEs; (2) listing and categorization of retired experts; (3) consolidating issues/problems of MSMEs via call-center, direct contact and emails; (4) categorizing the MSME issues and assigning them to relevant experts in the pool; (5) and communicating the solution to the MSMEs The key support activities included focus on (1) market building; (2) resources; (3) and networking and infrastructure.

Business Model of Service Delivery and MSME Analysis of select cases in India

MSME Solutions Centre - Value Chain Market Building Choice of Offerings, Promotion, Awareness Resources Knowledge experts, Support staff Network and Infrastructure Office Setup, Tie-up with local educational entities including universities, Government departments etc. Aggregation •Build a pool of retired experts

Listing and Categorization

Collection

Assign •Match knowledge experts with MSMEs specific to needs

•Receive MSME issues via helpline, in-person and email

•List and categorize experts by service offerings

Resolution •Provide solution to the MSMEs

9.6.2.Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics.

MSME Solutions Centre-Strategy Demystified Segmenting Strategically •Demand side : MSMEs •Offerings: Across the value chain including quality system improvements, setting up market linkages, taxation, labour, financing, waste reduction, productivity improvement, skill building, technology upgradation etc

Leveraging Unique Activities

Exploiting Trade-offs

•Created a pool of retired experts for providing solutions to the issues faced by local MSMEs in Uttarakhand •Created a low cost setup / business model for providing services to MSMEs. •Partnerships with local universities and government bodies

• Maintain focus on MSMEs rather than shifting focus to LSEs as well. • Maintain focus on MSMEs in Uttarakhand only • Providing services for free to enable market development and trust among MSMEs

Capitalizing on Industry Dynamics •Lac k of access to affordable and reliable BDS providers, who understand the context and can provide solutions specific to local issues. •24000 MSMEs in Uttarakhand, which was decreasing due to lack of access to services for financial and technology issues.

9.7.Business Model View 9.7.1.Customer Segments MSME Solutions Centre defined its customers as 24,000+ MSMEs, which were registered in the state of Uttarakhand.

9.7.2.Value Proposition MSME Solutions Centre offered services in the areas of quality system improvements, setting up market linkages, taxation, labour, financing, waste reduction, productivity improvement, skill building, technology upgradation etc. Besides these service offerings, it conducted entrepreneurship training courses in the universities and colleges located in Uttarakhand.

For MSMEs, this meant access to optimal and affordable solutions for their

needs at one place. Mr. Pankaj commented, "â&#x20AC;Ś.MSMEs face difficulties in filing their online applications or returns. The biggest problem arises from the Pollution Control Board. We have our experts who help our clients file applications. Then there is also an initiative to understand the financial literacy part, for which we have some experts from the financial field. They carry out exercises in scoring, how credit rating is done, what interest charges have been levied by banks, whether they're in order or not, how to claim one's credit linkup to subsidy schemes, credit guarantee funds etc."

9.7.3.Customer Relationships - Building Trust and Transparency MSME Solutions Centre realized the need to build market awareness as well as to generate word-of-mouth publicity for attracting the MSMEs to avail the services being offered. First, it conducted workshops and sent mailers to spread awareness about the services being offered and success stories of those, who availed the services. Second, it setup a helpline for enabling MSMEs to connect with MSME Solutions Centre for raising their problems. Third, it developed associations with local universities and colleges and conducted entrepreneurship trainings for the students. This helped it to spread its objective among the local population. Fourth, it offered the services free of charge to the MSMEs thereby building credibility and trust amongst the MSMEs. Fifth, it provided an opportunity for MSMEs to interact direct in person with the experts on specific days at the office.

9.7.4.Value Network - Collaborations and Partnerships The business model of MSME Solutions Centre was mainly dependant on the aggregation of a pool of retired experts, who were settled in Uttarakhand post retirement and were interested in getting attached to a professional entity, from where they could leverage their knowledge in resolving the business needs of the local MSMEs. This network of retired experts was the core of the business model of MSME Solutions Centre. These people gained expertise while working with PSUs, central and state government bodies and were looking for a platform to leverage their expertise for the benefit of the society. It also gained support from SIDBI and DFID in setting up the processes and framework for implementing this business model. It entered into MOUs with universities and colleges to conduct and attend courses on different areas of skill building.

Business Model of Service Delivery and MSME Analysis of select cases in India

9.7.5.Technology, Innovation and Learning The competitive advantage for MSME Solutions Centre was embedded in its business model innovation. It conceptualized the unique business model, which aggregated the skills and expertise of the retired individuals from government departments and universities to provide context specific and need based solutions for the business issues faced by the MSMEs in Uttarakhand. This unique aggregation of retired experts plugged the accessibility and affordability challenges for the MSMEs in Uttarakhand. Another key aspect of this business model innovation was that it carried lot of promise for scaling up in terms of diversified service offerings by expanding the pool of retired experts having knowledge of different domains of entrepreneurship. The third uniqueness of this business model was that the retired experts were not looking for financial incentives for their services but wanted to contribute something for the welfare of the society and people living in the state of Uttarakhand.

9.7.6.Pricing Model - Revenues and Cost Streams: Till 2012, MSME Solutions Centre was mainly focused on designing and implementing a practical business model, which can be made self-sustainable in the future. Considering the lack of trust among MSMEs towards BDS providers as well as reluctance of MSMEs in availing paid services from BDS providers, it was imperative for MSME Solutions Centre to establish a right business model first. The word 'right' means suited to the context of MSMEs in Uttarakhand, the one, which can be trusted by the MSMEs and the one, which can showcase the benefits and success stories. Keeping this in consideration, MSME Solutions Centre did not charge the MSMEs for their services till 2012. It was planning to transform this into a commercial venture from 2013 onwards. In the meantime, it was relying on funding support from IAU (Industries Association of Uttarakhand). Regarding Costs, it was operating with minimal expenses pertaining to market building initiatives, salary of two employees and small office setup.

9.8.Success Stories MSME Name

Issue

M/s Janardhan Need for Energy Efficiency Solution Plyboards Industries Ltd.

Energy Audit was carried out and the recommendations led to the savings of INR 10.2 lakhs per annum.

M/s GBPL Industries Pvt. Ltd.

Setting up a Unit

Helped in Setting up the unit and filing central investment subsidy and interest subsidy claims.

Devanshu Appliances

Manufacturing losses, Inventory overheads, Financial debt and Taxation Issues

Revamped the marketing strategy, inventory sell-off. Realigned the manufacturing processes, loan payments with banks and enabled the tie-up with branded players as a supplier.

M/s Bombay Drawing & Quality Issue due to manual operation Survey Instruments and Nalanda Acrylic

Result

Replaced the manual process by technology intervention.

9.9.Future Action Points The key action points identified by the company as a part of its future development agenda involved (1) expanding the pool of retired experts to expand the services offered to the local MSMEs; (2) expanding the reach and network to increased number of MSMEs within Uttarakhand; (3) and making the company self-sustainable by charging service based fees or annual fees for the services rendered in a manner which would be affordable and viable for the MSMEs

9.10.Key Learning MSME Solutions Centre's business philosophy was driven by the belief in aggregation creating a pool of retired experts for resolving the business problems of MSMEs in Uttarakhand. This philosophy of aggregating the retired experts and leveraging their years of experience helped to build a reliable and cost-effective channel for providing business solutions to the MSMEs in a cost-effective and affordable manner. The key learning from MSME Solutions Centre are as follows: Focus on building a market ecosystem. There is always a resistance to change or to adopt something new among the MSMEs. One of the reasons is the susceptibility to change. Another reason is the lack of market awareness and paying capacity to afford the changes. On the other hand, BDS providers lack the basic understanding of the market realities at the ground level. This signifies the importance of creating a collaborative platform where buyers-sellers can communicate and transact with each other. Devise Local Solutions for Local Problems. MSMEs in different regions face different problems, which require context specific solutions by local BDS providers. So, the practical approach for serving the MSMEs is to create a pool of local BDS providers, who understand the local context and are able to provide a need based end to end solution pertaining to the local context and environment. Build alliances with key stakeholders. To create a collaborative platform and develop trust and reach, there is a need for building relationships and partnerships with BDS providers, MSMEs, trading bodies, government bodies, industry associations and technology companies.

Business Model of Service Delivery and MSME Analysis of select cases in India

10 Rajesh Bheda Consulting Rajesh Bheda Consulting Pvt Ltd. (2006)

Overview

Founded by: Dr. Rajesh Bheda Outreach: Global Issue Addressed: Enable process and productivity improvements to enhance the competitiveness of the fashion industry organizations

Indian textile industry contributes nearly 14% of total industrial production of the country and contributes to 3% of the total GDP. Most of the organizations operating in the textile sector in India are MSMEs, which lack process efficiencies and are plagued with poor resource allocation and management. This affects their quality, productivity and overall sustainability. This warrants a need for the availability of consulting organizations, which can align with the textile companies and help them with systemic solutions from bringing in process efficiencies and productivity improvements at minimal costs.

Business Model: Need based Productivity and Quality Improvement Solutions Offerings: Productivity and Continuous Improvement related consulting & training programs Revenue Streams: Consulting & Training fees. Objective: To enhance the competitiveness of the fashion industry organizations by bringing productivity and quality improvements across the value chain Results Economic: [Year 2012E]  Network: 100+ clients across India, Bangladesh, Sri Lanka, Far East, Europe and USA. 80 MSMEs and 20+ LSEs.  Revenues: INR 9 million (approx) – 60% from MSMEs & 40% from LSEs

Actors Customers: Apparel manufacturers, Clusters, Development agencies, International brands Partners: Development Agencies and Trade bodies

Positives 1. 2. 3. 4. 5.

Technology and Industry expertise of the founder Competency in Apparel Fashion Industry Strong presence via articles, publications and research papers. Consulting & Academic network Team of passionate and skilled consultants

Challenges 1. Lack of awareness and resistance among the MSMEs regarding the adoption of improvement solutions. 2. Lack of availability of reliable data sets about the MSMEs 3. High cost and retention related challenges of skilled consultants

Source: Interview with Dr. Rajesh Bheda & http://rajeshbheda.com/

10.1.Introduction The Indian textile industry contributes nearly 14% of the total industrial production of the country and accounts for 4% of the country's GDP6 . The majority of the enterprises in the textile sector belong to MSMEs. With the growing role of technology, it has become important for MSMEs across the industries to become a part of the online marketplace, so that they can gain global visibility and access to global market. One of the key challenges faced by the manufacturers in textile sector involves the lack of access to knowledgeable business development service providers, which can enable a systemic process for

6 Source: A Brief Report on Textile Industry in India (March, 2012), available at http://www.asa.in/pdf/surveys_reports/Textile-Industry-in-India.pdf (Last accessed on 29 Apr 13)

identifying process inefficiencies and productivity overheads in a cost-effective manner. Most of the consulting organizations operating in process and productivity improvement areas focus on generic issues without core specialization and are unaffordable to the MSMEs. Dr. Rajesh Bheda targeted this opportunity and setup Rajesh Bheda Consulting (RBC) in 2006. RBC was setup as knowledge based organisation with the objective of bringing about process and productivity improvements to enhance the competitiveness of the fashion industry organizations. The key strength of RBC was attributed to the academic and consulting background of the founder. By 2012, the company built a clientele of 100+ clients across Asia, Europe and USA.

10.2. Apparel Consulting Industry Overview The apparel and textile industry is one of the core industries in India in terms of industrial output, employment and GDP contribution. The global apparel industry has undergone a gradual transition in terms of the migration of the factories and manufacturing setups from developed economies to low cost developing economies. One of the key factors attributed to the same includes availability of low cost resources like manpower, land, building and machineries in developing economies as well as emergence of technologies including internet and communication, which bridged the distances and management challenges. Another key factor includes the population and GDP growth of the emerging economies, which is shifting the demand for different products and services from developed nations to developing nations. India is one of the countries, which benefitted from these two driving factors with respect to the growth of textile industry. However, most of the organizations operating in the textile and apparel sector in India are MSMEs, which lack process efficiencies and are plagued with poor resource allocation and management. This affects their quality, productivity and overall sustainability. This warrants a need for the availability of consulting organizations, which can align with the textile companies and help them with systemic solutions for bringing in process efficiencies and productivity improvements at minimal costs. The Porter's five force analysis below reflects the high attractiveness of the textile consulting industry. On the positive side, the entry barriers are high; threat of substitutes is medium; and inter-organizational rivalry is medium. On the negative side, bargaining power of suppliers is high; and bargaining power of buyers is high which means focus is needed on retaining the skilled consultants and on providing measurable results to the customers. The key capabilities needed for building a competitive advantage in this industry is knowledge and execution capabilities.

Business Model of Service Delivery and MSME Analysis of select cases in India

Consulting (Textile Industry) – Porter’s 5 Force Analysis

• • •

Barriers to Entry (High) Knowledge Intensive Require Industry Contacts Require trust building

•

• • •

•

Industry Rivalry (Medium) Independent Consultants (brief-case consultants) Large consulting organizations Domain Knowledge drives the competition

Bargaining power of Customers (High) • MSME mindset resists spending money on consulting • Lack of awareness among MSMEs regarding measurable benefits • Availability of independent consultants at low cost

• •

Threat of Substitutes (Medium) Substitutes can be found easily over online. Published books on processes and productivity Individual consultants Not mandatory mindset

Bargaining power of Suppliers (High) • Less availability of skilled and trained resources / manpower to work in textile consulting

10.3.Industry and Organizational Challenges The Indian MSMEs in the textile and apparel industry were facing several challenges regarding process inefficiencies, market access and awareness. RBC decided to focus on providing solutions for resolving the back-end issues faced by the textile companies mainly related to process inefficiencies and poor resource allocation and management. However, during the years of operation, RBC faced significant challenges in terms of training and retaining the skilled pool of knowledge consultants. Dr. Rajesh said, "One challenge is of retaining talent. How do we cater to their aspirations?" The second challenge was related to unwillingness of small scale enterprises to engage consultants, especially on a payment basis due to the lack of guarantee of achieving desired outcomes. Dr. Rajesh said, "The struggle is that there is a comfort zone or resistance to change on the part of entrepreneurs. Even though we're able to show the numbers based on evidence, our past experience and consulting, about 30 percent of the total audience may agree to go for such programme. Another 30 percent would say maybe but wouldn't be sure whether their team would be able to implement this. The concept may sound interesting to them, but they would want to know whether it works in their organization. The rest would be least bothered, as it's not for them."

10.4 Competition RBC derived its competitive advantage from the various factors. These included (1) academic and industry expertise of the founder; (2) specialization in apparel fashion industry; (3) strong presence in literature owing to publications by the founder; (4) access to a network of professionals and students trained by Dr. Rajesh at National Institute of Fashion Technology, now working across different textile companies and brands; (5) and excellent team of consultants that strive to achieve client delight.

RBC operated in the niche area of imparting productivity, quality and process consulting to the fashion industry organizations. This focused approach coupled with the technical and industry expertise of the founder enabled RBC to stay away from the direct competition. However, technically speaking, RBC had some level of competition from (1) brief-case consultants providing partial solutions for small issues; (2) freelance experts; (3) fashion textile division of a large consulting organization; (4) and few medium sized consulting organizations providing services in operational improvement. The only factor, which could directly impact the business growth of RBC, was the unforeseen fluctuations in the economic environment including demand-supply situation and purchasing power of the people.

10.5 Overview RBC focused on enhancing the competitiveness of the fashion industry organizations by adopting a 2-step approach. The first step involved creating market awareness about the significance of productivity and process improvements. The second step involved conducting need based productivity improvement projects for clients in the fashion industry thereby ensuring the measurable and predictive outcomes. The 4C analysis below reflects the internal (company) and external (context, competition, and customer) view.

RBC - 4C Analysis Customers • • • •

Apparel Manufacturers Clusters International brands Development Agencies

Competition

Context

• (RBC operated in the niche area of imparting productivity and process consulting to the fashion industry organizations. This focused approach coupled with the technical and industry expertise of the founder enabled RBC to stay away from the direct competition. • Brief-case consultants • Textile vertical of large consulting organizations

• MSMEs have lack of fund and proper channels to promote their products as well as to seek inputs on processes and productivity aspects. • Funds allocated by government towards development of textile sector were not fulfilling the original objective • Lack of industry standards and processes

Company • Started in 2006 as a knowledge partner for fashion industry organizations • Focused on imparting productivity and process improvement related consulting and trainings. • Leveraging the technical and consulting expertise of the founder • Backed by 20+ years of academic and research experience of the founder • Supported by a strong team of skilled consultants.

Business Model of Service Delivery and MSME Analysis of select cases in India

10.6.Strategy View The strategy view of RBC is being evaluated from two perspectives. This includes value chain analysis and overall strategy framework analysis.

10.6.1.Value Chain Analysis The Value Chain Analysis for RBC brings forth the key primary activities as (1) customer need assessment; (2) devising a need based implementation plan; (3) execution; (4) setting up metrics and benchmarking; (5) and measure the results and outcomes The key support activities include (1) knowledge management; (2) customer relationships; (3) and human resource management.

RBC – Value Chain Knowledge Management Publications, Reports, Research Papers and Technical Articles Customer Relationships Building customer portfolio by participating in events, seminars, workshops, social media Human Resource Management Training and Retaining consultants

Need Assessment •Evaluating the specific needs and existing processes at customer site

Implementation Plan

•Underline the improvement plan

Execution •Implement the improvement plan

Metrics & Benchmark •Setup metrics and benchmarks for future monitoring and control

Evaluate Outcomes •Measure the results and outcomes

10.6.2.Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation of RBC across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics.

RBC - Strategy Demystified Segmenting Strategically •Sector: Textile •Focus Area: Fashion industry organizations •Geography: Global •Offerings: Productivity and Quality Improvement consulting & training

Leveraging Unique Activities •Leveraging the technical and consulting expertise of the founder •Backed by 20+ years of academic and research experience of the founder •Ability to provide need based end to end solutions for productivity and quality issues faced by apparel manufacturers •Supported by a strong team of skilled consultants.

Exploiting Trade-offs • Maintain focus on apparel manufacturers within textile sector rather than expanding across other areas in textile sector

Capitalizing on Industry Dynamics •Lack of availability of knowledge and cost-effective consulting organizations, who can understand the specific needs of the MSMEs and address the same.

10.7.Business Model View 10.7.1.Customer Segments RBC had four types of customer segments having specific consulting requirements. The first segment included apparel manufacturers (micro, small, medium and large) who faced the pressure of competition and declining bottom-line. These customers were looking for quick productivity improvement solutions. More mature clients are looking at guidance for continual improvement journey, lean principle and operational excellence. The second segment included clusters that represented the regional group of textile industries and sought help for conducting trainings and process improvement workshops/ consulting advice at cluster level. The third segment included international brands that sourced their supplies from India, Bangladesh and Sri Lanka. They wanted RBC to improve the quality, productivity and working conditions of their sourcing base to support Ethical Trading. RBC has also been engaged by international and national brands for process improvement and capacity building of internal teams. The fourth segment included development agencies like International Trade Center, European Bank for Reconstruction and Development and Asian Productivity Organizations, Japan etc. They wanted RBC to conduct trainings and infactory consulting across different geographies for specific productivity and quality improvement needs.

Business Model of Service Delivery and MSME Analysis of select cases in India

10.7.2.Value Proposition RBC focused on providing a range of service offerings to fashion industry organizations aimed at increasing the competitiveness. This included consulting and training services. The value offerings across Consulting included (1) productivity improvement programs; (2) quality improvement programs; (3) adoption of lean management principles ; (4) plant startup; (5) setting up training cell; (6) setting up metrics and benchmarking for world Class manufacturing (7) and executive search The value offerings across Training included (1) quality management; (2) productivity; (3) Lean principles; (4) and production planning and scheduling etc.

10.7.3. Customer Relationships RBC held the unique position in the fashion industry due to the technical expertise, industry consulting experience and business network of the founder. Apart from this, RBC had a positive influence on the fashion industry due to its publications available in research and consulting domain as well as word of mouth publicity driven by excellent customer relationships with apparel manufacturers, textile clusters, global brands and development agencies. Dr. Rajesh represented the face of RBC and had lot of respect and recognition in the textile industry. Dr. Rajesh said, "Our route of communication is articles, seminars, speaking at public forums, websites and through work. Communication travels through work." Apart from the charismatic leadership, the key operational principles of RBC that led to long term customer relationships, included (1) promising only what can be delivered; (2) passionate and capable team of consultants; (3) building the business on ethics; (4) providing customized solutions specific to the needs and paying capacity of the MSMEs; (5) and providing measurable outcomes for any type of service offering. The embedded knowledge and expertise coupled with the charismatic leadership and operating principles led to a rapid market acceptance and increase in customer portfolio. According to RBC, understanding the need of the customer was the key to service offering. Every customer had a unique problem, which warranted a unique solution.

10.7.4.Value Network - Collaborations and Partnerships In the formative years, RBC created a collaborative ecosystem for targeting the MSMEs in the fashion industry. It collaborated with development agencies and trade bodies for conducting trainings, seminars workshops for MSMEs. This enabled RBC to share the best practices and productivity improvement tips with the MSMEs. Subsequently, few of these MSMEs contacted RBC for individual need based consulting projects. The development agencies included UN, International Trade Center, European Bank for Reconstruction and Development and other Asian productivity Organizations etc. Dr. Rajesh said, "Of course, a bridge is definitely required to reach MSMEs because for one BDS provider or a small BDS provider, it's difficult to reach individual micro enterprises. It's not humanly possible and it's economically unviable. So, some trade bodies should be able to play a facilitating role to bring these people together."

RBC also collaborated with educational institutions to reach out the budding entrepreneurs in the textile industry. RBC also forged strategic partnership with leading international organisations and experts for joint delivery of consulting services.

10.7.5.Technology, Innovation and Learning Regarding Technology, RBC realized the criticality and importance of social media and virtual communication and promotion tools for connecting with the potential customers across Asia. It leveraged the social media platform to build market awareness, to showcase references and testimonials from existing customers and to showcase its publications and knowledge base. Regarding Innovation, RBC focused on innovations across the value offerings. First, the company focused on delivering customized need based solutions as per the specific problems and paying capacity of the customers. It operated in a project mode where the duration and scope of the project was designed as per the requirement of the individual customers. Secondly, the company focused on setting up measurable outcomes, which could be validated by the customers to confirm the success or failure of the project. Thirdly RBC's innovative approach of collaborative supply chain improvement projects for win-win results for brands, buying agents, apparel manufacturers and workers alike is being received very well.

10.7.6.Pricing Model - Revenues and Costs Streams RBC generated revenues from consulting and training activities. The major cost overhead for RBC was the expense related to training and salaries of the consultants employed by RBC.

10.8.Future Action Points RBC decided to keep itself focused on providing knowledge consultancy to the fashion industry organizations. The key action points identified by RBC as a part of its future development agenda included (1) achieving scale by expanding across more and more countries in Asia, Far East, Europe and USA; (2) penetrate the existing markets by expanding the client base; (3) expanding the pool of consultants; (4) and creating a leadership pool.

10.9.Key Learnings RBC's business philosophy focused on leveraging the embedded knowledge in the niche area of fashion industry. The key learning from RBC are as follows: Focus on the niche and develop a market ecosystem. There is always a resistance to change or to adopt something new among the MSMEs. This signifies the importance of making time and money investments in designing behaviour change communication for creating market awareness before expecting economic returns. The companies, which have the ability to identify the niche and capability to invest time and resources on market 71

Business Model of Service Delivery and MSME Analysis of select cases in India

development, have been found successful over a longer period of time. RBC operated in the niche area of imparting productivity, quality and process consulting to the fashion industry organizations. This focused approach coupled with the technical and industry expertise of the founder enabled RBC to stay away from the direct competition. Build alliances with key stakeholders. Collaborations and partnerships with development agencies and trade bodies are important for the competitiveness and sustainability of any business targeted at the MSMEs. RBC collaborated with development agencies and trade bodies for conducting trainings, seminars workshops for MSMEs. Focus on need based end to end solutions. The companies need to focus on delivering need based end to end solutions to build credibility with the small scale manufacturers as well as to leverage the time and capital investments over a large customer base. RBC operated in a project mode where the duration and scope of the project was designed as per the requirement of the individual customers Scalability is the key. The companies targeting the MSMEs need to spend considerable time and money on building market awareness and acceptance. So, achieving scalability either by expanding the offerings or by expanding across geographies is critical for the sustainability of such companies. RBC focused on scalability by expanding its operations and reach across Asia, Europe and USA

11 RedBus redBus (2006) Founded by: Mr. P Sama / Mr. C Padmaraju / Mr. S Pasupunuri Outreach: India (20+ States) Issue Addressed: Information asymmetry between bus operators and bus travelers. Business Model: Aggregator-Broadcaster via technology platform Offerings: Enabling bus operators to sell their seats and enabling customers to book tickets online, offline and through partners Revenue Streams: Sale of BOSS application, transaction fees from travel agents and commission on ticket sales via redBus setup. Objective: “To bridge the information asymmetry gaps between bus operators and bus travelers and ensure a seamless booking and travelling experience for the bus travelers” Awards: Forbes List of Top 5 start-ups (2010), BW’s top 5 (2010), IAMAI (2010) Results Economic: [Year 2012E]

Overview The inter-city bus transport industry had been characterized by a fragmented supply-chain, which involved thousands of bus operators relying on travel agents for seat bookings. This supply-side fragmentation led to demand side issues faced by bus travelers, who also relied on travel agents for booking the tickets. redBus entered the bus ticketing space in 2006 with a centralized realtime inventory database, online and offline booking and distribution network to bridge this demand-supply information gap.

Actors Customers: Bus operators, Bus travelers, Online portals, Travel agents, Govt. RTCs. Funding Partners: Seedfund, Inventus capital partners, Helion capital partners. Operational Partners: Bus operators, Sales & distribution, Travel agents Technology Partners: Amazon etc. Mentors: TiE, Bangalore

Positives 1. Ensuring information symmetry by aggregation and real-time upload of seats inventory at the supply side. 2. Ensuring choice to the travelers regarding buses, seat numbers, pick-up points, quality rating. 3. Market building by educating bus operators on potential routes. 4. Leveraging capabilities of Amazon to build reliable and scalable cloud based infrastructure.

 Network: 800+ bus operators, 26+ regional

offices, 7+ call-centers, 40000+ sales & distribution outlets, 450+ employees  Revenues: INR 345 million (approx)  Coverage: 19000+ bus services per day (20+

states)

Challenges 1. Build a leadership pool and management capacity to manage the scale. 2. Manage operational complexity with increasing transaction volumes. 3. Leverage data mining and analytics to expand the geographical foot-prints. 4. Remain relevant to the industry trends

Source: Interview with Mr. Sama on 17th August 2012

11.1.Introduction The inter-city bus transport has come a long way from the manual ticket booking process, which relies on travel agents making telephone calls to private bus operators for booking tickets. It has rather oriented itself to the more transparent online process, where the bus travelers can search and book the bus tickets themselves and get the confirmation in real time. This dynamic shift in the inter-city bus travel industry has happened in a short timespan of six years since 2006 and is mainly attributed to the entry of redBus. The real-life experience of Mr. Phanindra Sama, not getting a ticket during Diwali visit to his hometown in 2005, made him realize the limitations of the existing inter-city bus ticket bookings process. He understood the genesis of this demand-supply gap resulting from the information asymmetry and decided to launch an enterprise to bridge the same. He

Business Model of Service Delivery and MSME Analysis of select cases in India

created a team of founders, did the preliminary market research, got associated with TiE, Bangalore (The Indus Entrepreneurs) for mentorship and launched a bus ticketing company in 2006. By 2012, it became the largest bus ticket company in India - largest in almost all the aspects like network of bus operators; sale of tickets; sales and distribution outlets; number of booking transactions processed per day etc. By 2012, the company created an infrastructure of 26+ regional offices; 450+ employees; network of 800+ bus operators; 40000+ sales and distribution outlets; and a scale comprising daily transactions for19000+ bus services every day across 20+ states including 2 government RTCs.

11.2.Inter-City Bus Travel Industry The road transport has been considered as one of the most accessible and affordable modes of transport in India. It has been used for inter-city as well as overnight journeys, reachable by road. The road transport has been a fragmented industry, which includes government RTCs and thousands of small-size private bus operators. During the year 2012, 65% of the market was served by bus operators having fleet size of less than 20 buses each; 25% of the market was served by those having fleet size less than 75 buses each; and remaining 10% of the market was served by those having fleet size greater than 75 buses each. The bus transport industry has many-to-many relationship among thousands of regional bus operators on the supply side and thousands of bus travelers on the demand side. The bus travelers have to be dependent upon the travel agents to book the seats for inter-city bus travel. This supply side fragmentation has been one of the key challenges, resulting in an information asymmetry for the overall demand-supply economics in the bus transport industry. From the industry growth perspective, the high economic growth rate in India since 1990s has led to the increase in job opportunities, resulting in urbanization of cities and migration from rural areas. This has led to an increase in demand for inter-city travel options by road. The Porter's five force analysis below reflects the high attractiveness of the bus ticketing industry. On the positive side, the entry barriers are high; bargaining power of suppliers ranges from high to low; threat of substitutes is medium; and inter-organizational rivalry is medium. On the flip side, bargaining power of buyers is high which means focus is needed on customer service excellence. The key capabilities needed for building a competitive advantage in this industry comprises technology integration, operational efficiency and data mining capabilities

Bus Transport Ticketing: Porter’s Five Force Analysis Barriers to Entry (High) • • •

• •

Need for technology intensive network Brand Image of existing players Huge network effect resulting from integrated pool of bus operators, technology partners and customers. Trust and transparency matters. High operational complexity.

Bargaining power of Customers (High) • • • •

Demand > Supply Low switching costs Multiple online options for ticket booking. Alternative modes of transport like rail and air.

Threat of Substitutes (Medium) • •

Alternate modes of transport – rail and air Alternate communication channels like videoconferencing etc

Inter-Organization Rivalry (Medium)

• • •

•

Huge demand and supply availability. High growth market Competitive advantage lies in relationship with fragmented bus operators on one hand and use of technology in managing operational complexity at other end. High lead time for turning profitable as lot of investments in market building.

Bargaining power of Suppliers (Low / High) •

•

Low: Bus operators depend on intermediaries for selling the seats inventory. High: Technology intensive. So, dependency on technology suppliers High: Investors. Need for capital is high for market building. So, dependency on venture capitalists.

11.3.Industry and Organizational Challenges There were several challenges faced by the bus transport industry. The key challenge was the lack of aggregation of the large number of bus operators, who were operating in different cities across India. The fragmented supply-side coupled with manual ticket booking process led to huge information asymmetry resulting in demand-supply issues and revenue loss for the bus operators. Regarding ticket booking, the traditional ticket booking process for private buses had been manual based on phone calls by the travel agents. The process included (1) passenger going to travel agent's shop; (2) travel agent calling up the bus operators in his network one by one for ticket availability; (3) and the travel agent issuing the ticket and the payment receipt subject to availability of seat. This process had its own limitations and challenges. There was no information symmetry among bus operators, travel agents and bus travelers. Each travel agent was operating in stand-alone mode with access to limited number of bus operators and had no visibility in the status of seats booked by other travel agents. The system provided no flexibility to the traveler in evaluating the service quality of available bus operators, booking the return tickets, booking the seat number of their choice etc. Also, due to the lack of visibility in the available options, the traveler had to pay the premium fare demanded by the travel agent. The bus operator suffered from cash flow problems as he was dependent on the travel agent to get his payment and also had to bear the losses from seats not being booked during travel. Mr Sama understood these pain points of the bus travelers and bus operators and decided to convert the same into an opportunity by leveraging the technology and processes to aggregate the inventories of seats in real-time at one end and by providing 75

Business Model of Service Delivery and MSME Analysis of select cases in India

an online and telephone interface to the travelers at other end. From the redBus perspective, entering this white space had its own set of organizational challenges in the beginning. The first organizational challenge was to build the social acceptance, which required walking the fine line between acquiring the available inventory of seats from bus operators on one end and bringing the travelers to book those seats at other end. One would not come without the other. The second organizational challenge was convincing the bus operators to embrace technology and adopt the software application launched by redBus for uploading the inventory of seats in the centralized server. The bus operators were hesitant in shifting to internet technology for operating their business. The third organizational challenge was to build the software applications, to be used by the bus operators for uploading the available seats and by the travelers for booking their tickets. The fourth organizational challenge was to strengthen the processes and structures related to technology; leadership; operational efficiency; and customer service excellence as the company built scale.

11.4 Competition redBus derived its competitive advantage from various factors. These included (1) the scale and reach; (2) trust and transparency with suppliers and travelers; (3) capability in aggregating the large number of bus operators; (4) and capability in managing the operational complexity of real-time inventory management and processing millions of booking transactions. "From the competitive advantage perspective, I will say, it is the kind of scale, we have achieved; our focus on values; our agility and flexibility," commented by Mr. Bharat. redBus looked at competition from multiple dimensions. The first dimension was the competition from online travel agencies (OTAs) and travel portals like yatra, expedia etc. These companies were operating in the business of ticket bookings for air travel, rail travel, package tours and hotels etc. redBus aligned with them as complementary partners by providing an application plug-in (SeatSeller) for complementary bus travel bookings. "We are uniquely positioned to serve the middle class. It is a very non-overlapping thing with the other OTA's, which serve airline consumers. It is not the same consumer," commented by Mr. Bharat. The second dimension was the competition from individual travel agents, who were using manual ticket booking process, which involved making phone-calls to individual bus operators. redBus minimized this competition by building a technology platform to plug the demand-supply gaps resulting from information asymmetry and lack of real-time updates. The third dimension was the competition from other online bus ticket booking companies like Travelyaari, Ticketgoose etc. Most of these were regional players having local presence in 1-2 states and did not possess the kind of scale, trust and transparency and operational excellence, as compared to redBus. redBus built strong relationship with the bus operators and bus travelers thereby leading to a strong network effect, which was difficult to replicate for other direct competitors. 76

11.5 Overview - redBus During 2006, redBus was launched in Bangalore as a format independent bus ticketing company with a centralized real-time inventory database, online and offline booking and distribution network. It defined itself as a bus ticketing company, which serviced the bus operators by providing an online platform to display their real-time inventory and serviced the bus travelers by providing an efficient online and off-line ticket booking and delivery network. The key focus was on enabling a technology platform supported by physical network to bridge the technology gap between demand and supply in bus travel industry. It operated in Business to Business (B2B) and Business to Consumer (B2C) segments, with B2C contributing 80% of the revenues. "The business model is very simple you buy a ticket you sell a ticket. You don't do it with any other company. You do it with 800 Operators and 40000 agents and a million customer gateways and guarantee a comfortable journey by means of transport , which is very emotional and very personal for a customer," commented by Mr. Sama. "We are always telling ourselves that we are a bus ticket company means we will have equal investments in an equally more investments on our call center team as we have on our internet team," commented by Mr. Sama. redBus operated in the market by offering a suite of three different products comprising (1) BOSS application for the bus operators; (2) online internet website (redBus.in), offline call center and franchisee contact points for bus travelers (B2C); (3) and SeatSeller application for online travel agents (B2B). For the bus operators, the company offered a software application named as BOSS (Bus Operators Software System). This enabled the bus operators to upload their inventories in the redBus system. This enabled redBus to get a real time access to the inventory available along with other important details like available routes, seats available on those routes, price range etc. For non-computerized bus operators, the company took the inventory inputs by phone and uploaded the same manually in the redBus system. "Which routes, seats availability, price etc - all this information comes to us in real time," commented by Mr. Sama. For the bus travelers, the company offered multiple options to search for the available tickets and book the same as (1) online website (www.redBus.in); (2) call centers; (3) franchisee outlets; (4) travel agents etc. The customers had access to decision-making inputs like availability of buses on a particular route, service quality comparison, fare, availability of seat, choice of seat number, information on pick-up and drop points etc. For the online travel agents, the company offered SeatSeller (Global Distribution System). This application plug-in powered the ticketing applications for bus bookings. "â&#x20AC;Śthen we have redBus, which is a consumer facing travel agency where all the information is put for a consumers we realize the same information is also useful for travel agents so we take the same information and put it on seat seller for travel agents," commented by Mr. Sama.

Business Model of Service Delivery and MSME Analysis of select cases in India

The company earned commission as percentage of the transactions done using any of these three products. Additionally, the company also earned money from selling its software application, BOSS to the bus operators. The 4C analysis below reflects the internal (company) and external (context, competition, and customer) view regarding redBus.

redBus - 4 C’s Analysis

Customers • Supply side – bus operators •Demand side – bus travelers in the age group of 20-40 years, internet savvy, having credit card and living in Tier-I and Tier-II cities. • Travel agents, Online portals • Government transports

Competition

Context

(redBus ability to aggregate the supply-side bus operators and capability in managing operational complexity ensured a monopoly in the competitive space in bus ticketing. )

• Increase in demand for bus transport due to economic growth and job opportunities in cities. • Fragmented bus transport industry having ‘000s of small bus operators operating individually. • Manual ticket booking process driven by individual travel agents • Lack of industry standards and processes resulting in exploitation of bus operators and customers.

• Online portal and travel agents • Offline travel agents • Online bus ticket booking companies like Travelyaari, Travelgoose etc.

Company • India’s largest bus ticketing company with the highest bus operator partners, largest distribution network & highest sales • Format independent , which enabled customers to book bus tickets online, offline & through partners! • FY2012-26+ regional offices, 450+ employees, 800+ bus operators in the network, 40000+ sales and distribution outlets.

11.6.Strategy View The strategy view of redBus is being evaluated from three perspectives. This includes (1) value chain analysis; (2) and overall strategy framework analysis.

11.6.1. Value Chain Analysis The value chain analysis for redBus brings forth the key primary activities as (1) uploading the inventory of available seats; (2) search and choose operations done by the bus traveler; (3)book and pay operations done by the bus traveler; (4) delivery / confirmation of tickets; (5) and releasing the payments to bus operators. The key support activities include (1) focus on research and analytics; (2) setting up technology and operational benchmarks; (3) setting up technology infrastructure; (4) and building brick-and-mortar infrastructure across locations.

redBus – Value Chain Research and Analytics Focus on Research and Analytics; knowledge sharing with bus operators regarding new routes, which are underserved etc Metrics Technology driven metrics and performance benchmarks like server up-time, transaction response time for custom queries, friendliness of user interface, load balancing, real-time inventory upload time etc Technology Infrastructure In-house development of software applications as BOSS, redbus.in, Seat Seller etc, use of Amazon web service for building a reliable and scalable cloud based infrastructure etc Infrastructure Setup Setting up online and physical infrastructure comprising regional offices (26+), call-centers (7+), sales and distribution outlets (40000+) etc Inventory Upload

•Real-time upload of inventory of available seats by the bus operators using BOSS

Booking & Payments

Evaluation

• Customer/ Traveler logon to redbus.in website. • Evaluate the available options. • Make a choice to book or not.

• Customer completes the online booking and credit card payment. (OR) • Calls on phone for telephonic booking

Delivery

• Tickets delivered to customer as per requirement (online/offline)

Disbursement

• Payments received for bookings disbursed to the concerned bus operators. • Commission is kept.

11.6.2. Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation of redBus across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics. redBus - Strategy Demystified

Segmenting Strategically • Supply side – bus operators •Demand side – bus travelers in the age group of 20-40 years, internet savvy, having credit card and living in Tier-I and Tier-II cities. • Travel agents, Online portals • Government transports

Leveraging Unique Activities

Exploiting Trade-offs

• Offering technology platform (online and callcentre) to bridge the demand-supply discrepancy due to information asymmetry. • Ensuring customer service excellence. • Building trust and transparency. •Focus on creating an integrated network of bus operators, travel agents and bus travelers. • Focus on supplier ratings, analytics and research

• Ensuring information symmetry by real-time upload of seats inventory at the supply side. • Ensuring choice to the travelers regarding buses, seat numbers, pick-up points, quality rating. • Market building by educating bus operators on underserved routes. • Leveraging capabilities of Amazon to build reliable and scalable cloud based infrastructure.

Capitalizing on Industry Dynamics • Fragmented bus transport industry having thousands of small bus operators. • Lack of centralized technology for demand-supply transparency. • Manual ticket booking process driven by individual travel agents • Lack of industry standards and processes resulting in exploitation of bus operators and customers.

Business Model of Service Delivery and MSME Analysis of select cases in India

11.7.Business Model View - redBus The business model is defined as a blue-print of strategy. It determines the 'How' part of strategy. The business model view of redBus is being evaluated across the following dimensions as: l Who is

the customer?

l What

is being offered?

l What

kind of customer relationships exists?

l What

kind of organizational structure and leadership is in place?

l What

kind value network is being setup?

l What

are the performance indicators and metrics?

l How experimentation l How technology

and learning is being carried out?

integration and innovations are being carried out?

l What

is the revenue and cost model?

l What

kind of socio-economic performance is being achieved?

11.7.1. Customer Segments redBus defined its customer segment across four dimensions. The first dimension included the bus operators, who managed the supply-side by providing the information on available seats. The company built an integrated network of 800+ bus operators and sold the software application (BOSS) to them, to be used for uploading the real-time inventory details into the redBus server. The second dimension included the bus travelers, who used redBus website and call center for booking inter-city bus tickets. This segment included people living in Tier-I and Tier-II cities, in the age group of 20-40 years, both male and female, had access to credit card and were internet savvy. The third dimension included offline travel agents and online travel agents like expedia, yatra etc. These travel agents were engaged in the business of booking for air and rail travels, package tours and hotels. The company powered them to undertake bus ticket bookings via an application plug-in called SeatSeller. The fourth dimension included state government bus transports (RTCs). Most of these RTCs were unprofitable due to vacant seats on return routes from different states and needed someone to help in increasing the customer volumes on to-and-fro routes. The association between redBus and RTCs had a positive impact on the growth of customer volumes for RTCs. For redBus, this created a huge opportunity of getting associated with RTCs having large fleet of buses.

11.7.2.Value Proposition redBus defined its business as enabling access to reliable and transparent ticket booking system for inter-city travelers. The value proposition offered by the company included different offerings for different customer segments. For private bus operators and RTCs, the value proposition included (1) increase in revenues by reflecting the real-time inventory of available seats to the travelers; (2) timely payment for sale of tickets; (3)

standardized commission rates; (4) advice on new profitable routes; (5) and comparative service quality ratings based upon customer feedback. For bus travelers, the value proposition included (1) transparency in the booking process; (2) reliability of service; (3) real-time access to the available tickets on requested routes; (4) transparent pricing; (5) and option to make a choice on bus, seat number, payment mode, ticket delivery, pick-up point etc. For off-line travel agents and OTAs, the value proposition included (1) availability of complementary option of bus booking to be offered to their customers.

11.7.3. Customer Relationships - Building Trust and Transparency redBus realized very early in their business that the main entry barrier in this business would be the network effect, which would require an ecosystem of trust and transparency with bus operators and bus travelers. "So the way we define ourselves also answers the question about our entry barriers. One, we are a company oriented towards a very-very transparent business model," commented by Mr. Bharat. Regarding bus operators, the company focused on developing trust based relationship with different bus operators across different locations in India. This helped the company to build an integrated network of 800+ bus operators thereby aggregating their individual inventory of seats in real-time. The company took multiple initiatives for building trust and transparency with the bus operators. These included (1) online rating of the bus operators on the basis of quality of service; (2) charging standard commission to all bus operators irrespective of the size; (3) sharing research and analytics based information on new profitable routes; (4) providing equal visibility to all operators - small or big; (5) transformation of the private bus travel industry from an unorganized sector to an organized sector by aggregating the capacity of different bus operators; (7) and eliminating the dependency of the bus operators on travel agents for seats booking and payments etc. "So our customers basically come to us and tell us if there is some unfair trick happening on the ground. It is just because of the relationship that we have developed with them. Our operators tell us, how we should run etc. They come to us for counseling as well what should be done by us on the ground. This kind of thing becomes very-very difficult and takes a lot of time to develop," commented by Mr. Bharat. Regarding bus travelers, the company focused on building trust and transparency by enabling access to transparent information on bus travelers, on available seats, price range etc. The options included (1) service quality ratings of the bus operators; (2) online and offline booking facilities;(3) flexible search options to get information on routes, pick-up points, fares, available seats numbers etc.; (4) excellent technology infrastructure with quick navigation and response time; (5) user-friendly interface and call center staff; (8) and wide geographical coverage.

Business Model of Service Delivery and MSME Analysis of select cases in India

11.7.4. Organizational Structure and Leadership redBus believed in the philosophy of focusing on problem solving approach to streamline the entire value-chain process between bus operators and bus travelers. The leadership was driven by the zeal to focus on eliminating the core pain-point of information asymmetry suffered by the bus travelers. That is, how to make the experience of bus travelers as smooth as possible from the time, he visited the website or made a telephone call for ticket booking till the time, he completed his bus journey. Rather than working as a founder group, the company was managed as a professional organization having one CEO followed by a management team. The organizational culture was transparent from top to bottom. The resources were given the flexibility and empowerment to share their inputs on anything from technology to strategy. The company kept its focus on gaining more and more market expertise by making use of research and analytics.

11.7.5.Value Network - Collaborations and Partnerships redBus realized the criticality of technology and investments in scaling their business and thereby built strong partnerships with technology companies and venture capitalists. Regarding technology, redBus leveraged the technology capabilities of Amazon by using AWS (Amazon web services) to build a reliable and scalable cloud based infrastructure, which could handle all their operational complexities, resulting from huge number of online queries and transactions. The company was one of the earliest adopters of Google BigQuery7 . This enabled the company to provide a seamless online experience to the customers, who accessed the company's website for search, evaluation and booking transactions. Regarding funding, redBus had very supportive venture capital investors like Seedfund, Inventus Capital partners and Helion Capital Partners. The investors had complete faith in the business philosophy of the company and considered it as one of the most capital-efficient company in the travel industry. Regarding mentorship, redBus got tremendous support and insight from TiE (The Indus Entrepreneurs), Bangalore during their formative period. TiE helped the company to establish and fine-tune its business model based upon findings from the market realities after launch. The demand-supply network created by redBus led to a huge network effect. The integrated network of bus operators and distribution channels became a huge entry barrier for the competitors. At one end, the company aggregated the supply-side by getting a real-time view of the inventory of available seats and at the other end, the company provided an online and call-centre interface for travelers to evaluate and book the tickets. The increase in transactions at the demand side motivated the bus operators to increase their capacity and the increase in available options of available seats on the website enabled more and more prospective travelers to engage with the company for ticket bookings. This created a win-win opportunity for all the actors (bus operators, redBus, bus travelers), which led to the overall expansion of the integrated demand-supply network posing as a huge entry barrier for new entrants.

Google BigQuery is a web service that lets you do interactive analysis of massive datasetsâ&#x20AC;&#x201D;up to billions of rows.

11.7.6.Performance Indicators and Metrics redBus focused on technology benchmarks as criteria for performance assessment. The company was operating in a complex operational environment where the online interface to the travelers was processing large number of transactions simultaneously. Apart from the number of transactions, the nature of transactions was very complex unlike that in air travel and rail travel bookings. The server up-time, transaction response time for customer queries, friendliness of user interface, load balancing, real-time inventory upload time etc. were some of the critical performance indicators for the company.

11.7.7. Experimentation and Learning redBus realized the importance of experimentation and analytics quite early during inception. At the time of inception, the company started with the creation of the software application (BOSS) for bus operators to enable them to upload their inventory in the servers of redBus. The thinking behind this was that information about available seats is a prerequisite for selling the same. The founders of the company took that software to different bus operators but failed to sell the whole business idea. After discussing with TiE, Bangalore, the founders realized that rather than selling the software first as a tool to increase productivity and access to real-time inventory, they needed to showcase the inflow of revenues as a starting step to the bus operators. Realizing the same, they went about proving the business model first in an offline mode. They blocked 2 seats each with few bus operators and then sold them using the customer interface. This convinced the bus operators on the viability of the business model and the bus operators started adopting the BOSS application for inventory upload. The key lesson learnt by the company during this exercise was that to get buy-in from other stakeholders, it was important to prove the working model rather than trying to convince the stakeholders on building infrastructure only. Another learning, which came from this exercise, was that it was more important to align the business with other stakeholders rather than forcing them to change drastically. So, the company went about enabling change by doing minor tuning in existing process of bus operators model rather than pushing a drastic change all together.

11.7.8.Technology and Innovation The company leveraged technology to enable seamless experience for the customers. It started with the creation of three product offerings as BOSS, redBus online platform and SeatSeller, to bring forth the real-time and integrated demand-supply equation between bus operators, travelers and travel agents. To ensure seamless customer experience, the company focused on integrating technologically complex options like choice of seat number, choice of bus operator, quality comparison, choice of pick-up point etc in their online ticket booking website. As the business achieved volumes and scale, the company leveraged the technology capabilities of Amazon by using AWS (Amazon web services) to build a reliable and scalable cloud based infrastructure, which could handle all their operational complexities resulting from huge number of online queries and transactions. Also, the company focused on developing analytical tools to understand the market trends from current ticket booking transactions. The output from these market research

Business Model of Service Delivery and MSME Analysis of select cases in India

and analytical capabilities helped the company to strengthen the relationships with the bus operators by educating them on new profitable routes as well as with the bus manufacturers by advising them on the type of buses to be manufactured.

11.7.9. Pricing Model - Revenues and Costs Streams Regarding revenues, the company had multiple revenue streams. The first channel was regarding the revenue coming from the sale of BOSS application to the bus operators. The second channel was regarding the revenue generated in the form of transaction fees, from the travel agents for the transactions happening through the redBus ecosystem. The third channel was related to the commission on the ticket booking done using redBus ecosystem. Regarding costs, the company incurred substantial costs in setting up the infrastructure comprising regional offices (26+), technology product streams and call-centers (7+). Subsequently, the company had ongoing costs in terms of monthly salaries, payment gateway costs per transaction (18-20%), taxes (10-12 %) etc.

11.7.10 Social and Economic Performance Regarding social and economic performance, redBus had come a long way since its inception in 2006. The company had an interesting negative working capital cash flow, as the money remained with the company with 6-7 days from the time ticket booking was done till the time, the money was paid to the bus operators. By 2012, it developed a network of 26+ regional offices, 450+ employees, 800+ bus operators and 40000+ sales and distribution outlets. It reached a scale of managing daily transactions including 19000+ bus services every day across 20+ states including 2 government RTCs. It serviced more than 10 million customers / travelers till 2012 and had been growing at a rate of more than 200% every year. Regarding capital efficiency, it utilized INR 120 million against the raised capital of INR 400 million. All these factors made the company as one of the most capital efficient organization in the transport industry in India. It turned profitable in 2012 by recording a profit of INR 10 million. FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

Gross Market Value (INR million)

3.5

260

540

1330

3450

Annual Revenue @10% (INR million)

0.35

4.1

133

345

Bus Operators

800+

Regional Offices

26+

No. of Employees

450+

Sales & Distribution outlets

40000+

Coverage bus services per day across 20+ states

19000+

Note: Data as on 17th August 2012 84

11.8.Recognitions and Awards redBus received many recognitions and awards, which included (1) Forbes list of Top 5 start-ups in 2010, (2) Business World's top 5 most promising entrepreneurs in India, (3) and Startup of the year by IAMAI in 2010.

11.9.Future Action Points redBus had been a name synonymous with a unique business model, which leveraged technology and processes to plug the pain points in the demand-supply gaps of the intercity bus transport industry. It created a win-win business model around the collaborative ecosystem, which had a huge network effect resulting from aggregation of real-time inventory of bus seats on the supply and customer pull on the demand side. The key action points identified by the company as a part of its future development agenda involved (1) development of leadership pool to meet the challenges emerging from high growth rate; (2) focusing on becoming the best in analytics to drive the industry with the latest insights and trends emerging from mining of millions of ticketing transactions; (3) expanding the supply-side by collaborating with government transports; (4) strengthening the technology infrastructure for service excellence by strengthening the partnerships with Amazon and Google; (5) enhancing the customer service experience by improving the offerings like setting up boarding kiosks etc; (6) and expanding the geographical footprints.

11.10.Key Learnings redBus followed the philosophy of problem-solving approach to address the persistent issues related to information asymmetry and lack of transparency between bus operators and bus travelers. redBus has clearly demonstrated that a combination of emerging technologies, market needs based innovations, operational efficiency and ability to sense the customer mind-set can lead to a sustainable business model. The key component in this success is the company's ability to break down rigid mindsets and bringing about the market differentiation. The key learnings from redBus are the following: Do not assume. Assumptions are risky in any business venture. The companies often assume that they can dictate and can dynamically change the way, the market works. For example, many competitors of redBus tried to impose the technology adoption on the bus operators without proving the revenue outcome. redBus tried the same approach in the beginning but quickly realized the mistake and proved the business model and revenue aspect first to the bus operators. Find a niche (value proposition) and develop a market ecosystem. The companies that are able to identify the true market need and design a value proposition accordingly have better chances of success. Finding such a niche requires understanding of the market, creative approaches, and significant research. redBus created a technology platform to 85

Business Model of Service Delivery and MSME Analysis of select cases in India

bridge the information asymmetry between the bus operators and bus travelers. It invested lot of time and efforts in building trust and transparency with the bus operators. Focus on individual needs and not want. Consumer always looks for solutions to their need and not to the want. The need varies with each consumer. The companies that are able to design their value proposition, which can fulfill the individual needs and give a choice to the consumer have better chances of market acceptance. redBus offered multiple booking and payment options to the bus travelers. Additionally, the bus travelers were given choices to select a particular seat number on a particular bus etc. Focus on technology and innovation. The companies need to focus on innovative use of hi-touch technologies, which can meet the operational complexity while making the things (affordability, accessibility, availability, transparency) simpler for the target segment. The innovations should not be restricted to product or process innovations. There is a need for business model innovations, which can bring about a creative aspect and paradigm shift in sourcing, delivery and distribution.

12 San Blue Enterprises Pvt. Ltd. (fibre2fashion) San Blue Enterprises Pvt. Ltd.(2000) Founded by: Mr. Sanjiv Shah Outreach: Global Issue Addressed: Enable reach and access for textile MSMEs to the global market via online market platform in apparel industry. Business Model: Freemium model comprising free and premium services for textile MSMEs. Offerings: Enabling B2B services in Textile Industry. Provides competitive intelligent reports about the industry. Offers IT solutions like website development, social media promotion etc. to textile companies. Revenue Streams: Subscription based services. Premium membership, Corporate membership. Objective: To provide up-to-date information on the trade, trends and technologies in apparel and textile industries, online. To provide cutting edge technology for enhancement of online business and increase connectivity between buyers and sellers. Awards & Recognitions: Ranked No. 1 by Alexa.com and Ranking.com

Overview Indian textile industry contributes nearly 14% of total industrial production of the country and contributes to 3% of the total GDP. The textile industry like another industry has ventured into online B2B marketing in a big away and has easily adapted to this phenomenon. Sanblue Enterprises Pvt. Ltd. through its site Fibre2Fashion.com is one of the largest players in B2B textile industry.

Actors Customers: Textile MSMEs , Corporate & Consulting companies Funding Partners: Fibre2Fashion.com is owned and funded by Sanblue Enterprise Pvt Ltd.

Positives 1. Ensuring up to date information about happenings in textile industry. 2. Ensuring quality data reports about textiles to customers. 3. Market building by enabling B2B transactions among various players. 4. Providing IT solutions to textile companies.

Results Economic: [Year 2012E] ď&#x192;ź Network: 190 Countries, Catering 350+

subsectors , 1.25 million visitors per month,15 million page views 100 employees ď&#x192;ź Coverage: Catering 350+ subsectors in 190

countries

Source: Interview with San Blue Enterprises Pvt. Ltd. Management & http://www.fibre2fashion.com

12.1.Introduction The Indian textile industry contributes nearly 14% of the total industrial production of the country and accounts for 4% of the total GDP8 . The majority of the enterprises in the textile sector belong to MSMEs. With the growing role of technology, it has become important for MSMEs across the industries to become a part of the online marketplace, so that they can gain global visibility and access to global market. The Business-to-Business (B2B) account for a small proportion in India's growing ECommerce market. However, it has become critical for the MSMEs to leverage the ecommerce platform to gain a global visibility and market presence. This phenomenon

A Brief Report on Textile Industry in India (March, 2012), available at http://www.asa.in/pdf/surveys_reports/Textile-Industry-in-India.pdf (Last accessed on 29 Apr 13)

Business Model of Service Delivery and MSME Analysis of select cases in India

provides them exposure as well as a large base of audience to cater to. San Blue Enterprises Pvt. Ltd. identified this untapped opportunity and setup Fibre2Fashion.com in the year 2000 - a virtual B2B marketplace for buyers, sellers and information seekers in the textile industry. By 2012, the company became one of the largest B2B platforms for the global textile (apparel and fashion) industry by serving the demands of the entire value chain. The etrade platform connected the buyers and sellers for sourcing and marketing textile products. Additionally, this e-trade platform acted as an information hub on various aspects of textile, apparel and fashion industries.

12.2.Online B2B Marketplace The Porter's five force analysis reflects the competitive aspect of the online B2B platform industry focusing on MSME clients. Sanblue Enterprises Pvt. Ltd. differentiated itself from the other B2B players by focusing on the niche area of textile MSMEs. It created a huge knowledge base in textile industry, which led to huge entry barriers for other players trying to offer business development services for textile MSMEs. On the positive side, the entry barriers are high; threat of substitutes is medium; and inter-organizational rivalry is medium. On the negative side, bargaining power of suppliers is high; and bargaining power of buyers is high which means focus is needed on retaining the skilled consultants and on providing measurable results to the customers. The key capabilities needed for building a competitive advantage in this industry is knowledge and execution capabilities.

Online B2B Marketplace (Textile Industry): Porter’s Five Force Analysis

• •

•

• • •

Barriers to Entry (High) Need for technology intensive network Brand Image of existing players who enjoy early mover advantage Huge network effect resulting from integrated pool of suppliers, buyers, technology partners and investors. Need for creating awareness, trust and transparency. High operational complexity. Need for Vertical (domain) Knowledge Bargaining power of Customers (High)

• • •

•

Demand > Supply Low switching costs Multiple online options for trading platforms like Alibaba, Trade India Alternative platforms of trading: Telephone enquiry, Printed media etc.

Threat of Substitutes (Medium) •

• Inter-Organization Rivalry (Medium)

• •

•

Different organizations working in different segments Main Competitors: Sulekha, Trade India, Just dial Services, Alibaba International, Google, IndiaMART A lot of potential in terms of demand and supply for every segment, large number of untapped MSMEs

Alternative platforms of trading: Telecommunication (just Dial), Printed media(Yellow Pages) etc. Alternate channels: Trade fairs, Trade market/ Hyper marts etc.

Bargaining power of Suppliers (Low / High) •

•

12.3. Industry and Organizational Challenges When San Blue Enterprises Pvt. Ltd. entered the e-commerce market in 2000 by setting up Fibre2fashion, the Indian MSMEs in the textile industry were facing severe challenges regarding market access and awareness. On the other hand, the buyers were facing challenges pertaining to lack of reliable sources of information and data-sets pertaining to MSMEs operating in the textile industry. The key challenge for the buyers and sellers was the lack of access to specialized and low-cost sourcing, distribution, marketing and information channel to get connected with the millions of buyers and suppliers within and outside India. San Blue Enterprises Pvt. Ltd. identified this opportunity and brought about an industry transformation by setting up an online ecommerce platform thereby bringing about a drastic reduction in time and capital investments spent on seeking access to buyers, sellers and technical information in textile industry. It faced many challenges during the initial years of setting up Fibre2fashion. The key challenge that came up during the early 2000s was the low internet penetration and low adoption rate of internet technology by small enterprises in India. The next challenge was the lack of willingness of MSMEs in textile industry to take up the membership without seeing the increase in revenues. The third challenge was to build a revenue model around the niche area of textile industry, especially, when huge investments were made in setting up the technology platform.

12. 4 Competition San Blue Enterprises Pvt. Ltd. derived its competitive advantage from various factors. These included (1) specialization in textile industry; (2) scale, reach and reliability of technology platform; (3) trust and transparency; (4) and ability to capture and present information and trends on latest technologies in textile industry. Mr. Amar Ashish said, "â&#x20AC;Śthere isn't much of competition in this space. It is just the perceptional competition that is happening from our prospects' point of view." The company faced competition from e-commerce players like IndiaMART, JustDial, Alibaba as well as from traditional marketplaces like trade fairs, hyper marts etc. However, unlike other online B2B players, the company differentiated itself from the other B2B players by focusing on the niche area of textile MSMEs. There was no e-commerce player in the market having core specialization in textile industry. San Blue Enterprises Pvt. Ltd. captured the end to end supply chain of textile industries on its virtual platform, which could not be replicated by the competitors. This gave a niche area advantage to the company.

12.5. Overview San Blue Enterprises Pvt. Ltd. created an online platform (Fibre2fashion), which enabled the global market reach for the diverse offerings from different MSMEs in textile industry. In fact, it played the role of an integrator, which brought together the buyers, sellers and information seekers from the textile industry on a common e-commerce platform thereby

Business Model of Service Delivery and MSME Analysis of select cases in India

plugging the gaps regarding market access and reach. The global platform or the e-hub helped the buyers and the sellers to locate each other as per their requirements, interact, negotiate and conduct actual transactions online. The 4C analysis below reflects the internal (company) and external (context, competition, and customer) view.

San Blue Enterprises Pvt. Ltd. - 4C Analysis

Customers • Supply side – Textile and Apparel Companies •Demand side – Large organizations like Wal-mart, Vodafone etc., which need textile specific expert inputs • MSMEs who want to buy or sell textile products • Government agencies like IL&FS, EDI.

Competition

Context

(San blue has differentiated themselves from other online portals by providing a single product category like textiles, Therefore they have a monopoly in this sector)

• MSMEs have lack of fund and proper channels to brand and promote themselves globally • There is a gap between the textile and apparel suppliers and buyers • Funds allocated by government towards development of textile sector were not fulfilling the original objective •Lack of industry standards and processes following inefficiency in textile MSMEs

• Online portals like India-mart • Third party Textile agents and middle men

Company • It is amongst the world’s largest B2B platforms for the global Textile-Apparel and Fashion industry, • It is an e-trade platform facilitating the sourcing & marketing requirements in textile industry • Its provides Branding & Promotional services, Market watch reports and online trade fairs • FY2012 –6000+ companies in its clients database comprising 35-40% as SMEs •The online portal has around1.5 million hits per month

12.6.Strategy View The strategy view of San Blue Enterprises Pvt Ltd is being evaluated from two perspectives. This includes value chain analysis and overall strategy framework analysis.

12.6.1.Value Chain Analysis The Value Chain Analysis for San Blue Enterprises Pvt. Ltd. brings forth the key primary activities as (1) maintaining database of suppliers and buyers; (2) directory listing and categorization; (3) manage queries and buy-sell transactions; (4) delivery & payments; (5) and suppliers rating. The key support activities include (1) focus on product, process and business model innovation; (2) setting up technology and operational benchmarks; (3) and setting up technology infrastructure.

San Blue Enterprises Pvt. Ltd. - Value Chain Innovation Product, Process and Business Model Innovations Benchmarking & Metrics Performance benchmarking and metrics Infrastructure Technology Infrastructure Maintain Suppliers & Buyers database •Build a list of suppliers across free and premium memberships

Listing and Categorization

Manage Transactions •Buy Sell Transactions •Query Handling

•Directory Listing •Categorization

Quality Ratings

Delivery •Manage payments and deliveries.

•Quality ratings for the suppliers

12.6.2.Strategy Framework Analysis The Strategy Framework Analysis helps in the cross-sectional evaluation of San Blue Enterprises Pvt. Ltd. across the following dimensions as (1) segmenting strategically; (2) exploiting trade-offs; (3) leveraging unique activities; (4) and capitalizing on industry dynamics. San Blue Enterprises Pvt. Ltd. - Strategy Demystified Segmenting Strategically • Supply side – Textile and Apparel Companies •Demand side – Large organizations like Walmart, Vodafone, etc • MSMEs who want to buy or sell textile products • Government agencies like IL&FS, EDI.

Leveraging Unique Activities • Offering technology platform (online and offline) to bridge the demand-supply discrepancy due to information asymmetry. In textiles. •Ensuring efficient E-transactions • Ensuring customer service excellence. • Building trust and transparency in business. •Focus on supplier ratings, analytics and research •Largest portal to cater all needs of the vertical of textiles alone.

Exploiting Trade-offs • Retain focus on textile sector or expand across other sectors.

Capitalizing on Industry Dynamics •Lack of access to formal market ecosystem for MSMEs due to limited resources and awareness. •Low level of ICT adoption in SME

Business Model of Service Delivery and MSME Analysis of select cases in India

12.7.Business Model View The company followed a freemium (free + premium) business model, whereby it offered certain services for free to the customers and charged a subscription fee for offering premium services.

12.7.1.Customer Segments San Blue Enterprises Pvt. Ltd. defined its customers as anybody seeking different inputs, products and services across the value chain of the textile industry. The first segment of customers included small, medium and large business houses from across the globe, who wanted to access the global market for selling their products and services offerings. The second segment of customers included global buyers who wanted a reliable channel for identifying and transacting with the suppliers for textile related different products and services. The third segment of customers included consulting organizations, corporates, government bodies, educational institutes etc., who sought up-to-date information on the trade, trends and technologies in apparel and textile industries.

12.7.2.Value Proposition San Blue Enterprises Pvt. Ltd. defined its business as a virtual marketplace for providing end to end solutions across the value chain of the textile industry. It focused on building not only an e-trade platform facilitating the sourcing & marketing requirements but also on providing first-hand information on various aspects of textile, apparel and fashion industries, 24x7, globally. The core value offerings included (1) brand and product promotion solutions; (2) platform for connectivity for micro, small and medium manufacturers with the global business partners, importers and buyers; (3) market-watch reports comprising up-to-date information on the trade, trends and technologies in apparel and textile industries; (4) job listing enabling the connect between job-seekers and job-providers in textile industry; (5) listing of regional and global trade fairs and events pertaining to textile industry; (6) and conducting online trade fairs.

12.7.3.Customer Relationships Since its inception, the key objective of San Blue Enterprises Pvt. Ltd. was to work closely with MSME's and bring them online so that they could increase their revenues by gaining access to the global market via online platform. The company developed long-term relationship with the customers in the textile industry including MSMEs by providing end to end solutions for all sort of needs pertaining to textile industry, be it the connect between buyers-sellers or information on the trade, trends and technologies in apparel and textile industries or brand promotion or recruitment of skilled manpower or details on trade fairs and events etc. It setup a dedicated customer service desk for responding to customer queries and created a huge knowledge repository pertaining to any type of textile related technical and business information. The key aspect of San Blue Enterprises Pvt. Ltd. was packaging the service offerings for different types of customer segments as per their specific needs. For corporate members, it provided unique knowledge services by offering market watch reports, financial reports, articles etc. apart from offering advertising & promotion, business networking and recruitment services. For premium

membership holders, it provided the value add by assigning a dedicated customer care, publishing a micro-website for enhanced visibility and representation, issuing a TrustSign certificate to enhance reliability and trust in front of prospective buyers.

12.7.4 Value Network - Collaborations and Partnerships San Blue Enterprises Pvt. Ltd. focused on collaborations and partnerships, which could help to build an in-depth knowledge base on technology and trends in textile industry fitting the global standards and guidelines. During April 2011, the company entered into a strategic alliance with Textiles Intelligence for South Asia print publications called TAOSA (Textile and Apparel Outlook South Asia) & TTPASA (Technical Textiles and Performance Apparel South Asia). The aim of this alliance was to provide the South Asian textile and apparel industry with research-based information to support their strategic planning. The company established a resident representative office in Bangladesh as a part of global expansion.

12.7.5 Technology, Innovation and Learning San Blue Enterprises Pvt. Ltd. realized the importance of integrating the field learnings and evolving technologies to undertake continuous product, process and business model innovations. Regarding Technology, the company built an in-house IT and Analytics team, which focused on expanding the technological, operational and service capabilities of the Fibre2fashion online platform. This was needed to maintain the focus on customer service excellence and withstand the operational load and complexities, which was increasing due to the expansion of service offerings and growth of online transactions, visitors and customers. Regarding Innovation, the company focused on incremental and disruptive innovations aimed at providing end to end solutions for diverse needs of the different types of customer segments in the textile sector. The company aimed at becoming a largest ecommerce portal dedicated to the textile value chain. It started with the listing of textile suppliers and gradually expanded the value offerings across branding & promotion; job listing; consulting reports; market information; IT solutions etc. by doing innovations across the product, process and business model. The key driver for bringing about innovations was the focus on understanding the needs of the different types of customers and creating need based solutions. The company realized very well, that it needed to build operational efficiency as well as to widen the customer base in order to sustain and manage the large time and capital investments made in setting the technology platform. Unlike the common practice of outsourcing, the company created an in-house team of IT development and analytics to build technology competency and generate revenues by leveraging the in-house team for providing IT solutions for textile companies.

12.7.6 Pricing Model - Revenues and Costs Streams San Blue Enterprises Pvt. Ltd. started the revenue generation by offering premium membership services. Gradually, it expanded the revenue streams by providing different sort of service offerings to different types of customer segments. The revenue streams

Business Model of Service Delivery and MSME Analysis of select cases in India

included income from (1) offering premium memberships; (2) offering corporate memberships; (3) publishing market watch reports; (4) offering advertising solutions; (5) offering recruitment services; (6) offering liquidation of unused stocks and old machineries; (7) and offering IT solutions.

12.8.Recognitions and Awards Despite maintaining a low key profile, the unique business model of San Blue Enterprises Pvt. Ltd. led to recognition and awards like (1) top ranking by Alexa.com in textiles & nonwoven category; (2) top ranking by Ranking.com in textiles; (3) and among top 20 B2B sites by BSG Ltd.

12.9.Future Action Points San Blue Enterprises Pvt. Ltd. became India's largest online textile B2B marketplace connecting global buyers with suppliers as well as acting as a global knowledge repository on textile related information. The key action points identified by San Blue Enterprises Pvt. Ltd. as a part of its future development agenda included (1) focus on expanding the service offerings in IT solutions and job listing; (2) strengthening the analytics capabilities to process the data from millions of online transactions into a meaningful information for its customer base; (3) integrating the mobile based technology for buyer-seller transactions; (4) collaborating with global entities to strengthen the business information and tools; (5) and enhancing the knowledge repository for providing updated information on trade, trends and technologies in apparel and textile industries.

12.10.Key Learnings San Blue Enterprises Pvt. Ltd's business philosophy included focus on providing end to end solutions to the MSMEs in a niche area. The key learnings from San Blue Enterprises Pvt. Ltd. are as follows: Focus on the niche and develop a market ecosystem. The companies, which have the ability to identify the niche and capability to invest time and resources on market development, have been found successful over a longer period of time. Sanblue operated in the niche area of textile industry. It setup an online ecommerce platform, which helped the MSMEs and large companies in getting an online access to buyers, sellers and technical information related to textile industry. Focus on technology and innovation. The companies need to focus on innovative use of ever growing technologies such as internet, World Wide Web and smart mobile applications, which can help business grow by leaps and bounds. The online B2B marketplace of San Blue Enterprises Pvt. Ltd. brought a paradigm shift in sourcing, delivery and distribution of products, services and information.

Build alliances with key stakeholders. Collaborations and partnerships are important for the competitiveness and sustainability of any business. Companies can leverage its resources by engaging in strategic alliances with other firms. San Blue Enterprises Pvt. Ltd. collaborated with global entities for offering business information and business tools. Focus on need based end to end solutions. The companies need to focus on delivering need based end to end solutions to build credibility with the small scale manufacturers as well as to leverage the time and capital investments over a large customer base. Sanblue provided a platform, which enabled the buyers and the sellers to locate each other as per their requirements, interact, negotiate and conduct actual transactions online. Scalability is the key. The companies operating in a niche area need to focus on scalability to ensure sustainability and competitive advantage. Sanblue focused on scalability by expanding its value offerings as well as by expanding its reach across companies operating globally.

Business Model of Service Delivery and MSME Analysis of select cases in India

13 Findings and Conclusion The business development service providers, which are being studied, have displayed the common intent, objective and passion for creating a unique ecosystem to deliver the differentiated service offerings to the specific needs of MSMEs in India. All these organizations were driven by the passion and domain expertise of the founders, which overcame the operating environment challenges and led to the creation of respective business models, which had potential to scale and self-sustainability. This brings an answer to the interesting question for the future. That is, how to build sustainable and scalable business ventures, which focus on providing those business development services to the MSMEs that are affordable, accessible, available and acceptable to the MSMEs? The key operating principles, which were commonly evident across the BDS providers in the scope of this study and which act as a reference for the other BDS providers include the following. First, there is a need to focus on Market Building and Awareness. There is always a resistance to change or to adopt something new among the MSMEs. This is being attributed to the susceptibility to change by the MSMEs, lack of reliability on BDS providers and lack of market awareness. This signifies the importance of investing time and efforts on creating awareness, trust and transparency with the MSMEs. Second, there is a need to focus on creating a collaborative ecosystem. Collaborations and partnerships are the key aspects to become sustainable and to build competitive advantage. The BDS providers targeting the MSMEs need to leverage the capabilities and reach of different stakeholders including government bodies, industry associations, technology providers etc., to connect and gain trust with the MSMEs. Third, there is a need to focus on need based end-to-end solution offerings. The MSMEs in India are always looking for reliable solutions to their needs and thereby have in-built resistance in adopting the new market solutions unless and until those solutions confirm the value addition to the bottom-line. The BDS providers need to focus on creating need based solutions, which are affordable and acceptable. Fourth, there is a need to focus on scalability. This is needed to ensure the sustainability and competitive advantage driven by high volumes. The scalability strategy should be embedded in the DNA of the business model right at the stage of the inception. Fifth, there is a need to focus on technology and innovation. The BDS providers need to focus on leveraging the innovative use of technology for offering cost-effective solutions to the different needs of the MSMEs.

ANNEXES

Business Model of Service Delivery and MSME Analysis of select cases in India

ANNEXES Annexe1: User Guide for Analytical Framework The purpose of this is to explain the analytical framework, which has been used for evaluating the BDS providers engaged in providing non-financial services to the MSMEs. The subsequent sections will highlight the details about the macro, meso and micro level analysis. In the next annexe, analytical tool has also been described separately.

Macro Level: Industry View The fundamental unit of strategic analysis is Industry choice. This section of the analytical framework (Annexe II: Slides 2-3) attempts to understand how the companies perceive the industry, in which they are operating. The purpose of Slide 2 is to understand the industry overview. It includes two dimensions. The first dimension is related to PEST analysis. This involves understanding the environment from company perspective. This is the basis for identifying the environmental challenges and opportunities. This includes Political trends (regulatory environment, tax policies, regulatory bodies, government support, public infrastructure, deregulation, export/import policies etc.), Economic trends (income, demographic profile, spending and savings pattern, rural versus urban, occupations etc.), Social trends (social values, cultural aspect, social norms, customer habits, attributes etc.), Technological trends (information technologies, communication technologies, market penetration etc.). The second dimension is related to Industry trends. This involves understanding how industry has evolved, what kind of dynamic shifts have happened, what are the emerging trends, how the environment is influencing the industry etc.? The purpose of Slide 3 is to understand the company view on the competitiveness of the industry on the basis of Porter's five force analysis. The five forces framework determines the long term profitability of an industry. This includes understanding how the company perceives the competitiveness of the industry on five dimensions. The horizontal view talks about the two dimensions as the bargaining power of buyers and bargaining power of suppliers. The bargaining power of the buyers and the suppliers is determined by the size and concentration of buyers and suppliers as well as by the relative importance and availability of the products of the suppliers in the buyer's value chain. The vertical view talks about the two dimensions as threat of substitutes and threat of new entrants. The impact of the threat of substitutes on industry profitability depends upon the relative price/performance ratio of the available substitutes, which fulfill the same basic need of the customers. The impact of the threat of new entrants is influenced by the entry barriers of the industry in terms of existing number of competitors, size of capital investment needed, complexity of technologies required, government policies etc. The average industry profitability is influenced by both existing and potential competitors. The central view talks about rivalry amongst existing competitors. There are multiple structural determinants of the degree of rivalry present in the industry. The first

Business Model of Service Delivery and MSME Analysis of select cases in India

determinant is the number and relative size of competitors. The second determinant is the pre-requisites and operating conditions in the industry. This includes factors like capital investment needed, role of technology, availability of key resources etc. The third determinant is the behavior aspect which is influenced by conditions like entry barriers, exit barriers, irreversible resource commitments etc.

Meso level: Company View This section (Annexe II: Slides 4-5) of the analytical framework attempts to know the company across multiple dimensions. The dimensions include understanding the context, customer details, company background, competitive scenario (competitors, market share etc.) and company financials. The first dimension is related to understanding the Context. The Context dimension highlights the operating conditions in the environment, which directly impact the company's line of business and which are being leveraged by the company to design its unique activities and differentiating factors. For example: Specific industry sector, customer traits and changes happening, emerging social trends, type of government policies and attributes etc. The second dimension is the Customer. The Customer dimension highlights the customer segments being targeted, contribution to the bottom-line, types of services demanded, customer profiles, specific actions implemented for different customer segments etc. The third dimension is the Company. The Company dimension highlights the background of the company, management overview, products and services offerings, types and names of key clients, areas of operations, number of employees, certifications, awards etc. The fourth dimension is the Competition. The Competition dimension highlights the details regarding competitors, relative market share, relative growth rates, basis of competition etc. The fifth dimension is the Financials. The Financials dimension highlights the financial health and bottom-line of the company, financial performance on different indicators projected in the slide (Slide 5) in last 5 years from 2008-09 till 2012-13.

Micro level: Strategy and Business Model View This section (Annexe II: Slides 6-18) of the analytical framework attempts to understand the strategic theme and business model of the company across multiple dimensions. The sound strategy and its underlying business model for a company, is characterized by a unique value proposition compared to competitors; a different, tailored value chain; clear tradeoffs, and choosing what not to do; activities that fit together and reinforce each other; and continuity of strategy with continual improvement in realization. This has two main themes as Creating a Strategy and Understanding the Competitive Advantage.

100

Creating a Strategy The purpose of the theme 'Creating a Strategy' (Slides 6-10) is to understand How the companies perceive and define their strategy? The key dimensions of this include focusing on segmenting strategically; exploiting trade-offs; leveraging unique activities; capitalizing on industry dynamics; designing a unique value proposition; and continuity of strategy with continual improvement in realization.

1 Segmenting Strategically The first dimension is Segmenting Strategically. This dimension tries to understand the basis of segmentation and identification of target segments; mapping of product and service offerings to specific needs of each target segment; and unique value mix offered to each target segment. The basis of segmentation involves different approaches like varietybased positioning (offering variety of goods or services irrespective of target segment); need-based positioning (focusing on end to end needs of a specific target segment rather than targeting multiple target segments); and access-based positioning (focusing on particular geography or location).

2 Exploiting Trade-offs The second dimension is Exploiting Trade-offs. An essential part of strategy is choosing what not to do. Tradeoffs are incompatibilities between strategic positions that create a need for choice. The sources of trade-offs are incompatible product / service feature or attributes; differences in the best configuration of activities in the value chain; inconsistencies in image or reputation; limits on internal coordination, measurement, motivation and control etc. The trade-offs helps to make a strategy sustainable against imitation by established rivals. The essential part of this dimension is to understand from the company the following questions. What kind of trade-offs have been undertaken since inception? What was the basis of those trade-offs? How those decisions helped the company?

3 Leveraging Unique Activities The third dimension is Leveraging Unique Activities. This involves design and implementation of business model which is characterized by a unique combination and configuration of activities, which makes the business model as valuable, rare, inimitable and non-substitutable. The essential part of this dimension is to understand from the company the following questions. What are the key activities, which give them competitive edge over its competitors? What are the key resources, which give them competitive edge over its competitors? Why does the company think so? How the key activities are configured in a value chain? How the key resources are retained by the company? How the activities have evolved / changed over time?

4 Capitalizing on Industry Dynamics The fourth dimension is Capitalizing on Industry Dynamics. This involves identifying the strategic positions created by the structural industry changes and the flexibility of the company to respond rapidly towards the competitive market accordingly. The essential

101

Business Model of Service Delivery and MSME Analysis of select cases in India

part of this dimension is to understand from the company the following questions. What kind of structural changes have happened in your industry, which posed a challenge or an opportunity for your company? Why do you think so? How did you leverage the changing dynamics?

5 Unique Value Proposition The fifth dimension is designing a Unique Value Proposition. The value proposition is the element of business model that looks outward at customers; their pain-points and needs at the demand side of the business. The value chain focuses internally on operations and is the core of the business model. The value proposition aims to understand the company view on the following three questions: l Which

customers? Within an industry, there are distinct groups of customers, or

customer segments. A value proposition can be aimed specifically at finding a unique way to serve the chosen segment profitably. It focuses on end users and the channels. l Which

needs? These appeal to a mix of customers who might defy traditional

demographic segmentation. These focus on products & services and the related features. l What

relative price? The companies have two value propositions: deliver higher

value at a premium price or offer a low relative price according to their efficiency.

6 Strategic Continuity The sixth dimension is Strategic Continuity. An essential part of strategy is maintaining Strategic Continuity. Reinvention and frequent shifts in direction are costly and confuse the customer, the industry, and the organization. Continuity is required in the value proposition. Successful companies continuously improve in how they realize their strategy. Strategic continuity and continuous business model evolution should occur simultaneously - they should not be inconsistent. Continuity allows learning and change to be faster and more effective. The essential part of this dimension is to understand from the company the following questions. How do you perceive the evolution and change in the strategy of the company over the years, since inception? What kinds of changes have happened? What has been the basis of those changes? How that has helped the company? How do you perceive the corresponding evolution and change in the business model of the company over the years, since inception? What kinds of changes have happened? What has been the basis of those changes? How that has helped the company?

Understanding the Competitive Advantage The purpose of the theme 'Understanding the Competitive Advantage' (Slides 11-18) is to understand the key activities of the company and the basis of competition for the company. The key dimensions of this include focusing on designing a unique value chain; identifying the strategy map comprising strategic themes and underlying tactical activities; creating a value network; and determining the basis of relative performance.

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1 Value Chain Analysis The first dimension is Value Chain Analysis. The Value Chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the company. Therefore, it evaluates which value each particular activity adds to the products or services offerings of the company. This includes primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service. They can be grouped into five main areas: inbound logistics; operations; outbound logistics; marketing and sales; and service. Each of these primary activities is linked to support activities which help to improve their effectiveness or efficiency. There are four main areas of support activities: procurement; technology development (including R&D); human resource management; and infrastructure (systems for planning, finance, quality, information management etc.). A typical value chain analysis can be performed in the following steps: l Analysis

of own value chain - which costs are related to every single activity?

l Analysis

of customer's value chains - how does our product/service fit into customer's

value chain? l Identifying

the potential cost advantages in comparison with competitors.

l Identification

of potential value added for the customer - how can our product add

value to the customer's value chain (e.g. lower costs or higher performance)? Where does the customer see such potential? The essential part of this dimension is to understand from the company the following questions. What are the key activities across the value chain of each of your product and service offerings? Which of these are unique as compared to competition? Why do you think so? How have these activities changed over time?

2 Strategy Map Analysis The second dimension is Strategy Map Analysis. The strategy map of the company depicts the key strategic themes and underlying tactical activities. This configuration of strategic themes and tactical activities creates an inimitable network, which delivers value as a whole to the company and carries no value as independent components with-in. The essential part of this dimension is to understand from the company the following questions. What are the key strategic dimensions of your company? How do you achieve the same i.e., tactical activities involved? How are those inter-related? How have those evolved and changed over time?

3 Value Network Analysis The third dimension is Value Network Analysis. The company derives competitive advantages by aligning the supplier, firm, channel and buyer value chains. In most industries, it is rather unusual that a single company performs all activities from product design, production of components, and final assembly to delivery to the final user by itself. Most often, organizations are elements of a value system or supply chain. Hence, value network analysis covers the whole value system in which the company operates. Within the whole value system, there is only a certain value of profit margin available. This is the 103

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difference of the final price the customer pays and the sum of all costs incurred with the production and delivery of the product/service (e.g. raw material, energy etc.). It depends on the structure of the value system, how this margin spreads across the suppliers, producers, distributors, customers, and other elements of the value system. Each member of the system will use its market position and negotiating power to get a higher proportion of this margin. Nevertheless, members of a value system can cooperate to improve their efficiency and to reduce their costs in order to achieve a higher total margin to the benefit of all of them (e.g. by reducing stocks in a Just-In-Time system). The essential part of this dimension is to understand from the company the following questions. What kind of partnerships and collaborations exist? How these collaborations differentiate the company from its competitors? What kind of contracts and agreements are in place? What are the benefits of these collaborations?

4 Basis of Relative Performance The fourth dimension is focusing on either operational effectiveness or strategic positioning or both. The competitive advantage flows from either operational effectiveness [OE] or strategic positioning [SP] by being unique. OE is a function of improving product quality, rationalizing facilities, introducing advanced capital equipment, upgrading processes, training employees and improving information systems. The intent is on running the race faster. SP is a function of creating a unique and sustainable competitive position by creating a unique value proposition compared to other companies; by creating a distinctive value chain embodying choices to operate differently from the competition; by making a choice of activities across the value chain that fit and reinforce each other and making the continuity of change as per the environmental dynamics. The intent is on running a race differently. The essential part of this dimension is to understand from the company the following questions. What are the key actions taken up by the company for improving the operational efficiency? What was the basis of those actions? How those actions have helped the company? What are the key actions taken up by the company as a part of its strategic positioning? What was the basis of those actions? How those actions have helped the company?

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Annexe II: Analytical Framework This framework is inspired by the article titled "What is Strategy1 ? " by Prof. Michael E. Porter and his work on competitiveness and strategy

Slide 1: Economic Foundations of Competition

ยง The fundamental unit of strategic analysis is the industry ยง Companies economic performance results from two distinct causes

Industry Structure Overall rules of the Competition

Relative Position Within the Industry Sources of Competitive Advantage

Pillar 1: Industry View

Slide 2: Industry Information Observe and Understand details pertaining to ยง PEST (Political, Economic, Social, Technological Trends) ยง Evolution & Shifts in the Industry v Challenges v Constraints v Opportunities v Growth trends v Emerging trends 1

Porter, M.E. (1996). What is Strategy? Harvard Business Review, 74(6), 61-78 105

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Slide 3: Determinants of Long Term Industry Profitability Threat of Substitute Products or Services

Rivalry Amongst Existing Competitors

Bargaining Power of Buyers

Bargaining Power of Suppliers

Threat of New Entrants

Pillar 2: Company View

Slide 4: About the company

Context Unique activities, differentiating factor

Customer Profile of consumers, Different Strategies adopted for different groups

Company

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Competition

Background, product & services, location (in

Competitors in the marketplace, their influence

and outside the country)

and how they compete

Slide 5: Financials (for last 5 years) § Sales Revenue § Gross Profits § Net Profits § Profits (%age) § Return on Invested Capital (ROIC) § Market Share (%age) § No. of MSME Clients § No. of Large Clients § Revenues (%age) – From MSME § Revenues (%age) – From LSE § Profits (%age) – From MSME § Profits (%age) – From LSE § Revenue per Employee (in Number)

2008-09

2009-10

2010-11

2011-12

2012-13

Pillar 3: Strategy & Business Model View

Slide 6: Creating a Strategy Analytical Tool

Segmenting Strategically

Exploiting Tradeoffs

Creatively segmenting product varieties,

Finding tradeoffs in the value proposition or in

customer groups and purchase occasions

the value chain

Leveraging Unique Activities

Capitalizing on Industry Dynamics

Building off activities with true uniqueness,

Identify strategic positions, opened up by

look for new activity configurations and

industry changes. Discuss about scalability

combinations

aspect

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Slide 7: What is Strategy? Segmenting Strategically

Tradeoffs

Variety Based Positioning Based on choice of product or service varieties rather than customer segments

Inconsistencies in image or reputation

Need Based Positioning Serving most or all the needs of a particular group of customers

Limits on internal coordination and control

Fit First Order Fit Simple consistency between each activity

Tradeoffs arise from activities

Making a choice on what not to do

Second Order Fit Activities are reinforcing Third Order Fit Optimization of effort

Access Based Positioning Access can be a function of customer geography or customer scale—or of anything that requires a different set of activities to reach customers in the best way

§ A Unique value proposition compared to competitors § Continuity of strategy with continual improvement in realization

Slide 8: Defining the Value Proposition What Customers?

Which Needs?

What end users? What delivery channels?

Which pain points? Which products? Which features? Which services?

What Relative Cost & Price? Relative pricing, cost, offerings

Slide 9: Making Strategic Tradeoffs § Tradeoffs are incompatibilities between strategic positions that create a need for choice § Sources of Tradeoffs Incompatible product / service feature or attributes Differences in the best configuration of activities in the value chain Inconsistencies in image or reputation Limits on internal coordination, measurement, motivation and control

§ Tradeoffs make a strategy sustainable against imitation by established rivals § An essential part of strategy is choosing what not to do

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Slide 10: Strategic Continuity § Continuity of strategy is fundamental to sustainable competitive advantage – – – –

e.g., allows the organization to understand the strategy builds truly unique skills and assets related to the strategy establishes a clear identity with customers, channels, and other outside entities strengthens the fit across the value chain

§ Reinvention and frequent shifts in direction are costly and confuse the customer, the industry, and the organization

§ Continuity is required in the value proposition § Successful companies continuously improve in how they realize their strategy – Strategic continuity and continuous business model evolution should occur simultaneously. They are not inconsistent

§ Continuity allows learning and change to be faster and more effective

Slide 11: Sources of Competitive Advantage Activities and the Value Chain Firm Infrastructure HRM

Support Activities

Technology Development Procurement Inbound Logistics Incoming Material Storage, Data Collection, Service, Customer Access

Operations Assembly, Component Fabrication, Branch Operations

Outbound Logistics Order Processing, Warehousing, Report Preparation

Marketing & Sales Sales Force, Promotion, Advertising, Proposal Writing, Website

After Sales Service Installation, Customer Support, Complaint Resolution, Repair

Value What Buyers are Willing to Pay

Primary Activities Competitive advantage arises from choices in the value chain. Discuss about key activities in a typical operational life-cycle which add value in successive stages. What kind of supporting activities exist? What kind of key resources? Also, discuss about Technology and Innovation perspectives.

Slide 12: Sources of Competitive Advantage Strategy Map Strategic Dimensions

Tactical Activities

Key Strategic Aspects

Tactical Activities for each Strategic Aspect

Evolutionary Pattern Dynamic aspects and triggers?

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Slide 13: The Value System / Value Network Business Unit Value Chain

Supplier Value Chains

Business Unit Value Chain

Channel Value Chains

Buyer Value Chains

Business Unit Value Chain

The Organization derives competitive advantages by aligning the supplier, firm, channel and buyer value chains. What kind of partnerships and collaborations?

Slide 14: Levels of Strategy Competitive or Business Strategy How to compete in each distinct business or industry

Group or Corporate Strategy The overall mix of businesses of the company and the way business unit strategies are integrated

Slide 15: Creating Corporate Value Added Strategic Business Unit Value Chain

Strategic Business Unit Value Chain The corporation adds value if there is a competitive advantage across the chains of business units ยง Migrating proprietary knowledge and skills across businesses ยง Sharing activities across businesses

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Slide 16: What do you think about Competition & Strategy? Competing To Be The Best

Competing To Be Unique

What kind of competition does a company want to have?

Variables that makes the company different from its competitors

Slide 17: Determinants of Relative Performance Differentiation (Price Premium)

Competitive Advantage

Superior Productivity

Cost Efficiency

Slide 18: Determinants of Relative Performance Contd.. Operational Effectiveness

Strategic Positioning

Assimilating, attaining and extending best practice

Creating a Unique and Sustainable competitive position

Run the same race faster

Choose to run a different race

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Annexe III: Reference Questions Dimension

Description

Sample Questions

Industry View

"PEST (Political, Economic,

l How

the political trends (regulatory

Social, Technological

environment, tax policies, regulatory bodies,

Trends).

government support, public infrastructure,

l Evolution

& Shifts in the

Industry v Challenges

deregulation, export/import policies etc.) impact your business? l What

kind of role is played by government

and industry associations and bodies in

v Constraints

bridging the connectivity gap between BDS

v Opportunities

providers & MSMEs?

v Growth

trends

v Emerging

trends

l How

the economic trends (income,

demographic profile, spending and savings pattern, rural versus urban, occupations etc.) impact your business? l How

the social trends (social values, cultural

aspect, social norms, customer habits etc.) impact your business? l How

the technological trends (emerging

information technologies and communication technologies etc.) impact your business? l How

do you define your industry?

l How

your industry has evolved during the

last 5 years? Talk about the current state of industry (emerging, growth or maturity or decline phase), operating challenges and opportunities, future scope etc. Industry View

Discuss the overall industry scenario and competitiveness using Porter's 5 forces framework

l How

do you define your buyers (customers)

in this industry? l How

do you think about the bargaining

power of buyers in your industry? Talk about size of buyers, no. of buyers, negotiation ability of buyers, criticality of your offering in the buyer's value chain, availability of substitutes (relative quality, pricing etc.) etc. l How

do you define your suppliers in this

industry? l How

do you think about the bargaining

power of suppliers in your industry? Talk about size of suppliers, no. of suppliers, negotiation ability of suppliers, criticality of supplier's offering in your value chain, availability of substitutes (relative quality, pricing etc.) etc. 112

l How

do you consider the entry barriers for

new entrants in your industry? Talk about existing number of competitors, size of capital investment needed, complexity of technologies required, role of government policies etc. l How

do you consider the threat of substitutes

in your industry? Talk about availability of substitutes, relative price/performance ratio of the same etc. l How

do you consider the inter-organizational

rivalry in your industry? Talk about number and relative size of competitors, prerequisites and operating conditions in the industry like capital investment needed, role of technology, availability of key resources etc. and behavioral factors like entry barriers, exit barriers, irreversible resource commitments etc. Industry View

l Understand

the

context, customer details, company background, competitive scenario

Context l This

involves understanding the operating

environment and underlying challenges and opportunities.

(competitors, market

Customers

share etc.).

l How

l Understand

the

financial parameters of the company.

do you define your customer segments?

Talk about %age share of different customer types etc. l What

are the kinds of services offered? How?

Company l How

do you describe your organization?

Competition l What l This

is the basis of competition?

involves understanding the customer

segments being targeted, types of services demanded, customer profiles, specific actions implemented for different customer segments etc. Financials l Financial

Performance over the last 3 years.

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Creating a Strategy

To understand how the companies perceive and define their strategy? The key dimensions of this include focusing on

Segmenting Strategically How do you decide upon your customer

segments? What is the basis of segmentation? Like

segmenting strategically;

criteria for choice of location, choice of

exploiting trade-offs;

customer profile (income, gender, education,

leveraging unique

profession etc.), choice of products & services

activities; capitalizing on

mix, choice of geography etc.

industry dynamics; designing a unique value proposition; and continuity of strategy with continual improvement in realization.

Exploiting Trade-offs What is it that you decided not to do or

decided to do differently as compared to existing competitors in the past? What was the basis of that trade-offs?

How those decisions proved beneficial or

harmful to the company? Leveraging Unique Activities What are the key resources and

competencies, which give you a competitive edge over your competitors? What are the key activities, which give you a

competitive edge over your competitors? How do you identify the key competencies

and resources? How do you build the same? How do you identify the key activities? How

do you build the same? How have those activities evolved over time? How do you get the market feedback and

learning about your performance and competitive performance? Capitalizing on Industry Dynamics What kind of structural changes have

happened in your industry, which have posed a challenge or an opportunity for your company? Why do you think so? How did you leverage those changing

dynamics? Scalability: How do you define Scalability?

What is your scalability criterion and how have you achieved the same? What is the plan for the future? Unique Value Proposition Needs/Pain Points

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What are the pain points of your customers? How do you address the same?

What according to you is considered as a "VALUE" by the MSMEs? How do you ensure the same?

Offering

What kinds of products or services are offered by you for MSMEs?

Customer Segments

Who are the main customer segments?

Why do MSMEs take your services?

How do you differentiate from your competitors?

Customer Channels and Relationships

What are your customer acquisition & retention strategies?

What are the different channels being used for getting new customers and for service delivery and support?

How do you justify the returns on investments to the small and medium clients, so that they engage you?

How do you differentiate from your competitors in this aspect?

Pricing

What is your pricing strategy for MSME offerings? Discuss about costs, revenues, margins, sales in numbers/customers etc.

How do you convince the MSME to avail your offerings at a specific price?

How do you differentiate from your competitors in this aspect?

Strategic Continuity What kinds of shifts in strategy and business model have been undertaken by the company since inception?

How these have been implemented? Why these were needed?

How do you decide upon the required changes in strategy and business model? Discuss about the basis of decision inputs like learning and feedback mechanism.

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Understanding the

To understand the key

Competitive

activities of the company

Advantage

and the basis of competition for the company. The key dimensions of this include focusing on designing a unique value chain;

Value Chain Analysis What are the key activities across the value

chain of each of your product and service offerings? Why do you think so? How these activities are different from the

competitors providing the similar offerings? What have been the changes in your key

identifying the strategy

activities over time? What has been the basis

map comprising strategic

for deciding upon the same?

themes and underlying tactical activities; creating a value network; and determining the basis of relative performance.

What kind of cost overheads are involved in

these activities? HRM: How do you describe your

organizational culture and leadership? Technology: What is the role of technology in

your business? Technology: What kinds of technologies are

needed and how do those help in attaining competitive advantage? Technology: How do you identify, assess and

implement new technologies in your company? Innovation: What is the role of innovation in

your business? Innovation: What kinds of innovations are

needed and how do those help in attaining competitive advantage? Innovation: How do you identify, assess and

implement new innovations in your company? Strategy Map Analysis What are the key strategic objectives and

milestones of your company? What are the underlying activities to achieve

the same i.e., tactical activities involved?\ Value Network Analysis Who Who are your key partners? Which of these

partners are most important for operating with MSMEs? *What is the basis of relationship (type of

contracts, terms and conditions etc.) with the partners?

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What is the significance of industry bodies

and government as bridge partners? Why & How Why you need these partnerships for working

with MSMEs? How do you differentiate from your

competitors in this aspect? Basis of Relative Performance How do you define your competitive

approach - Is it driven by focus on Strategic Positioning [SP] or focus on Operational Effectiveness [OE] or focus on both? If [SP], then how do you drive [SP] in your

company? Discuss as how the company has created a unique and sustainable competitive position by creating a unique value proposition compared to other companies; or by creating a distinctive value chain embodying choices to operate differently from the competition; or by making a choice of activities across the value chain that fit and reinforce each other and making the continuity of change as per the environmental dynamics. If [OE], then how do you drive [OE] in your

company? Discuss as how the company has built the cost efficiency in the value chain; how the technology has been integrated to become cost efficient; what kind of cost based innovations have been undertaken etc.

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